<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-K

(Mark one)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the Fiscal year ended January 31, 2003.

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

     For the transition period from ________________ to _______________.

                          Commission File Number 0-2180

                          COVISTA COMMUNICATIONS, INC.
               (Exact name of Company as specified in its charter)

          New Jersey.                                           22-1656895.
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

               721 Broad Street, Suite 200, Chattanooga, TN 37402
               (Address of principal executive offices)(Zip Code)

Company's telephone number, including area code: (423) 648-9700

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

          Securities registered pursuant to Section 12 (g) of the Act:
                     Common Stock, $.05 par value per share

Indicate by check mark whether Covista Communications, Inc. ("Covista" or the
"Company")(1) has 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 Covista was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
                                 Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K       [ ]

Aggregate market value (based upon a $2.20 closing price) of the voting stock
held by nonaffiliates of Covista as of May 1, 2003: $12,722,820

Number of shares of Common Stock outstanding on May 1, 2003: 17,783,092

                      Documents Incorporated By Reference:
                                      None





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                                     PART I

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS:

          Certain matters discussed in this Annual Report on Form 10-K are
"forward-looking statements" intended to qualify for the safe harbor from
liability provided by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as Covista "believes",
"anticipates", "expects", or words of similar import. Similarly, statements,
which describe Covista's future plans, objectives or goals, are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties, which are described in, close proximity to such
statements and which could cause actual results to differ materially from those
anticipated as of the date of this Report. Shareholders, potential investors and
other readers are urged to consider these factors in evaluating the
forward-looking statements and are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements included herein are
only made as of the date of this Report and Covista undertakes no obligation to
publicly update such forward-looking statements to reflect subsequent events or
circumstances.

ITEM 1. Business

General

          Covista is a long distance telecommunications, Internet and data
services provider. Covista operates three distinct business segments: retail,
KISSLD and wholesale. Retail is currently the largest segment and provides long
distance, data and Internet services to small and medium sized businesses,
principally in the Northeast region of the United States. KISSLD is a new
segment started in Fiscal 2003, which targets residential users located in areas
supported by network facilities. The wholesale segment sells long distance
telecommunication services to other carriers for resale. Covista utilizes its
own switching equipment and leased fiber optic transmission cable. Covista's
product and services include a broad range of voice, data and Internet,
including long distance and toll-free services, calling cards, data,
Internet access, virtual private network, directory assistance and
teleconferencing services. Covista currently operates five switches in various
locations. In July 2001, Covista acquired long-term access to nationwide network
facilities comprising 2,822,400,000 channel miles of telecommunications capacity
measured by length of voice-grade circuits. Covista processes approximately 87.5
percent of all its call volume through its own facilities.

          In the retail market, Covista has segmented potential customers and
tailored its service offerings, sales, marketing approach and network
development to provide service in a cost-effective manner. Covista applies a
dedicated team approach to soliciting and servicing its commercial clients, with
substantial involvement of sales, customer service and technical personnel in
all aspects of customer relations. Covista intends to continue to maintain its
retail marketing efforts on small to medium-sized businesses with sales of $1
million to $60 million and monthly communications bills that range from $500 to
$30,000. KISSLD is a new segment that was launched during Fiscal 2003. This
segment targets residential users with direct marketing campaigns. The Company
expects the KISSLD segment to become the fastest growing of the three. The
Company plans to introduce local services into the KISSLD segment during Fiscal
2004. Covista also maintains a wholesale segment.

          During the fiscal year ended January 31, 2003, Covista completed
the relocation of its corporate headquarters from Little Falls, New Jersey
to Chattanooga, Tennessee and opened a new call center facility in Chattanooga,
Tennessee. In addition, the Company operates a network operations center in
Chattanooga to monitor and control its New Jersey network and to coordinate
its various services. On February 8, 2002, the Company acquired Capsule
Communications, Inc. ("Capsule"), a telecommunications carrier providing
long-distance telephone communications services to small and medium size
business customers and residential customers generally located in the
Mid-Atlantic region. Covista maintains sales offices in Paramus, New Jersey
and Bensalem, Pennsylvania.

          For Fiscal 2003, Covista had gross revenues of approximately $101
million, derived approximately 75% from retail, 13% from KISSLD and 12% from
wholesale. For Fiscal 2002, Covista's gross revenues were approximately $95
million. Prior to the Capsule acquisition and the introduction of KISSLD
Covista's retail sales activities historically were concentrated in Northern
New Jersey and New York City, where, Covista believes, approximately half of all
United States multinational corporations have headquarters. The Capsule base
expanded the Company's retail reach through the Mid-Atlantic States and the
KISSLD segment targets customers throughout the United States. See Note 3 to the
Consolidated Statements for segment information.

          Covista's principal executive offices are located at 721 Broad Street,
Suite 200, Chattanooga, TN 37402, and its telephone number is (423) 648-9700.


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                                INDUSTRY OVERVIEW

History and Industry Development

          Prior to 1984, AT&T dominated both the local exchange and long
distance marketplaces by owning the operating entities that provided both local
exchange and long distance services to most of the United States population.
Although long distance competition began to emerge in the late 1970s, the
critical event triggering the growth of long distance competition was the
breakup of AT&T and the separation of its local and long distance businesses as
mandated by the Modified Final Judgment (the "MFJ") relating to the breakup of
AT&T. To foster competition in the long distance market, the MFJ prohibited
AT&T's divested local exchange businesses, the Regional Bell Operating Companies
("RBOCs"), from acting as single-source providers of telecommunications
services.

          The Telecommunications Act of 1996, (the "1996 Act"), is considered to
be the most comprehensive reform of the nation's telecommunications laws, affect
the development of competition for local telecommunications services. The 1996
Act provides for the removal of legal barriers to entry into the local
telecommunications services market, the interconnection of the Incumbent Local
Exchange Carrier (the "ILEC") network with competitors' networks and the
relaxation of the regulation of certain telecommunications services provided by
Local Exchange Carriers ("LECs") and others. Procedures and requirements were
established to be followed by the RBOCs, including the requirement that RBOCs
offer local services for resale as a precondition to their entering the long
distance and telecommunications equipment manufacturing markets.

          The continuing deregulation of the telecommunications industry and
technological change has resulted in an increasingly information-intensive
business environment. Regulatory, technological, marketing and competitive
trends have substantially expanded Covista's opportunities in the converging
voice and data communications services markets. For example, technological
advances, including rapid growth of the Internet, the increased use of packet
switching technology for voice communications, and the growth of multimedia
applications, are expected to result in growth in the high-speed data services
market.

          This new market opportunity should permit Competitive Local Exchange
Carriers ("CLECs") with operating and marketing expertise to offer a full range
of telecommunications services, including local and long distance calling,
toll-free calling, custom calling features, data services, and Internet access
and services. Telecommunications companies with an established base of long
distance customers may have an opportunity to sell additional services to such
customers.

Network

          Covista's strategy has been to develop a geographic concentration of
revenue-producing customers through the sale of telecommunications services in
areas where it has installed switching platforms.

Current Network

          Switches. Currently, Covista operates an advanced telecommunications
network that includes five Alcatel switches, located in New York City,
Philadelphia, Pennsylvania, Minneapolis, Minnesota, Dallas, Texas
and Chattanooga, Tennessee. The Philadelphia switch was acquired upon the merger
with Capsule Communications. The New York switch is an Alcatel Megahub DEX600E,
which provides interexchange switching capabilities and is currently being used
as Covista's international gateway switching platform.

          In July 2001, Covista acquired long-term access to nationwide network
facilities comprising 2,822,400,000 channel miles of telecommunications capacity
measured by length of voice-grade circuits.

          During Fiscal 2003, Covista billed approximately 1.45 billion minutes,
with approximately 87.5% of its minutes carried over its own switches. Covista
believes that increasing the traffic carried on its own network should improve
operating margins.


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          International. Covista is interconnected with a number of United
States and foreign wholesale international carriers through its New York switch.
The purpose of connecting to a variety of carriers is to provide
state-of-the-art, lowest-cost routing and network reliability. These
interconnected international carriers have been a source of wholesale
international traffic and revenue.

          Internet. Currently, Covista owns and operates an IP (Internet
Protocol) Network that includes two Cisco 7500 routers, located in New York
City. Covista also owns and operates an Ascend TNT remote access server (RAS)
located in New York. The RAS provides dial-up Internet access services. Through
associations with providers of wholesale Digital Subscriber Lines ("DSL"),
Covista offers DSL Internet service in the Philadelphia, New York, New Jersey
and Connecticut markets. Covista also offers Internet services over dedicated
DS0, DS1 and DS3 digital transmission circuits.

          Other Features. Covista is interconnected by SS7 out-of-band digital
signaling throughout its network. The SS7 signaling system reduces connect time
delays, thereby enhancing overall network efficiencies. Additionally, the SS7
technology is designed to permit the anticipated expansion of Covista's Advanced
Intelligent Network ("AIN") capabilities throughout its network. Covista's
advanced switching platform would enable it to (i) deploy features and functions
quickly throughout its entire network, (ii) expand switch capacity in a
cost-effective manner, and (iii) lower maintenance costs through reduced
training and spare parts requirements.

          Security and Reliability. Covista has a Network Operating Center (NOC)
in Chattanooga, Tennessee, which monitors and controls Covista's network and
coordinates its various services from a central location, increasing the
security, reliability and efficiency of Covista's operations. Centralized
electronic monitoring and control of Covista's network allows Covista to avoid
duplication of this function in each switch site. The NOC also helps reduce
Covista's per-customer monitoring and customer service costs. In addition,
Covista's network employs an "authorized access" architecture. Unlike many
telecommunications companies, which allow universal access to their network,
Covista utilizes an automatic number identification security screening
architecture which ensures only the Automatic Number Identification (ANIs) of
those users who have subscribed to Covista's services and have satisfied
Covista's credit and provisioning criteria have access to the network. Covista
believes that this architecture provides Covista the ability to better control
bad debt and fraud in a manner, which is invisible and nonintrusive to the
customer. This architecture also allows Covista to better manage network
capacity, as unauthorized and unplanned users cannot access the network.

                         PRINCIPAL PRODUCTS AND SERVICES

Product and Service Offerings

          Retail Services. Covista provides telecommunications services to over
152,000 commercial customers, primarily small and medium-sized businesses,
located in the Northeastern region of the United States. Covista sells retail
services through its independent marketing representatives and web based
marketing programs. Retail services accounted for approximately $75,455,000 or
75% of Covista's Fiscal 2003 total revenue. This compares to approximately
$47,423,000 of retail revenue in Fiscal 2002. The increase in retail revenue is
a result of the acquisition of Capsule Communications.

Covista's retail services include the following:

     o    Long Distance: Covista offers a full range of switched and dedicated
          domestic and international long distance services, including "1+"
          outbound service in all 50 states along with global termination to
          over 200 countries. Long distance services include intra-LATA (Local
          Access Terminating Area), inter-LATA, and worldwide international
          services. Long distance features include both verified and
          non-verified accounting codes, station-to-station calling, third-party
          calling, directory assistance and operator-assisted calling.


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     o    Toll-free Services: Covista offers a full range of switched and
          dedicated domestic toll-free services, including toll-free origination
          in all 50 states, international toll-free origination from over 30
          countries, and toll-free directory assistance. AIN enhanced toll-free
          services include the following features: Command Routing, Dialed
          Number Identification Service Area Code/Exchange Routing, Real Time
          Automatic Number Identification Delivery, Day-of-Year Routing,
          Day-of-Week Routing, Time-of-Day Routing, Percentage Allocation
          Routing, PIN protected 800 services, integrated voice response
          services and store locator services.

     o    Access Options: Covista offers its long distance and toll-free
          customers multiple access options, including dedicated access at DS0,
          DS1, and DS3 speed(s) and switched access.

     o    Calling Card and Services: Covista offers nationwide switched access,
          customized calling card services. Customers have the option of calling
          cards, which are personalized, branded or generic.

     o    Internet: Covista currently offers high-quality, dedicated DSL and
          dial-up Internet access, e-mail, IP addressing and Domain Name
          Services.

     o    Data Services: Covista offers advanced data transmission services,
          including private line and Frame Relay services. Data services have
          multiple access options, including dedicated access at DS0, DS1, and
          DS3 speed(s) and switched access.

     o    Customer Management Control Features: All of Covista's customers have
          the option of customized management reporting features, including
          interstate/intrastate area code summaries, international destination
          matrix, daily usage summaries, state summaries, time of day summaries,
          duration distribution matrix, exception reporting of long duration
          calls, and incomplete and blocked call reporting.

          KISSLD. During Fiscal 2003, Covista introduced a new business segment,
KISSLD, a direct marketing program that targets residential customers located in
areas supported by the existing company network. At year-end, over 58,000
customers were being billed on a monthly basis. KISSLD revenues accounted for
$12,990,000 or 13% of Covista's Fiscal 2003 total revenue.

          Wholesale Services. Covista offers the following wholesale services:
domestic and international termination, switch ports, colocation facilities and
transport services to a broad spectrum of domestic and international carriers.
Covista offers international wholesale termination and transport services
primarily to domestic and international telecommunications carriers. Covista's
wholesale results were severely affected by the September 11, 2001 terrorist
attack. The Company suffered the temporary loss of its New York City switch,
which is situated in the immediate vicinity of the World Trade Center. As a
result, Covista incurred a significant reduction in wholesale revenues.
The impact of the revenue loss, combined with additional expenses, was in
excess of approximately $14,000,000. Covista has filed an insurance claim
for losses and expenses associated with the events of September 11, and
received an initial $1,000,000 in the FY 2002. The total claim and final
settlement cannot be determined at this time. Wholesale revenues were
approximately $12,514,000 and $47,889,000 during Fiscal 2003 and Fiscal 2002,
respectively. Future Wholesale revenues are expected to decline as management
dedicates more focus and resources to the higher margin retail and KISSLD
revenues.

                                  CUSTOMER BASE

Telecommunications Services Market

          Overview of the United States Market. The United States market for
telecommunications services can be divided into four basic service sectors: long
distance, local exchange, Internet access and international.

          Long Distance Services. A long distance telephone call can be
envisioned as consisting of three segments. Starting with the originating
customer, the call travels along a local exchange network to a long distance
carrier's point of presence ("POP"). At the POP, the call is combined with other
calls and sent along a long distance network to a POP on the long distance
carrier's network near where the call will terminate. The call is then sent from
this POP along a local network to the terminating customer. Long distance
carriers provide only the connection between the two local networks; and, unless
the long distance carrier is a local service provider, pay access charges to
LECs for originating and terminating calls.


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          Local Exchange Services. A local call is one that does not require the
services of a long distance carrier. In general, the local exchange carrier
connects end-user customers within a locally defined area known as a Local
Access and Transport Area or "LATA" and also provides the local access (ingress
and egress) of most long distance calls.

          Internet Service. Internet services are generally provided in at least
two distinct segments. A local network connection is required from the Internet
Service Provider ("ISP") customer to the ISP's local facilities. For large,
communication-intensive users and for content providers, the connections are
typically unswitched, dedicated connections provided by LECs, Intelligent Call
Processing ("ICP"), or other providers, either as independent service providers
or, in some cases, by a carrier that is both a Competitive Local Exchange
Carrier (CLEC ) and an Internet Service Provider ( ISP). For residential and
small and medium-sized business users, these connections are generally Public
Switched Telephone Network ("PSTN") connections obtained on a dial-up access
basis as a local exchange telephone call. Once a local connection is made to the
ISP's local facilities, information can be transmitted and obtained over a
packet-switched IP data network, which may consist of segments provided by many
interconnected networks operated by a number of ISPs. The collection of
interconnected networks makes up the Internet. A key feature of Internet
architecture and packet switching is that a single dedicated channel between
communication points is never established which distinguishes Internet-based
services from the PSTN.

          International Service. A typical international long distance call
originates on a local exchange network or private line and is carried to the
international gateway switch of a long distance carrier. The call is then
transported along a fiber optic cable or a satellite connection to an
international gateway switch in the terminating country and, finally, to another
local exchange network or private line where the call is terminated. Generally,
only a small number of carriers are licensed by a foreign country for
international long distance and, in many countries, only the Postal Telephone &
Telegraph administration ("PTT") is licensed or authorized to provide
international long distance service. Any carrier which desires to transport
switched calls to or from a particular country, in addition to obtaining a
license or other permission (if required), must enter into operating agreements
or other arrangements with the PTT or another international carrier in that
country or lease capacity from a carrier which already has such arrangements.

Market Opportunities

          As a result of the 1996 Act and other Federal, state, and
international initiatives, numerous telecommunications markets have been opened
to competition. In addition, the increasing globalization of the world economy,
along with increased reliance upon data transmission and Internet access, has
expanded traditional telecommunications markets. Covista has targeted its
services principally to small and medium-sized businesses based upon its belief
that such customers are not aggressively targeted by Tier I providers and are
underserved with respect to customer service and support. Covista is also
targeting residential long distance users with competitive rates for domestic
and international long distance usage and plans to offer Local Exchange Services
to residential users during FY2004.

                                   COMPETITION

Overview

          Covista operates in a highly competitive industry and estimates that
it has less than a 1% share of the market in which it operates. Covista expects
that competition will continue to intensify in the future due to regulatory
changes, including the continued implementation of the 1996 Act, and further
increases in the size, resources, and number of market participants. In each of
its markets, Covista will face competition from larger, better capitalized Tier
I and Tier II providers and ILECs and CLECs. While new business opportunities
may be made available to Covista through the 1996 Act and other federal and
state regulatory initiatives, regulators are likely to provide ILECs with an
increased degree of flexibility with regard to pricing of their services as
competition increases.

          Competition for Covista's products and services is based upon price,
quality, the ability to bundle services, name recognition, network reliability,
service features, billing services, perceived quality and responsiveness to
customers' needs. While Covista believes that it currently has certain
advantages relating to price, quality, customer service and responsiveness to
customer needs, there is no assurance that Covista will be able to maintain
these advantages or obtain additional advantages. A continuing trend toward
business combinations and alliances in the telecommunications industry may
create significant new competitors to Covista. Many of Covista's existing and
potential competitors have financial, technical, and other resources
significantly greater than those of Covista. In addition, in December, 1997, the
FCC issued rules to implement the provisions of the World Trade Organization
Agreement on Basic Telecommunications, which was drafted to liberalize
restrictions on foreign ownership of domestic telecommunications companies and
to allow foreign telecommunications companies to enter domestic markets. The new
FCC rules went into effect in February, 1998 and are expected to make it
substantially easier for many non-United States telecommunications companies to
enter the United States market, thus further increasing the number of
competitors. The new rules will also give non-United States individuals and


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corporations greater ability to invest in United States telecommunications
companies, thus increasing the financial and technical resources potentially
available to existing and potential competitors as well as Covista.

          The effects of recent financial restructuring of major competitors
(WordCom, Global Crossing and others) could allow these companies to reduce
retail prices, thereby increasing competitive pressure on the Company.

Long Distance Market

          The long distance telecommunications industry is highly competitive
and affected by the introduction of new services by, and the market activities
of, major industry participants. Covista competes against various national and
regional long distance carriers, including both facilities-based providers and
switchless resellers offering essentially the same services as Covista. In
addition, significant competition is expected to be provided by ILECs including
RBOCs. The RBOC's have been authorized to provide long distance services in
certain states. Covista's success will depend upon its ability to provide
high-quality services at prices competitive with, or lower than, those charged
by its competitors. In addition, a high level of customer attrition or "churn"
has characterized the long distance industry. Such attrition is attributable to
a variety of factors, including initiatives of competitors as they engage in
advertising campaigns, marketing programs, and provide cash payments or other
incentives. End users are often not obligated to purchase any minimum usage
amount and can discontinue service without penalty at any time. Covista's
revenue has been, and is expected to continue to be, affected by churn.

          Tier I providers and other carriers have implemented new price plans
aimed at residential customers with significantly simplified rate structures,
which may have the impact of lowering overall long distance prices. There can
also be no assurance that long distance carriers will not make similar offerings
available to the small to medium-sized businesses, which Covista primarily
serves. While Covista believes that small and medium-sized business customers
are not aggressively targeted by large long distance providers, such as the Tier
I providers, there can be no assurance that Covista's customers and potential
customers will not be targeted by these or other providers in the future.
Additional pricing pressure may come from IP transport, which is a developing
use of packet-switched technology which can transmit voice communications at a
cost which may be below that of traditional circuit-switched long distance
service. While IP transport is not yet available in all areas, its use requires
the dialing of additional digits. While the service has generally produced sound
quality inferior to traditional long distance service, it could eventually be
perceived as a substitute for traditional long distance service. This, in turn,
could put further pricing pressure on long distance rates. Any reduction in long
distance prices may have a material adverse effect on Covista's business,
financial condition and results of operations.

          Some of Covista's principal competitors are also major suppliers of
services to Covista. Covista both links its switching equipment with
transmission facilities and services purchased or leased from these suppliers,
and also resells services obtained from these suppliers. There can be no
assurance that these suppliers will continue to offer services to Covista at
competitive rates or on attractive terms, if at all, and any failure to do so
could have a material adverse effect on Covista.

Seasonal Nature of Business

          The Company's business is not seasonal.

Patents, Trademarks, Licenses, etc.

          The Company does not hold any material patents, franchises or
 concessions.

                             GOVERNMENT REGULATIONS

Overview

          Covista's services are subject to regulation by federal, state and
local governmental agencies. The FCC exercises jurisdiction over all facilities
and services of telecommunications common carriers to the extent those
facilities are used to provide, originate or terminate interstate or
international communications. State regulatory agencies retain jurisdiction over
carriers' facilities and services to the extent they are used to originate or
terminate intrastate communications. Municipalities and other local government
agencies may require carriers to obtain licenses or franchises regulating use of
public rights-of-way necessary to install and operate their networks. The
networks are also subject to numerous local regulations such as building codes,
franchises, and rights of way licensing requirements. Many of the regulations
issued by these regulatory bodies may be subject to judicial review, the results
of which Covista is unable to predict.

Federal Regulations - The 1996 Act

          Statutory Requirements. The 1996 Act requires all LECs (including
ILECs and CLECs) (i) not to prohibit or unduly restrict resale of their
services; (ii) to provide local number portability; (iii) to provide dialing
parity and nondiscriminatory access to telephone numbers, operator services,
directory assistance, and directory listings; (iv) to afford access to poles,
ducts, conduits, and rights-of-way; and (v) to establish reciprocal compensation
arrangements for the transport and termination of local telecommunications
traffic. It also requires ILECs to


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negotiate local interconnection agreements in good faith and to provide
interconnection (a) for the transmission and routing of telephone exchange
service and exchange access, (b) at any technically feasible point within the
ILEC's network, (c) which is at least equal in quality to that provided by the
ILEC to itself, its affiliates, or any other party to which the ILEC provides
interconnection, and (d) at rates and terms and conditions which are just,
reasonable and nondiscriminatory. ILECs also are required under the 1996 Act to
provide nondiscriminatory access to network elements on an unbundled basis at
any technically feasible point, to offer their local telephone services for
resale at wholesale rates, and to facilitate colocation of equipment necessary
for competitors to interconnect with or access Unbundled Network Elements
("UNEs").

          The 1996 Act also eliminates the existing AT&T antitrust consent
decree, which barred the provision of long distance services and manufacturing
by the RBOCs. In addition, the 1996 Act requires RBOCs to comply with certain
safeguards and offer interconnection which satisfies a prescribed 14-point
competitive checklist before RBOCs are permitted to provide in-region inter-LATA
services. These safeguards are designed to ensure that the RBOCs competitors
have access to local exchange and exchange access services on nondiscriminatory
terms and that the subscribers of regulated non-competitive RBOC services do not
subsidize their provision of competitive services. The safeguards also are
intended to promote competition by preventing RBOCs from using their market
power in local exchange services in order to obtain an anti-competitive
advantage in the provision of other services. RBOCs have the ability to provide
out-of-region long-distance services and, if they obtain authorization and under
prescribed circumstances, may provide additional in-region long-distance
services. In December 1999, the FCC granted Bell Atlantic's (now Verizon)
application to offer in-region long distance services in New York, marking the
first time since the breakup of AT&T that an RBOC has been able to provide its
customers with both local and long distance service.

          The 1996 Act also granted important regulatory relief to industry
segments, which compete with CLECs. ILECs were given substantial new pricing
flexibility. RBOCs also were granted new rights to provide certain cable TV
services. Inter Exchange Carriers ("IXCs") were permitted to construct their own
local facilities and/or resell local services. State laws may no longer require
CATVs to obtain a franchise before offering telecommunications services nor
permit CATVs' franchise fees to be based on their telecommunications revenue. In
addition, under the 1996 Communications Act, all utility holding companies are
permitted to diversify into telecommunications services through separate
subsidiaries.

          FCC Rules Implementing the Local Competition Provisions of the 1996
Act. In August 1996, the FCC released a First Report and Order, a Second Report
and Order and a Memorandum Opinion and Order (combined, the "Interconnection
Orders") which established a framework of minimum, national rules enabling state
Public Utility Commissions ("PUCs") and Public Service Commissions ("PSCs"), and
the FCC to begin implementing many of the local competition provisions of the
1996 Act. In its Interconnection Orders, the FCC prescribed certain minimum
points of interconnection necessary to permit competing carriers to choose the
most efficient points at which to interconnect with the ILECs' networks. The FCC
also adopted a minimum list of UNEs that ILECs must make available to
competitors upon request and a methodology for states to use in establishing
rates for interconnection and the purchase of UNEs. The FCC also adopted a
methodology for States to use when applying the 1996 Act "avoided cost standard"
for setting wholesale prices with respect to retail services.

The U.S. Supreme Court affirmed the authority of the FCC to establish rules
governing interconnection. Covista believes that additional disputes regarding
interconnection issues and other related FCC actions are likely. In particular,
the Supreme Court remanded to the FCC issues regarding what UNEs the FCC will
require ILECs to make available to competitors. In November 1999, the FCC
released a decision modifying the list of UNEs which all ILECs must offer to
other carriers. The Eighth Circuit decisions and their reversal by the Supreme
Court continue to cause uncertainty about the rules governing the pricing, terms
and conditions of interconnection agreements. The Supreme Court's ruling and
further proceedings on remand (either at the Eighth Circuit or the FCC) may
affect the scope of the PUCs' and PSCs' authority to conduct arbitration
proceedings or to implement or enforce interconnection agreements. The ruling
could also result in new or additional rules being promulgated by the FCC. Given
the ongoing uncertainty surrounding the effect of the Eighth Circuit decisions
and the decision of the Supreme Court reversing them, Covista may not be able to
obtain or enforce interconnection terms acceptable to it or that are consistent
with its business plans.

Other Federal Regulations

          In general, the FCC has a policy of encouraging the entry of new
competitors in the telecommunications industry and preventing anti-competitive
practices. Therefore, the FCC has established different levels of regulation for
dominant carriers and non-dominant carriers. For purposes of domestic common
carrier telecommunications regulation, large ILECs are currently considered
dominant carriers, while CLECs are considered non-dominant carriers.

          o    Tariffs. As a non-dominant carrier, Covista may install and
               operate facilities for the transmission of domestic interstate
               communications without prior FCC authorization. Services of
               non-dominant carriers have been subject to relatively limited
               regulation by the FCC, primarily consisting of the filing of
               tariffs and periodic reports. However, non-dominant carriers like
               Covista must offer interstate services on a nondiscriminatory
               basis, at just and reasonable rates, and remain subject to FCC


                                        8





<PAGE>

               complaint procedures. With the exception of informational tariffs
               for operator-assisted services and tariffs for interexchange
               casual calling services, the FCC has ruled that IXCs must cancel
               their tariffs for domestic interstate interexchange services.
               Tariffs continue to be required for international services.
               Pursuant to these FCC requirements, Covista has filed and
               maintains tariffs for its interstate services with the FCC. All
               of the interstate access and retail "basis" services (as defined
               by the FCC) provided by Covista are described therein. "Enhanced"
               services (as defined by the FCC) need not be tariffed. Covista
               believes that its proposed enhanced voice and Internet services
               are "enhanced" services which need not be tariffed. However, the
               FCC is reexamining the "enhanced" definition as it relates to IP
               transport and Covista cannot predict whether the FCC will change
               the classification of such services.

          o    International Services. Non-dominant carriers such as Covista are
               required to obtain FCC authorization pursuant to Section 214 of
               the Communications Act and file tariffs before providing
               international communication services. Covista has obtained
               authority from the FCC to engage in business as a resale and
               facilities-based international carrier to provide voice and data
               communications services between United States and all foreign
               points.

          o    Access Charges. Over the past several years, the FCC has granted
               ILECs significant flexibility in their pricing of interstate
               special and switched access services. Under this pricing scheme,
               ILECs may establish pricing zones based on access traffic density
               and charge different prices for each zone. Covista anticipates
               that this pricing flexibility should result in ILECs lowering
               their prices in high traffic density areas, the probable area of
               competition with Covista. Covista also anticipates that the FCC
               will grant ILECs increasing pricing flexibility as the number of
               interconnections and competitors increases. In May, 1997, the FCC
               took action to reform the current interstate access charge
               system. The FCC adopted an order which makes various reforms to
               existing rate structures for interstate access designed to move
               access charges, over time, to more economically efficient rate
               levels and structures. The FCC recently granted LECs additional
               pricing flexibility. As such, the carriers may offer volume
               discounts which may benefit larger long distance carriers.

               The FCC has also implemented changes in interstate access rules
               that result in restructuring of the access charge system and
               changes in access charge rate levels. As of January 1998, access
               charges incurred by Covista are being passed on to end users. In
               May 1999, the U.S. Court of Appeals (D.C. Circuit) sent the
               access rate formula back to the FCC for further explanation
               regarding how certain factors were calculated. These and related
               actions may change access rates. If the formula is upheld, and
               access rates are reduced, the result will be a lower cost of
               providing long distance service, especially to business
               customers. The impact of these new changes will not be known
               until they are fully implemented over the next several years. In
               a related proceeding, the FCC has adopted changes to the
               methodology by which access has been used in part to subsidize
               universal telephone service and other public policy goals.
               Telecommunications providers like Covista pay fees calculated as
               a percentage of revenue to support these goals. The full
               implications of these changes remains uncertain and subject to
               change.


                                        9





<PAGE>

          o    PICC. As part of Access Reform mandated in the Telecommunications
               Act of 1996, beginning in 1998, local phone companies were
               permitted to assess the Pre-subscribed Interexchange Carrier
               Charge, also known as "PICC." The "PICC" is a monthly per line
               cost charged by the local telephone company to every long
               distance carrier for each multi-line business phone line that is
               pre-subscribed to that carrier. PICC charges are billed to the
               commercial end users.

          o    Universal Service Reform. In May, 1997, the FCC released an order
               which reforms the current system of interstate universal service
               support and implements the universal service provisions of the
               1996 Act. The FCC established a set of policies and rules
               designed to ensure that low-income consumers and consumers who
               live in rural, insular and high-cost areas receive a defined set
               of local telecommunications services at affordable rates. This
               was to be accomplished in part through expansion of direct
               consumer subsidy programs and in part by ensuring that rural,
               small and high-cost LECs continue to receive universal service
               subsidy support. The FCC also created new programs to subsidize
               connection of telecommunications networks to eligible schools,
               libraries and rural health care providers. These programs were to
               be funded by assessment of eligible revenue of nearly all
               providers of interstate telecommunications carriers, including
               Covista.

               In October 1999 the FCC adopted a new high-cost universal service
               support mechanism for non-rural carriers. The new mechanism is
               based on the forward-looking costs of providing supported
               services as determined by the Commission's cost model. The
               forward-looking support mechanism provides support to non-rural
               carriers in those states that have a statewide average
               forward-looking cost per line greater than the national
               benchmark, which is set at 135 percent of the national average
               forward-looking cost per line. The FCC's decisions regarding
               universal service could have a significant impact on future
               operations of Covista.

          o    Colocation. In March 1999, the FCC released its Colocation Order,
               which requires ILECs to permit CLECs to colocate any equipment
               used for interconnection or access to unbundled network elements
               even if that equipment includes switching or enhanced service
               functions. Among other things, the Colocation Order also
               prohibits ILECs from placing any limits on the use of switching
               or enhanced features for collocated equipment, and requires ILECs
               to make cageless colocation available and permit CLECs to
               construct their own cross-connect facilities.

               In March, 2000, the U.S. Court of Appeals for the District of
               Columbia Circuit vacated limited portions of the Collocation
               Order, holding certain definitions contained in FCC rules were
               impermissibly broad. The Court remanded the Collocation Order, in
               part, for further FCC consideration of these issues.

          o    Line Sharing. In November, 1999, the FCC adopted a new order
               requiring ILECs to provide line sharing, which will allow CLECs
               to offer data services over the same line the consumer uses for
               voice services, without the CLECs being required to offer the
               voice services. State commissions have been authorized to
               establish the prices to the CLECs for such services. The decision
               has been appealed.

State Regulation

          Some states in which Covista operates are considering legislation,
which could impede efforts by new entrants in the local services market to
compete effectively with ILECs. This legislation could adversely impact the
Company's plans to launch local services in FY2004.


                                       10





<PAGE>

Compliance with Environmental Provisions

          The Company believes that it complies in all material respects with
current pertinent federal, state, and local provisions relating to the
protection of the environment and does not believe that continued compliance
would require any material capital expenditure.

Recent Development

          Effective April 16, 2003, Covista executed a revolving credit and
security agreement along with related documents that provide the Company with an
$8 million revolving loan of which $7 million is currently available.
The remaining $1 million becomes available upon Covista maintaining twelve
consecutive months of positive cash flow as defined in the agreement.
This thirty-six month facility allows the Company to borrow funds based on a
portion of eligible customer accounts receivable and bears interest at the
Prime Rate plus 2.00% with a floor of 6.25%. Interest, unused line and
collateral management fees are payable monthly in arrears. Covista is
required to maintain certain covenants that include cash velocity and
fixed charge coverage ratios as defined in the agreement. The loan is secured
by all of the Company's assets. Initial loan proceeds were used to payoff the
Wells Fargo facility in full.

                                    PERSONNEL

          As of the April 15, 2003, Covista and its subsidiaries employed 263
full-time and part-time employees in its long distance telecommunication
business, of whom 21 were engaged in sales activities, 106 in customer service
and support, 30 in technical and field services, 29 in data processing, and 77
in general and administrative activities. Covista also utilizes the services of
approximately 2,200 independent sales agents. Covista considers its relations
with its employees to be satisfactory.

ITEM 2. Properties

          On November 15, 1993, and December 28, 1993, Covista entered into
leases for an aggregate of approximately 3,500 square feet of space at 744 Broad
Street, Newark, New Jersey, for its switching equipment. The lease ran from
January 1, 1994 through December 31, 1998, with an option to renew the lease
through August 31, 2002, which has been exercised. The annual rental of $63,200
also requires the tenant to pay a proportionate share of any increase in the
"Consumer Price Index", U. S. City Average over the base year. Covista has also
renewed this lease on a month-to-month term while the switching components are
relocated to Miami, Florida. This should be completed during FY2004

          On February 22, 1994, Covista entered into a lease, subsequently
modified on April 15, 1994, for approximately 17,700 square feet of space at 150
Clove Road, Little Falls, New Jersey to be used as sales, executive and
administrative offices. The lease provided for a rent holiday until July, 1995,
after which the annual rental would be approximately $360,000. The lease is for
five years and ten months and has been amended by a second lease modification
agreement dated February 9, 1995 whereby Covista leased approximately 6,700
additional square feet of space at the same location at an additional annual
rental of $121,707 for the first four years and $138,154 for the next year and
two months. The modified agreement also extended the term of the existing lease
for an additional two years to August 14, 2002 at a then annual rental of
$563,000. The lease required the payment of the tenant's proportionate share of
operating expenses and real estate tax increases over the base year. This lease
was not renewed on expiration.

          On November 1, 1996, Covista entered into a lease for approximately
8,300 square feet of space at 40 Rector Street, New York City, New York, for use
as a second switching facility. The term of the lease is for fifteen years and
ten months from the date of commencement, which was March 1, 1997. Rental
payments are $163,918 per annum for the first five years after commencement,
$166,480 per annum for the next five years, and $183,128 per annum for the
remaining five years and ten months. The lease requires the payment of the
tenant's proportional share of increased operating expenses and real estate
taxes over the base year.

          On January 30, 1997, Covista entered into a third modification of its
lease for approximately 16,640 square feet of additional office space at its
existing facility at 150 Clove Road, Little Falls, New Jersey. The annual rental
on the additional space was $357,760 per annum from July 1, 1997 through
February 14, 1998, is $366,800 per annum from February 15, 1998 through August
14, 2000, and was $384,820 per annum from August 15, 2000 through August 14,
2002. In addition, Covista was obligated for its proportionate share of
increases in real estate taxes and operating expenses over the base year. This
lease was not renewed on expiration.


                                       11





<PAGE>

          On February 6, 1998, Covista entered into a lease for approximately
5,000 square feet of space at 28 W. Flagler Street, Miami, Florida. The term of
the lease is 15 years, commencing February 1, 1998. The annual rental is
approximately $116,160, with an annual adjustment based on the Revised Urban
Wage Earners and Clerical Workers Index, capped at a maximum of 3% increase over
the prior year's rental payment. In addition, Covista is liable for its
proportionate share of increases in real estate taxes and operating expenses
over the base year. Covista sublet this space on January 1, 2000 for the balance
of its term, to another tenant at an annual rate of approximately $116,160,
subject to adjustments. The sub-tenant has defaulted on the sublease and Covista
is currently moving switching equipment from the Newark, New Jersey facility to
this location. That move will be complete during FY2004.

          On August 20, 1999, Covista entered into a three year lease,
commencing August 20, 1999 for 2,770 square feet of space at 20 Crossways Park
North, Woodbury, New York. Rental payments were $62,235 per annum from October
1, 1999 to August 31, 2000, and $64,818 from September 1, 2000 to August 31,
2001 and $67,422 from September 1, 2001 to August 31, 2002. The lease required
the payment of the tenant's proportionate share of increased operating expenses
and real estate taxes over the base year. Covista has not renewed this lease
on expiration.

          On November 17, 1999, Covista entered into a three-year lease,
commencing November 17, 1999 for 2,186 square feet of space at One Landmark
Square, Stamford, Connecticut. Rental payments were $50,278 per annum from
November 17,1999 to November 16,2000, are $51,371 from November 17,2000 to
November 16, 2001, and $51,556 from November 17, 2000 to November 16, 2002.
There was an option to renew for three years, upon nine months' prior written
notice. The lease required the payment of the tenant's proportionate share of
increased operating expenses and real estate taxes over the base year. Covista
has not renewed this lease on expiration.

          On October 11, 1999, Covista entered into a three year lease,
commencing October 11,1999 leasing 1,926 square feet of space at 1810 Chapel
Avenue West, Cherry Hill, New Jersey. Rental payments were $38,520 per annum
from October 11,1999 to October 31,2002. There was an option to renew for
three years, upon nine months' prior written notice. The lease required the
payment of the tenant's proportionate share of increased operating expenses
and real estate taxes over the base year. Covista has not renewed this
lease on expiration.

          On September 1, 2001, Covista entered into a lease agreement for
approximately 28,000 square feet of office space in Chattanooga, Tennessee, with
Henry G. Luken III, Chairman of the Board, and a principal shareholder of
Covista. The term of the lease is for five years. The lease provides for annual
rent of $86,400 from September 1, 2001 to August 30, 2002; $115,200 from
September 1, 2002 to August 30, 2003; $144,000 from September 1, 2003 to August
30, 2004, with the last two years to be $144,000 annually adjusted for the
Consumer Price Index. Covista believes that such premises are leased on terms
not less favorable than an arm's length transaction.

          On December 1, 2001, Covista entered into a lease for property located
at 806 East Main Street, Chattanooga, Tennessee, for use as a switching
facility. The lessor is Henry G. Luken III, Chairman of the Board and a
principal shareholder of Covista. The lease expires on November 30, 2006.
Annual rent is payable as follows: $22,500 from December 1, 2001
to November 30, 2002, $27,000 from December 1, 2002 to November 30, 2003,
$31,500 from December 1, 2003 to November 30, 2004, and $36,000 from December 1,
2004 to November 30, 2005. Rental amounts for months beginning after October 1,
2005 will be adjusted upward for the U.S. Consumer Price Index. The lease may be
renewed for an additional 5 years upon 90 days' written notice prior to the
lease expiration date. Covista believes that such premises are leased on terms
not less favorable than an arm's length transaction.

          On December 15, 2001, Covista entered into a lease for Suite 1350,
1201 Main Street, Dallas, TX, for use as a switching facility, and expires on
April 14, 2006. Annual rent is due as follows: $164,475 from April 15, 2000
to April 14, 2002, $175,440 from April 15, 2002 to April 14, 2004, and
$186,405 from April 15, 2004 to April 14, 2006. The lease has no
provision for renewal.


                                       12





<PAGE>

          On February 8, 2002, Covista assumed a lease for Suite 940, 401 N.
Broad Street, Philadelphia, PA , for use as a switching facility. Covista's
obligations under this lease commenced with the purchase of Capsule
Communications. The lease expires on March 31, 2007. Base rent is $62,019
annually, with provisions for inflationary increases in operating costs.
The lease has no provision for renewal.

          On February 8, 2002, Covista assumed a lease for Suite 275, 3331
Street Road, Bensalem, PA, for use as a branch office facility. Covista's
obligations under this lease commenced with the purchase of Capsule
Communications. The lease expires on August 31, 2004. Annual rent is payable
as follows: $237,575 from September 1, 2001 to August 31, 2002, $243,012
from September 1, 2002 to August 31, 2003, $248,448 from September 1, 2003
to August 31, 2004. Covista has no right to further extend or renew the
term of the lease.

          On May 31, 2002, Covista entered into a lease for 2,900 useable (3,335
rentable) square feet at 511 11th Avenue South, Suite 312, Minneapolis,
Minnesota for use as a switching facility. The lease expires on May 31, 2009.
Annual rent is payable as follows: Year 1 = $86,376, Year 2 = $93,047,
Year 3 = $96,382, Year 4 = $99,717, Year 5 = $103,052, Year 6 = $106,387,
and Year 7 = $109,721. The lease may be renewed for an additional 5 years
upon 4 months' written notice prior to the lease expiration date. Covista
pays its proportionate share of real estate taxes and utilities for the leased
space.

          On August 15, 2002, Covista entered into a lease for approximately
3,700 square feet of the 5th Floor at 1 Mack Drive, Paramus, NJ for use as a
branch office facility. The lease expires on July 31, 2005 with annual fixed
rent due of $85,859. Additional rent of 1.07% is paid for operating costs,
subject to adjustment for escalation.

          On October 1, 2002, Covista entered into a lease for Suite 200 at 721
Broad Street, Chattanooga, Tennessee, for use as offices for Corporate
Headquarters. The lessor is Henry G. Luken III, Chairman of the Board and a
principal shareholder of Covista. The lease expires on November 30, 2007.
Annual rent is payable as follows: Year 1 = $101,674, Year 2 = $111,670,
Year 3 = $120,000, Year 4 = $120,000, Year 5 = $120,000. Rental amounts for
months beginning after October 1, 2005 will be adjusted upward for the U.S.
Consumer Price Index. The lease may be renewed for an additional 5 years
upon 90 days' written notice prior to the lease expiration date. Covista
believes that such premises are leased on terms not less favorable than an
arm's length transaction.

ITEM 3. Pending Legal Proceedings

          There are no pending legal proceedings which could be expected to have
a material adverse effect on Covista.

ITEM 4. Submission of Matters to a Vote of Security Holders

          A proxy statement dated November 19, 2002 and mailed to stockholders
on or about November 20, 2002 provided details on the election of eight
directors to serve for a term of one year and until their successors were duly
elected and qualified; a proposal to issue and sell up to 4,360,000 shares of
the Company's Common Stock to Henry G. Luken III, Chairman of the Board of
Directors of the Company, or a limited number of persons designated by Mr.
Luken; adoption of the 2002 Equity Incentive Plan; Ratification of the selection
of Deloitte & Touche LLP as independent auditors of the Company for the fiscal
year ending January 31, 2003; and the transaction of such other business as may
properly come before the meeting or any adjournment or postponement thereof.
During the scheduled annual meeting of stockholders on December 19, 2002.
All of the foregoing matters were approved by the requisite vote of stockholders
of Covista.


                                       13





<PAGE>

                                    PART II

ITEM 5. Market for Company's Common Stock and Related Security Holder Matters

Common Stock

          Covista's authorized capital stock consists solely of 50,000,000
shares of Common Stock. Holders of Covista's Common Stock are entitled to
receive such dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion from funds legally available therefor. Each
holder of Common Stock is entitled to one vote for each share held. There is no
right to cumulative voting. Upon liquidation, dissolution, or winding up of
Covista, the holders of Common Stock are entitled to receive a pro rata share of
all assets available for distribution to stockholders. The Common Stock has no
pre-emptive or other subscription rights, and there are no conversion or
redemption rights with respect to such shares.

          As of the date of this report, there were 17,783,092 shares of Common
Stock issued and outstanding, held by approximately 860 persons.

Price Range of the Common Stock

          Covista's Common Stock is traded on the NASDAQ National Market
System under the Symbol CVST. The following table sets forth, for the quarterly
fiscal periods indicated, the high and low closing sale prices for Covista's
Common Stock in such market, as reported by the National Association of
Securities Dealers, Inc.

<TABLE>
<CAPTION>
FISCAL 2002                         HIGH     LOW
-----------                        ------   ------
<S>                                <C>      <C>
February 1, 2001 thru April 30     $6.188   $1.547

May 1 thru July 31                 $ 7.25   $ 3.25

August 1 thru October 31           $10.25   $ 4.50

November 1 thru January 31, 2002   $10.25   $ 5.62
</TABLE>

<TABLE>
<CAPTION>
FISCAL 2003                        HIGH     LOW
-----------                        -----   -----
<S>                                <C>      <C>
February 1, 2002 thru April 30     $8.15   $3.90

May 1 thru July 31                 $5.15   $2.83

August 1 thru October 31           $4.17   $2.00

November 1 thru January 31, 2003   $3.97   $2.01
</TABLE>

          Covista has not paid or declared any cash dividends during the past
          two fiscal years and does not anticipate paying any in the foreseeable
          future.

COMPENSATION PLANS AND SECURITIES

    The following table sets forth certain information as of January 31, 2003
with respect to compensation plans under which equity securities of the Company
are authorized for issuance:

<Table>
<Caption>
                                                                                     NUMBER OF SECURITIES
                                   NUMBER OF SECURITIES TO     WEIGHTED-AVERAGE      REMAINING AVAILABLE
                                   BE ISSUED UPON EXERCISE    EXERCISE PRICE OF      FOR FUTURE ISSUANCE
                                   OF OUTSTANDING OPTIONS,   OUTSTANDING OPTIONS,        UNDER EQUITY
          PLAN CATEGORY              WARRANTS AND RIGHTS     WARRANTS AND RIGHTS    COMPENSATION PLANS (1)
          -------------              -------------------     -------------------    ----------------------
<S>                                <C>                       <C>                    <C>
Equity compensation plans
  approved by security holders...         1,673,556                 $3.90                 1,261,510
Equity compensation plans not
  approved by security holders...                 0                     0                         0
                                          ---------                 -----                 ---------
Total............................         1,673,556                 $3.90                 1,261,510
</Table>

---------

(1) Under all plans, if any shares subject to a previous award are forfeited, or
    if any award is terminated without issuance of shares or satisfied with
    other consideration, the shares subject to such award shall again be
    available for future grants.


                                       14





<PAGE>

ITEM 6. Selected Financial Data

                    (In thousands except per share amounts)
                             Year ended January 31,
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                               2003         2002         2001       2000       1999
                                             --------     --------     --------   --------   --------
<S>                                          <C>          <C>          <C>        <C>        <C>
RESULTS OF OPERATIONS:

Net Revenues                                 $100,960     $ 95,313     $133,230   $139,760   $137,283

Net Loss                                     $ (9,407)    $(11,970)    $ (8,629)  $ (9,414)  $ (3,418)

Weighted average common shares outstanding

   Basic                                       13,283       10,204        7,324      7,069      6,818

   Diluted                                     13,283       10,204        7,324      7,069      6,818

Loss per common and equivalent shares

Basic Loss per share                         $  (0.71)    $  (1.17)    $  (1.18)  $  (1.33)  $  (0.50)

Diluted Loss per share                       $  (0.71)    $  (1.17)    $  (1.18)  $  (1.33)  $  (0.50)

Cash dividends per common share                  None         None         None       None       None

Additions to property and equipment          $  4,943(b)  $  5,465     $  3,227   $  3,019   $  4,727

Depreciation and amortization                $  7,442     $  4,569     $  3,578   $  2,985   $  2,785

FINANCIAL POSITION:

Working Capital                              $ (9,536)    $(11,327)    $ (7,734)  $  1,222   $  1,261

Property and equipment-net                   $ 15,150     $ 12,490     $ 13,021   $ 13,317   $ 14,473

Total assets                                 $ 51,050     $ 31,257     $ 39,097   $ 45,184   $ 45,692

Long-term debt                               $  1,811     $  4,400(a)  $    382   $    997   $  1,566

Shareholders' Equity                         $ 19,693     $  1,569     $  5,777   $ 14,007   $ 16,442

Common shares outstanding                      17,783       10,849        7,969      7,944      7,605
</TABLE>

     (a)  $4,400,000 consists of a loan from Covistas' Chairman of the Board
          which was converted equity in Fiscal 2003 (see ITEM 13).

     (b)  Includes $3,400,000 of property contributions from Covista's
          Chairman of the Board, (see ITEM 13).

                                       15





<PAGE>

ITEM 7. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

          The following discussion is presented to assist in assessing the
changes in financial condition and performance of Covista for the fiscal years
ended January 31, 2001 (Fiscal 2001), January 31, 2002 (Fiscal 2002) and January
31, 2003 (Fiscal 2003). The following information should be read in conjunction
with the financial statements and related notes and other detailed information
regarding Covista included elsewhere in this report and should not be construed
to imply management's belief that the results, causes or trends presented will
necessarily continue in the future. Certain information contained below and
elsewhere in this annual report, including information with respect to Covista's
plans and strategy for its business, are "forward-looking statements."

Recent Accounting Pronouncements

          In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations." SFAS 141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminated the
pooling-of-interests method. As of January 31, 2003 Covista has
approximately $8,206,000 of Goodwill recorded on its books.

          In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is
effective February 1, 2002. SFAS 142 requires, among other things, the
discontinuance of goodwill amortization. In addition, the standard includes
provisions for the reclassification of certain existing recognized intangibles
as goodwill, reassessment of the useful lives of existing recognized
intangibles, reclassification of certain intangibles out of previously reported
goodwill and the identification of reporting units for purposes of assessing
potential future impairments of goodwill. SFAS 142 also requires Covista to
complete a transitional goodwill impairment test six months from the date of
adoption. Covista has not incurred impairment of Goodwill, based upon this test.

          In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations",
which is effective for all fiscal years beginning February 1, 2003. SFAS 143
requires recording the fair value of a liability for an asset retirement
obligation in the period in which it is incurred, and a corresponding increase
in the carrying value of the related long-lived asset. Over time, the liability
is accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, it is either settled for its recorded amount or a gain or loss upon
settlement is recorded. The adoption of SFA3 143 does not have a significant
impact on the financial position, results of operation, or cash flows of
Covista.

          In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 ("SFAS 144"), " Accounting for the Impairment or Disposal of
Long Lived Assets", which is effective February 1, 2002. SFAS 144 replaces the
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long Lived Assets and for Long-Lived Assets to be Disposed Of".
SFAS 144 requires that long-lived assets be measured at the lower of the
carrying amount or fair value, less cost to sell, whether included in continuing
operations or in discontinued operations. The adoption has not had a material
impact on Covista's financial position or results of operations.

          In July 2002, the FASB issued Statement of Financial Accounting
Standards No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities." SFAS 146 requires that a liability for a cost that is associated
with an exit or disposal activity be recognized when the liability is incurred.
SFAS 146 also establishes that fair value is the objective for the initial
measurement of the liability. SFAS 146 is effective for exit or disposal
activities that are initiated after December 31, 2002.


                                       16





<PAGE>

          In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), "Guarantees," an interpretation of FASB Statement No. 5, "Accounting for
Contingencies." This interpretation elaborates on the disclosures to be made by
a guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. Compliance with this interpretation
is not expected to have a material impact.

          In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of SFAS 123." SFAS 148 is effective for fiscal years
ending after December 15, 2002 and provides for additional annual and interim
financial statement disclosures. Adoption has not had a material impact
of Covista's financial position or results of operations.

          In January 2003, FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities ("FIN 46"). FIN 46 requires a variable interest
entity to be consolidated by a company if that company is subject to a majority
of the risk of loss from the variable interest entity's activities or entitled
to receive a majority of the entity's residual returns or both. FIN 46 also
requires disclosures about variable interest entities that a company is not
required to consolidate but in which it has a significant variable interest.
Adoption of this interpretation is not expected to have a material impact.

                              RESULTS OF OPERATIONS

                     FISCAL 2003 AS COMPARED TO FISCAL 2002

Revenues

          Net sales of telecommunications services for the fiscal year ended
January 31, 2003 were approximately $100,960,000, an increase of approximately
$5,647,000 or 5.9% from the approximately $95,313,000 of net sales in Fiscal
2002. These revenues were comprised of retail sales of approximately
$75,455,000, KISSLD revenue of approximately $12,990,000 and wholesale sales
of approximately $12,514,000. Covista billed approximately 1,453,124,000 minutes
in Fiscal 2003 as compared to approximately 1,075,758,000 minutes in Fiscal
2002, an increase of 377,366,000 minutes or 35.1%.

          Net retail sales for Fiscal 2003 were approximately $75,455,000 an
increase of approximately $28,031,000, or 59.1% from the approximately
$47,424,000 billed in Fiscal 2002. Retail billed minutes were approximately
1,087,295,000, an increase of approximately 468,749,000 minutes or 75.8%, over
the retail minutes of approximately 618,546,000 billed in Fiscal 2002. The
average price per minute decreased approximately 7.4% as the industry continued
to experience decreased price per minute of usage. Covista does not foresee that
this trend in pricing will abate in the near future. The current year increase
is primarily a result of the Capsule acquisition.

          Net KISSLD sales were approximately $12,990,000 for the first year of
this new business segment. KISSLD billed minutes were approximately 196,032,000.

          Net wholesale (carrier) sales for Fiscal 2003 were approximately
$12,514,000, a decrease of approximately $35,375,000 or 73.9% from the
approximately $47,889,000 billed in Fiscal 2002. Billed wholesale minutes
amounted to approximately 169,797,000, a decrease of approximately 287,414,000
minutes or 62.8% from the billed wholesale minutes of approximately 457,211,000
billed in Fiscal 2002. The sales mix continued to move toward higher priced
international traffic from the lower priced domestic traffic. International
carrier traffic decreased 280,879,000 minutes or approximately 29% to
approximately 114,740,000 minutes. Domestic minutes decreased approximately
6,535,000 or approximately 10.6% to approximately 55,057,000 minutes.

Cost of Revenue

          Cost of revenue consists of access fees, line installation expenses,
switch expenses, Network Operating Center ("NOC" ) expenses, network
depreciation, transport expenses, and local and long-distance expenses. Cost of
revenue for Fiscal 2003 was approximately $66,671,000; a decrease of
approximately $9,805,000 or 12.8% from the approximately $76,476,000 of cost of
revenue in Fiscal 2002. The decrease in cost was primarily due to the decrease
in lower margin wholesale volume of approximately $35,809,000; a net increase
in retail cost of revenue related primarily to the merger with Capsule
Communications of approximately $18,565,000 and an increase related to the
launch of KISSLD of approximately $7,439,000.

          In the normal course of business, Covista files disputes with its
service providers. The Covista accounting policy, followed on a consistent
basis, is to record the invoiced amount to cost of revenue, which may include
disputed amounts. When the dispute is resolved and the credit is received, the
amount reduces cost of revenue. During the fiscal year ended January 2003,
Covista obtained net credits of approximately $3.4 million for resolved
disputes. These credits reduced cost of revenue and the corresponding accounts
payable and accrued liability. Open and unresolved disputes included in accounts
payable and accrued liabilities totaled approximately $5.2 million at January
31, 2003.

          In the normal course of business, Covista uses certain estimates to
determine its monthly cost of revenue ("line cost") and corresponding accounts
payable to these service providers, These line costs include fees for network
transport, access, egress and facility charges. The Covista accounting policy
provides that changes in the accrued cost of revenue estimates will be adjusted
to actual amounts as soon as the actual liabilities can be fixed and
determinable. These adjustments to actual expense are typically identified
within 90 days following the period of estimate.


                                       17





<PAGE>

Selling, General and Administrative:

          Selling, general and administrative (S, G&A) expenses are comprised of
selling and marketing costs, and general and administrative costs. S, G&A
expenses for Fiscal 2003 increased to approximately $43,456,000, an increase of
approximately $12,469,000 or 40.2% from the approximate $30,987,000 in Fiscal
2002. This increase was primarily due to an increase in SG&A expenses associated
with the merger with Capsule Communications of approximately $16,867,000, a
decrease in salary, wages and benefits due to the transition of corporate
headquarters from New Jersey to Tennessee of $1,888,000; a decrease in
commissions due to certain sales agents of approximately $1,052,000; a
decrease in bad debt expense of $3,437,000 due to the substantial reduction
of the high risk wholesale line of business; and increased marketing expenses
related to the formation of the KISSLD segment of approximately $2,053,000.

Stock Compensation Expense

          There were no stock compensation expenses for Fiscal 2003 as compared
to $12,000 in Fiscal 2002; this decrease is due to a majority of stock grants
being fully vested.

Income Tax Benefit

          During Fiscal 2003, the Company recorded income related to a tax
refund received as a result of recent tax law changes in the amount of
approximately $511,000. No income was realized during Fiscal 2002.

Other Income and Expense

          Total other income, net for Fiscal 2003 increased approximately
$944,000. The components of other income and expense are interest expense,
interest income and other items. Interest income decreased approximately
$111,000 after the selling of securities; interest expense increased
approximately $588,000 due to interest paid on the Wells Fargo Credit Line
and the Note Payable to SunTrust; and gains on sales of securities decreased
approximately $245,000.

Net Loss

          For the reasons set forth above, the net loss for Fiscal 2003 of
approximately $9,407,000 represents a decrease in net loss of approximately
$2,563,000 over the net loss of approximately $11,970,000 reported in Fiscal
2002.


                                       18





<PAGE>

                              RESULTS OF OPERATIONS

                     FISCAL 2002 AS COMPARED TO FISCAL 2001

Revenues

          Net sales of telecommunications services for the fiscal year ended
January 31, 2002 were approximately $95,313,000, a decrease of approximately
$37,917,000 or 28.5% from the approximately $133,230,000 of net sales in Fiscal
2001. These revenues were comprised of retail sales of approximately $47,424,000
and wholesale sales of approximately $47,889,000. Covista billed approximately
1,075,758,000 minutes in Fiscal 2002 as compared to approximately 1,255,437,000
minutes in Fiscal 2001, a decrease of 179,678,000 minutes or 14.3%.

          Net retail sales for Fiscal 2002 were approximately $47,424,000, a
decrease of approximately $6,063,000, or 11.3% from the approximately
$53,487,000 billed in Fiscal 2001. Retail billed minutes were approximately
618,546,000, an increase of approximately 18,165,000 minutes or 3%, over the
retail minutes of approximately 600,381,000 billed in Fiscal 2001. The average
price per minute decreased approximately 17.3% as the industry continued to
experience decreased price per minute of usage. Covista does not foresee that
this trend in pricing will abate in the near future.

          Net wholesale (carrier) sales for Fiscal 2002 were approximately
$47,889,000, a decrease of approximately $31,854,000 or 39.9% from the
approximately $79,743,000 billed in Fiscal 2001. Billed wholesale minutes
amounted to approximately 457,211,000, a decrease of approximately 197,844,000
minutes or 30.2% from the billed wholesale minutes of approximately 655,055,000
billed in Fiscal 2001. The sales mix continued to move toward higher priced
international traffic from the lower priced domestic traffic. International
carrier traffic decreased 162,049,000 minutes or approximately 29.1% to
approximately 395,619,000 minutes. Domestic minutes decreased approximately
35,794,000 or approximately 36.8% to approximately 61,592,000 minutes. The
average wholesale price per minute fell 16% due to continuing competition in the
industry, a trend, which Covista believes, will continue.

Cost of Revenue

          Cost of revenue consists of access fees, line installation expenses,
switch expenses, Network Operating Center ("NOC" ) expenses, network
depreciation, transport expenses, and local and long-distance expenses. Cost of
revenue for Fiscal 2002 was approximately $76,476,000, a decrease of
approximately $39,583,000 or 34.1% from the approximately $116,059,000 of cost
of revenue in Fiscal 2001. Included in cost of revenue are direct line costs,
usage charges and the direct costs of Covista's switches and NOC. The decrease
in cost of revenue was primarily due to the decrease in lower margin wholesale
volume of approximately $24,401,000; a decrease in technician salary, wages and
fringe benefits of approximately $46,000; decreased consulting expense of
approximately $174,000 an improvement in rates obtained from vendors of
approximately $15,298,000 ; other net savings in the NOC and switches of
approximately $123,000; an increase in depreciation expense resulting from
upgrades to the switches of approximately $130,000; an increase in equipment
rental resulting from a switch sale/leaseback agreement in the amount of
approximately $329,000; and the effect of the access charge settlement
recorded in Fiscal 2001.


Selling, General and Administrative:

          Selling, general and administrative (S, G & A) expenses are comprised
of selling and marketing costs, and general and administrative costs. S, G & A
expenses for Fiscal 2002 increased to approximately $30,987,000, an increase of
approximately $4,083,000 or 15.2% from the approximate $26,903,000 in Fiscal
2001. This increase was primarily due to increases in salary, wages and benefits
due to the new residential service and call center being established in
Tennessee of approximately $412,000; a $570,000 severance accrual established
for New York/New Jersey staff reductions taking place in fiscal 2003; an
increase in marketing cost related to new residential service of approximately
$177,000; an increase in general office expense of approximately $272,000; an
increase in bad debt expense of $2,758,000 due to the write off of a portion of
certain carrier receivables; an increase in depreciation and amortization due to
amortization of customer lists (from customer lists acquired from Blink Data
Corporation) of approximately $731,000; and an increase in travel and
entertainment of approximately $98,000. These increases were offset by
reductions in commissions due to decreased sales volume of approximately
$497,000; decreases in selling expense of approximately $90,000; and a decrease
in professional fees and consulting of $252,000.

Stock Compensation Expense

          Stock compensation expenses for Fiscal 2002 decreased to approximately
$12,000, a decrease of approximately $255,000, or 95.5%, from the approximately
$267,000 charged in Fiscal 2001. The decrease is due to a majority of stock
grants being fully vested.


                                       19





<PAGE>

Other Income and Expense

          Total other expense, net for Fiscal 2002 increased approximately
$88,000. The components of other income and expense are interest expense,
interest income and other items. Interest income decreased approximately $8,000;
interest expense increased approximately $137,000; and gains on sales of
securities increased approximately $232,000.

Net Loss

          The net loss for Fiscal 2002 of approximately $11,970,000 represents
an increase in net loss of approximately $3,340,000 over the net loss of
approximately $8,629,000 reported in Fiscal 2001, based on the explanations of
changes above.

                         LIQUIDITY AND CAPITAL RESOURCES

Working Capital

          At January 31, 2003, Covista had a working capital deficit of
approximately $9,536,000 as compared to approximately $11,327,000 at
January 31, 2002, an improvement in working capital of approximately $1,791,000.
The increase in cash of approximately $2,065,000; a reduction in investments of
approximately $440,000; an increase in accounts receivable of approximately
$5,463,000; a decrease in prepaid expenses of approximately $747,000; and an
increase in accrued liabilities of approximately $6,589,000. Also affecting
working capital were a decrease in notes receivable of approximately $500,000;
a reduction in accounts payables of approximately $4,392,000; a decrease in
accrued salaries and wages of approximately $594,000; and an increase in
current portion of long-term debt of $2,447,000. The current ratio of 0.67 to 1
improved from the 0.55 to 1 ratio at the end of Fiscal 2002.

                    On February 20, 2002, Covista's Board of Directors approved
the private sale of additional Common Stock of up to $12,500,000, including
a cash infusion of $4,800,000, contribution of $3,300,000 of fixed assets for
debt or Common Stock and the conversion of existing long-term debt for Common
Stock at the rate of $5.00 per share, the closing price for the Common Stock on
the date authorized by the Board. The commitment for funding for the investment
and the conversion of the Indebtedness was anticipated to come primarily from
the Chairman of Covista's Board or his designees and was subject to
shareholder's approval at the next Annual Meeting, or a special meeting of
Shareholders to be convened for such purpose.

          Effective April 16, 2003, Covista executed a revolving credit and
security agreement along with related documents that provide the Company with
an $8 million revolving loan of which $7 million is currently available. This
thirty-six month facility allows the Company to borrow funds based on a portion
of eligible customer accounts receivable and bears interest at the Prime Rate
plus 2.00% with a floor of 6.25%. Interest, unused line and collateral
management fees are payable monthly in arrears. The loan is secured by all of
the Company's assets. Initial loan proceeds were used to payoff the Wells Fargo
facility in full.

Cash Flow Statement

          The cash flow statement of Covista for Fiscal 2003 indicated an
increase in cash and cash equivalents of approximately $2,065,000. Non-cash
adjustments (depreciation, amortization, and provision for bad debt,) of
approximately $10,196,000 are added back and net changes in assets and
liabilities of approximately $8,249,000 deducted from the net loss of
approximately $9,407,000 resulted in net cash used by operations of
approximately $7,461,000. Cash used in investing activities amounted to
approximately $79,000, of which approximately $1,543,000 were used for the
purchase of capital additions, proceeds from sale investments approximated
$440,000, repayment of a note from Capsule Communications of $500,000, and
payment for deferred line installation costs of approximately $655,000.
These changes were partially offset by net cash acquired from the Capsule
merger of approximately $1,179,000. The cash provided by financing activities
of approximately $9,605,000 consisted primarily of net bank borrowings of
approximately $2,520,000, cash received from the exercise of stock options
of approximately $378,000, proceeds from the issuance of Common Stock of
approximately $4,107,000.

Accounts Receivable

          The Company has entered into offset arrangements with certain carrier
customers, who are also vendors, allowing for the ability to offset payable
balances against the Company's receivable balances.


                                       20





<PAGE>

          Covista experienced consolidated net accounts receivable turnover
of approximately 51 and 59 days for Fiscal 2003 and Fiscal 2002 respectively.

                          CRITICAL ACCOUNTING POLICIES

Revenue Recognition

          The Company's revenues, net of sales discounts, are recognized in the
period in which the service is provided, based on the number of minutes of
telecommunications traffic carried, and a rate per minute. Access and other
service fees charged to customers, typically monthly, are recognized in the
period in which service is provided.

Deferred Line Installation Costs

          Deferred line installation costs are costs incurred by the Covista for
new facilities and costs incurred for connections from within the Covista's
network to the network of other telecommunication suppliers. Amortization of
these line installation costs is provided using the straight-line method over
the contract life of the lines ranging from three to five years.

Long-Lived Assets

          The Company accounts for the impairment of long-lived assets and for
long-lived assets to be disposed of by evaluating the carrying value of its
long-lived assets in relation to the operating performance and future
undiscounted cash flows of the underlying businesses annually and when
indications of impairment are present. Long-lived assets to be disposed of, if
any, are evaluated in relation to the net realizable value. If impairment is
indicated, the amount of the impairment is typically calculated using discounted
expected future cash flows. The discount rate applied to these cash flows is
based on the Company's weighted average cost of capital. If the carrying value
of the asset exceeds the fair value of the asset, the difference will be charged
to the results of operations in the period that the impairment occurred. Based
on the Company's analysis of future undiscounted cash flows, which are in excess
of the carrying value of its long-lived assets, there does not appear to be an
impairment as of January 31, 2003.

                              CAPITAL EXPENDITURES

          Capital expenditures for Fiscal 2003 totaled approximately
$1,543,000, excluding fixed assets acquired in the Capsule merger and fixed
assets contributed from Covista's Chairman of the Board. These expenditures
were financed from funds provided from Covista's working capital, and a private
sale of equity and a loan. The capital expenditures were used primarily for
upgrades to Covista's switches and switch sites, software and hardware upgrades
to Covista's computer network, and furniture, fixtures and equipment.

          Capital expenditures for Fiscal 2004 are estimated at approximately
$2,000,000 and are expected to be financed from funds provided from operations.

Inflation

          Since inflation has slowed in recent years, Covista does not believe
that its business has been materially affected by the relatively modest rate of
price increases in the economy. However, pressures in the industry to reduce
prices, which have impacted Covista in the past, are expected to continue. Also
the telecommunications industry has recently experienced the failure of several
businesses, some of which are Covista's wholesale customer and suppliers. These
failures not only have affected Covista's FY 2003 results, but also may impact
future results. Covista continues to seek improvements in operations and
efficiency through capital expenditures. Expenditures to improve the signaling
system, information systems and the local area network are expected to result in
operating costs savings, which could partially offset any future cost increases.

                              ENVIRONMENTAL MATTERS

          Covista is not a party to any legal proceedings or the subject of any
claim regarding environmental matters generally incidental to its business. In
the opinion of Management, compliance with the present environmental protection
laws should not have a material adverse effect upon the financial condition of
Covista


                                       21





<PAGE>

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

          Market risk represents the risk of changes in value of a financial
instrument, derivative or non-derivative, caused by fluctuations in interest
rates, foreign exchange rates and equity prices. The exposure to interest rate
risk relates primarily to the marketable securities held by Covista. Covista
only invests in instruments with high credit quality where a secondary market
exists. Covista does not hold any derivatives related to its interest rate
exposure. Covista also maintains long-term debt at fixed rates. Due to the
nature and amounts of Covista's note payable, an immediate 10% change in
interest rates would not have a material effect in Covista's results of
operations over the next fiscal year. Covista's exposure to adverse changes
in foreign exchange rates is also immaterial to the consolidated statements
as a whole.

ITEM 8. Financial Statements and Supplementary Data

          The Financial Statements and Supplementary Data are included under
Item 15 of this Report.

ITEM 9. Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure

          Not applicable.


                                      22





<PAGE>

                                    PART III

ITEM 10. Directors and Executive Officers of Covista

The directors and officers of Covista are as follows:

<TABLE>
<CAPTION>
NAME                  AGE   POSITION
-------------------   ---   ----------------------------------------------
<S>                    <C>  <C>
Henry G. Luken, III    43   Chairman of the Board

A. John Leach, Jr.     40   Director, President & Chief Executive Officer

Kevin Alward           36   Director, Chief Operating Officer

Jay J. Miller          69   Director

Nicholas Merrick       40   Director

Leon Genet             71   Director

Donald Jones           67   Director

W. Thorpe McKenzie     55   Director

Thomas P. Gunning      65   Treasurer, Secretary & Chief Financial Officer
</TABLE>

          Covista's directors all serve for one-year terms and until their
successors are elected and qualify. Officers serve at the pleasure of the Board
of Directors.

          Henry G. Luken, III was elected a Director of Covista in February
1999, and Chairman of the Board in February 2001. Currently, he is President of
Montlake Properties, Inc., a real estate development firm; a director of Equity
Broadcasting Corp., a TV network; a director of ACNTV, a home shopping company
selling through TV; Managing Agent of Henry IV LLC, an aircraft sales company. A
co-founder of Telco Communications Group inc., he served as Chief Executive
Officer and Treasurer from July 1993 to April 1996, and Chairman from July 1993
to October 1997. Mr. Luken has also served as Chairman of Tel-Labs, Inc., a
telecommunications billing firm ("Tel-Labs") since 1991, and as Chairman of
Telco Development Group, Inc., a computer systems firm owned by Mr. Luken, since
1987, both of which entities he founded.

          Leon Genet has served as a Director since October 1996. For more than
the past five years, he has been a partner in Genet Realty, a commercial and
industrial real estate brokerage firm. He serves as a member of the National
Commerce and Industry Board for the State of Israel Bonds Organization and is a
shareholder, director and officer of LPJ Communications, Inc., which has earned
commissions from Covista on the same basis as other independent sales
representatives. See "Certain Relationships and Related Transactions".

          A. John Leach, Jr. was appointed President and Chief Executive Officer
and a Director of Covista on May 18, 2000. He had been Senior Vice President of
Sales at BTI Telecomm, Inc., from December, 1999 to May, 2000; Senior Vice
President of Teleglobe, Inc. from June 1996 to December 1999, where he assumed
responsibility for US and Canadian commercial sales markets. He was promoted to
this position from Senior Vice President of Wholesale and Agent Markets, Telco
Communications (a subsidiary of Teleglobe, Inc.) June 1996 to February 1999.
Prior to that, Mr. Leach was Vice President of Agent Services at BTI Telecomm,
from December 1989 to June 1996. Regional Sales Manager of Mobilecomm (a Bell
South Company) where he started in sales and rose to a Regional Sales Manager
position May 1985 to December 1989.

          Jay J. Miller, Esq. has served as a Director since 1983. He has been a
practicing attorney for more than 40 years in New York. He is Chairman of the
Board of AmTrust Pacific Ltd., a New Zealand real estate company. He is also a
director of Technology Insurance Company, Inc., a provider of workers'
compensation, as well as, various insurance products to the technology
industry, and certain of its affiliates. Mr. Miller has performed legal services
on behalf of Covista. See "Certain Relationships and Related Transactions."


                                       23





<PAGE>

          Thomas P. Gunning was appointed Vice President, Secretary / Treasurer
of Covista in May 1999. He was appointed Chief Financial Officer in September,
1994 and served in that capacity until May 0f 1999. He was again appointed Chief
Financial Officer in May of 2000. He was appointed Secretary of Covista in
January of 1995. He has served as Controller of Covista since September 1992. He
is a Certified Public Accountant licensed by the States of New York and New
Jersey. From 1989 until joining Covista, Mr. Gunning was the Senior Audit
Manager at Rosenberg Selsman & Company, a certified public accounting firm. From
1976 to 1989, he was Chief Financial Officer of Flyfaire, Incorporated, a travel
wholesale operator. Prior to such time, Mr. Gunning held various positions in
both public and private accounting firms.

          Donald Jones recently retired from his position as Senior Vice
President for Chapter Services of the American Red Cross, for which he worked
since 1991. Prior to joining the Red Cross, Mr. Jones was Deputy Assistant
Secretary of Defense for Military Manpower and Personnel Policy. Mr. Jones
served in the United States Army for over 35 years and retired in 1991 with the
permanent rank of Lieutenant General.

          Nicholas Merrick currently serves as President of Mt Vernon
Investments, LLC, an investment company, which he has served as President since
January 2002. Mr. Merrick served as Senior Vice President and Chief Financial
Officer of Telergy, Inc., a high-speed fiber optic communications network
company, from May 2000 to July 2001. Telergy filed for reorganization under the
bankruptcy laws in October 2001 and has liquidated. Prior to joining Telergy,
Mr. Merrick was Chief Executive Officer of Up2 Technologies, Inc. and Executive
Vice President of Excel Communications, each of which is a subsidiary of
Teleglobe, Inc. (global communications, e-business services), from 1998 until
2000. From 1996 to 1997, he was Vice President and Chief Financial Officer of
Telco Communications Group, Inc., and from 1985 to 1996, he was Vice President
of Corporate Finance at the Robinson-Humphrey Company, Inc. and Managing
Director of R-H Capital Partners.

          Kevin A. Alward was appointed Chief Operating Officer of Covista on
March 29, 2001 and was elected a director of Covista on July 17, 2001. He had
previously served TotalTel USA as President and Chief Operating Officer from
1994 to 1998, when he left the company to become President of North America for
Destia Communications, Inc. (formerly known as Econophone, Inc.) and its
successor bymerger, Viatel, Inc. In April 2000, he co-founded Blink Data Corp.,
a telecommunications and data services provider headquartered in northern New
Jersey, where he was President and Chief Executive Officer until his return to
Covista.

          W. Thorpe McKenzie is Managing Director of Pointer Management Company,
Chattanooga, Tennessee, which he co-founded in 1990 to invest in hedge funds and
similar types of partnerships utilizing a fund of funds approach. From 1982
until 1990, he was a private investor in New York City, and a director of
several public and private companies. From 1980 until 1982, he was founding
general partner of TIGER, a global hedge fund. From 1971 until 1980, he was a
Vice President of Kidder, Peabody, & Co., Inc. in New York. McKenzie is a
graduate of the University of North Carolina in Chapel Hill, and the Wharton
Graduate division of the University of Pennsylvania in Philadelphia. He is
currently a director of Novestra AB, a publicly traded venture capital
investment firm located in Stockholm, Sweden.

Board of Directors

          Covista's Board of Directors currently consists of eight persons, two
of whom are members of management and six of whom are non-management directors.
During the fiscal year ended January 31, 2003, the Board held five meetings,
each of which was attended by at least 80% of the directors then serving.

          Covista's Board of Directors has Audit and Compensation Committees,
but does not have a Nominating Committee or a committee performing a similar
function. The Audit Committee currently consists of three non-management
directors, Messrs. Nicholas Merrick, Donald Jones and W. Thorpe McKenzie. The
Committee reviews, analyzes and may make recommendations to the Board of
Directors with respect to Covista's financial statements and controls. The
Committee has met and intends to meet from time to time with Covista's
independent public accountants to monitor their activities. The Compensation
Committee consists of Messrs. Henry Luken and Jay J. Miller and is charged with
reviewing and recommending the compensation and benefits payable to Covista's
senior executives. Mr. Leach is an ex-officio member of both the Compensation
and Audit Committees.

          (THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)


                                       24





<PAGE>

ITEM 11. Executive Compensation

The following table sets forth the compensation that Covista paid during the
fiscal years ended January 31, 2003, 2002 and 2001 to its Chief Executive
Officer and to each executive officer of Covista or person performing similar
functions whose aggregate remuneration exceeded $100,000, during Covista's
fiscal year ended January 31, 2003 (the "Named Executives").

Summary Compensation Table

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
        NAME &          FISCAL YEAR      ANNUAL         ANNUAL      OTHER ANNUAL   COMPENSATION     ALL OTHER
      PRINCIPAL            ENDED      COMPENSATION   COMPENSATION   COMPENSATION      AWARDS      COMPENSATION
       POSITION          JANUARY 31    SALARY ($)      BONUS ($)        ($)         OPTIONS ($)        ($)
--------------------------------------------------------------------------------------------------------------
<S>                         <C>         <C>          <C>                 <C>            <C>        <C>
John Leach,                 2003        $300,000     $150,000            $0             $0         $24,292(3)
President & Chief           2002        $300,000     $400,000 (2)        $0             $0         $ 5,250(4)
Executive Officer (1)       2001        $210,000     $0                  $0             $0         $15,346(5)
--------------------------------------------------------------------------------------------------------------
Thomas P. Gunning,          2003        $155,000     $0                  $0             $0         $ 8,397(6)
Vice President,             2002        $155,000     $15,000             $0             $0         $11,085(7)
Treasurer and               2001        $147,360     $0                  $0             $0         $11,427(8)
Secretary
--------------------------------------------------------------------------------------------------------------
Kevin Alward, Chief         2003        $250,000     $125,000            $0             $0         $ 9,638(9)
Operating Officer           2002        $235,577     $104,167            $0             $0         $ 3,567(10)
--------------------------------------------------------------------------------------------------------------
</TABLE>

----------
(1)  Mr. Leach joined Covista on May 18, 2000.

(2)  The amount shown includes $250,000 in bonus due to Mr. Leach for the period
     from 05/01/00 to 04/30/01 but not paid until FY2002.

(3)  The amount shown represents Covista's contributions under its 401(K)
     Deferred Compensation and Retirement Savings Plan of $5,500, Covista's
     group major medical benefit of $3,792 and $15,000 in reimbursement for
     certain relocation expenses.

(4)  The amount shown represents Covista's contribution under its 401(K)
     Deferred Compensation and Retirement Savings Plan.

(5)  The amount shown represents Covista's contribution under its 401(K)
     Deferred Compensation and Retirement Savings Plan of $346 and $15,000 in
     reimbursement for certain relocation expenses.

(6)  The amount shown represents Covista's contributions under its 401(K)
     Deferred Compensation and Retirement Savings Plan of $4,740, Covista's
     group major medical benefit of $4,800 and $1,780 for the use of a Company's
     vehicle for non-business purposes.

(7)  The amount shown represents Covista's contribution under its 401(K)
     Deferred Compensation and Retirement Savings Plan of $4,505; Covista
     company auto expenses of $1,780; and Covista's group major medical benefit
     of $4,800.

(8)  The amount shown represents Covista's contribution under its 401(K)
     Deferred Compensation and Retirement Savings Plan of $4,460, $2,167 for the
     use of a Company's vehicle for non-business purposes and $4,800 for term
     life insurance premiums.

(9)  The amount shown represents Covista's contributions under its 401(K)
     Deferred Compensation and Retirement Savings Plan of $4,518 and Covista's
     group major medical benefit of $5,120.

(10) The amount shown represents Covista's contribution under its 401(K)
     Deferred Compensation and Retirement Savings Plan.


                                       25





<PAGE>

          Compensation Pursuant to Plans

          In October, 1996, adopted its 1996 Stock Option Plan and in February
2000, adopted its 1999 Equity Incentive Plan, and in February 2002 adopted its
2001 Equity Incentive Plan and in December 2002 adopted its 2002 Equity
Incentive Plan (the "Option Plans"). The Option Plans provide that
certain options granted thereunder are intended to qualify as "incentive stock
options" within the meaning of Section 422A of the United States Internal
Revenue Code, while non-qualified options may also be granted under the Option
Plans. Incentive stock options may be granted only to employees of Covista,
while non-qualified options may be granted to non-executive directors,
consultants and others as well as employees.

          The Option Plans may be administered by the Compensation Committee of
Covista's Board of Directors. Covista has reserved 600,000 shares of Common
Stock under the 1996 Option Plan and 750,000 shares of Common Stock under its
1999 Equity Incentive Plan, and 900,000 under its 2001 Equity Incentive Plan
and 750,000 under its 2002 Equity Incentive Plan for issuance to employees,
officers, directors and consultants of Covista.

          No option may be transferred by an optionee other than by will or the
laws of descent and distribution, and during the lifetime of an optionee, an
option may be exercised only by him. In the event of termination of employment
other than by death or disability, the optionee will have one month (subject to
extension not to exceed an additional two months) after such termination during
which he may exercise his option. Upon termination of employment of an optionee
by reason of death or permanent total disability, his option remains exercisable
for one year thereafter to the extent it was exercisable on the date of such
termination. No similar limitation applies to non-qualified options.

          Options under the Option Plans must be granted within 10 years from
the effective date of the respective Option Plan. Incentive stock options
granted under the Option Plans cannot be exercised later than 10 years from the
date of grant. Options granted under the Option Plans permit payment of the
exercise price in cash or by delivery to Covista of shares of Common Stock
already owned by the optionee having a fair market value equal to the exercise
price of the options being exercised, or by a combination of such methods of
payment. Therefore, an optionee may be able to tender shares of Common Stock to
purchase additional shares of Common Stock and may theoretically exercise all of
his stock options with no additional investment other than his original shares.

          Any option, which expires, unexercised or that terminates upon an
employee's ceasing to be employed by Covista become available again for issuance
under the Option Plans.

          For further information related to stock option plans, reference is
made to note 10 in the Notes to the Consolidated Financial Statements.


                                       26





<PAGE>

          Compensation of Directors

          For the fiscal year ended January 31, 2003, each director who was not
an employee of Covista was entitled to receive a director's fee of $15,000 per
year, and to be reimbursed for out-of-pocket expenses incurred in connection
with attendance at meetings. However, Mr. Luken waived the right to receive
such compensation.

          Employment Contracts, Termination of Employment and Change of Control
Arrangements

          As Covista's Chief Executive Officer, Mr. Leach has a three-year
employment agreement with Covista effective as of May 18, 2000, pursuant to
which Mr. Leach was paid base salary at the rate of $300,000 per annum during
fiscal 2001. Pursuant to this agreement, Mr. Leach was also entitled to receive
a signing bonus in the amount of $25,000 to cover relocation and other expenses.
Mr. Leach is also entitled to receive an annual bonus in an amount not to exceed
100 percent of his then effective base salary, based upon Mr. Leach's attainment
of annual revenue and earnings targets as well as management goals set by the
Board of Directors. Mr. Leach was guaranteed a minimum bonus payment of $150,000
during each year of this agreement.

          In connection with his appointment as Chief Executive Officer of
Covista, Mr. Leach was granted an option under Covista's 1996 Stock Option Plan
to purchase 288,000 shares of Covista Common Stock. The option granted to Mr.
Leach was scheduled to vest over a period of three years, in six equal
semi-annual installments, the first of which commenced on November 18, 2000. The
exercise price for the option was $14.25 and was based on the fair market value
of the Covista Common Stock on the date of the grant, and the options expire
after ten years. According to the agreement, in the event that the Covista
Common Stock did not close at or above $14.25 for at least 20 consecutive
trading days between May 18, 2000 and May 18, 2001, a new exercise price would
be calculated based on the average closing price of the Covista Common Stock for
the 40 trading days prior to May 18, 2001. In lieu of adjusting the exercise
price of Mr. Leach's options in the manner provided in his employment agreement,
on February 1, 2001 Covista granted to Mr. Leach a new option to purchase
288,000 shares of Covista Common Stock. These options fully vested as a result
of the Capsule merger. The exercise price for the option is $2.00 per share and
is based on the fair market value of the Covista Common Stock on the date of
grant. The option expires after a term of ten years.

          As Covista's Chief Operating Officer, Mr. Alward has a two-year
employment agreement effective as of March 29, 2001, pursuant to which Mr.
Alward is paid an annual base salary of $250,000. Pursuant to this agreement,
Mr. Alward received a signing bonus in the amount of $24,000. Mr. Alward is also
entitled to receive an annual bonus in an amount not to exceed 100 percent of
his then effective base salary, based upon Covista's attainment of annual
revenue and earnings targets as well as management goals set by the Board of
Directors. Mr. Alward's agreement provides that he shall receive the same
percentage bonus as Mr. Leach. Mr. Alward is guaranteed a minimum bonus payment
of $125,000 for each year of this agreement. Mr. Alward's contract was extended
for an additional year at March 29, 2003.


                                       27





<PAGE>

          In connection with his appointment as Chief Operating Officer of
Covista, Mr. Alward was granted an option under Covista's 2001 Equity Incentive
Plan to purchase 250,000 shares of Covista Common Stock. The option granted to
Mr. Alward became fully vested as a result of the Capsule merger. The exercise
price for the option is $2.00.

Compensation Committee Interlocks and Insider Participation

          Jay J. Miller, a director of Covista, provided various legal services
for Covista during fiscal 2003. In fiscal 2003, Covista paid $57,481 to Mr.
Miller for services rendered and accrued during fiscal 2003. As of January 31,
2003, Covista had invoices payable to Mr. Miller totaling $41,085. Covista
believes that Mr. Miller's fees were reasonable for the services performed and
were no less favorable to Covista than could have been obtained from an
unrelated third party.

Report on Executive Compensation

          The following report describes the policies pursuant to which
compensation was paid to executive officers of Covista for performance during
the fiscal year ended January 31, 2003.

Compensation Philosophy and Approach. Generally, Covista seeks to attract,
retain and motivate its executive officers through a combination of base salary,
incentive awards based upon individual performance and stock option awards under
the Covista Communications, Inc. Equity Incentive Plans and otherwise. The
Board of Directors believes that a substantial portion of the aggregate annual
compensation of each executive officer should be influenced by the performance
of Covista and the individual contribution of the executive officer.

          Base Salaries. The Board of Directors believes that the base salaries
of Covista's executive officers for fiscal 2003 were generally in line with
those for other comparable positions within the telecommunications service
industry and similar industries. However, Covista places significant emphasis
on incentive awards and stock option grants as a means of motivating and
rewarding its management. The Board of Directors believes that this strategy
provides optimal incentives for management to create long-term stockholder
value.

          Incentive Compensation Payments. In addition to base pay, some of
Covista's senior executives (including its Chief Executive Officer) are eligible
to receive bonuses and stock option awards. Bonuses and stock options may be
awarded, based upon the individual performance of each executive officer at the
sole discretion of the Board of Directors. During the fiscal year 2003 John
Leach received a cash bonus of $150,000; and Kevin Alward received a bonus of
$125,000. There were no additional stock option grants to the Named Executive
Officers during fiscal 2003.

          Compensation of the Chief Executive Officer. The compensation policies
applicable to Covista's Chief Executive Officer are similar to those applicable
to Covista's other executive officers. Mr. Leach has a three-year employment
agreement with Covista effective as of May 18, 2000, pursuant to which Mr. Leach
was paid base salary at the rate of $300,000 per annum during fiscal 2001.
Pursuant to this agreement, Mr. Leach was also entitled to receive a signing
bonus in the amount of $25,000 to cover relocation and other expenses. Mr. Leach
is also entitled to receive an annual bonus in an amount not to exceed 100
percent of his then effective base salary, based upon Mr. Leach's attainment of
annual revenue and earning targets, as well as management goals set by the Board
of Directors. Mr. Leach was guaranteed a minimum bonus payment of $150,000
during the term of this agreement.

(THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)


                                       28





<PAGE>

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners. The following table sets forth
the beneficial ownership of Covista's Common Stock as of May 1, 2003 by each
person or group known by Covista to be the beneficial owner of five percent or
more of the outstanding shares of Covista Common Stock. Unless otherwise
indicated, each such person (alone or with family members) has sole voting and
dispositive power with respect to the shares listed opposite such person's name.

<TABLE>
<CAPTION>
Name and Address of Beneficial Owner   Amount and Nature of Beneficial Ownership (1)   Percentage of Class (2)
------------------------------------   ---------------------------------------------   -----------------------
<S>                                                    <C>                                      <C>
Kevin A. Alward
182 Powell Road                                        1,480,779(3)                              8.2%
Allendale, NJ 07401

W. Thorpe McKenzie
735 Broad Street, Suite 1108                           1,060,727                                 6.0%
Chattanooga, TN 37402

Warren Feldman
45A Samworth Road                                      1,146,478(4)                              6.4%
Clifton, NJ 07012

Donald A. Burns
1021 North Ocean Blvd                                  1,883,261                                10.6%
Palm Beach, FL 33480

Henry G. Luken, III
900 Fairway Lane                                       8,780,566(5)                             49.4%
Soddy Daisy, TN 37379
</TABLE>

     (1)  Except as otherwise set forth in the footnotes to this table, all
          shares are beneficially owned and sole investment and voting power is
          held by the persons named above, to the best of Covista's knowledge.
          Shares of Covista Common Stock subject to options that are currently
          exercisable or exercisable within 60 days of November 6, 2002 are
          deemed to be outstanding and to be beneficially owned by the person
          holding such options for the purpose of computing the percentage
          ownership of such person, but are not treated as outstanding for the
          purpose of computing the percentage ownership of any other person.

     (2)  Based on 17,783,092 shares outstanding.

     (3)  Includes 250,000 shares of Covista Common Stock issuable to Mr. Alward
          under currently exercisable options. Also includes 186,516 shares of
          Covista Common Stock owned by trusts of which Mr. Alward's minor
          children are beneficiaries, as to which Mr. Alward disclaims
          beneficial ownership. Based on the Schedule 13D jointly filed by Mr.
          Alward and certain related entities on November 16, 2001.

     (4)  Includes 375,678 shares of Covista Common Stock owned by The Warren H.
          Feldman Family L.L.C., as to which shares Mr. Feldman disclaims
          beneficial ownership. Based on the Schedule 13D/A filed by Mr. Feldman
          on March 7, 2003.

     (5)  Based on the Schedule 13D/A filed by Mr. Luken on January 10, 2003.


                                       29





<PAGE>

Security Ownership of Management. The following table sets forth as of May 1,
2003, information concerning the beneficial ownership of Covista Common Stock by
each director, each nominee for election as a director, and each Named
Executive, and for all directors, director nominees and executive officers as a
group:

<TABLE>
<CAPTION>
Name and Address of Beneficial Owner   Amount and Nature of Beneficial Ownership (1)   Percentage of Class (2)
------------------------------------   ---------------------------------------------   -----------------------
<S>                                                  <C>                                         <C>
Kevin A. Alward                                       1,480,779(3)                                8.2%

W. Thorpe McKenzie                                    1,060,727                                   6.0%

Leon Genet                                               41,120                                     *

Thomas P. Gunning                                        62,300(4)                                  *

Donald Jones                                              5,000                                     *

A. John Leach, Jr.                                      534,000(5)                                3.0%

Henry G. Luken, III                                   8,780,566(6)                               49.4%

Nicholas Merrick                                            100                                     *

Jay J. Miller                                            35,400(7)                                  *

All directors, director nominees and
executive officers as a group                        11,999,992(3)-(7)                           65.2%
(9 persons)
</TABLE>

* Less than one percent.

     (1)  Except as otherwise set forth in the footnotes to this table, all
          shares are beneficially owned and sole investment and voting power is
          held by the persons named above, to the best of Covista's knowledge.
          Shares of Covista Common Stock subject to options that are currently
          exercisable or exercisable within 60 days of November 6, 2002 are
          deemed to be outstanding and to be beneficially owned by the person
          holding such options for the purpose of computing the percentage
          ownership of such person, but are not treated as outstanding for the
          purpose of computing the percentage ownership of any other person.

     (2)  Based on 17,783,092 shares outstanding

     (3)  Includes 250,000 shares of Covista Common Stock issuable to Mr. Alward
          under presently exercisable options. Also includes 186,516 shares of
          Covista Common Stock owned by trusts of which Mr. Alward's minor
          children are beneficiaries, as to which Mr. Alward disclaims
          beneficial ownership. Based on the Schedule 13D jointly filed by Mr.
          Alward and certain related entities on November 16, 2001.

     (4)  Includes 37,000 shares of Covista Common Stock issuable to Mr. Gunning
          under currently exercisable options. Does not include 25,400 shares
          owned by Mr. Gunnings' spouse.

     (5)  Includes 288,000 shares of Covista Common Stock issuable to Mr. Leach
          under currently exercisable options.

     (6)  Based on the Schedule 13D/A filed by Mr. Luken on January 10, 2003.

     (7)  Includes 35,000 shares of Covista Common Stock issuable to Mr. Miller
          under currently exercisable options.


                                       30





<PAGE>

c)   Changes in Control

          On February 1, 2001, the Board of Directors of Covista authorized a
transaction (the "Stock Issuance Transaction") involving the issuance and sale
of a total of 3,500,000 shares of Common Stock to the following three persons
(the "Purchasers") in the amounts indicated: Kevin Alward, 1,000,000 shares; A.
John Leach, 500,000 shares; and Henry G. Luken, III, 2,000,000 shares. Pursuant
to the rules of the NASD, consummation of the Stock Issuance Transaction was
subject to the approval of Covista's shareholders because Messrs. Leach and
Luken currently were directors and officers of Covista, and, in addition, it was
expected that Mr. Alward would become an officer of Covista. The transaction was
approved at a special shareholders meeting on March 29, 2001. The stock was
issued in April 2001.

ITEM 13. Certain Relationships and Related Transactions

          Jay J. Miller, a Director of Covista, has provided various legal
services for Covista during Fiscal 2003. In Fiscal 2002, Covista paid $57,481
to Mr., Miller for services rendered and accrued for in Fiscal 2003. As of
January 31, 2003, Covista owed Mr. Miller $41,085. Covista believes that Mr.
Miller's fees were reasonable for the services performed and were no less
favorable to Covista than could have been obtained from an unrelated third
party. In February 2002, Covista granted to Mr. Miller non-statutory options to
purchase 35,000 shares of Covista stock at $2.00 per share.

          Leon Genet, a Director of Covista, has provided agent services for
Covista through his wholly owned Company, LPJ, Inc. During Fiscal 2003, LPJ,
Inc. was paid commissions of $78,134. The commissions paid to LPJ, Inc. were
computed on the same basis as other independent agents retained by Covista.

          Covista has entered into a lease agreement for 28,000 square feet of
office space in Chattanooga, Tennessee, with Henry G. Luken III who is Covista's
Chairman of the Board and its principal shareholder. The term of the lease is
for five years beginning September 1, 2001. The lease provides for annual rent
of $86,400 from September 1, 2001 to August 30, 2002; $115,200 from September 1,
2002 to August 30, 2003; $144,000 from September 1, 2003 to August 30 2004, with
the last two years to be $144,000 annually adjusted for the Consumer Price
Index. Covista believes that such premises are leased on terms similar to an
arm's length transaction.

          On December 1, 2001, Covista entered into a lease for property
located at 806 East Main Street, Chattanooga, Tennessee, for use as a
switching facility. The lessor is Henry G. Luken III, Chairman of the
Board and a principal shareholder of Covista. The lease expires on November 30,
2006. Annual rent is payable as follows: $22,500 from December 1, 2001 to
November 30, 2002, $27,000 from December 1, 2002 to November 30, 2003, $31,500
from December 1, 2003 to November 30, 2004, and $36,000 from December 1, 2004
to November 30, 2005. Rental amounts for months beginning after October 1,
2005 will be adjusted upward for the U.S. Consumer Price Index. The lease may
be renewed for an additional 5 years upon 90 days' written notice prior to the
lease expiration date. Covista believes that such premises are leased on terms
not less favorable than an arm's length transaction.

          On October 1, 2002, Covista entered into a lease for Suite 200 at
721 Broad Street, Chattanooga, Tennessee, for use as offices for Corporate
Headquarters. The lessor is Henry G. Luken III, Chairman of the Board and a
principal shareholder of Covista. The lease expires on November 30, 2007.
Annual rent is payable as follows: Year 1 = $101,674, Year 2 = $111,670,
Year 3 = $120,000, Year 4 = $120,000, Year 5 = $120,000. Rental amounts for
months beginning after October 1, 2005 will be adjusted upward for the U.S.
Consumer Price Index. The lease may be renewed for an additional 5 years upon
90 days' written notice prior to the lease expiration date. Covista believes
that such premises are leased on terms not less favorable than an arm's length
transaction.

          On July 2, 2001, Covista received a loan from Henry G. Luken III, its
Chairman of the Board and principal shareholder, in the amount of $4,000,000.
The loan matures on February 1, 2003 together with accumulated interest at a
rate of 7% per annum. The proceeds of the loan were used to purchase a 10-year
commitment for approximately 2.8 billion DS-0 channel miles of
telecommunications network capacity from an unaffiliated party. The unaffiliated
party has recently filed for Chapter 11 reorganization; however at the time of
this filing is continuing to perform under the agreement. Mr. Luken also
advanced the company $400,000, the proceeds of which were used for construction
of new facilities.

          On February 1, 2001, the Board of Directors of the Company, subject to
shareholder's approval which was obtained on March 29, 2001, authorized the sale
of a total of 3,500,000 shares of Common Stock to the following three persons
(the "Purchasers") in the amounts indicated: Kevin Alward, 1,000,000 shares;
A. John Leach, 500,000 shares; and Henry G. Luken, III, 2,000,000 shares. The
purchase price for the Common Stock issued to Messrs. Alward, Leach and Luken
was $2.00 per share, based on the fair market value of shares at February 2,
2001. The stock sale was consummated in April 2001 with the issuance of
3,150,000 shares of Common Stock. The Board of Directors authorized a decrease
of 350,000 shares to be purchased by Mr. Leach.


                                       31




<PAGE>

          On July 24, 2001, the Company loaned $200,000 to Capsule
Communications, Inc. of which a director and the Chairman of the Company were
principal shareholders. The Loan was evidenced by a note in the principle
amount of $200,000 with interest payable of 8 3/4% per annum, due July 24, 2002.
On August 9, 2001, the Company loaned an additional $300,000 to Capsule
Communications, Inc. evidenced by a similar note due August 9, 2002. By virtue
of the merger with Capsule, the indebtedness was extinguished as an inter
company obligation.

          On August 31, 2001, Covista entered into a transaction with Applied
Financial Corp. an unaffiliated firm involving the sale and leaseback of a
telecommunications switch. Covista realized proceeds of approximately
$1,250,000 from the sale portion of the transaction, and agreed to lease back
the switch for a three-year period at a cost of approximately $420,000 per
annum. Henry G. Luken, III provided an unconditional guaranty of Covista's
payment obligations to Applied Financial under the lease. Covista did not
compensate Mr. Luken for providing such guaranty.

          A proxy statement dated November 19, 2002 and mailed to stockholders
on or about November 20, 2002 provided details on; a proposal to issue and
sell up to 4,360,000 shares of the Company's Common Stock to Henry G. Luken III,
Chairman of the Board of Directors of the Company, or a limited number of
persons designated by Mr. Luken. In December 2002, Covista completed the
issuance and sale of 4,359,958 shares of common stock to Henry G. Luken III,
in exchange for conversion of a note payable to him in the amount of $7,000,000,
the contribution of other assets with a fair value of $3,400,000 and cash
of $2,100,000. These shares were sold at $2.87 per share which was the market
price on the date the transaction was approved.

          Covista also issued and sold  500,000 shares of common stock to
W. Thorpe McKenzie, member of the Board of Directors, in exchange for cash
of $1,433,500. The shares were sold at $2.87 per share which was the market
price on the date the transaction was approved.

ITEM 14. Controls and Procedures

          Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer,
we have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures within 90 days of filing of this annual
report on Form 10-K, and, based on their evaluation, our principal executive
officer and principal financial officer have concluded that these controls
and procedures are effective. There were no significant changes in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.

          Disclosure controls and procedures are our controls and other
procedures that are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.

                (THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)


                                       32





<PAGE>

                          COVISTA COMMUNICATIONS, INC.

                                AND SUBSIDIARIES

ITEM 15. Exhibits and Financial Statements Schedule Years Ended January 31,
         2003, 2002, and 2001

                                      INDEX

     (a) (1) Financial Statements: The following consolidated financial
statements of Covista Communications, Inc. and subsidiaries are included at
the end of this Report:

<TABLE>
<CAPTION>
               Consolidated Financial Statements:             Page
               ----------------------------------             ----
<S>                                                           <C>
Independent auditors' report                                   F-1

Consolidated balance sheets - January 31, 2003
   and 2002                                                    F-2

Consolidated statements of loss and
   comprehensive loss  - years
   ended January 31, 2003, 2002 and 2001                       F-3

Consolidated statements of shareholders' equity -
   years ended January 31, 2003, 2002, 2001                    F-4

Consolidated statements of cash flows - years
   ended January 31, 2003, 2002, 2001                          F-5

Notes to consolidated financial statements                     F-7

(a) (2)   Supplementary Data Furnished Pursuant
             to the Requirements of FORM 10-K:

Schedule - years ended January 31, 2002, 2001 and 2000

II      Valuation and Qualifying Accounts (Consolidated)      F-26
</TABLE>

                                 ***************

Schedules other than those listed above are omitted because they are not
required, not applicable or the information has been otherwise supplied.

                (THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)


                                       33





<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 21st day of
May 2003

                                       COVISTA COMMUNICATIONS, INC.
                                       (Registrant)


                                       By: /S/ Henry G. Luken III
                                          --------------------------------------
                                           Henry G. Luken III
                                           Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
       Signature                        Title                        Date
       ---------                        -----                        ----
<S>                       <C>                                  <C>


/S/ Henry G. Luken III    Chairman of the Board                    May 21, 2003
-----------------------
Henry G. Luken III


/S/ W. Thorpe McKenzie    Director                                 May 21, 2003
-----------------------
W. Thorpe McKenzie


/S/ Kevin Alward          Director,                                May 21, 2003
-----------------------
Kevin Alward              Chief Operating Officer


/S/ Leon Genet            Director                                 May 21, 2003
-----------------------
Leon Genet


/S/ Donald Jones          Director                                 May 21, 2003
-----------------------
Donald Jones


/S/ A. John Leach         Director, President and                  May 21, 2003
-----------------------
A. John Leach             Chief Executive Officer


/S/ Nicholas Merrick      Director                                 May 21, 2003
-----------------------
Nicholas Merrick


/S/ Jay J. Miller         Director                                 May 21, 2003
-----------------------
Jay J. Miller


/S/ Thomas P. Gunning     Vice President, Treasurer and            May 21, 2003
-----------------------   Secretary, Chief Financial Officer
Thomas P. Gunning         and Principal Accounting Officer
</TABLE>



                                       34





<PAGE>


I, A. John Leach, Jr., certify that;

     1) I have reviewed this annual report on Form 10-K of Covista;

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

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

     4) Covista's other certifying officers and I are responsible for
        establishing and maintaining disclosure controls and procedures (as
        defined in Exchange Act Rules 13a-14 and 15d-14) for Covista and have;

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

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

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

     5) Covista's other certifying officers and I have disclosed, based on our
        most recent evaluation, to Covista's auditors and the audit committee of
        Covista's Board of Directors (or persons performing the equivalent
        functions);

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

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

     6) Covista's other certifying officers and I have indicated in this annual
        report whether there were significant changes in internal controls or in
        other factors that could significantly affect internal controls
        subsequent to the date of our most recent evaluation, including any
        corrective actions with regard to significant deficiencies and material
        weaknesses.


Date: May 21, 2003                     By: /s/ A. John Leach, Jr.
                                           -------------------------------------
                                           A. John Leach, Jr.
                                           President and Chief Executive Officer

                                       35




<PAGE>


I, Thomas P. Gunning, certify that;

     1) I have reviewed this annual report on Form 10-K of Covista;

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

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

     4) Covista's other certifying officers and I are responsible for
        establishing and maintaining disclosure controls and procedures (as
        defined in Exchange Act Rules 13a-14 and 15d-14) for Covista and have;

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

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

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

     5) Covista's other certifying officers and I have disclosed, based on our
        most recent evaluation, to Covista's auditors and the audit committee of
        Covista's Board of Directors (or persons performing the equivalent
        functions);

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

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

     6) Covista's other certifying officers and I have indicated in this annual
        report whether there were significant changes in internal controls or in
        other factors that could significantly affect internal controls
        subsequent to the date of our most recent evaluation, including any
        corrective actions with regard to significant deficiencies and material
        weaknesses.


Date: May 21, 2003                   By: /s/ Thomas P. Gunning
                                         ---------------------------------------
                                         Thomas P. Gunning
                                         Vice President, Chief Financial Officer
                                         And Principal Accounting Officer

                                       36



<PAGE>


                           CERTIFICATION PURSUANT TO

                            18 U.S.C. SECTION 1350,

                             AS ADOPTED PURSUANT TO

                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of Covista Communications, Inc. on Form
10-K for the period ending January 31, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, A. John Leach, Jr.,
President and CEO of Covista Communications, Inc. certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that;

     1) The report fully complies with the requirements of section 13(a) or
        15(d) of the Securities Exchange Act of 1934; and

     2) The information contained in the Report fairly represents, in all
        material aspects, the financial condition and result of operations of
        Covista Communications, Inc.


Date: May 21, 2003                     By: /s/ A. John Leach, Jr.
                                           -------------------------------------
                                           A. John Leach, Jr.
                                           President and Chief Executive Officer

                                       37



<PAGE>


                           CERTIFICATION PURSUANT TO

                            18 U.S.C. SECTION 1350,

                             AS ADOPTED PURSUANT TO

                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of Covista Communications, Inc. on Form
10-K for the period ending January 31, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Thomas P. Gunning,
Chief Financial Officer of Covista Communications, Inc. certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that;

     1) The report fully complies with the requirements of section 13(a) or
        15(d) of the Securities Exchange Act of 1934; and

     2) The information contained in the Report fairly represents, in all
        material aspects, the financial condition and result of operations of
        Covista Communications, Inc.


Date: May 21, 2003                   By: /s/ Thomas P. Gunning
                                         ---------------------------------------
                                         Thomas P. Gunning
                                         Vice President, Chief Financial Officer
                                         And Principal Accounting Officer


                                       38




<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                        Description of Document
-----------                        -----------------------
<S>           <C>
(3)(a)        Certificate of Incorporation, as amended. Incorporated by
              reference to Exhibits 2-A, 2-B, 2-C and 2-D to Registration
              Statement No. 2-15546 and Registrant's proxy statement
              relating to its 1987 Annual Stockholder's Meeting.

(3)(b)        By-Laws of Registrant. Incorporated by reference to Exhibit
              A to Registrant's Annual Report on Form 10-K for the year
              ended January 31, 1972.

(3)(c)        Amended Certificate of Incorporation to change the name of
              the Corporation from Faradyne Electronics Corp. to Total-Tel
              USA Communications, Inc., dated November 4, l991.
              Incorporated by reference to Exhibit 3 (c) to Registrant's
              Annual Report on Form 10-K for the year ended January 31,
              l992.

(3)(d)        By-Law Amendments incorporated by reference to Form 8K filed
              on April 7, 1998.

(3)(e)        Shareholder Rights plan filed by reference to Form 8K, on April
              12, 1998.

(3)(f)        Amended Certificate of Incorporation to change the name of
              the Corporation from Total-Tel USA Communications, Inc. to
              Covista USA Communications, Inc., dated September 15, 2000.
              Incorporated by reference to Form 8-K filed on September 29,
              2000.

(10)(a)       Lease of premises at 140 Little Street, Belleville, New Jersey,
              between Mansol Realty and Mansol Ceramics, dated March 30, 1960.
              Incorporated by reference to Exhibit 13 (e) to Registration
              Statement No. 2-17546.

(10)(a) (1)   Assignment of lease from Mansol Realty Company to Mansol
              Realty Associates. Incorporated by reference to Exhibit 10
              (a) (1) to Registrant's Annual Report on Form 10-K for the
              year ended January 31, l982.

(10)(b)       Extension Agreement re: Lease of premises at 140 Little Street
              dated October 31, l974. Incorporated by reference to Exhibit 10
              (b) to Registrant's Annual Report on Form 10-K for the year ended
              January 31, l981.

(10)(c)       Lease of premises at 471 Cortland Street, Belleville, New
              Jersey, between Birnfeld Associates and Mansol Ceramics
              Company, dated October 31, 1974. Incorporated by reference
              to Exhibit 10 (c) to Registrant's Annual Report on Form 10-K
              for the year ended January 31, 1981.

(10)(d)       Lease Modification Agreement re: Lease of premises at 471
              Cortland Street dated July 24, 1980. Incorporated by
              reference to Exhibit 10 (d) to Registrant's Annual Report on
              Form 10-K for the year ended January 31, 1981.

(10)(e)(i)    Term Loan Agreement and Term Note both dated April 22, 1983
              between Mansol Ceramics Company and United Jersey Bank in the
              principal amount of $1,192,320. Incorporated by reference to
              Exhibit 10 (e) to Registrants Annual Report on Form 10-K for the
              year ended January 31, 1983.

(10)(e)(ii)   Installment Note and Equipment Loan and Security Agreement
              of Mansol Ceramics Company and Guaranty of Registrant, dated
              August 1, 1988, in connection with extension of the maturity
              date of the loan referenced to in Exhibit 10 (e) (i).
              Incorporated by reference to the Registrant's Annual Report on
              Form 10-K for the year ended January 31, 1989.

(10)(f)       Lease of premises at 17-25 Academy Street, Newark, New
              Jersey between Mansol Ceramics Company and Rachlin & Co.,
              dated April 29, 1983. Incorporated by reference to Exhibit
              10 (f) to Registrant's Annual Report on Form 10-K for the
              year ended January 31, 1984.

(10)(g)       Lease Modification Agreement re: Lease of Premises at 471
              Cortland Street dated July 24, 1985. Incorporated by reference to
              Exhibit 10 (g) to Registrant's Annual Report on Form 10-K for the
              year ended January 31, l986.
</TABLE>


                                       39





<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                        Description of Document
-----------                        -----------------------
<S>           <C>
(10)(h)       Master Lease Agreement between Mansol Ceramics Company and
              Fidelcor Services, Inc. dated December 30, l985. Incorporated by
              reference to Exhibit 10 (h) to Registrant's Annual Report on Form
              10-K for the year ended January 31, l986.

(10)(i)       Deed, Mortgage and Mortgage Note between William and Fred
              Schneper as Grantees and Borrowers and Mansol Ceramics Company as
              Grantor and Lender, dated July 26, l985 re: property located in
              Hanover Township, New Jersey. Incorporated by reference 10 (i) to
              Registrant's Annual Report on Form 10-K for the year ended
              January 31, l986.

(10)(j)       Lease of premises at 140 Little Street, Belleville, New Jersey,
              between Mansol Realty Association and Mansol Ceramics Company,
              dated July 31, 1986. Incorporated by reference to Exhibit 10 (j)
              to Registrant's Annual Report on Form 10-K for the year ended
              January 31, l987.

(10)(k)       1987 Stock Option Plan. Incorporated by reference to Registrant's
              proxy statement relating to its 1987 Annual Stockholders' Meeting.

(10)(k)(1)    Amendment to the 1987 Stock Option Plan. Incorporated by
              reference to Registrant's Form S-8 dated November 13, l995.

(10)(l)       Renewal of Lease and Extension to additional space at 17-25
              Academy Street, Newark, New Jersey (a/k/a 1212 Raymond Boulevard,
              Newark, New Jersey) between Mansol Ceramics Company and Rachlin &
              Co. Incorporated by reference to Exhibit 10 (l) to Registrant's
              Annual Report on Form 10-K for the year ended January 31, l988.
              (See also Exhibit 10 (f)).

(10)(m)       Agreement dated June 13, 1989, between Mansol Ceramics Company
              and Bar-lo Carbon Products, Inc. providing for the sale of
              Ceramics' Carbon fixtures division. Incorporated by reference to
              Exhibit 10 (m) to Registrant's Annual Report on Form 10-k for the
              year ended January 31, 1990.

(10)(n)       Modification of Note and Mortgage from William Schneper, Fred
              Schneper and Leon Schneper (Mortgagor) to Mansol Ceramics Company
              (Mortgagee) dated August 1, l990, extending the term of the Note
              and Mortgage and modifying the interest provision. Incorporated by
              reference to the Registrant's Annual Report on Form 10-K for the
              year ended January 31, 1991.

(10)(o)       Asset Purchase Agreement between Registrant, Mansol Ceramics
              Company and Mansol Industries Inc. dated May 22, l990, including
              Subordinated Term Promissory Note and Security Agreement,
              covering sale of assets and business of Manufacturing Division of
              Mansol Ceramics Company. Incorporated by reference to Exhibits 1,
              2 and 3 to Registrant's Current Report on Form 8-K dated May 22,
              l990.

(10)(p)       Modification of Loan between Mansol Industries, Inc. (borrower)
              and Mansol Ceramics Company (Lender) dated January 31, 1992,
              allowing for the deferral of the principal for twelve months
              through and including the period ending June 22, l992 in
              consideration for personal guarantees from Borrower. Incorporated
              by reference to Exhibit 10 (p) to Registrant's Annual Report on
              Form 10-K for the year ended January 31, 1992.

(10)(q)       Lease of premises at 470 Colfax Avenue, Clifton, New Jersey,
              between Total-Tel USA Communications, Inc. and Broadway Financial
              Investment Services, Inc. dated March 25, 1991. Incorporated by
              reference to Exhibit 10 (q) to Registrant's Annual Report on Form
              10-K for the year ended January 31, l992.

(10)(r)       Lease of premises at 744 Broad Street, Newark, New Jersey between
              Total-Tel USA Inc. and Investment Property Services, Inc. dated
              November 15, 1993. Incorporated by reference to Exhibit 10 (r) to
              the Registrant's Annual Report on Form 10-K for the year ended
              January 31, 1994.
</TABLE>


                                       40





<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                        Description of Document
-----------                        -----------------------
<S>           <C>
(10)(s)       Lease of premises at 744 Broad Street, Newark, New Jersey between
              Total-Tel USA, Inc. and Investment Property Services, Inc. dated
              December 28, 1993. Incorporated by reference to Exhibit 10 (s) to
              the Registrant's Annual Report on Form 10-K for the year ended
              January 31, 1994

(10)(t)       Lease of premises at 471 Cortland Street, Belleville, New Jersey,
              between Total-Tel USA Inc. and Birnfeld Associates - Belleville
              dated December 1, 1993. Incorporated by reference to Exhibit 10
              (t) to the Registrant's Annual Report on Form 10-K for the year
              ended January 31, 1994.

(10)(u)       Lease of premises at 150 Clove Road, Little Falls, New Jersey,
              between Total-Tel USA, Inc. and the Prudential Insurance Company
              of America dated February 22, 1994. Incorporated by reference to
              Exhibit 10 (u) to the Registrant's Annual Report on Form 10-K for
              the year ended January 31, 1994.

(10)(v)       Lease modification to the lease of the premises at 150 Clove
              Road, Little Falls, New Jersey between TotalTel, Inc. and The
              Prudential Company of America dated May 18, 1994. Incorporated by
              reference to Exhibit 10 (v) to the Registrant's Annual Report on
              Form 10-K for the year ended January 31, l995.

(10)(w)       Second lease modification to the lease of the premises at 150
              Clove Road, Little Falls, New Jersey between TotalTel, Inc. and
              Theta Holding Company, L. P., successor to the Prudential
              Insurance Company of America dated February 9, 1995. Incorporated
              by reference to Exhibit 10 (w) to the Registrant's Annual Report
              on Form 10-K for the year ended January 31, 1995.

(10)(x)       Third lease modification to the lease of the premises at 150
              Clove Road, Little Falls, New Jersey between TotalTel, Inc. and
              Theta Holding Company, L. P., successor to the Prudential
              Insurance Company of America dated January 31, 1997. Incorporated
              by reference to exhibit (10)(x) to the registrants Annual Report
              on Form 10-K for the year ended January 31, l997.

(10)(y)       Equipment Facility and Revolving Credit Agreement dated August
              23, 1996 between Total-Tel USA Communications, Inc., TotalTel,
              Inc., TotalTel USA, Inc., and TotalTel Carrier Services, Inc. and
              the Summit Bank in the amount of $10,000,000. Incorporated by
              referral to Exhibit (10)(y) to the Registrants Annual Report on
              Form 10K for the year ended January 3, 1997.

(10)(z)       Lease of premises at 500 Fifth Avenue, New York City, New York
              between TotalTel, Inc. and 1472 Broadway, Inc. dated November 8,
              1996. Incorporated by reference to Form 10K for the year ended
              January 31, 1997.

(10)(AA)      Lease of premises at 40 Rector Street, New York City, New York
              between Total-Tel USA Communications, Inc. and 40 Rector Street
              Company dated November 1, 1996. Incorporated by reference to Form
              10K for the year ended January 31, 1997.

(10)(AB)      1996 Stock Option Plan, Incorporated by reference to Registrant's
              Proxy Statement relating to its 1996 Annual Stockholder Meeting.

(10)(AC)      Lease of premises of 28 West Flagler Street, Miami, Florida
              between TotalTel, Inc. and Mosta Corporation, Inc. dated February
              6, 1998. Incorporated by reference to Form 10K for the year ended
              January 31, 1998.

(10)(AD)      Amended Equipment Facility and Revolving Credit Agreement dated
              August 23, 1996 between Total-Tel USA Communications, Inc.,
              TotalTel, Inc., Total-Tel USA, Inc., and Total-Tel Carrier
              Services, Inc. and the Summit Bank in the amount of 13,000,000.
              Incorporated by reference to Form 10K for the year ended January
              31, 1997.
</TABLE>


                                      41





<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                        Description of Document
-----------                        -----------------------
<S>           <C>
(10)(AE)      Amendment to the Amended Facility and Revolving Credit Agreement
              dated November 1, 1998 between Total-Tel USA Communications,
              Inc., TotalTel, Inc., Total-Tel USA, Inc., and Total-Tel Carrier
              Services, Inc. and the Summit Bank in the amount of 13,000,000.
              Incorporated by reference to Form 10K for the year ended January
              31, 1999.

(10)(AF)      Lease of premises of 20 Crossways Park North, Woodbury, New York,
              between TotalTel, Inc. and Industrial and Research Associates
              Company, dated August 20, 1999. Incorporated by reference to Form
              10K for the year ended January 31, 2000.

(10)(AG)      Lease of premises of One Landmark Square, Stamford, Connecticut
              between TotalTel, Inc. and Reckson Operating Partnership, LLP,
              dated November 17, 1999. Incorporated by reference to Form 10K
              for the year ended January 31, 2000.

(10)(AH)      Lease of premises of 1810 Chapel Avenue West, Cherry Hill, New
              Jersey between TotalTel, Inc. and Commerce Center Holdings, Inc.,
              dated December 6, 1999. Incorporated by reference to Form 10K for
              the year ended January 31, 2000.

(10)(AI)      The 1999 Equity Incentive Plan. Incorporated by reference to the
              Registrant's Proxy Statement relating to its 1999 Annual
              Shareholder Meeting.

(10)(AJ)      Employment agreement of A. John Leach. Incorporated by reference
              to the Registrant's Proxy Statement relating to its 2001 Annual
              Shareholders meeting.

(10)(AL)      The Covista Communications, Inc. 2001 Equity Incentive Plan dated
              February 1, 2001; incorporated by reference to Form S-4
              Registration Statement No 333-6944 effective January 09,2002.

(10)(AM)      Sale and Lease/Back Master Lease agreement for Alcatel phone
              switch between Covista and Applied Financial dated July 25, 2001.
              Incorporated by reference to the Registrant's Annual Report on
              Form 10-K for the year ended January 31, 2002.

(10)(AO)      Sale and Lease/Back Schedule 1 agreement for Alcatel phone switch
              between Covista and Applied Financial dated July 25, 2001.
              Incorporated by reference to the Registrant's Annual Report on
              Form 10-K for the year ended January 31, 2002.

(10)(AP)      Sale and Lease/Back Schedule 2 agreement for Alcatel phone switch
              between Covista and Applied Financial dated July 25, 2001.
              Incorporated by reference to the Registrant's Annual Report on
              Form 10-K for the year ended January 31, 2002.

(10)(AQ)      Merger agreement between Covista Communications, Inc. and Capsule
              Communications, Inc.; incorporated by reference to Form S-4
              Registration Statement No 333-6944 effective January 09, 2002.

(10)(AR)      Lease of premises at 806 Main Street, Chattanooga, Tennessee

(10)(AS)      Lease of premises at 721 Broad Street, Chattanooga, Tennessee.

(10)(AT)      Lease of premises at 4801 Highway 58, Chattanooga, Tennessee.

(10)(AU)      Revolving Credit and Security Agreement with Capital Source Finance, LLC
              Dated April 16, 2003.

(10)(AV)      The 2002 Equity Incentive Plan incorporated by reference to the
              Registrant's Proxy Statement dated November 19, 2002 relating to
              its 2002 Annual Shareholders Meeting.

(23)          Independent Auditor's Consent.
</TABLE>


                                       42









<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Covista Communications, Inc.

We have audited the accompanying consolidated balance sheets of Covista
Communications, Inc. and subsidiaries (the "Company") as of January 31, 2003 and
2002, and the related consolidated statements of loss and comprehensive loss,
shareholders' equity, and cash flows for each of the three years in the period
ended January 31, 2003. Our audits also included the consolidated financial
statement schedule listed in the index at Item 15. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Covista Communications, Inc. and
subsidiaries as of January 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 2003 in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

As described in Note 2 to the consolidated financial statements, on
January 1, 2002, the Company changed its method of accounting for goodwill
and other intangible assets to conform to Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."


/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
May 15, 2003


                                      F-1





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            JANUARY 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                           2003           2002
                                                       ------------   ------------
<S>                                                    <C>            <C>
ASSETS

   CURRENT ASSETS:
      Cash and cash equivalents                        $  3,444,307   $  1,379,038
      Investments available for sale                             --        439,773
      Trade accounts receivable (net of allowance of
         $5,569,160 and $4,987,130 in 2003 and
         2002 respectively)                              15,716,015     10,252,837
      Notes receivable                                           --        500,000
      Prepaid expenses and other current assets             626,574      1,373,780
                                                       ------------   ------------
   Total current assets                                  19,786,896     13,945,428
                                                       ------------   ------------
   Property and equipment, net                           15,150,416     12,489,626
   Deferred line installation costs (net of
      accumulated amortization of $9,198,955 and
      $843,049 in 2003 and 2002 respectively)               473,688        174,785
   Intangible assets (net of accumulated
      amortization of $4,249,281 and $846,452 in 2003
      and 2002 respectively)                              6,786,967      3,366,667
   Goodwill                                               8,205,850             --
   Other assets                                             646,581      1,280,285
                                                       ------------   ------------
                                                       $ 51,050,398   $ 31,256,791
                                                       ============   ============

LIABILITIES AND SHAREHOLDERS' EQUITY

   CURRENT LIABILITIES:
      Accounts payable                                 $ 15,073,691   $ 19,465,274
      Other current and accrued liabilities              11,024,151      4,434,795
      Salaries and wages payable                            397,430        991,012
      Current portion of long-term debt                   2,827,999        381,405
                                                       ------------   ------------
   Total current liabilities                             29,323,271     25,272,486
                                                       ------------   ------------
   Other long-term liabilities                              223,434         15,466
                                                       ------------   ------------
   Long-term debt                                         1,810,759      4,400,000
                                                       ------------   ------------

Commitments and contingencies (Note 14)

   SHAREHOLDERS' EQUITY:
      Common stock, par value $0.05 per share,
         authorized 50,000,000 shares, issued
         19,319,511 in 2003 and 12,385,757
         shares in 2002                                     965,976        619,288
   Additional paid-in capital                            52,834,984     25,650,098
   Accumulated deficit                                  (32,662,586)   (23,255,107)
                                                       ------------   ------------
                                                         21,138,376      3,014,279

   Treasury stock at cost (1,536,419 shares in
   2003 and 2002)                                        (1,445,440)    (1,445,440)
                                                       ------------   ------------
      Total shareholders' equity                         19,692,934      1,568,839
                                                       ------------   ------------
                                                       $ 51,050,398   $ 31,256,791
                                                       ============   ============
</TABLE>

See notes to consolidated financial statements


                                      F-2





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
                   YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>
                                                         2003           2002           2001
                                                     ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>
NET REVENUES                                         $100,959,692   $ 95,312,696   $133,230,437
                                                     ------------   ------------   ------------
COSTS AND EXPENSES:
   Cost of revenue                                     66,670,757     76,475,802    116,059,002
   Access charge settlement (Note 17)                          --             --     (1,264,483)
   Selling, general and administrative (excluding
      stock compensation                               43,455,931     30,986,877     26,902,962
Stock compensation                                             --         12,011        266,565
                                                     ------------   ------------   ------------
Total costs and expenses                              110,126,688    107,474,690    141,964,046
OPERATING LOSS                                         (9,166,996)   (12,161,994)    (8,733,609)
                                                     ------------   ------------   ------------
OTHER INCOME (EXPENSE):
   Interest income                                         48,867        159,996        167,583
   Other                                                   29,853        274,466         41,994
   Interest expense                                      (830,423)      (242,056)      (105,272)
                                                     ------------   ------------   ------------
Total other income (expense), net                        (751,703)       192,406        104,305
                                                     ------------   ------------   ------------
LOSS BEFORE INCOME TAXES                               (9,918,699)   (11,969,588)    (8,629,304)
                                                     ------------   ------------   ------------
INCOME TAX BENEFIT                                       (511,220)            --             --
                                                     ------------   ------------   ------------
NET LOSS                                               (9,407,479)   (11,969,588)    (8,629,304)
                                                     ------------   ------------   ------------
OTHER COMPREHENSIVE INCOME, NET OF TAX
   Unrealized holding gain                                     --             --         79,531
                                                     ------------   ------------   ------------

COMPREHENSIVE LOSS                                   $ (9,407,479)  $(11,969,588)  $ (8,549,773)
                                                     ============   ============   ============

BASIC LOSS PER COMMON SHARE                          $      (0.71)  $      (1.17)  $      (1.18)
                                                     ============   ============   ============

DILUTED LOSS PER COMMON SHARE                        $      (0.71)  $      (1.17)  $      (1.18)
                                                     ============   ============   ============
</TABLE>

See notes to consolidated financial statements


                                      F-3





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                   YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>
                                        Common      Common    Additional Paid-in     Retained Earnings
                                        Shares      Stock          Capital         (Accumulated Deficit)   Treasury Stock
                                      ----------    --------   ------------------   ---------------------   --------------
<S>                                    <C>         <C>           <C>                   <C>                  <C>
BALANCE AT JANUARY 31, 2000            9,489,320   $474,466       $29,710,494           $(2,656,215)        $(1,458,550)
   Unrealized holding gain                               --                --                    --                  --
   Exercise of employee stock
    options/grants                        16,504        825           135,187                    --                  --
   Issuance of shares for other
    assets                                               --           170,773                    --              13,380
   Forfeiture of stock grants                            --                --                    --                (270)
   Net loss                                              --                --            (8,629,304)                 --
                                     -----------   --------      ------------          ------------         -----------
BALANCE AT JANUARY 31, 2001            9,505,824    475,291        30,016,454           (11,285,519)         (1,445,440)
                                     -----------   --------      ------------          ------------         -----------

   Sale of Common Stock                3,150,000    157,500         6,142,500                    --                  --
   Exercise of employee stock
    options/grants                        29,940      1,497            41,944                    --                  --
   Issuance of shares for other
    assets                               299,993     15,000           885,000                    --                  --
   Cancellation of ESOP                 (600,000)   (30,000)      (12,195,000)                   --                  --
   Fully vested stock grants                             --           759,200                    --                  --
   Realized gain on sale of
    investments                                          --                --                    --                  --
   Net loss                                              --                --           (11,969,588)                 --
                                     -----------   --------      ------------          ------------         -----------
BALANCE AT JANUARY 31, 2002           12,385,757   $619,288      $ 25,650,098          $(23,255,107)        $(1,445,440)
                                     -----------   --------      ------------          ------------         -----------

   Sale of Common Stock                  699,996     35,000         1,971,900
   Sale of Common Stock to Related
    Party                                732,484     36,624         2,063,376
   Exercise of employee stock
    options/grants                       149,480      7,474           370,073
   Issuance of shares to related party
    for Telecommunications Equipment   1,185,894     59,295         3,340,705
   Issuance of shares to related to
    related party for debt conversion  2,441,580    122,079         6,877,921
   Issuance of shares for acquisition
    of Capsule                         1,724,320     86,216        12,560,911
   Net loss                                              --                --            (9,407,479)
                                     -----------   --------      ------------          ------------         -----------
BALANCE AT JANUARY 31, 2003           19,319,511   $965,976      $ 52,834,984          $(32,662,586)        $(1,445,440)
                                     ===========   ========      ============          ============         ===========

<CAPTION>
                                                   Unearned ESOP    Accumulated Other
                                                      Shares       Comprehensive Income      Total
                                                   -------------   --------------------   ------------
<S>                                                 <C>                 <C>               <C>
BALANCE AT JANUARY 31, 2000                          (12,225,000)         161,776           14,006,971
   Unrealized holding gain                                    --           79,531               79,531
   Exercise of employee stock options/grants                  --               --              136,012
   Issuance of shares for other assets                        --               --              184,153
   Forfeiture of stock grants                                 --               --                 (270)
   Net loss                                                   --               --           (8,629,304)
                                                    ------------        ---------         ------------
BALANCE AT JANUARY 31, 2001                          (12,225,000)         241,307            5,777,093
                                                    ------------        ---------         ------------

   Sale of Common Stock                                       --               --            6,300,000
   Exercise of employee stock options/grants                  --               --               43,441
   Issuance of shares for other assets                        --               --              900,000
   Cancellation of ESOP                               12,225,000               --                   --
   Fully vested Stock Grants                                  --               --              759,200
   Realized gain on sale of investments                       --         (241,307)            (241,307)
   Net loss                                                   --               --          (11,969,588)
                                                    ------------        ---------         ------------
BALANCE AT JANUARY 31, 2002                         $         --        $      --         $  1,568,839
                                                    ------------        ---------         ------------

   Sale of Common Stock                                                                      2,006,900
   Sale of Common Stock to Related
    Party                                                                                    2,100,000
   Exercise of employee stock options/grants                                                   377,547
   Issuance of shares to related party for
    telecommunications equipment                                                             3,400,000
   Issuance of shares to related party for debt                                              7,000,000
   Issuance of shares for acquisition of Capsule                                            12,647,127
   Net loss                                                                                 (9,407,479)
                                                    ------------        ---------         ------------
BALANCE AT JANUARY 31, 2003                         $         --        $      --         $ 19,692,934
                                                    ============        =========         ============
</TABLE>


                 See notes to consolidated financial statements

                                      F-4





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                                    2003           2002           2001
                                                                                ------------   ------------   -----------
<S>                                                                             <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

   Net Loss                                                                     $ (9,407,479)  $(11,969,588)  $(8,629,304)

Adjustments to reconcile net loss to net cash (used in) provided by operating
   activities:

   Depreciation and amortization                                                   7,441,502      4,568,631     3,577,995
   Provision for doubtful accounts                                                 2,754,712      5,382,384     2,346,761
   Non-cash stock compensation expense                                                    --         12,011       266,565
   Loss of disposal of property and equipment                                             --             --        88,690
   (Gain) loss on sale of investments                                                     --       (265,733)        5,317

Change in assets and liabilities, excluding effect of acquisition:
      Trade accounts receivable                                                   (2,647,222)     4,890,957       789,518
      Prepaid expenses and other current assets                                      893,966        251,683     1,339,568
      Other assets                                                                   336,150       (164,300)     (293,584)
   Increase (decrease) in liabilities:
      Accounts payable                                                            (7,663,882)    (8,494,772)    3,157,678
      Other current and accrued liabilities                                          623,590      2,033,621      (558,312)
      Other long-term liabilities                                                    207,968       (208,322)      (26,744)
                                                                                  ----------     ----------     ---------
Net cash (used in) provided by operating activities                               (7,460,695)    (3,963,428)    2,064,148

CASH FLOWS FROM INVESTING ACTIVITIES:
   Net cash acquired in purchase of business                                       1,179,172         90,402            --
   Proceeds from sales and maturities of investments available for sale              439,773        115,529        86,788
   Purchases of property and equipment                                            (1,542,952)    (5,465,329)   (3,227,593)
   Proceeds from sale of property and equipment and leaseback transactions             0          2,338,038         1,975
   Notes receivable from related party                                               500,000       (500,000)           --
   Payments for deferred line installation costs                                    (654,809)       (55,809)       (47,621)
   Payments for prepaid network capacity                                               0         (4,000,000)           --
   Collection on notes receivable from employees                                       0                 --            --

                                                                                  ----------     ----------     ---------
Net cash used in investing activities                                                (78,816)    (7,477,169)   (3,186,451)
</TABLE>


                                      F-5





<PAGE>

<TABLE>
<CAPTION>
                                                                                   2003          2002          2001
                                                                                ----------   -----------   -----------
<S>                                                                             <C>          <C>           <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from the issuance of Common Stock                                    4,106,900     6,300,000            --
   Proceeds from Stock Options exercised                                           377,547        43,441       136,012
   Note payable to related party                                                 2,600,000     4,400,000            --
   Repayment on bank borrowings                                                  2,520,333      (615,695)     (696,299)
                                                                                ----------    ----------    ----------
Net cash provided by (used in) financing activities                              9,604,780    10,127,746      (560,287)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                             2,065,269    (1,312,851)   (1,682,590)

CASH AND CASH EQUIVALENTS BEGINNING OF YEAR                                      1,379,038     2,691,889     4,374,479

CASH AND CASH EQUIVALENTS END OF YEAR                                            3,444,307   $ 1,379,038   $ 2,691,889

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid (received) during the year for:
      Interest                                                                  $  830,423   $   242,056   $   105,272
      Income Taxes                                                                (511,220)        1,560    (1,643,227)

Non-cash:
      Exchange of Debt for Common Stock Issued to Related Party                  7,000,000            --            --
      Contribution of property from shareholder                                  3,400,000            --            --
      Issuance of treasury stock for customer lists
      included in other assets                                                          --            --       184,153

Issuance of Common Stock in connection with acquisition for other
   assets and cash                                                                      --       900,000            --

Business Acquired:
      Fair value of assets excluding cash                                     $ 21,849,458
      Less: liability assumed                                                  (10,056,503)
      Less: stock consideration for business acquired                          (12,972,127)
      Cash acquired                                                              1,179,172
</TABLE>

                 See notes to consolidated financial statements


                                      F-6





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

1.   NATURE OF OPERATIONS

Covista Communications, Inc. ("Covista"), and its wholly-owned subsidiaries
(collectively, the "Company") operates as a switch based resale common carrier
providing domestic and international long distance telecommunications service
to customers throughout the United States. Prior to the acquisition of Capsule
the Company's principal customers were primarily businesses and other common
carriers. On September 15, 2000, the Company changed its name from Total-Tel
USA Communications, Inc. to Covista Communications, Inc. On February 8, 2002,
Covista completed the acquisition of Capsule Communications, Inc. As a result,
Capsule became a wholly owned subsidiary of Covista. Capsule is a switch-based
interexchange carrier providing long distance telephone communications services
primarily to small and medium-size business customers as well as residential
accounts. The results of Capsule's operations have been included in the
Company's statement of operations since the acquisition Date.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation - The consolidated financial statements include the
accounts of Covista Communications, Inc. and its subsidiaries, all of which are
wholly owned. All significant intercompany transactions and balances have been
eliminated in the consolidated financial statements.

Revenue Recognition - The Company's revenues, net of sales discounts, are
recognized in the period in which the service is provided, based on the number
of minutes of telecommunications traffic carried, and a rate per minute. Access
and other service fees charged to customers, typically monthly, are recognized
in the period in which service is provided.

Property and Equipment - Property and equipment are stated at cost. Depreciation
and amortization is being provided by use of the straight-line method over the
estimated useful lives of the related assets. Leasehold improvements are
amortized over the shorter of the term of the lease or the useful lives of the
asset.

The estimated useful lives of the principal classes of assets are as follows:

<TABLE>
<CAPTION>
Classification                             Years
----------------------------------------   -----
<S>                                         <C>
Machinery and equipment                     5-10
Office furniture, fixtures and equipment    5-10
Vehicles                                    3-5
Leasehold improvements                      2-10
Computer equipment and software             5-7
</TABLE>

Deferred Line Installation Costs - The Company defers charges from other common
carriers, related to the cost of installing telephone transmission facilities
(lines). Amortization of these costs is provided using the straight-line method
over the related contract life of the lines ranging from three to five years.

Intangible Assets--Intangible assets consist of prepaid network capacity and
purchased customer and agent relationships being amortized over a straight-line
basis over periods varying between 10 and 120 months. The Company incurred
amortization expense on intangible assets of approximately $3,400,000,
$800,000, and $0 for the years ended January 31, 2003, 2002, and 2001
respectively. The Company's balance of intangible assets with a definite life
was approximately $6,787,000, net of accumulated amortization of approximately
$4,249,000 at January 31, 2003 and approximately $3,367,000 net of
accumulated amortization of approximately $846,000 at January 31, 2002.
Approximate amortization expense on intangible assets for the
next 5 years as of January 31, is as follows:

          2004          $2,075,000
          2005          $1,914,000
          2006          $1,032,000
          2007          $  400,000
          2008          $  400,000
          Thereafter    $  966,000

                                      F-7





<PAGE>
                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the 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.

Concentrations of Credit Risk - The Company sells its telecommunications
services and products primarily to small and medium size businesses,
residential and wholesale customers. The Company performs ongoing credit
evaluations of both its retail and wholesale customers. The Company generally
does not require collateral, however when circumstances warrant, deposits are
required. Recent conditions in the telecommunications industry have given rise
to an increase in potential doubtful accounts. Allowances are maintained for
such potential credit losses. The Company has entered into offset arrangements
with certain of its customers, who are also vendors, allowing for the ability
to offset receivables against the Company's payables balance.

Stock-Based Compensation

The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, amended by SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
Statement No. 123". This Statement amends the disclosure requirements of
Statement 123 to require prominent disclosures in the summary of significant
accounting policies in the financial statements. The Company adopted the
disclosure requirements of SFAS No. 148 effective January 31, 2003. There was no
impact on the Company's basic financial statements resulting from its adoption.

The following disclosure complies with the adoption of this statement and
includes pro forma net loss as if the fair value based method of accounting
had been applied.

<Table>
<Caption>
                                                  (in thousands except per share amounts)
                                                        Year Ended January 31
                                               --------------------------------------------
                                                2003               2002                2001
                                                ----               ----                ----
<S>                                             <C>                <C>                 <C>
Net loss as reported                           $(9,407)          $(11,970)           $(8,629)

Stock based employee compensation included
in reported net loss                                --                 --                 --

Total stock-based employee compensation
(expense) benefit determined under fair
value based method for all options                (692)             1,133               (259)
                                              --------           --------             ------
Pro forma net loss                            $(10,099)          $(10,837)           $(8,886)
                                              ========           ========             ======
Basic loss per share

 As reported                                    $(0.71)            $(1.17)            $(1.18)

 Pro forma                                        (.76)             (1.06)             (1.23)
                                              ========           ========             ======
Diluted loss per share

 As reported                                    $(0.71)            $(1.17)            $(1.18)

 Pro forma                                        (.76)             (1.06)             (1.23)
</Table>

The fair value of the option grants is estimated based on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in fiscal 2003, 2002, and 2001: dividend yield of
0.00% for the three years; expected volatility of 153.33%, 165.18%, 62.23%
respectively; risk-free interest rate of 2.0%, 6.47%, and 7.85% respectively;
and expected lives of 3 to 5 years for each of the three years.

Loss per Share - Basic loss per share is represented by net loss available to
common shareholders divided by the weighted-average number of common shares
outstanding during the period. Diluted loss per share reflects the potential
dilution that could occur if securities or stock options were exercised or
converted into Common Stock during the period, if dilutive (see Note 15).

Authorized Common Stock - On February 23, 2000, the Company's shareholders
approved an increase in the number of authorized shares of Common Stock from
20,000,000 to 50,000,000 shares.

Cash and Cash Equivalents - The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents. Cash and cash equivalents consist of cash on hand, demand deposits
and money market accounts.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

In the event the future tax consequences of differences between the financial
reporting bases and the tax bases of Covista's assets and liabilities result
in deferred tax assets, an evaluation of the probability of being able to
realize the future benefits indicated by such asset is required. A valuation
allowance is provided for a portion of the deferred tax assets when it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. In assessing whether deferred tax assets can be realized, management
considers the scheduled reversals of deferred tax liabilities, projected future
taxable income, and tax-planning strategies.

Fair Value of Financial Instruments - For cash and cash equivalents, the
carrying value is a reasonable estimate of its fair value. The estimated fair
value of publicly traded financial instruments is determined by the Company
using quoted market prices, dealer quotes and prices obtained from independent
third parties. For financial instruments not publicly traded, fair values are
estimated based on values obtained from independent third parties or quoted
market prices of comparable instruments. The fair value of the debt was
determined based on interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities for debt issues
that are not traded on quoted market prices. However, judgment is required to
interpret market data to develop the estimates of fair value. Accordingly, the
estimates are not necessarily indicative of the amounts that could be realized
in a current market exchange.

The carrying values were approximately equal to the fair values of financial
instruments as of January 31, 2003 and 2002.

                                      F-8



<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

Long-Lived Assets - The Company accounts for the impairment of long-lived assets
and for long-lived assets to be disposed of by evaluating the carrying value of
its long-lived assets in relation to the operating performance and future
undiscounted cash flows of the underlying businesses annually and when
indications of impairment are present. Long-lived assets to be disposed of, if
any, are evaluated in relation to the net realizable value. If impairment is
indicated, the amount of the impairment is typically calculated using discounted
expected future cash flows. The discount rate applied to these cash flows is
based on the Company's weighted average cost of capital. If the carrying value
of the asset exceeds the fair value of the asset, the difference will be charged
to the results of operations in the period that the impairment occurred.

Recent Accounting Pronouncements -

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations."
SFAS 141 requires the purchase method of accounting for business combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method.
As of January 31, 2003 Covista has approximately $8,206,000 of Goodwill
recorded on its books.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective
February 1, 2002. SFAS 142 requires, among other things, the discontinuance of
goodwill amortization. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments of goodwill. Covista did not have any goodwill as of the adoption
of SFAS 142.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143 ("SFAS 143"), "Accounting for Asset Retirement Obligations", which is
effective for all fiscal years beginning February 1, 2003. SFAS 143 requires
recording the fair value of a liability for an asset retirement obligation in
the period in which it is incurred, and a corresponding increase in the carrying
value of the related long-lived asset. Over time, the liability is accreted to
its present value each period, and the capitalized cost is depreciated over the
useful life of the related asset. Upon settlement of the liability, it is either
settled for its recorded amount or a gain or loss upon settlement is recorded.
The Company believes that the adoption of SFAS 143 will not have a significant
impact on the financial position, results of operation, or cash flows of
Covista.


                                      F-9





<PAGE>

                 COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
              FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long Lived
Assets", which is effective February 1, 2002. SFAS 144 replaces the Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long
Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS 144 requires
that long-lived assets be measured at the lower of the carrying amount or fair
value, less cost to sell, whether included in continuing operations or in
discontinued operations. The adoption of SFAS 144 did not had a material impact
on Covista's financial position or results of operations.

In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS
146 requires that a liability for a cost that is associated with an exit or
disposal activity be recognized when the liability is incurred. SFAS 146 also
establishes that fair value is the objective for the initial measurement of the
liability. SFAS 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. Covista does not believe the adoption
will have a material impact on its financial position or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantees," an interpretation of FASB Statement No. 5, "Accounting for
Contingencies." This interpretation elaborates on the disclosures to be made by
a guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. The disclosure provisions of FIN 45
are effective for these statements and had no effect on the Company. Covista
does not believe that the adoption of the measurement provisions of FIN 45 will
have a material impact on its financial position or results of operations.

In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an amendment of SFAS 123." SFAS 148 is effective for fiscal years ending after
December 15, 2002 and provides for additional annual and interim financial
statement disclosures. Adoption has not had a material impact on the Company's
financial position or results of operations.

In January 2003, FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"). FIN 46 requires a variable interest
entity to be consolidated by a company if that company is subject to a majority
of the risk of loss from the variable interest entity's activities or entitled
to receive a majority of the entity's residual returns or both. FIN 46 also
requires disclosures about variable interest entities that a company is not
required to consolidate but in which it has a significant variable interest.
Covista does not believe the adoption will have a material impact on its
financial position or results of operations.

3.   SEGMENT REPORTING

The Company sells telecommunication services to three distinct segments: a
retail segment, consisting primarily of small to medium size businesses,
a wholesale segment, with sales to other telecommunications carriers, and
KISSLD which targets residential users.


                                      F-10





<PAGE>

In addition to direct costs, each segment is allocated a proportion of the
Company's operating expenses, including utilization of its switch and
facilities. The allocation of expenses is based upon the minutes of use flowing
through the Company's switching network. There are no intersegment sales.
Specifically identified assets are allocated to each segment. All intangible
assets and goodwill have been allocated to the retail segment. Certain
other assets including capital expenditures are allocable based on total
revenue. Management evaluates performance on operating results of the three
business segments.

Summarized financial information concerning the Company's reportable segments is
shown in the following table.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
                           Retail      Wholesale       KISSLD         Total
-----------------------------------------------------------------------------
<S>                   <C>           <C>           <C>           <C>
2003
   Net Sales            $75,454,835   $12,514,438   $12,990,418   $100,958,692
   Operating loss       $(7,426,717)  $(2,570,584)  $   830,305   $ (9,166,998)
   Assets               $41,494,950   $ 5,046,068   $ 4,509,380   $ 51,050,398
   Capital Expenditures $ 1,153,165   $   191,256   $   198,531   $  1,542,952
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2002
   Net Sales            $47,423,502   $47,889,194            --   $ 95,312,696
   Operating loss       $(7,013,376)  $ (5,148,61)           --   $(12,161,994)
   Assets               $17,243,594   $14,013,197            --   $ 31,256,791
   Capital Expenditures $ 2,719,313   $ 2,746,016            --   $  5,465,329
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2001
   Net Sales            $53,487,012   $79,743,425            --   $133,230,437
   Operating loss       $(6,541,566)  $(2,192,043)           --   $ (8,733,609)
   Assets               $15,696,137   $23,401,265            --   $ 39,097,402
   Capital Expenditures $ 1,295,757   $ 1,931,836            --   $  3,227,593
-----------------------------------------------------------------------------
</TABLE>


                                      F-11





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

4.   INVESTMENT SECURITIES

Investments available for sale in fiscal 2002 consisted of a $25,000 bond and a
$415,000 mutual fund. For both investments, the cost approximated the fair
market value at January 31, 2002. The mutual fund investment was sold during
fiscal 2003. The bond will mature in 2005 and has been reclassified to other
long-term assets in 2003.

5.   PROPERTY AND EQUIPMENT

     Property and equipment consists of:

<TABLE>
<CAPTION>
Classification                                       2003          2002
----------------------------------------------    -----------   -----------
<S>                                              <C>           <C>
Machinery and equipment                           $21,285,940   $17,064,974

Leasehold improvements                              1,554,662     1,497,811

Office furniture, fixtures and equipment            3,080,588     2,672,237

Vehicles                                              181,256       181,256

Computer equipment and software                     8,590,964     7,325,243

Machinery and equipment in progress                 2,770,940     2,102,897
                                                  -----------   -----------
                                                   37,464,350    30,844,416

Less accumulated depreciation and amortization    (22,313,934)  (18,354,790)
                                                  -----------   -----------
                                                  $15,150,416   $12,489,626
                                                  ===========   ===========
</TABLE>

Depreciation and amortization expense related to property and equipment for the
years ended January 31, 2003, 2002 and 2001, was $3,959,144, $3,658,244, and
$3,433,004 respectively.



                                     F-12





<PAGE>

6. ACQUISITION OF CAPSULE COMMUNICATIONS

On February 8, 2002, Covista Communications, Inc. ("Covista") completed the
merger (the "Merger") of its wholly owned subsidiary CCI Acquisitions, Inc.
("CCI") with and into Capsule Communications, Inc. ("Capsule"), pursuant to the
Agreement and Plan of Reorganization dated as of July 17, 2001 among Covista,
CCI and Capsule (the "Merger Agreement") through the issuance of 1,742,320
shares of Common Stock and the assumption of certain liabilities and stock
options. As a result of the Merger, Capsule became a wholly owned subsidiary
of Covista. The Company has accounted for the combination with Capsule as a
purchase business combination under SFAS 141("Business Combination"). Capsule
is a switch-based interexchange carrier providing long distance telephone
communications services primarily to small and medium-size business customers
as well as residential accounts.

The results of Capsule's operations have been included in the Company's
Consolidated Statement of Loss and Comprehensive Loss since the date of the
merger. The total purchase price including certain direct costs was
approximately $12,972,000 plus assumed liabilities of approximately $10,057,000.
Included in the purchase price, the Company assumed options from Capsule for the
purchase of 286,975 shares of Common Stock valued at approximately $1.1 million
using the Black-Scholes Valuation Model, using an exercise price of $3.49 to
$20.10, expected lives of 0.5 to 2 years, 156% volatility, 2.69% discount rate,
and a Company stock price of $6.71. In addition, the Company incurred
approximately $0.3 million in acquisition expenses.

The Company's allocation of the purchase price is based on a final appraisal
of fair value. The following table summarizes these fair values of
the assets acquired and liabilities assumed at the Merger Date.

<TABLE>
<S>                        <C>
Cash                       $  1,179,172
Current assets                5,717,428
Property and equipment        3,544,981
Other assets                    191,199
Intangible assets             4,190,000
Goodwill                      8,205,850
                           ------------
   Total assets acquired     23,028,630
                           ------------
Current liabilities         (10,056,503)
                           ------------
   Total purchase price    $ 12,972,127
                           ------------
</TABLE>

The identifiable intangible assets acquired from Capsule were classified
as its business customer relationships valued at $1,288,000, its residential
customer relationships valued at $376,000, and its agent relationships valued
at $2,526,000. These intangibles are being amortized using the straight line
method over a weighted average period of 40 months. Goodwill and Intangible
Assets acquired are not deductible for tax purposes.

The unaudited pro forma information below represents the consolidated results
of operations as if the acquisition had occurred as of February 1, 2002 and
2001. The unaudited pro forma information has been included for comparative
purposes and is not indicative of the actual results of operations, nor
is it necessarily indicative of future results.

<Table>
<Caption>
                                          Twelve Months Ended
                                   ------------------------------------
                                   January 31, 2003    January 31, 2002
                                   ----------------    ----------------
<S>                                <C>                 <C>
Total Revenue                         $101,772,641       $132,289,342
Loss attributable to
Common stockholders                     (9,314,836)       (12,850,871)
Basic net loss per
common share                                  (.70)             (1.07)
</Table>


                                      F-13





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

7.  INCOME TAXES

The provision (benefit) for income taxes includes the following:

<TABLE>
<CAPTION>
                               2003                         2002
                               ----                         ----
<S>                            <C>                          <C>
Federal

   Current                   $(511,220)                     --

   Deferred                         --                      --

State income taxes

   Current                          --                      --

   Deferred                         --                      --
                             ---------                 ---------
                             $(511,220)                    $--
                             =========                 =========
</TABLE>

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. Valuation allowances are
provided against assets that are not likely to be realized.

The income tax effects of significant items comprising the Company's net
deferred tax asset (liability) are as follows:

<TABLE>
<CAPTION>
                                             2003                     2002
                                       ------------------    -------------------------
                                       Current   Long Term     Current      Long Term
                                       -------   ---------   -----------   -----------
<S>                                    <C>       <C>         <C>           <C>
Deferred tax assets

   Allowance for doubtful accounts     $426,925  $     --     $ 1,991,860   $       --

   Accrued compensation expense          50,632        --              --      268,130

   Accrued expenses                     109,276        --         332,560           --

   Net operating loss carry forward          --   18,022,750           --   10,877,719

   Alternative minimum tax credit            --           --           --      593,940

   Other                                 26,997           --       74,550           --
                                       --------   ----------  -----------  -----------
Total gross deferred tax assets         613,830   18,022,750    2,398,970   11,739,789

   Less: valuation allowance           (613,830) (14,443,977)  (2,398,970)  (9,539,179)
                                       --------   ----------  -----------  -----------
Total net deferred tax asset                 --    3,578,773           --    2,209,610
                                       --------   ----------  -----------  -----------



Deferred tax liabilities:

   Property and equipment                    --   (2,050,653)          --   (2,209,610)

   Other                                     --   (1,528,120)          --           --
                                       --------   ----------  -----------  -----------
Total deferred tax liabilities               --   (3,578,773)          --   (2,209,610)
                                       --------   ----------  -----------  -----------
                                       --------   ----------  -----------  -----------
Net deferred tax asset (liability)     $     --  $        --   $       --  $        --
                                       --------   ----------  -----------  -----------
                                       --------   ----------  -----------  -----------
</TABLE>

A reconnciliation from the U.S. statutory tax rate of 34% to the effective
tax rate for income taxes on the consolidated statement of loss is as follows:

<Table>
<Caption>
                                             2003            2002            2001
                                         ------------   -------------    ------------
<S>                                      <C>             <C>             <C>
Computed expense at statutory rates      $(3,553,921)    $(4,069,660)     $(2,933,963)

(Reductions) increase in taxes
resulting from:

Tax exempt interest income                        --            (550)          (3,140)

State taxes (benefit), net of
federal income tax benefit                  (626,404)       (708,853)        (513,164)

Valuation allowance                        3,119,659       4,522,609        3,703,659

Other                                        549,446        (256,454)        (253,392)
                                           ---------      ----------       ----------
                                           $(511,220)     $       --       $       --
                                           =========      ==========       ===========
</Table>

At January 31, 2003 for Federal income tax purposes, the Company had net
operating loss carryforwards of approximately $44,000,000 which will begin
to expire in stages in the year 2009.

The utilization of these net operating loss carryforwards and realization of
tax benefits depends predominantly upon the Company's having taxable income
in future years. Further, the utilization of approximately $22,000,000 of
these net operating loss carryforwards is subject to annual limitation as
a result of a change in ownership, as defined under Section 382 of the Internal
Revenue Code. The limitation does not reduce the total amount of such net
operating losses that may be taken, but rather substantially limits the amount
that may be used during a particular year. In addition, the net operating losses
generated by Capsule Communications, Inc. prior to February 8, 2002, which
approximate $12,000,000 can be utilized only to the extent it generates
taxable income in future years. Any future benefits attributable to all of
the Company's net operating loss carryforwards may be reduced upon further
changes in ownership.


                                     F-14





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

8.   LEASE COMMITMENTS

The Company rented various facilities under lease agreements classified as
operating leases. Several of the underlying agreements contained certain
incentives eliminating payments at the inception of the lease. Lease incentives
are amortized on a straight-line basis over the entire lease term. Under terms
of these leases, the Company is required to pay its proportionate share of
increases in real estate taxes, operating expenses and other related costs.

The Company leased warehouse space in Belleville, New Jersey from a partnership
in which two of the partners were directors and major shareholders of the
Company. Both partners are no longer directors. During the fiscal years ended
January 31, 2002, 2001 and 2000, the Company paid rent of $21,530, $49,479 and
$62,848, respectively to the partnership. The lease expired on November 30,
1998, and had been renewed subject to termination upon 120-days prior written
notice by either party. The lease was amended on August 31, 1999 to provide an
annual rate of $47,980. The lease terminated during the fiscal year ended
January 31, 2002.

On September 1, 2001, Covista entered into a lease agreement for 28,000
square feet of office space in Chattanooga, Tennessee, with Henry G. Luken III
who is Covista's Chairman of the Board and its principal shareholder. The term
of the lease is for five years beginning September 1, 2001. The lease provides
for annual rent of $86,400 from September 1, 2001 to August 30, 2002; $115,200
from September 1, 2002 to August 30, 2003; $144,000 from September 1, 2003 to
August 30 2004, with the last two years to be $144,000 annually adjusted for the
Consumer Price Index.


                                      F-15





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

On December 1, 2001, Covista entered into a lease for property located at 806
East Main Street, Chattanooga, Tennessee, for use as a switching facility. The
lessor is Henry G. Luken III, Chairman of the Board and a principal shareholder
of Covista. The lease term is 5 years, expiring on November 30, 2006. Annual
rent is due as follows: $22,500 from December 1, 2001 to November 30, 2002,
$27,000 from December 1, 2002 to November 30, 2003, $31,500 from December 1,
2003 to November 30, 2004, and $36,000 from December 1, 2004 to November 30,
2005. Rental amounts for months beginning after October 1, 2005 will be adjusted
upward for the U.S. Consumer Price Index. The lease may be renewed for an
additional 5 years with 90 days' written notice prior to the lease expiration
date.

On October 1, 2002, Covista entered into a lease for Suite 200 at 721 Broad
Street, Chattanooga, Tennessee, for use as offices for Corporate Headquarters.
The lessor is Henry G. Luken III, Chairman of the Board and a principal
shareholder of Covista. The lease term is 5 years terminating on November 30,
2007. Annual rent is due as follows: Year 1 = $101,674, Year 2 = $111,670, Year
3 = $120,000, Year 4 = $120,000, Year 5 = $120,000. Rental amounts for months
beginning after October 1, 2005 will be adjusted upward for the U.S. Consumer
Price Index. The lease may be renewed for an additional 5 years with 90 days'
written notice prior to the lease expiration date.

In July 2001, Covista entered into an approximately $1,245,000 sale and
leaseback transaction whereby Covista sold and leased back telecommunications
switching equipment purchased earlier in the current fiscal year. The equipment
was sold for the original purchase price. The term is three years and Covista
has an option to repurchase the equipment at fair market value upon lease
termination. The related lease is being accounted for as an operating lease.

In November 2001, Covista negotiated another sale and leaseback transaction for
a second telecommunications switch for approximately $1,092,700. The lease
contract is similar to the first transaction, with a term of three years with an
option to repurchase the equipment at fair market value upon lease termination.
The second lease is also accounted for as an operating lease.

Future minimum annual rentals on these leases as of January 31, 2003 are as
follows:

<TABLE>
<CAPTION>
Year ending January 31,   Annual Minimum Rentals
-----------------------   ----------------------
<C>                             <C>
2004                            $2,149,745
2005                             1,561,038
2006                               772,632
2007                               492,697
2008                               409,250
2008 and thereafter              1,637,846
                                ----------
TOTAL                           $7,023,208
                                ==========
</TABLE>

Rental expense for the years ended 2003, 2002 and 2001 was approximately
$2,945,000, $2,355,000 and $1,500,000, respectively.


                                      F-16





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

9.   EMPLOYEE BENEFIT PLANS

The Company has established a savings incentive plan for substantially all
employees of the Company, which is qualified under section 401(k) of the
Internal Revenue Code. The savings plan provides for contributions to an
independent trustee by both the Company and its participating employees. Under
the plan, employees may contribute up to 15% of their pretax base pay. The
Company matches 50% of the first 6% of participant contributions.

Participants vest immediately in their own contributions and over a period of
five years for the Company's contributions. Company contributions were
approximately $148,000, $162,000 and $95,000, for the years ended January 31,
2003, 2002 and 2001, respectively.

10.   STOCK OPTION PLANS

The Company has four stock option plans authorizing the granting of either
Incentive Stock Options or Nonqualified Stock Options. The 1996 Stock Option
Plan (the "1996 Plan") provides for the issuance of an aggregate of not more
than 600,000 shares of the Company's Common Stock. The 1999 Equity Incentive
Plan (the "1999 Plan") provides for the issuance of an aggregate of not more
than 750,000 shares of the Company's Common Stock. The 2001 Equity Incentive
Plan (the "2001 Plan") provides for the issuance of an aggregate of not more
than 900,000 shares of the Company's Common Stock. The 2002 Equity Incentive
Plan (the "2002 Plan") provides for the issuance of an aggregate of not more
than 750,000 shares of the Company's Common Stock. The Capsule Equity Incentive
Plan (the "Capsule Plan") provides for the issuance of an aggregate of not more
than 286,975 shares of the Company's Common Stock. The 1987 Plan is disclosed
for prior year information purposes.

Incentive Stock Options granted pursuant to the Plans must have an exercise
price equal to the fair market value of the Company's Common Stock at the time
the option is granted, except that the price shall be at least 110% of the fair
market value where the option is granted to an employee who owns more than 10%
of the combined voting power of all classes of the Company's voting stock.

Nonqualified Stock Options granted pursuant to the Plans must have an exercise
price equal to at least 50% of the fair market value of the Company's Common
Stock at the time the option is granted. Incentive Stock Options may be granted
only to employees. Nonqualified Stock Options may be granted to employees as
well as directors, independent contractors and agents, as determined by the
Board of Directors. All options available to be granted under the 1996 Plan,
totaling 54,750 at January 31, 2003, must be granted by October 10, 2006. All
options available to be granted under the 1999 Plan, totaling 320,725 at January
31, 2003, must be granted by February 23, 2009. All options available to be
granted under the 2001 Plan, totaling 289,458 at January 31, 2003, must be
granted by February 8, 2012. All options available to be granted under the 2002
Plan, totaling 547,000 at January 31, 2003 must be granted by December 19, 2012.

On February 23, 2000, the Board of Directors adopted a resolution allowing the
Company to reprice all outstanding options granted under the 1996 and 1999
Plans. All outstanding options, approximately 243,000 net of cancellations,
which were originally granted at prices ranging from $14.63 to $21.50 per share,
were repriced to $14.25 per share. Accordingly, the option prices per share and
weighted average exercise price in the following 1996 Plan and 1999 Plan tables
have been restated to reflect the $14.25 exercise price. All other terms and
conditions, including vesting periods remain unchanged. The repriced options are
subject to variable plan accounting and as a result there was no income
statement effect of these options in the year ended January 31, 2003,
January 31, 2002 and January 31, 2001 due to the decrease in the Company's
stock price below the new exercise price.


                                      F-17





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

On February 1, 2001, 35 employees were given the opportunity to cancel 248,200
options to purchase Common Shares. All 35 agreed to cancel the options. On
August 2, 2001 248,200 options to purchase Common Shares were issued at the then
closing market price of $5.65 per share.

As part of the Capsule acquisition, each Capsule stock option was converted into
options to purchase shares of Covista Common Stock. Under the Capsule stock
option plans, options were granted to officers and employees of Capsule. No
option was granted for a term in excess of ten years from the date of grant. The
Capsule stock options were fully vested on the date of acquisition. The options
if not exercised, expire up to 5 years after the date of grant.


                                      F-18





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001



    Information regarding options under the 1987 Plan is as follows:

<Table>
<Caption>
                                                                                            Weighted
                                              Option Price                                  Average
                                               Per Share     Outstanding   Exercisable   Exercise Price
                                               ---------     -----------   -----------   --------------
<S>                                           <C>            <C>           <C>           <C>
January 31 1999 balance                       $0.51 - $4.81    310,000       310,000         $1.77
Exercised                                     $0.51 - $4.81   (211,000)     (211,000)        $2.25
                                              -------------   --------      --------         -----
January 31, 2000 balance                      $0.51 - $1.00     99,000         99,00         $0.75
Exercised                                     $        0.51    (16,500)      (16,500)        $0.51
                                              -------------   --------      --------         -----
January 31, 2001 balance                      $0.51 - $1.00     82,500        82,500         $0.80
Exercised                                     $        1.00    (16,500)      (16,500)        $1.00
Cancelled                                     $0.51 - $1.00    (66,000)      (66,000)        $0.80
                                              -------------   --------      --------         -----
January 31, 2002 balance                                 --         --            --         $  --
                                              =============   ========      ========         =====
</Table>

Information regarding options under the 1996 Plan is as follows:

<TABLE>
<CAPTION>
                            Option Price                               Weighted Average
                             Per Share     Outstanding   Exercisable    Exercise Price
                           -------------   -----------   -----------   ----------------
<S>                        <C>              <C>            <C>              <C>
January 31, 2000 balance   $10.00-$14.25     344,000        97,183          $14.06
   Became exercisable      $       14.25          --        18,184          $14.25
   Cancelled               $       14.25    (259,600)      (64,000)         $14.25
                           -------------    --------       -------          ------
January 31, 2001 balance   $10.00-$14.25      84,400        51,367          $13.50
   Granted                 $        2.00     523,000            --          $ 2.00
   Became exercisable      $        2.00          --       101,000          $ 2.00
   Cancelled               $ 2.00-$14.25    (259,400)      (51,367)         $ 5.74
   Exercised               $        2.00      (5,000)       (5,000)         $ 2.00
                           -------------    --------       -------          ------
January 31, 2002 balance   $        2.00     343,000        96,000          $ 2.00
   Became exercisable      $        2.00          --       247,000          $ 2.00
   Exercised               $        2.00      (5,000)       (5,000)         $ 2.00
                           -------------    --------       -------          ------
January 31, 2003 balance   $        2.00     338,000       338,000          $ 2.00
                           =============    ========       =======          ======
</TABLE>

Information regarding options under the 1999 Plan is as follows:

<TABLE>
<CAPTION>
                           Option Price                               Weighted Average
                            Per Share     Outstanding   Exercisable    Exercise Price
                           ------------   -----------   -----------   ----------------
<S>                        <C>             <C>            <C>               <C>
January 31, 2000 balance   $      14.25     521,000        48,000           $14.25
   Granted                 $      14.25     365,100            --           $14.25
   Became exercisable      $      14.25          --        92,375           $14.25
   Cancelled               $      14.25    (372,600)      (48,000)          $14.25
                           ------------    --------       -------           ------
January 31, 2001 balance   $      14.25     513,500        92,375           $14.25
   Granted                 $ 2.00-$7.00     558,400            --           $ 3.76
   Became exercisable      $ 2.00-$3.50          --         8,433           $ 2.02
   Cancelled               $3.00-$14.25    (573,000)      (89,175)          $12.93
   Exercised               $ 2.00-$3.50      (8,433)       (8,433)          $ 2.02
                           ------------    --------       -------           ------
January 31, 2002 balance   $2.00-$14.25     490,467         3,200           $ 4.00
   Granted
   Became exercisable       2.00-$14.25          --       425,975             3.50
   Cancelled                3.00-$14.25     (61,292)           --            12.00
   Exercised                2.00-$ 3.50     (41,875)      (41,875)            2.11
                           ------------    --------       -------           ------
January 31, 2003 balance   $2.00-$14.25     387,300       387,300           $ 4.09
                           ============    ========       =======           ======
</TABLE>


                                      F-19





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

Information regarding options under the 2001 Plan is as follows:

<TABLE>
<CAPTION>
                           Option Price                               Weighted Average
                            Per Share     Outstanding   Exercisable    Exercise Price
                           ------------   -----------   -----------   ----------------
<S>                         <C>             <C>           <C>               <C>
January 31, 2001 balance             --          --            --              --
   Granted                  $2.00-$6.71     855,500            --           $4.02
   Became exercisable       $2.00-$5.65          --       213,899           $4.26
   Cancelled                $      5.65      (2,900)           --           $5.65
                            -----------     -------       -------           -----
January 31, 2002 balance    $2.00-$6.71     852,600       213,899           $4.02
   Granted                  $      5.00      41,000            --           $5.00
   Became exercisable       $2.00-$5.65          --       355,643           $3.68
   Cancelled                $2.00-$5.65    (283,058)           --           $4.90
   Exercised                $2.00-$5.65     (78,842)      (78,842)          $2.55
                            -----------     -------       -------           -----
January 31, 2003 balance    $2.00-$6.71     531,700       490,700           $2.95
                            ===========     =======       =======           =====
</TABLE>

Information regarding options under the 2002 Plan is as follows:

<TABLE>
<CAPTION>
                           Option Price                               Weighted Average
                            Per Share     Outstanding   Exercisable    Exercise Price
                           ------------   -----------   -----------   ----------------
<S>                         <C>             <C>           <C>               <C>
January 31, 2002 balance             --         --            --               --
   Granted                        $2.87     203,000           --            $2.87
                            -----------     -------       -------           -----
January 31, 2003 balance          $2.87     203,000           --            $2.87
                            ===========     =======       =======           =====
</TABLE>

Information regarding options under the Capsule Plan is as follows:

<TABLE>
<CAPTION>
                           Option Price                               Weighted Average
                            Per Share     Outstanding   Exercisable    Exercise Price
                           ------------   -----------   -----------   ----------------
<S>                            <C>          <C>              <C>            <C>
January 31, 2002 balance             --         --            --              --
   Granted                  $3.49-24.20    286,975       286,975           10.38
   Cancelled                 3.49-24.20    (49,656)      (49,656)          15.72
   Exercised                       3.49    (23,763)      (23,763)           3.49
                           ------------    -------       -------           -----
January 31, 2003 balance   $3.49-$20.45    213,556       213,556           $9.90
                           ============    =======       =======           =====
</TABLE>


                                      F-20





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

The following table summarizes information about options outstanding as of
January 31, 2002 under the 1987, 1996, 1999, 2001, 2002 and Capsule Plans:

<TABLE>
<CAPTION>
                                   Outstanding                                   Exercisable
                    -----------------------------------------------   ---------------------------------
                                        Remaining
Range of exercise   Number of Shares   Contractual       Average      Number of Shares       Average
      prices          Outstanding          Life      Exercise Price      Outstanding     Exercise Price
-----------------   ----------------   -----------   --------------   ----------------   --------------
<S>                     <C>                <C>           <C>               <C>               <C>
   $ 2.00-$7.00         1,546,515          5.0           $ 3.11          1,302,515           $ 3.06
   $7.01-$20.45           126,963          1.90          $14.51            126,963           $14.51
</TABLE>

11.  STOCK GRANTS

The Company, at the discretion of the Board of Directors, has awarded from time
to time to management personnel shares of its Common Stock at par value. These
shares vest over a period of three to five years. The Company awarded 0 shares,
0 shares and 0 shares of its Common Stock and recorded compensation expense of
$0, $ 12,011 and $266,565 for the years ended January 31, 2003, 2002 and 2001,
respectively.

12. VENDOR DISPUTES AND ACCRUED LINE COST ESTIMATES

In the normal course of business, Covista files disputes with its service
providers. The Covista accounting policy, followed on a consistent basis, is
to record the invoiced amount to cost of sales, which may include disputed
amounts. When the dispute is resolved and the credit is received, the amount
reduces cost of sales. During the fiscal year ended January 2003, Covista
obtained net credits of approximately $3.4 million for resolved disputes. These
credits reduced cost of sales and the corresponding accounts payable and accrued
liability. Open and unresolved disputes included in accounts payable and accrued
liabilities totaled approximately $5.2 million at January 31, 2003.

In the normal course of business, Covista uses certain estimates to determine
its monthly cost of sales ("line cost") and corresponding accounts payable to
these service providers. These line costs include fees for network transport,
access, egress and facility charges. The Covista accounting policy provides
that changes in the accrued cost of sales estimates will be adjusted to actual
amounts as soon as the actual liabilities are fixed and determinable.
These adjustments to actual expense are typically identified within 90 days
following the period of estimate.

13.  LONG-TERM DEBT

The Company has a revolving $2,000,000 credit facility with Wells Fargo Business
Credit Corporation, which was renegotiated and amended on May 11, 2002, which
expires on May 11, 2004. Interest on the revolving credit facility is currently
calculated at the prime lending rate plus 2 3/4%, on a minimum loan balance of
$750,000. The loan is collateralized by accounts receivable and fixed and
intangible assets of the Company. As of January 31, 2003, the Company's
outstanding balance on this credit facility was $1,559,172 leaving approximately
$440,000 available based on collateral, for future borrowing under the credit
facility. The entire balance is classified as current. Subsequent to January 31,
2003, this facility was terminated and paid in full with proceeds from a new
credit facility. See footnote 19.


                                      F-21





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

On June 17, 2002, Covista entered into a term loan agreement with a major bank.
The initial principal amount of this note was $3,775,000, payable in 36 monthly
installments at a fixed interest rate of 4.495% for the first year and
converting to 2% over LIBOR on June 17, 2003 and thereafter. This note is
secured by certain of the Company's switching equipment and Certificates of
Deposit provided by Covista's Chairman of the Board. The balance on this
facility was $3,079,586 at January 31, 2003 of which $1,268,827 is classified as
current.

On July 2, 2001, Covista received a loan from Henry G. Luken III, its Chairman
of the Board and principal shareholder, in the amount of $4,000,000. The loan
was scheduled to mature on February 1, 2003 together with accumulated interest
at a rate of 8% per annum. The proceeds of the loan were used to purchase a
10-year commitment for approximately 2.8 billion DS-0 channel miles of
telecommunications network capacity from an unaffiliated party. The current
portion of prepaid network capacity is included in prepaid expenses.
The long term portion, net of current year amortization of is included
in Intangible Assets. The cost will be amortized to operations based
upon the greater of capacity use or straight line over the term of the
agreement. The unaffiliated party has recently filed for Chapter 11
Reorganization; however at January 31, 2003 is continuing to perform
under the agreement. Mr. Luken also advanced the Company, $400,000, the
proceeds of which were used for construction of new facilities. The
agreement calls for interest to be accrued at a rate of 8% per
annum. The total balance of the liability was $4,400,000 plus
accrued interest at January 31, 2002. During fiscal 2003, Mr. Luken loaned
the Company an additional $2,600,000. The $7,000,000 note was converted
to common stock at $2.87 per share, which was the market price on the date
of approval, in December of 2002.

As of January 31, 2002, Covista owed a remaining balance of $381,405 loan
payable to a New Jersey bank, all of which was classified as current. The
interest rate on the term loan was 7.71% and was payable the scheduled monthly
installments of $55,923. This balance was paid in full during fiscal 2003.


                                      F-22





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

14.  COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal and administrative actions arising in
the normal course of business. While the resolution of any such actions may have
an impact on the financial results for the period in which it is resolved,
management believes that the ultimate disposition of these matters will not have
a material adverse effect upon its consolidated results of operations, cash
flows or financial position.

15.  LOSS PER SHARE

Basic loss per share was computed by dividing net loss by the weighted
average number of shares of Common Stock outstanding during each year.

Outstanding stock options to purchase shares of Common Stock were not included
in the computation of diluted loss per share for the fiscal years ended January
31, 2003, 2002 and 2001 because to do so would have been antidilutive.

The reconciliation of the loss and common shares included in the computation of
basic loss per common share and diluted loss per common share for the years
ended January 31, 2003, 2002 and 2001 is as follows:


                                     F-23





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>
                                   2003                              2002                               2001
                      -------------------------------  --------------------------------   --------------------------------
                                                Per                               Per                                Per
                                               Share                             Share                              Share
                          Loss       Shares    Amount       Loss       Shares    Amount      Loss        Shares     Amount
                      -----------  ----------  ------  ------------  ----------  ------  -----------   ----------   ------
<S>                   <C>          <C>         <C>     <C>           <C>         <C>
Net Loss              ($9,407,475)                      $(11,969,588)                     $(8,629,304)

Basic Loss Per Share   (9,407,475) 13,282,858  $(.71)   (11,969,588) 10,203,610  $(1.17)   (8,629,304)  7,324,085   $(1.18)

Effect of dilutive
   securities:

Stock Options

Diluted loss per
   share              ($9,407,475) 13,282,858  $(.71)  $(11,969,588) 10,203,610   $(1.17) $(8,629,304)  7,324,085   $(1.18)
                      ===========  ==========  =====   ============  ==========   ======  ===========   =========   ======
</TABLE>

16.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

                   Amounts in thousands except per share data


<TABLE>
<CAPTION>
                                           April 30, 2000   July 31, 2000   October 31, 2000   January 31, 2001
                                           --------------   -------------   ----------------   ----------------
<S>                                            <C>             <C>             <C>                 <C>
Net sales                                      $31,792         $34,108          $33,903            $33,427
Operating loss                                  (1,606)         (1,405)          (2,417)            (3,306)
Net loss                                        (1,514)         (1,366)          (2,403)            (3,346)
Basic loss per common share                      (0.21)          (0.19)           (0.33)             (0.45)
Diluted loss per common share                    (0.21)          (0.19)           (0.33)             (0.45)

<CAPTION>
                                           April 30, 2001   July 31, 2001   October 31, 2001   January 31, 2002
                                           --------------   -------------   ----------------   ----------------
<S>                                            <C>             <C>             <C>                 <C>
Net sales                                      $29,444         $28,892          $20,467            $16,510
Operating income (loss)                         (4,863)             42           (1,790)            (5,551)
Net earnings (loss)                             (4,592)             86           (1,859)            (5,605)
Basic earnings (loss) per common share           (0.56)           0.01            (0.17)             (0.52)
Diluted earnings (loss) per common share         (0.56)           0.01            (0.17)             (0.52)

<CAPTION>

<S>                                            <C>             <C>             <C>                 <C>
                                           April 30, 2002   July 31, 2002   October 31, 2002   January 31, 2003
                                           --------------   -------------   ----------------   ----------------
Net sales                                      $24,548         $25,681          $26,773            $23,958
Operating loss                                  (2,667)         (3,741)            (298)            (2,461)
Net loss                                        (2,865)         (3,217)            (431)            (2,895)
Basic loss per common share                       (.27)           (.25)            (.03)              (.19)
Diluted loss per common share                     (.23)           (.25)            (.03)              (.19)
</TABLE>


Subsequent to the issuance of the Company's unaudited interim financial
statements for the period ended October 31, 2002, the Company determined that
certain vendor credits related to disputed amounts for telecommunications costs
had been received but not properly recorded as a reduction of cost of revenues
in the period such vendor credits were received. As a result, the Company has
restated its unaudited results of operations data for the second and third
fiscal quarters of 2003 from amounts previously reported in the Company's Form
10-Q for those periods to properly account for the vendor credits. A summary of
the significant effects of the restatement is as follows (amounts in thousands,
except per share data):

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------
                                For the quarter ended July 31,  For the quarter ended October 31,
                                              2002                                 2002
------------------------------------------------------------------------------------------------
                                 As previously    As restated    As previously     As restated
                                   reported                         reported
------------------------------------------------------------------------------------------------
<S>                                 <C>             <C>           <C>               <C>
Operating loss                      $(4,131)       $(3,741)     $(1,259)           $(298)
------------------------------------------------------------------------------------------------
Net loss                            $(3,607)       $(3,217)     $(1,392)           $(431)
------------------------------------------------------------------------------------------------
Loss per share - basic and diluted  $  (0.28)      $  (0.25)    $  (0.11)          $(0.03)
------------------------------------------------------------------------------------------------

</TABLE>



                                      F-24





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

17.  ACCESS CHARGE SETTLEMENT

In the second quarter of fiscal 2001, the Company received a cash payment of
$1,264,483 from certain Bell Companies in settlement of a class action suit, to
which the Company was a party, filed in 1992 relating to alleged overcharges by
those companies. The settlement concluded the class action with the Bell
Companies. The Company's portion of the settlement was not determined until the
second quarter ended July 31, 2000. The cash payment was recorded as a separate
line item as a reduction of costs and expenses in the quarter ended July 31,
2000.

18.  RELATED PARTY TRANSACTIONS

On February 1, 2001, the Board of Directors of the Company representing a
majority ownership of the Company, subject to perfunctory shareholder's approval
which was obtained on March 29, 2001, authorized the sale of a total of
3,500,000 shares of Common Stock to the following three persons (the
"Purchasers") in the amounts indicated: Kevin Alward, 1,000,000 shares; A. John
Leach, 500,000 shares; and Henry G. Luken, III, 2,000,000 shares. The purchase
price for the Common Stock to be issued to Messrs. Alward, Leach and Luken is
$2.00 per share, based on the fair market value of shares at February 1, 2001.
The stock sale was consummated in April 2001 with the issuance of 3,150,000
shares of common stock. The Board of Directors authorized a decrease of 350,000
shares to be purchased by Mr. Leach.

On February 1, 2001, the Board of Directors of the Company authorized the
acquisition of Blink Data Corporation, a telecommunications company, of which
Kevin Alward was a principal shareholder, officer and director, for 300,000
shares of the Company's Common Stock valued at the fair market value at March
29, 2001 for total consideration of $900,000. The primary asset was a customer
list which was fully amortized as of January 31, 2003. The transaction was
completed on March 29, 2001.

Jay J. Miller, a Director of Covista, has provided various legal services for
Covista. In Fiscal 2003, Covista paid $57,481 to Mr. Miller for services
rendered and accrued for in Fiscal 2003. As of January 31, 2003, Covista owed
Mr. Miller $41,085.

Leon Genet, a Director of Covista, has provided agent services for Covista
through his wholly owned Registrant, LPJ, Inc. During Fiscal 2003, LPJ, Inc. was
paid commissions of $78,134.


                                      F-25





<PAGE>

A proxy statement dated November 19, 2002 and mailed to stockholders on or about
November 20, 2002 provided details on; a proposal to issue and sell up to
4,360,000 shares of the Company's Common Stock to Henry G. Luken III, Chairman
of the Board of Directors of the Company, or a limited number of persons
designated by Mr. Luken.

In December 2002, Covista completed the issuance and sale of 4,359,958 shares
of Common Stock to Henry G. Luken III, in exchange for conversion of a note
payable in the amount of $7,000,000, the contribution of telecommunications
equipment with a fair value of $3,400,000 and cash of $2,100,000.

In December 2002, Covista completed the issuance and sale of 500,000 shares of
Common Stock to W. Thorpe McKenzie, a Director, in exchange for cash of
$1,433,500.


                                      F-26





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2003, 2002 AND 2001

19.  SUBSEQUENT EVENTS

Effective April 16, 2003, Covista executed a revolving credit and security
agreement along with related documents that provide the Company with an $8
million revolving loan of which $7 million is currently available. The
remaining $1 million becomes available upon Covista maintaining twelve
consecutive months of positive cash flow as defined in the agreement. This
thirty-six month facility allows the Company to borrow funds based on a
portion of eligible customer accounts receivable and bears interest at the
Prime Rate plus 2.00% with a floor of 6.25%. Interest, unused line and
collateral management fees are payable monthly in arrears. Covista is
required to maintain certain covenants that include cash velocity and
fixed charge coverage ratios as defined in the agreement. The loan is secured
by all of the Company's assets. Initial loan proceeds were used to payoff the
Wells Fargo facility in full. (See footnote 13).


                                      F-27





<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES

Schedule II - Valuation and Qualifying Accounts (Consolidated)

<TABLE>
<CAPTION>
                                                               Charged
                                               Balance at     (Credited)                   Balance at
                                              Beginning of   to Cost and                     End of
                                                 Period        Expenses    Deductions        Period
                                              ------------   -----------   ----------     -----------
<S>                                            <C>           <C>           <C>            <C>
YEAR ENDED JANUARY 31, 2003

Reserves and allowances deducted from asset
   accounts:
   Allowance for uncollectible accounts        $4,987,130    $2,754,712    $2,172,682(A)  $ 5,569,160
Valuation reserve on deferred tax asset       $11,938,149    $3,119,658            --     $15,057,807

YEAR ENDED JANUARY 31, 2002
Reserves and allowances deducted from asset
   accounts:
   Allowance for uncollectible accounts        $4,075,223    $5,382,384    $4,470,477(A)  $ 4,987,130

Valuation reserve on deferred tax asset        $7,406,540    $4,531,609    $       --     $11,938,149

YEAR ENDED JANUARY 31, 2001
Reserves and allowances deducted from asset
   accounts:
   Allowance for uncollectible accounts        $1,827,260    $2,346,761    $   98,798     $ 4,075,223

Valuation reserve on deferred tax asset        $3,702,881    $3,703,659    $       --     $ 7,406,540

Allowances not deducted:
   Restructuring reserve                       $   11,995    $       --    $   11,995     $        --

</TABLE>

(A)  Represents write-off of accounts receivable against the allowance in Fiscal
     Year 2002.


                                      F-28