<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 [FEE REQUIRED]

         For the Fiscal year ended        JANUARY 31, 2001
                                  ---------------------------------

                                       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 Registrant as specified in its charter)

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

                 150 CLOVE ROAD, LITTLE FALLS, NEW JERSEY 07424
                 ----------------------------------------------
               (Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code:  (973) 812-1100

          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 the Registrant (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 the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                  Yes X   No
                                     ---    ---

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 Registrant'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 $3.00 closing price) of the voting stock
held by nonaffiliates of the Registrant as of April 25, 2001: $7,904,604

Number of shares of Common Stock outstanding on April 25, 2001: 11,769,405

                      Documents Incorporated By Reference:
                                      None



<PAGE>


                                     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 the Registrant "believes",
"anticipates", "expects", or words of similar import. Similarly, statements
which describe the Registrant'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 the Registrant undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.

ITEM 1.           Business

GENERAL

         Covista Communications, Inc. ("Covista", the "Registrant" or the
"Company") is a leading regional facilities-based long distance
telecommunications and internet service provider servicing both the commercial
and wholesale marketplace. The Registrant's retail segment operates principally
in the Northeast, primarily servicing small and medium-sized businesses. The
Registrant's products and services include a broad range of voice, data and
Internet solutions. The wholesale division provides domestic and international
termination services to carriers worldwide at competitive rates. The Registrant
currently owns and operates two long distance switches, in New York City and
Newark, New Jersey. In addition, the Registrant currently owns and operates two
carrier grade routers, a remote access server and an e-mail server located in
New York City and Northern New Jersey for its internet service offerings.
Covista has a Network Operations Center ("NOC") in Northern New Jersey, to
monitor and control its New Jersey network and to coordinate its various
services.

         Covista processes approximately 90% of all its call volume through its
own facilities. The Registrant uses proven technology to provide customized
telecommunications solutions to its customers.

         In the retail market, the Registrant has segmented potential customers
and tailored its service offerings, sales, marketing approach and network
development to provide service in a cost-effective manner. The Registrant
believes its customer service to be one of its principal competitive advantages.
The Registrant applies a dedicated team approach to soliciting and servicing its
clients, with substantial involvement of sales, customer service and technical
personnel in all aspects of customer relations. The Registrant intends to
continue to focus its efforts on small to medium-sized customers with sales of
$1 million to $60 million and monthly communications bills that range from $500
to $30,000. The Registrant's focus on customer service has also enabled it to
attract larger customers.

         For Fiscal 2001, Covista had gross revenues of approximately $134
million, derived approximately 60% from wholesale and 40% from commercial
services. For Fiscal 2000, the Registrant's gross revenues were approximately
$140 million. The Registrant's commercial sales activities have been
concentrated in Northern New Jersey and New York City, where, the Registrant
believes, approximately half of all United States multinational corporations
have headquarters. Based on industry sources, this area is believed to represent
40% of the total United States telecommunications market. For the near term, at
least, Covista intends to focus its efforts on further penetrating commercial
users of its services in the Northeast, from the Washington, D.C. market through
Boston, Massachusetts, and to augment the services offered to its customers.

         The Registrant's principal executive offices are located at Overlook at
Great Notch, 150 Clove Road, Little Falls, New Jersey 07424, and its telephone
number is (973) 812-1100. The Registrant was incorporated in 1959 as Faradyne
Electronics Corp. In November 1991, the Registrant changed its name from
Faradyne Electronics Corp. to Total-Tel USA Communications, Inc. In September,
2000, the Registrant adopted its present name, Covista Communications, Inc.

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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 (the "MFJ").
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.

         Although the MFJ established the preconditions for competition in the
market for long distance services in 1984, the market for local exchange
services has, until recently, virtually been closed to competition and has
largely been dominated by regulated monopolies. Efforts to open the local
exchange market began in the late 1980s on a state-by-state basis.

         The Telecommunications Act of 1996, (the "1996 Act") is considered to
be the most comprehensive reform of the nation's telecommunications laws and
affects 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 into 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 the Registrant'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 substantial 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.

         The Registrant has observed that RBOCs and the Tier I carriers
(carriers with annual revenues in excess of $5 billion), primarily concentrate
their sales and marketing efforts on residential and large business customers.
Thus, the Registrant believes there is a significant market opportunity with
respect to small and medium-sized businesses to which customer service may be
a significant part of their buying decision.

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NETWORK

         The Registrant'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, the Registrant operates an advanced
telecommunications network that includes two Alcatel switches, located in New
York City and Newark, New Jersey. The Registrant has installed Alcatel DEX 600
switches in Newark and a Megahub DEX600E switch in New York, which provides
interexchange switching capabilities and is currently being used as the
Registrant's international gateway switching platform.

         During Fiscal 2001, the Registrant billed approximately 1.25 billion
minutes, with approximately 90% of its minutes over its own switches. The
Registrant believes that increasing the traffic carried on its own network would
improve operating margins.

         International. The Registrant 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 are also a source of wholesale
international traffic and revenue.

          Internet. Currently, the Registrant owns and operates an IP (Internet
Protocol) Network that includes two Cisco 7500 routers, located in New York
City. The Registrant 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"), the Registrant offers DSL internet service in the Philadelphia, New
York, New Jersey and Connecticut markets. The Registrant also offers internet
services over dedicated DS0, DS1 and DS3 digital transmission circuits.

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

                         PRINCIPAL PRODUCTS AND SERVICES

PRODUCT AND SERVICE OFFERINGS

         The Registrant offers retail telecommunications services primarily to
small and medium-sized businesses. The Registrant's retail service offerings
currently include long distance and toll-free services (both with and without an
AIN), multiple access options, calling card, data, Internet access, DSL, e-mail,
facsimile, directory assistance and teleconferencing services. The Registrant's
wholesale services include domestic and international termination and transport
services to domestic and international telecommunications carriers.

CURRENT SERVICES

         Retail Services. The Registrant provides retail telecommunications
services to over 10,000 commercial customers, primarily small and medium-sized
businesses located in the Northeastern region of the United States. The
Registrant sells retail services through its direct retail sales force and
independent marketing representatives. Retail commercial communications services
accounted for approximately 40% of the Registrant's Fiscal 2001

                                       4



<PAGE>


revenues, and produced revenues of approximately $53,487,000 in Fiscal 2001 and
$69,023,000 in Fiscal 2000. Retail revenues fell in fiscal 2001 due to continued
downward pricing pressure and reductions in volume, which the Registrant
attributes to ever increasing competition within the industry. While the
Registrant believes that it may return to its previous volume levels, as the
worldwide demand for communications services increases, it also believes that
the intense competition for those minutes from other telecommunications
providers will continue to force down prices. This continued downward effect on
price may adversely affect operations.

The Registrant's retail services include the following:

       o LONG DISTANCE: The Registrant 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,
         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.

       o TOLL-FREE SERVICES: The Registrant 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: The Registrant 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: The Registrant offers nationwide switched
         access, customized calling card services. Customers have the option of
         calling cards, which are personalized, branded or generic.

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

       o DATA SERVICES: The Registrant 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 the Registrant'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.

Wholesale Services. The Registrant 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.
The Registrant offers international wholesale termination and transport services
primarily to domestic and international telecommunications carriers. Once the
Registrant interconnects with a carrier customer, the carrier may utilize the
Registrant on an as-needed basis, depending upon the pricing offered by the
Registrant and its competitors, as well as capacity. The Registrant has been
tested and approved as an authorized carrier for, and included in the routing
tables of all of its long distance and international carrier customers.
Wholesale revenues were approximately $79,743,000 and $70,737,000 during Fiscal
2001 and Fiscal 2000, respectively.

                                  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

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<PAGE>


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.

         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 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 CLEC and an 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 Post 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 must, 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. The Registrant 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.

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                                   COMPETITION

OVERVIEW

         The Registrant operates in a highly competitive industry and estimates
that it has no greater than a 1% share of the market in which it operates. The
Registrant 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, the Registrant 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 the Registrant 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 the Registrant'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 the Registrant believes that it
currently has certain advantages relating to price, quality, customer service
and responsiveness to customer needs, there is no assurance that the Registrant
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 the
Registrant. Many of the Registrant's existing and potential competitors have
financial, technical, and other resources significantly greater than those of
the Registrant. 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 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 Registrant.

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. The Registrant competes against various national
and regional long distance carriers, including both facilities-based providers
and switchless resellers offering essentially the same services as the
Registrant. In addition, significant competition is expected to be provided by
ILECs including, when authorized, RBOCs. The Registrant'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. The Registrant'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 the Registrant
primarily serves. While the Registrant 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 the
Registrant'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, 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 the Registrant's business, financial condition and results of operations.

         Some of the Registrant's principal competitors are also major suppliers
of services to the Registrant. The Registrant 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 the
Registrant at competitive rates or on attractive terms, if at all, and any
failure to do so could have a material adverse effect on the Registrant.

                                       7



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SEASONAL NATURE OF BUSINESS

         Registrant's business is not seasonal.

PATENTS, TRADEMARKS, LICENSES, ETC.

         Registrant does not hold any material patents, franchises or
concessions.

                             GOVERNMENT REGULATIONS

OVERVIEW

         The Registrant'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 the Registrant 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 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 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

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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. The Registrant 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, the Registrant 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, the Registrant 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
              the Registrant must offer interstate services on a
              nondiscriminatory basis, at just and reasonable rates, and remain
              subject to FCC 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, the
              Registrant 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 the
              Registrant are described therein. "Enhanced" services (as defined
              by the FCC) need not be tariffed. The Registrant 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 the Registrant cannot predict whether the FCC will
              change the classification of such services.

         o    INTERNATIONAL SERVICES. Non-dominant carriers such as the
              Registrant are required to obtain FCC authorization pursuant to
              Section 214 of the Communications Act and file tariffs before
              providing international communication services. The Registrant 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    ILEC PRICE CAP REGULATION REFORM. In 1991, the FCC replaced
              traditional rate of return regulation for large ILECs with price
              cap regulation. Under price caps, ILECs can raise prices for
              certain services by only a small percentage each year. In
              addition, there are constraints on the pricing of ILEC services
              which are competitive with those of CLECs. In September 1995, the
              FCC proposed a three-stage plan which would substantially reduce
              ILEC price cap regulation as local markets become increasingly
              competitive and, ultimately, would result in granting ILECs
              nondominant status. Adoption of the FCC's proposal to reduce
              significantly its regulation of ILEC pricing would significantly
              enhance the ability of ILECs to compete against the Registrant and
              could have a material adverse effect on the Registrant. The FCC
              released an order in December, 1996 that adopted certain of these
              proposals, including the elimination of the lower service band
              index limits on price reductions within the access service
              category. The FCC's December 1996 order also eased the
              requirements necessary for the introduction of new services by
              ILECs. In May, 1997, the FCC took further action updating and
              reforming its price cap plan for the ILECs. Among other things,
              the changes require price cap LECs to reduce their price cap
              indices by 6.5 percent annually, less an adjustment for inflation.
              The FCC also eliminated rules that require ILECs earning more than
              certain specified rates of return to "share" portions of the
              excess with their access customers during the next year in the
              form of lower access rates. In August, 1999, the FCC again took
              action designed to grant greater flexibility to price cap LECs as
              competition develops. These reforms should facilitate the removal
              of services from price cap regulation as competition develops in
              the marketplace. The order granted immediate pricing flexibility
              to price cap LECs in the form of streamlined introduction of new
              services, geographic

                                       9



<PAGE>


              deaveraging of rates for services in the trunking basket, and
              removal, upon implementation of toll dialing parity, of certain
              interstate interexchange services from price cap regulation. These
              actions could have a significant impact on the interstate access
              prices charged by the ILECs with which the Registrant expects to
              compete.

         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. The Registrant
              anticipates that this pricing flexibility should result in ILECs
              lowering their prices in high traffic density areas, the probable
              area of competition with the Registrant. The Registrant 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 the Registrant 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 the Registrant pay fees
              calculated as a percentage of revenue to support these goals. The
              full implications of these changes remains uncertain and subject
              to change.

         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 customer phone line that is pre-subscribed to
              that carrier. These charges are passed on to the 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 the Registrant.

              The Registrant, like other telecommunications carriers providing
              interstate telecommunications services, is required to contribute
              a portion of its end-user telecommunications revenue to fund
              universal service programs. These contributions became due
              beginning in 1998 for all providers of interstate
              telecommunications services. Such contributions were to be
              assessed based on intrastate, interstate and international end
              user telecommunications revenue. Contribution factors vary
              quarterly and carriers, including the Registrant, are billed each
              month. In addition, many state regulatory agencies have instituted
              proceedings to revise state universal fund contribution
              requirements which will vary from state to state. Recently, the
              U.S. Court of Appeals for the Fifth Circuit rejected the FCC's
              effort to base contributions in part on intrastate revenues. The
              FCC's universal service program may be altered as a result of
              appeals, agency reconsideration of its actions, or future
              Congressional legislation.

              Pursuant to the Universal Service Order, all carriers are required
              to submit a Universal Service Fund worksheet. The Registrant has
              filed its Universal Service Fund worksheet. The amounts remitted
              to the Universal Service Fund may be billed to the Registrant's
              customers. If the Registrant does not bill these amounts to its
              customers, its profit margin may be less than if it had elected to
              do so. However, if the Registrant elects to bill these amounts to
              its customers, customers may reduce their use of the Registrant's
              services, or elect to use the services provided by the
              Registrant's competitors, which may have a material adverse effect
              upon the Registrant's business, financial condition, or results of

                                       10



<PAGE>


              operations. The Registrant is eligible to qualify as a recipient
              of universal service support if it elects to provide
              facilities-based service to areas designated for universal service
              support and if it complies with federal and state regulatory
              requirements to be an eligible telecommunications carrier.

              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 the Registrant.

         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. The FCC will
              be instituting proceedings to comply with the Court's remand.

         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

         The Registrant believes that most, if not all, states in which it may
operate as a local telecommunications provider, require certification or other
authorization to offer intrastate services. Many of the states in which the
Registrant may operate are in the process of addressing issues relating to the
regulation of CLECs.

         In some states, existing state statutes, regulations or regulatory
policy may preclude some or all forms of local service competition. However,
Section 253 of the 1996 Act prohibits states and localities from adopting or
imposing any legal requirement which may prohibit, or have the effect of
prohibiting, the ability of any entity to provide any interstate or intrastate
telecommunications service. The FCC has the authority to preempt any such state
or local requirements to the extent necessary to enforce the 1996 Act's open
market entry requirements. States and localities may continue to regulate the
provision of interstate communications services and require carriers to obtain
certificates or licenses before providing service, if such requirements do not
constitute prohibitive barriers to market entry.

         Some states in which the Registrant operates are considering
legislation which could impede efforts by new entrants in the local services
market to compete effectively with ILECs. For example, some state PSCs and PUCs
are currently considering actions to preserve universal service and promote the
public interest. Such actions may impose conditions on the certificate issued to
an operator which would require it to offer service on a geographically
widespread basis through (i) the construction of facilities to serve all
residents and business customers in such areas, (ii) the acquisition from other
carriers of network facilities required to provide such service, or (iii) the
resale of other carriers' services. The Registrant believes that state PSCs and
PUCs have limited authority to impose such requirements under the 1996 Act. The
imposition of such conditions by state PUCs, however, could increase the cost to
operating companies of providing local exchange services or otherwise affect an
operating company's flexibility to offer services.

         The Registrant has obtained intrastate authority for the provision of
resold interexchange services through certification or registration in every
state where it is required. The Registrant has CLEC certifications pending in
several states. There can be no assurance that the Registrant will receive the
authorizations it may seek in the future to the extent it expands into other
states or seeks to provide additional services. In most states, the Registrant
is required to file tariffs setting forth the terms, conditions and prices for
services which are classified as intrastate.

         Local Interconnection. The 1996 Act imposes a duty upon all ILECs to
negotiate in good faith with potential interconnectors to provide
interconnection to the ILEC networks, exchange local traffic, make UNEs
available and permit resale of most local services.

                                       11



<PAGE>


COMPLIANCE WITH ENVIRONMENTAL PROVISIONS

         Registrant 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.

                                    PERSONNEL

         As of the April 11, 2001, the Registrant and its subsidiaries employed
212 full-time and part-time employees in its long distance telecommunication
business, of whom 79 were engaged in sales activities, 16 in customer service
and support, 44 in technical and field services, 27 in data processing, and 46
in general and administrative activities. The Registrant also utilizes the
services of approximately 70 independent sales agents. The Registrant considers
its relations with its employees to be satisfactory.

ITEM 2.           Properties

         On November 15, 1993, and December 28, 1993, the Registrant 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.

         On December 1, 1993, the Registrant entered into a five-year lease,
which expired on November 30, 1998, for approximately 20,000 square feet of
space from a partnership in which two of the partners were directors and major
shareholders of the Registrant. Both of the partners are no longer directors.
The lease was amended on August 31, 1999, whereby the space was reduced to
12,295 square feet at an annual rate of $47,980. The lease provides a 120 day
written notice by either party to terminate. This space is used for warehousing
and office space for the technical support employees. The lease requires the
payment of any increase in operating expenses and real estate taxes over the
base year.

         On February 22, 1994, the Registrant 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 the Registrant 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 requires the payment of the tenant's proportionate
share of operating expenses and real estate tax increases over the base year.
There are two five year renewal options.

         On January 30, 1997, the Registrant 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 will be $384,820 per annum from August 15, 2000 through August 14,
2002. In addition, the Registrant is obligated for its proportionate share of
increases in real estate taxes and operating expenses over the base year. There
are two five year renewal options, requiring nine months' prior notice.

         On November 1, 1996, the Registrant 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 November 8, 1996, a subsidiary of the Registrant entered into a
lease for approximately 2,300 square feet of office space in New York City, New
York at an annual rental of approximately $77,781. The lease commenced February
1, 1997 and is for sixty three (63) months. The lease requires the payment of
the tenant's proportionate share of increased operating expenses and real estate
taxes over the base year.

         On February 6, 1998, the Registrant 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, the Registrant is
liable for its proportionate share of increases in real estate taxes and
operating expenses over the base year. The Registrant 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.

                                       12



<PAGE>


         On September 1, 1998, the Registrant entered into a five year lease,
commencing September 1, 1998 for 3,008 square feet of space at 500 Cypress Creek
Road, Fort Lauderdale, Florida. Rental payments were $48,128 per annum from
September 1, 1998 to August 31, 1999, $50,554 from September 1, 1999 to August
31, 2000, $53,061 from September 1, 2000 to August 31, 2001, $55,708 from
September 1, 2001 to August 31, 2002 and $58,506 from September 1, 2002 to
August 31, 2003. The lease requires the payment of the tenant's proportionate
share of increased operating expenses and real estate taxes over the base year.
In January, 2000 the Registrant entered into a modification of the lease whereby
the space was reduced to 1,200 square feet. Rental payments have been modified
to be $30,300 from February 15, 2000 to February 14, 2001, $33,033 from February
15, 2001 to February 14, 2002, $34,587 from February 15, 2002 to February 14,
2003 and $32,538 from February 15, 2003 to February 14, 2004. The Registrant has
sublet this space to another tenant.

         On August 20, 1999, the Registrant 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 are $64,818 from September 1, 2000 to August 31,
2001 and $67,422 from September 1, 2001 to August 31, 2002. The lease requires
the payment of the tenant's proportionate share of increased operating expenses
and real estate taxes over the base year.

         On November 17, 1999, the Registrant 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 is an option to renew for three years, upon nine months' prior written
notice. The lease requires the payment of the tenant's proportionate share of
increased operating expenses and real estate taxes over the base year.

         On October 11, 1999, the Registrant 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 are $38,520 per annum from
October 11,1999 to October 31,2002. There is an option to renew for three years,
upon nine months' prior written notice. The lease requires the payment of the
tenant's proportionate share of increased operating expenses and real estate
taxes over the base year.

         The renewable options generally provide for rentals to be determined by
the then prevailing fair market rental rates for similar real estate in the
area.

ITEM 3.           Pending Legal Proceedings

         The Registrant brought suit in Civil Court of the City of New York,
County of New York against a customer, Community Network Services, Inc. d/b/a
Telecommunity, for the recovery of an account receivable of $45,346, plus
interest, attorneys fees and damages. Defendant asserted a counter claim against
the Registrant in the Supreme Court of the State of New York, County of New York
alleging breach of contract and seeks compensatory and punitive damages of
$1,300,000. The Registrant believes the counter suit is without merit and is
vigorously defending this action.

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

         No matter was submitted to a vote of security holders during the fourth
quarter of Fiscal 2001.

                (THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)

                                       13






<PAGE>



                                     PART II

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

COMMON STOCK

         The Registrant's authorized capital stock consists solely of 50,000,000
shares of Common Stock. An increase in the number of authorized shares from
20,000,000 was approved at the Shareholder's Meeting held on February 23, 2000.
Holders of the Registrant'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 the Registrant, 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.

           Effective on July 1, 1996, the Registrant distributed 1,873,420
shares of Common Stock in connection with a 2-for-1 stock split of all
outstanding shares as of June 15, 1996. Effective on July 15, 1998, the
Registrant distributed 4,207,887 shares of Common Stock in connection with a
2-for-1 stock split of all outstanding shares as of June 30, 1998. As of the
date of this report, there were 11,769,405 shares of Common Stock issued and
outstanding, inclusive of 600,000 shares held by the Registrant's ESOP which the
Registrant is seeking to cancel, held by 720 persons, as reported by the
Registrant's transfer agent.

PRICE RANGE OF THE COMMON STOCK

         The Registrant's Common Stock is traded in the over-the-counter market
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
sales prices for the Registrant's Common Stock in such market, as reported by
the National Association of Securities Dealers, Inc.

<TABLE>
<CAPTION>

         FISCAL 2001                            HIGH               LOW
         -----------                            ----               ---
         <S>                                    <C>                <C>
         February 1, 2000 thru April 30          15                9 3/16
         May 1 thru July 31                      12 6/16           6
         August 1 thru October 31                9 1/2             3 5/8
         November 1 thru January 31, 2001        4 15/16           5/8

         FISCAL 2000
         -----------

         February 1, 1999 thru April 30          19 15/16          16
         May 1 thru July 31                      18 3/4            11 1/2
         August 1 thru October 31                14 5/8            10 15/16
         November 1 thru January 31, 2000        15 3/4            12

</TABLE>

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



                                       14






<PAGE>

ITEM 6.           Selected Financial Data

<TABLE>
<CAPTION>

                                                        (In thousands except per share amounts)

                                                                Year ended January 31,
                                       ---------------------------------------------------------------------
RESULTS OF OPERATIONS:                  2001           2000            1999           1998          1997
                                      ---------     ----------      ---------      ---------     ----------


<S>                                   <C>            <C>            <C>            <C>           <C>
Net sales                             $ 133,230      $ 139,760      $ 137,283      $ 123,286     $  89,326

Net (Loss) earnings                   $  (8,629)     $  (9,414)     $  (3,418)     $   1,094     $     492

Weighted average
 common shares
    outstanding (a)

  Basic                                   7,324          7,069          6,818          6,213         5,883

  Diluted                                 7,324          7,069          6,818          6,842         6,739

(Loss) earnings per common and
    common equivalent shares

Basic (Loss) earnings per share       $   (1.18)     $   (1.33)     $   (0.50)     $    0.18     $    0.08

Diluted (Loss) earnings per share     $   (1.18)     $   (1.33)     $   (0.50)     $    0.16     $    0.07

Cash dividends per
    common share                           None           None           None           None          None

Additions to property
    & equipment                       $   3,227      $   3,019      $   4,727      $   3,268     $   6,397

Depreciation and
    amortization                      $   3,578      $   2,985      $   2,785      $   2,028     $   1,382

FINANCIAL POSITION:

Working Capital                       $  (7,734)     $   1,222      $   1,261      $   7,936     $   5,419

Property and equipment - net          $  13,021      $  13,317      $  14,473      $  12,406     $  11,066

Total assets                          $  39,097      $  45,184      $  45,692      $  40,245     $  31,029

Long-term debt                        $     382      $     997      $   1,566      $   2,092     $   2,940

Shareholders' Equity                  $   5,777      $  14,007      $  16,442      $  18,598     $  14,772

Common shares
    outstanding (a)                       7,969          7,944          7,605          6,679         5,891

</TABLE>


(a) All per share amounts have been restated to reflect the 2 for 1 stock split
distributed July 1, 1998.




                                       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 the Registrant for the fiscal
years ended January 1, 1999 (Fiscal 1999), January 31, 2000 (Fiscal 2000) and
January 31, 2001 (Fiscal 2001). The following information should be read in
conjunction with the financial statements and related notes and other detailed
information regarding the Registrant 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 the Registrant's plans and strategy for its business, are
"forward-looking statements."

New Accounting Pronouncements

          Statement of Financial Accounting Standards (SFAS) No. 133, Accounting
for Derivative Instruments and Hedging Activities, is effective for all fiscal
years beginning after June 15, 2000. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
Under SFAS 133, certain contracts that were not formerly considered derivatives
may now meet the definition of a derivative. The Company will adopt SFAS 133
effective February 1, 2001. Management does not expect the adoption of SFAS 133
to have a significant impact on the financial position, results of operation, or
cash flows of the Company.

          In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements",
which was adopted during the quarter ending January 31, 2001. The implementation
of SAB 101 did not have a material effect on the Company's financial position
and results of operations.

                              RESULTS OF OPERATIONS

                     FISCAL 2001 AS COMPARED TO FISCAL 2000

REVENUES

         Net sales of telecommunications services and systems for the fiscal
year ended January 31, 2001 were approximately $133,230,000, a decrease of
approximately $6,530,000 or 4.7% from the approximately $139,760,000 of net
sales in Fiscal 2000. These revenues were comprised of retail sales of
approximately $53,487,000 and wholesale sales of approximately $79,743,000. The
Registrant billed approximately 1,255,437,000 minutes in Fiscal 2001 as compared
to approximately 1,242,942,000 minutes in Fiscal 2000, an increase of 12,495,000
minutes or 1.0%.

         Net retail sales for Fiscal 2001 were approximately $53,487,000, a
decrease of approximately $15,536,000, or 22.5% from the approximately
$69,023,000 billed in Fiscal 2000. Retail billed minutes were approximately
600,381,000, a decrease of approximately 80,333,000 minutes or 11.8%, from the
retail minutes of approximately 680,714,000 billed in Fiscal 2000. The average
price per minute has decreased approximately 13.8% as the industry continues to
experience decreased price per minute of usage. The Registrant does not foresee
that this trend in pricing will abate in the near future.

         Net wholesale (carrier) sales for Fiscal 2001 were approximately
$79,743,000, an increase of approximately $9,006,000 or 12.7% over the
approximately $70,737,000 billed in Fiscal 2000. Billed wholesale minutes
amounted to approximately 655,055,000, an increase of approximately 92,828,000
minutes or 16.5% over the billed wholesale minutes of approximately 562,227,000
billed in Fiscal 2000. The sales mix continued to move toward higher priced
international traffic from the lower priced domestic traffic. International
carrier traffic increased 177,976,000 minutes or approximately 46.9% to
approximately 557,669,000 minutes. Domestic minutes decreased approximately
85,149,000 or approximately 46.6% to approximately 97,387,000 minutes. The
average wholesale price per minute fell 4.1% due to continuing competition in
the industry, a trend, which the Registrant believes, will continue.

COST OF SALES

         Cost of sales consists of access fees, line installation expenses,
switch expenses, NOC expenses, depreciation, transport expenses, and local and
long-distance expenses. Cost of sales for Fiscal 2001 was approximately
$116,059,000, an increase of approximately $3,265,000 or 2.9% over the
approximately $112,794,000 of cost of sales in Fiscal 2000. Included in cost of
sales are direct line costs, usage charges and the direct costs of the
Registrant's switches and Network Operating Center ("NOC"). The increase in cost
of sales was primarily due to the increase in lower margin wholesale volume of
approximately $10,319,000; increases in salary, wages and fringe benefits of
approximately $881,000; increased consulting expense of approximately $178,000,
and an increase in depreciation expense resulting from upgrades to the switches
of approximately $239,000. This was offset by the reduced volume of retail
traffic amounting to approximately $5,297,000; an improvement in cost rates
obtained from vendors of approximately $2,924,000 and other net savings in the
NOC and switches of approximately $131,000.

ACCESS CHARGE SETTLEMENT:

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





                                       16





<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 2001 decreased to approximately $26,903,000, a decrease of
approximately $1,087,000 or 3.9% from the approximate $27,990,000 in Fiscal
2000. This decrease was primarily due to a reduction in commission expenses of
approximately $1,639,000 resulting from the decline in retail sales volume; a
decrease in advertising and promotions of approximately $363,000; a decrease in
data processing services resulting from bringing the billing system in house of
approximately $165,000; a decrease in salaries, fringe benefits and taxes of
approximately $311,000; a reduction of meals and entertainment expense of
approximately $63,000; a reduction of legal fees of approximately $185,000; a
reduction of selling expense of approximately $191,000, and other net savings of
approximately $256,000. These decreases were offset by additions to the bad debt
provision, due to the failure of certain wholesale accounts, of approximately
$1,272,000; increased spending for general office of approximately $302,000; an
increase in recruiting and training for new sales employees of approximately
$180,000; and an increase in depreciation expense on new ISP equipment of
approximately $332,000.

RESTRUCTURING EXPENSE

         In Fiscal 2000, approximately $319,000 of a prior accrual for
restructuring expenses was reversed. This amount included an approximately
$97,000 reduction in the severance accrual; a reduction of approximately $20,000
for fringe benefits and an approximately $202,000 reduction in the accrual on
the Fort Lauderdale lease, due to revisions in the lease. There were no charges
to restructuring expense in Fiscal 2001; however, the Registrant settled, for
approximately $12,000, the balance on the lease in Fort Lauderdale, Florida,
which was charged against accrued restructuring costs.

STOCK COMPENSATION EXPENSE

         Stock compensation expenses for Fiscal 2001 increased to approximately
$267,000, an increase of approximately $63,000, or 30.9%, from the approximately
$204,000 charged in Fiscal 2000. The increase is due to having fewer
cancellations of certain restricted stock grants to employees in the current
year over the prior year.

OTHER COMPENSATION

         On September 21, 1999, the Registrant entered into an agreement with
Warren Feldman, the then Chairman of the Board of Directors and a shareholder of
the Registrant. As part of this agreement, a lump sum payment in the then amount
of $900,000 was made to Mr. Feldman in settlement of his employment agreement.
The Registrant paid $650,000 and Mr. Walt Anderson, a major shareholder, paid
$250,000. Mr. Feldman's Employment Agreement was to have been in effect until
December 31, 2001. The Registrant expensed $900,000 in Fiscal 2000 with $250,000
being accounted for as a capital contribution.

         Simultaneously, Revision LLC and Mr. Walt Anderson ("Revision/
Anderson") and the Registrant entered into Put Option agreements with Warren
Feldman, Sol Feldman ("the Feldmans") and Leon Genet, ("Genet") a director of
the Registrant. These Put Option agreements allowed the Feldmans and Genet the
right to sell their shares of the Registrant to Revision/Anderson at a price of
$16.00 per share and obligated Revision/Anderson to purchase the shares during
an exercise period beginning on December 11, 1999 and ending on February 10,
2000. Revision/Anderson purchased the shares under the put option agreements
prior to the expiration, with the exception of 100,778 shares still held by the
Feldmans. The Registrant had no obligation to purchase any shares from the
Feldmans or Genet. The closing market price of the Registrant's shares on
September 21, 1999, the date of the agreements, was $12.25, and the total number
of shares covered by the agreements was 1,208,137. Using a binomial valuation
model with an interest rate of 5% and a volatility rate of 50%, the fair value
of the Put Option agreements was determined to be $4.03 per share or $4,870,554.
The Registrant accounted for this non-cash transaction as a charge to expense
and a credit to paid-in capital during Fiscal 2000.

         There were no similar charges in Fiscal 2001.

OTHER INCOME AND EXPENSE

         Total other income and expense for Fiscal 2001 increased approximately
$135,000. The components of other income and expense are interest expense,
interest income and other items. Interest income increased approximately
$52,000; interest expense decreased approximately $42,000; and approximately
$41,000 in insurance claims were received.

         The net loss for Fiscal 2001 of approximately $8,629,000 represents a
decrease in net loss of approximately $785,000 from the net loss of
approximately $9,414,000 reported in Fiscal 2000. Charges included in the Fiscal
Year ended January 31, 2000, but not included in the Fiscal Year ended January
31, 2001 were charges resulting from other compensation expense of approximately
$5,770,000 and income tax expense of





                                       17





<PAGE>

approximately $2,700,000. Also in the Fiscal Year ended January 31, 2001 were
cost savings in S,G & A, of approximately $1,087,000 and a settlement from the
Bell companies of approximately $1,264,000. Offsetting these improvements was a
loss in margin of approximately $9,794,000. Other net items (including changes
in Restructuring costs, Stock Compensation Expense and other income and expense)
of approximately $242,000 also increased the net loss for the current year. For
the foregoing reasons, a loss per common share of $1.18 (basic and diluted) was
realized in Fiscal 2001, a decrease from the loss of $1.33 per common share
(basic and diluted) in Fiscal 2000.

                              RESULTS OF OPERATIONS

                     FISCAL 2000 AS COMPARED TO FISCAL 1999

REVENUES

         Net sales of telecommunications services and systems for the fiscal
year ended January 31, 2000 were approximately $139,760,000, an increase of
approximately $2,478,000, or 1.8% over the approximately $137,283,000 of net
sales in Fiscal 1999. These revenues were comprised of retail sales of
approximately $69,023,000 and wholesales revenues of approximately $70,737,000.
The Registrant billed approximately 1,242,942,000 minutes in Fiscal 2000 as
compared to approximately 978,971,000 minutes in Fiscal 1999, an increase of
263,971,000 minutes or 27.0%. Due to the competitive nature of the long distance
communications industry, the average price for a minute of both retail and
wholesale traffic continued to decrease. In Fiscal 2000, this decrease was
approximately 20%.

         Net retail sales for Fiscal 2000 were approximately $69,023,000, a
decrease of approximately $3,533,000, or 4.9%, over the approximately
$72,556,000 billed in Fiscal 1999. Retail billed minutes were approximately
680,714,000, an increase of approximately 51,934,000 minutes, or 8.3%, over the
retail minutes of approximately 628,780,000 billed in Fiscal 1999. The average
price per minute has decreased approximately 12.2% as the industry continued to
experience decreased price per minute of usage.

         Net wholesale (carrier) sales for Fiscal 2000 were approximately
$70,737,000, an increase of approximately $6,010,000, or 9.3%, over the
approximately $64,727,000 billed in Fiscal 1999. Billed wholesale minutes
amounted to approximately 562,227,000, an increase of approximately 212,036,000
minutes, or 60.5%, over the billed wholesale minutes of approximately
350,191,000 billed in Fiscal 1999. The sales mix continues to move toward higher
priced international traffic, from the lower priced domestic traffic.
International carrier traffic increased 184,428,000 minutes or approximately
94.5% to approximately 379,692,000 minutes. Domestic minutes increased
approximately 27,608,000 or approximately 17.8% to approximately 182,535,000
minutes. The wholesale price per minute fell 32.2% due to the continuing
competition in the industry, a trend which the Registrant believes will
continue.

COST OF SALES

         Cost of sales for Fiscal 2000 were approximately $112,794,000, an
increase of approximately $1,294,000, or 1.2%, over the approximately
$111,500,000 of cost of sales in Fiscal 1999. Included in cost of sales are
direct line costs, usage charges and the direct costs of the Registrant's
switches and Network Operating Center ("NOC"). The increase in cost of sales was
primarily due to the increased amount of retail sales minute volume, of
approximately $3,824,000 and an increase in wholesale cost of sales of
approximately $3,500,000 offset by cost reductions due to increased network
efficiencies and competitive pricing of approximately $5,240,000. The net
increase in direct line and usage costs was offset by reductions in the
operating expenses of the switches and NOC: the close out of the Miami switch, a
decrease of approximately $227,000; decrease in salary, wages and fringe
benefits of approximately $525,000; decreased recruiting expense of
approximately $74,000 and decreased consulting expenses of approximately
$127,000 were offset, in part, by increases in equipment repairs of
approximately $80,000 and general operating expenses of approximately $82,000.

SELLING, GENERAL AND ADMINISTRATIVE:

         Selling, general and administrative expenses for Fiscal 2000 decreased
to approximately $27,990,000, a decrease of approximately $922,000, or 3.2%,
over the approximate $28,912,000 in Fiscal 1999. This decrease was primarily due
to a reduction in legal expenses of approximately $1,517,000 resulting from the
settlement of litigation; a decrease in consulting fees of approximately
$504,000; a decrease in data processing services of approximately $230,000
resulting from bringing the billing system in house; a reduction of travel
expenses of approximately $188,000 and a net decrease in spending on other
expenses such as office expenses, meetings contributions, telephone of
approximately $85,000. These decreases were offset by Increased spending on
salaries and wages of approximately $641,000 for the additional sales staff
needed to compete in the Northeast region; additional salary and wage expense of
approximately $267,000 resulting from an approximate 4.6% salary increases in
Fiscal 2000; increased fringe benefit and payroll taxes of approximately
$125,000 paralleling the increased salaries and wages; additional recruiting
expense of approximately $100,000 spent on hiring new sales





                                       18






<PAGE>

and technical personnel; an increase in depreciation and amortization expense of
approximately $278,000 related to the new ISP equipment and sales offices and
additions in the bad debt provision of approximately $196,000.

RESTRUCTURING EXPENSE

         During the fourth quarter of Fiscal 1999, the Company recorded a
restructuring charge of approximately $2,368,000 related to the adoption by the
Company of a formal plan for restructuring its focus of operations. The
restructuring was adopted in an effort to concentrate the Company's efforts on
the Northeastern United States market. Elements of the Company's restructuring
plan included eliminating sales offices in Florida, Atlanta, Georgia, Washington
D.C. and the United Kingdom as well as the Miami switch.

         The write downs incurred in connection with the restructuring included
a charge of approximately $1,280,000 associated with the planned disposal of the
Miami switch and switch site, a charge of approximately $723,000 associated with
the termination costs to reduce employee headcount and sales offices. A charge
of approximately $265,000 for the cost associated with the balance on the Fort
Lauderdale lease, and a charge of approximately $100,000 to write off line
installation costs associated with the Florida network. In the fiscal year
ending January 31, 1999, amounts paid included approximately $240,000 for
severance and termination costs. The balance of approximately $2,128,000 was
included on the consolidated balance sheet at January 31, 1999 as accrued
restructuring costs.

         For Fiscal 2000, amounts applied against the accrual consisted of
approximately $1,280,000 for the write down of the Miami switch; approximately
$99,000 for the line installation costs; approximately $51,000 for payments made
on the Fort Lauderdale lease; approximately $327,000 for severance payments and
approximately $40,000 for payments made to shut down the U.K. operation.
Approximately $319,000 of the accrual was reversed in the Fiscal 2000. This
amount included an approximately $97,000 reduction in the severance accrual; a
reduction of approximately $20,000 for fringe benefits and an approximately
$202,000 reduction in the accrual on the Fort Lauderdale lease, due to revisions
in the lease.

STOCK COMPENSATION EXPENSE

         Stock compensation expenses for Fiscal 2000 decreased to approximately
$204,000, a decrease of approximately $220,000, or 51.9%, from the approximately
$424,000 charged in Fiscal 1999. This decrease is due to the cancellation of
certain shares of Common Stock granted in prior years to employees who were
terminated in Fiscal 2000.

OTHER COMPENSATION

         On September 21, 1999, the Registrant entered into an agreement with
Warren Feldman, Chairman of the Board of Directors and a shareholder of the
Registrant. As part of this agreement, a lump sum payment in the then amount of
$900,000 was made to Mr. Feldman in settlement of his employment agreement. The
Registrant paid $650,000 and Mr. Walt Anderson, a major shareholder, paid
$250,000. Mr. Feldman's Employment Agreement was to have been in effect until
December 31, 2001. The Registrant expensed the $900,000 in Fiscal 2000 with the
$250,000 being accounted for as a capital contribution.

         Simultaneously, Revision LLC and Mr. Walt Anderson
("Revision/Anderson") and the Registrant entered into Put Option agreements with
Warren Feldman, Sol Feldman ("the Feldmans") and Leon Genet, ("Genet") a
director of the Registrant. These Put Option agreements allowed the Feldmans and
Genet the right to sell their shares of the Registrant to Revision/Anderson at a
price of $16.00 per share and obligated Revision/Anderson to purchase the shares
during an exercise period beginning on December 11, 1999 and ending on February
10, 2000. Revision/Anderson purchased the shares under the put option agreements
prior to the expiration. The Registrant had no obligation to purchase any shares
from the Feldmans or Genet. The closing market price of the Registrant's shares
on September 21, 1999, the date of the agreements, was $12.25, and the total
number of shares covered by the agreements was 1,208,137. Using a binomial
valuation model with an interest rate of 5% and a volatility rate of 50%, the
fair value of the Put Option agreements was determined to be $4.03 per share or
$4,870,554. The Registrant accounted for this non-cash transaction as a charge
to expense and a credit to paid-in capital during Fiscal 2000.

OTHER INCOME AND EXPENSE

         Total other income and expense for Fiscal 2000 decreased approximately
$93,000. The components of other income and expense are interest expense,
interest income and other items. Interest income increased approximately $21,000
and interest expense decreased approximately $39,000. This was offset by reduced
other income of approximately $153,000, resulting from the elimination of
certain prepaid calling card activity in Fiscal 1999.

         The net loss for Fiscal 2000 of approximately $9,414,000 represents an
increase in net loss of approximately $5,996,000 over the net loss of
approximately $3,418,000 reported in Fiscal 1999. The primary cause for the
additional loss was the other compensation expense of approximately $5,771,000
for the Warren





                                       19






<PAGE>

Feldman settlement, of which approximately $5,121,000 was for non-cash items. An
income tax provision caused by a valuation allowance on the net deferred tax
asset increased income tax expense to approximately $2,704,000; an increase of
approximately $5,145,000 over the Fiscal 1999 benefit amount of $2,441,000.
Other income and expense decreased approximately $93,000.This was offset by an
increase in gross margin of approximately $1,184,000; savings in selling,
general and administrative expense of approximately $922,000; the change in
restructuring expense of approximately $2,687,000 and decrease in stock
compensation expense of approximately $220,000. For the foregoing reasons, a
loss per share of $1.33 (basic) was realized in Fiscal 2000, an increase in the
loss of $0.83 per common share (basic and diluted) from the loss per share
(basic and diluted) $0.50 posted in Fiscal 1999.

                         LIQUIDITY AND CAPITAL RESOURCES

         At January 31, 2001, the Registrant had negative working capital of
approximately $7,734,000 as compared to approximately $1,222,000 at January 31,
2000, a decrease of approximately $8,956,000. The decrease in working capital in
Fiscal 2001 was primarily attributable to an increase in accounts payable of
approximately $3,158,000; an increase in doubtful accounts of approximately
$2,347,000; a decrease in cash and cash equivalents of approximately $1,683,000;
a decrease in the current balance in income tax refund receivable of
approximately $1,578,000; the change in the current portion of long term debt of
approximately $47,000; a decrease in accounts receivable of approximately
$789,000; and a decrease in marketable securities of approximately $12,000. This
was offset by increases in prepaid expenses and other current assets of
approximately $238,000; and decreases in accrued expenses and other current
liabilities of approximately $420,000. The current ratio of 0.8 to 1, decreased
from the 1.0 to 1 ratio at the end of Fiscal 2000.

         The cash flow statement of the Registrant for Fiscal 2001 indicated a
decrease in cash and cash equivalents of approximately $1,683,000. Non-cash
adjustments (depreciation, amortization, reserve for bad debt, restructuring,
non-cash compensation expense and the loss on disposal of property and
equipment) of approximately $6,280,000 and net changes in assets and liabilities
of approximately $4,413,000 added back to the net loss of approximately
$8,629,000 resulted in net cash provided by operations of approximately
$2,064,000. Cash used in investing activities amounted to approximately
$3,186,000, of which approximately $3,228,000 were used for the purchase of
capital additions and approximately $47,000 was used for the purchase of
additional circuits to build out the network. These additions were partially
offset by proceeds from the sale of short term investments of approximately
$87,000 and the sale of fixed assets of approximately $2,000. The cash used in
financial activities of approximately $561,000 consisted primarily of the
repayment of bank borrowings of approximately $569,000, offset by cash received
from the exercise of stock options of approximately $8,000.

         Subsequent to the year end of Fiscal 2001, the Registrant increased its
cash position by $7,000,000 through the private sale of Common Stock to a group
of investors who are also officers and directors of the Registrant.

                              CAPITAL EXPENDITURES

         Capital expenditures for Fiscal 2001 totaled approximately $3,228,000
and were financed from funds provided from Registrant's working capital and cash
derived from operations. The capital expenditures were used for the addition of
the IP network of approximately $174,000; upgrades to the Registrant's switches
and switch sites of approximately $1,098,000; software and hardware upgrades to
the Registrant's computer network of approximately $888,000; the addition of
Oracle financial and sales compensation systems of approximately $402,000;
hardware and software necessary to bring the billing system in house of
approximately $426,000; and furniture, fixtures and equipment for new sales
offices of approximately $240,000.

         Capital expenditures for Fiscal 2002 are estimated at approximately
$5,000,000 and are expected to be financed from funds provided from operations,
vendor financing and a capital infusion of $7,000,000 from a group of investors
who are also officers and directors of the Registrant.

INFLATION

         Since inflation has slowed in recent years, the Registrant 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 the Registrant in the past, are expected to
continue. Also the telecommunications industry has recently experienced the
failure of several businesses, some of which are the Registrant's wholesale
customer and suppliers. These failures not only have affected the Registrant's
FY 2001 results, but may impact future results. The Registrant 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.






                                       20





<PAGE>

                              ENVIRONMENTAL MATTERS

         The Registrant 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 the Registrant.

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 Registrant's cash and
investments exceed long-term debt; therefore, the exposure to interest rate risk
relates primarily to the marketable securities held by the Registrant. The
Registrant only invests in instruments with high credit quality where a
secondary market exists. The Registrant does not hold any derivatives related to
its interest rate exposure. The Registrant also maintains long-term debt at
fixed rates. Due to the nature and amounts of the Registrant's note payable, an
immediate 10% change in interest rates would not have a material effect in the
Registrant's results of operations over the next fiscal year. The Registrant'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
14 of this Report.

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

         Not applicable.







                (THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)



                                       21




<PAGE>


                                    PART III

ITEM 10. Directors and Executive Officers of the Registrant

The directors and officers of the Registrant are as follows:

<TABLE>
<CAPTION>
Name                               Age          Position
----                               ---          --------
<S>                                 <C>         <C>
Walt Anderson                       46          Chairman of the Board

Leon Genet                          70          Director

A. John Leach                       38          Director, President, Chief Executive Officer

Henry G. Luken III                  40          Director

Jay J. Miller                       68          Director

Thomas P. Gunning                   63          Treasurer, Secretary and Chief Financial Officer
</TABLE>

The Registrant'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.

         Mr. Henry G. Luken, III was elected a Director of the Registrant in
February, 1999, and Chairman of the Board in February, 2001. Currently, he is
President of Mont Lake 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.

         Mr. Walt Anderson was elected a Director of the Registrant in February,
1999, and as Chairman of the Board in November , 1999. He stepped down as
Chairman in February, 2001. He has been Manager of Revision LLC from June 1998
to the present; President and Chairman of Entree International Ltd. (Financial
Consulting Services) from July, 1997 to the present; Chairman of Capsule
Communications, Inc, as of April 2001, Chairman of Teleport UK Ltd. (Satellite
Communications) from May, 1996 to the present; Chairman of Espirit Telecom Group
plc. (Telecom Services) from October, 1992 to November, 1998 and President and
Chairman, Mid Atlantic Telecom (Telecom Services), from May, 1984 to December,
1993. Mr. Anderson is also a director of American Technology Labs (Network
Equipment) and Aquarius Holdings Ltd. (Water Transport Systems),

         Mr. 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 the Registrant on the same basis as other independent sales
representatives. See "Certain Relationships and Related Transactions".

         Mr. A. John Leach, Jr. was appointed President and Chief Executive
Officer and a Director of the Company 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.

         Mr. Jay J. Miller, Esq. has served as a Director since 1983. He has
been a practicing attorney for more than 35 years in New York. He is Chairman of
the Board of AmTrust Pacific Ltd., a New Zealand real estate company. He is

                                       22




<PAGE>


also a director of Technology Insurance Company, Inc., a provider of various
insurance products to the technology industry, and certain of its affiliates.
Mr. Miller has performed legal services on behalf of the Registrant. See
"Certain Relationships and Related Transactions."

         Mr. Thomas P. Gunning was appointed Vice President, Secretary /
Treasurer of the Registrant 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 the Registrant in January of 1995. He has served as Controller of
the Registrant since September, 1992. He is a Certified Public Accountant
licensed by the States of New York and New Jersey. From 1989 until joining the
Registrant, 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.

Board of Directors

         The Registrant's Board of Directors currently consists of five persons,
one of whom is a member of management. and four of whom are non-management
directors. During the fiscal year ended January 31, 2001, the Board held six
meetings, each of which was attended by all of the directors then serving.

         The Company'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. Henry Luken, Walt Anderson and Leon Genet. The Committee
reviews, analyzes and may make recommendations to the Board of Directors with
respect to the Company's financial statements and controls. The Committee has
met and intends to meet from time to time with the Company'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 the Company'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)


                                       23




<PAGE>


ITEM 11. Executive Compensation

The following table sets forth the compensation which the Company paid during
the fiscal years ended January 31, 2001, 2000 and 1999 to its Chief Executive
Officer and to each executive officer of the Company or person performing
similar functions whose aggregate remuneration exceeded $100,000, during the
Company's fiscal year ended January 31, 2001 (the "Named Executives").

Summary Compensation Table

<TABLE>
<CAPTION>
Name and          Fiscal Year            Annual Compensation                       Other       Compensation
Principal           Ended            ---------------------------                   Annual         Awards        All Other
Position           anuary 31         Salary($)           Bonus($)             Compensation($)     Options     Compensation($)
---------          ---------         ---------           --------             ---------------     -------     ---------------
<S>                  <C>             <C>                 <C>                     <C>             <C>             <C>
A. John Leach        2001            $210,000            $      0                $      0                        $15,346(3)
President and
Chief Executive
Officer (2)

Thomas P             2001            $147,360            $      0                $      0                        $11,427(4)
Gunning              2000            $140,000            $      0                $      0                        $11,179(5)
Vice President,      1999            $124,230            $  2,000                $      0                        $10,161(6)
Treasurer
and Secretary

Dennis Spina         2001            $ 57,692
President and        2000            $305,769                                                                    $ 2,857(8)
Chief Executive
Officer (7)

Sal Quadrino         2001            $ 72,019                                                                    $ 2,160(10)
Vice President       2000            $137,307
and Chief Financial
Officer (9)
</TABLE>

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

(1)   See Option Grant Table below.

(2)   Mr. Leach joined the Company on May 18, 2000. See part (e) for a
      discussion of Mr. Leach's employment agreement

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

(4)   The amount shown represents the Company'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.

(5)   The amount shown represents the Company's contribution under its 401(K)
      Deferred Compensation and Retirement Savings Plan of $4,200, $2,179 for
      the use of a Company's vehicle for non-business purposes and $4,800 for
      term life insurance premiums.

(6)   The amount shown represents the Company's contribution under its 401(K)
      Deferred Compensation and Retirement Savings Plan of $3,837, $1,524 for
      the use of a Company's vehicle for non-business purposes and $4,800 for
      term life insurance premiums.

(7)   Mr. Spina resigned from his position on March 17, 2000.

(8)   The amount shown represents $2,857 for the use of a Company vehicle for
      non-business purpose

(9)   Mr. Quadrino resigned from his position on June 16, 2000.

(10)  The amount shown represents the Company's contribution under its 401(K)
      Deferred Compensation and Retirement Savings Plan of $2,160.

                                       24




<PAGE>




         Compensation Pursuant to Plans

         In October, 1987, the Registrant adopted its 1987 Stock Option Plan, in
October, 1996, adopted its 1996 Stock Option Plan and in February, 2000,adopted
its 1999 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 the
Registrant, 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
the Registrant's Board of Directors. The Registrant has reserved 1,329,800
shares of Common Stock under the 1987 Option Plan, 600,000 shares of Common
Stock under the 1996 Option Plan and 750,000 shares of Common Stock under its
1999 Equity Incentive Plan for issuance to employees, officers, directors and
consultants of the Registrant. The shares underlying the options granted prior
to July 15, 1994 have been adjusted for a 10% stock dividend. The shares
underlying the options granted prior to July 1, 1996 have been adjusted to
reflect a 2-for-1 stock split, and options granted prior to July 1, 1998 have
been adjusted to reflect a 2-for-1 stock split.

         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 the Registrant 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 the Registrant become available again for
issuance under the Option Plans.

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                              Potential Realizable
                                                                                                Value At Assumed
                                                                                                Rates of Stock
                                                                                               Appreciation  For
                                                                                            -----------------------
                Number of Securities   % of Total Option/SARs                                Option            Term
                  Underlying Options/  Granted To Employees In    Exercise    Expiration     -----------------------
Name              SARs Granted(#)           Fiscal Year             Price       Date            5%               10%
----              ---------------      -----------------------    ---------   -----------    --------        ----------
<S>                  <C>                      <C>                 <C>       <C>              <C>             <C>
A. John Leach        288,000 (1)               61.92%              $14.25    May 18, 2003    $646,893        $1,358,424
</TABLE>

--------------------------------------------------------------------------------
(1)   Stock option granted under the 1996 Stock Option Plan. Vesting in six
      equal semi-annual installments, commencing six months from the date of
      grant. The market price on the date of grant was less than the exercise
      price of $14.25 per share.

                                       25




<PAGE>



         The following table sets forth information concerning each exercise of
a stock option during the Registrant's fiscal year ended January 31, 2001 by
each of the Named Executives, and the number and value of unexercised options
granted by the Registrant held by each of the Named Executives on January 31,
2001.

                 Aggregated Option Exercises In Last Fiscal Year
                        And Fiscal Year-End Option Values

<TABLE>
<CAPTION>
                                                                 Number of Securities                Value of Unexercised
                                                                Underlying Unexercised            In-The Money Options/SARs
                      Shares Acquired                       Options/SARs At Fiscal Year End           At Fiscal Year End
Name                   On Exercise(#)    Value Realized($)     Exercisable/Unexercisable          Exercisable/Unexercisable
----                  ----------------   -----------------  -------------------------------       --------------------------
<S>                        <C>                <C>                     <C>                              <C>
Thomas P. Gunning          16,500             $58,078                 20,000/8,500                      $8,325/$0
</TABLE>

         Compensation of Directors

         For the fiscal year ended January 31, 2001, each director who was not
an employee of the Registrant 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 his attendance at meetings. However, Messrs. Anderson and Luken
waived the right to receive such compensation.

         Employment Contracts,Termination of Employment and Change of Control
         Arrangements

         As the Registrant's Chief Executive Officer, Mr. Leach has a three year
employment agreement with the Registrant effective as of May 18, 2000, pursuant
to which Mr. Leach is paid an annual base salary of $300,000. Pursuant to this
agreement, Mr. Leach was also to receive a signing bonus in the amount of
$25,000 to cover relocation and other expenses; however, as of this date Mr.
Leach has only received $15,000 of this amount. Mr. Leach is also entitled to
receive an annual bonus in an amount not to exceed 100% 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 is
guaranteed a minimum bonus payment of $150,000 during the first year of this
agreement.

         In connection with his appointment as Chief Executive Officer of the
Registrant, Mr. Leach was granted an option under the Registrant's 1996 Stock
Option Plan to purchase 288,000 shares of Common Stock. The option granted to
Mr. Leach is 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 is $14.25 and is based on the fair market value of
the Common Stock on the date of the grant, and the options expire after a term
of five years.

         In the event of a "change of control" of the Registrant, as defined in
his employment agreement, Mr. Leach's stock option, and similar benefits, if
any, shall be deemed to vest in full on the effective date of such change of
control.

                (THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)

                                       26




<PAGE>



ITEM 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth the beneficial ownership of the Registrant's
Common Stock as of April 15, 2001 by each person known by the Registrant to be
the beneficial owner of more than 5% of the issued and outstanding shares of
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                        Number of Shares                   Percentage
of Beneficial Owner                          Owned(1)                       of Class
-------------------                          --------                       --------
<S>                                         <C>                             <C>
Henry G. Luken, III                         3,466,743                       29.46%
400 Fairway Lane
Soddy Daisy, TN  37379

Walt Anderson                               1,361,196(2)                    11.57%
c/o Entree International
1023 31st Street NW
Suite 300
Washington, DC  20007

Revision LLC                                1,353,896(2)                    11.50%
c/o Entree International
1023 31st Street NW
Suite 300
Washington, DC  20007

Donald A. Burns                             1,883,261(3)                    16.00%
1021 North Ocean Boulevard
Palm Beach FL  33480

Kevin Alward                                1,230,779                       10.46%
182 Powell Road
Allendale, NJ  07401

Warren Feldman                              1,119,578                        9.51%
45A Samworth Road
Clifton, NJ  07012

Covista Communications, Inc.                  600,000                        5.10%
Employee Stock Ownership Plan
150 Clove Road
Little Falls, NJ  07424

Foundation for the International Non-
  Governmental Development of  Space          725,329(4)                     6.16%
1023 31st Street  NW
Suite 300
Washington, DC  20007

</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 the Registrant's knowledge.

(2)   Includes 1,353,896 shares owned by Revision LLC, a wholly owned subsidiary
      of Gold & Appel Transfer, S.A. Of the 1,353,896 shares owned by Revision
      LLC, 1,179,732 are pledged to Donald A. Burns to secure a loan. Excludes
      725,329 shares owned by the Foundation for International Non-Governmental
      Development of Space, (FINDS) of which Mr. Anderson is the President and a
      director, and to which Mr. Anderson disclaims beneficial ownership.


                                       27




<PAGE>


(3)   Includes 1,179,732 shares owned of record by Revision LLC, and 703,529
      shares owned of record by FINDS, which shares are pledged to Mr. Burns to
      secure a loan. Such loan is currently in default, and consequently Mr.
      Burns has voting power with respect to such pledged shares

(4)   Of the 725,329 shares owned by the FINDS, 703,529 are pledged to Donald A.
      Burns to secure a loan.


         (b) Security Ownership of Management

The following table sets forth as of April 15, 2001, information concerning the
beneficial ownership of Common Stock by each director of the Registrant, each
nominee for election as a director and all directors and officers of the
Registrant as a group:

<TABLE>
<CAPTION>
Name of Beneficial                 Number of Shares                    Percentage
     Owner                             Owned(1)                         of Class
     -----                             --------                         --------
<S>                                   <C>                                 <C>
Henry G. Luken III                    3,466,743                           29.29%

Walt Anderson                         1,361,196(2)(3)                     11.50%

Revision LLC                          1,353,896(2)(3)                     11.44%

Kevin Alward                          1,230,779                           10.40%

Leon Genet                               41,120                              (4)

Jay J. Miller                               400                              (4)

A. John Leach                           554,000(5)                         4.68%

All directors and officers
as a group (7 in number)              6,708,438                           56.67%
</TABLE>


(1)   All shares are beneficially owned and sole investment and voting power is
      held by the persons named above.

(2)   1,353,896 of such shares are beneficially owned by Revision LLC. As the
      sole manager and holder of 100% of the voting membership interests in
      Revision LLC, Mr. Anderson has the sole power to vote and dispose of such
      shares. Accordingly, Mr. Anderson may be deemed the beneficial owner of
      such shares. Of the 1,353,896 shares owned by Revision LLC, 1,179,732 are
      pledged to Donald A. Burns to secure a loan.

(3)   Does not include 725,329 shares of Common Stock owned by the FINDS, of
      which Mr. Anderson is the President and a director. Mr. Anderson disclaims
      beneficial ownership of such shares. Mr. Anderson and Revision, LLC are
      subject to certain restrictions on the purchase of additional shares.

(4)   Less than 1%

(5)   Includes options to purchase 48,000 shares of the Common Stock which are
      exercisable currently or within 60 days hereof.


         c) Changes in Control

         In August, 2000, Walt Anderson and two entities controlled by him, Gold
& Appel Transfer, S.A. and Revision LLC, along with FINDS, entered into a Stock
Pledge Agreement with Donald A. Burns, which was subsequently amended in October
2000 (as amended, the "Pledge Agreement"). Pursuant to the Pledge Agreement,
Revision LLC has pledged 1,179,732 shares of Common Stock, and FINDS has pledged
703,529 shares of Common Stock, to secure a $13,000,000 loan made by Mr. Burns
to Mr. Anderson, Gold & Appel Transfer, S.A. and Revision

                                       28




<PAGE>


LLC. Such loan is currently in default, and consequently Mr. Burns has voting
power with respect to the pledged shares. Were Mr. Burns to foreclose upon the
1,883,261 shares of Common Stock pledged pursuant to the Pledge Agreement, which
represent approximately 16% of the outstanding Common Stock, it could result in
a change of control of the Registrant.

         On February 1, 2001, the Board of Directors of the Registrant
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 the Registrant's
shareholders because Messrs. Leach and Luken currently were directors and
officers of the Registrant, and, in addition, it was expected that Mr. Alward
would become an officer of the Registrant. The transaction was approved at a
special shareholders meeting on March 29, 2001. The stock was issued in April ,
2001.

A change in control of the Registrant may be deemed to have occurred as a result
of the foregoing transactions, as Walt Anderson now controls 11.57% of the
outstanding Common Stock, and Henry G. Luken III now controls 29.46% of the
outstanding Common Stock

ITEM 13. Certain Relationships and Related Transactions

         Jay J. Miller, a Director of the Registrant, has provided various legal
services for the Registrant during Fiscal 2001. In Fiscal 2001, the Registrant
paid $284,295 to Mr., Miller for services rendered and accrued for in Fiscal
2000. As of January 31, 2001, the Registrant owed Mr. Miller totaling $181,489.
The Registrant believes that Mr. Miller's fees were reasonable for the services
performed and were no less favorable to the Registrant than could have been
obtained from an unrelated third party.

         Leon Genet, a Director of the Registrant, has provided agent services
for Covista through his wholly-owned Registrant, LPJ, Inc. During Fiscal 2001,
LPJ, Inc. was paid commissions of $96,359. The commissions paid to LPJ, Inc.
were computed on the same basis as other independent agents retained by the
Registrant.

         Walt Anderson, a Director of the Registrant, serves on the Board of
Directors' of one of the Registrant's competitors, as described in ITEM 10. The
Registrant both purchases and sells services from Capsule Communications, Inc.
Sales to Capsule in Fiscal 2001 were approximately $532,000. Purchases from
Capsule were approximately $544,000. All transactions were based on competitive
terms obtained at an arm's length basis.


                (THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)


                                       29






<PAGE>

                          COVISTA COMMUNICATIONS, INC.

                                AND SUBSIDIARIES

ITEM 14. Exhibits and Financial Statements Schedule Years Ended January 31,
         2001, 2000, and 1999

                                      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, 2001
                  and 2000                                                      F-2

         Consolidated statements of loss and
                  comprehensive loss  - years
                  ended January 31, 2001, 2000 and 1999                         F-3

         Consolidated statements of shareholders' equity -
                  years ended January 31, 2001, 2000, 1999                      F-4

         Consolidated statements of cash flows - years
                  ended January 31, 2001, 2000, 1999                            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, 2001, 2000 and 1999


II                Valuation and Qualifying Accounts (Consolidated)              F-24

</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)




                                       30






<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Covista Communications, Inc.
150 Clove Road
Little Falls, New Jersey 07424

We have audited the accompanying consolidated balance sheets of Covista
Communications, Inc. (f.k.a. Total-Tel USA Communications, Inc.) and
subsidiaries (the "Company") as of January 31, 2001 and 2000, 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, 2001.
Our audits also included the consolidated financial statement schedule listed in
the index at Item 14(a)(2). 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, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 2001 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.

/s/ DELOITTE & TOUCHE LLP
New York, New York

April 11, 2001
(April 24, 2001 as to Note 21c.)





                                       F-1







<PAGE>

COVISTA COMMUNICATIONS, INC. (f.k.a. TOTAL-TEL USA COMMUNICATIONS, INC.) AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2001 AND 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>             <C>
ASSETS                                                                                   2001            2000

CURRENT ASSETS:
  Cash and cash equivalents                                                         $  2,691,889    $  4,374,479
  Investments available for sale                                                         537,007         549,580
  Trade accounts receivable (net of allowance for doubtful accounts
    of $4,075,223 and $1,827,260 in 2001 and 2000, respectively)                      20,526,178      23,662,457
  Prepaid expenses and other current assets                                            1,225,463       2,565,031
                                                                                    ------------    ------------

           Total current assets                                                       24,980,537      31,151,547
                                                                                    ------------    ------------
PROPERTY AND EQUIPMENT - Net                                                          13,020,579      13,316,655
                                                                                    ------------    ------------

  Deferred line installation costs (net of accumulated amortization
    of $745,353 and $634,123 in 2001 and 2000, respectively)                             216,672         280,281
  Other assets (net of accumulated amortization of $33,761 in 2001)                      879,614         435,639
                                                                                    ------------    ------------


                                                                                    $ 39,097,402    $ 45,184,122
                                                                                    ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                  $ 27,960,046    $ 24,802,097
  Other current and accrued liabilities                                                2,834,557       3,073,937
  Accrued restructuring costs                                                             -               11,995
  Salaries and wages payable                                                           1,304,818       1,472,766
  Current portion of long-term debt                                                      615,053         568,653
                                                                                    ------------    ------------
           Total current liabilities                                                  32,714,474      29,929,448
                                                                                    ------------    ------------
OTHER LONG-TERM LIABILITIES                                                              223,788         250,532
                                                                                    ------------    ------------
LONG-TERM DEBT                                                                           382,047         997,171
                                                                                    ------------    ------------

COMMITMENTS AND CONTINGENCIES (Note 14)

SHAREHOLDERS' EQUITY:
  Common stock, par value $.05 per share; authorized 50,000,000 shares in 2001
    and 20,000,000 in 2000, issued
    9,505,824 shares in 2001 and, 9,489,324 in 2000                                      475,291         474,466
  Additional paid-in capital                                                          30,016,454      29,710,494
  Accumulated deficit                                                                (11,285,519)     (2,656,215)
                                                                                    ------------    ------------
                                                                                      19,206,226      27,528,745

Unearned ESOP Shares                                                                 (12,225,000)    (12,225,000)
Treasury stock - at cost - 1,536,419 shares in 2001 and 1,545,253 shares in 2000      (1,445,440)     (1,458,550)
Accumulated other comprehensive income                                                   241,307         161,776
                                                                                    ------------    ------------
        Total shareholders' equity                                                     5,777,093      14,006,971
                                                                                    ------------    ------------
                                                                                    $ 39,097,402    $ 45,184,122
                                                                                    ============    ============

</TABLE>

See notes to consolidated financial statements.

                                       F-2





<PAGE>


COVISTA COMMUNICATIONS, INC. (f.k.a. TOTAL-TEL USA COMMUNICATIONS, INC.) AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
YEARS ENDED JANUARY 31, 2001, 2000 AND 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------

                                                              2001               2000               1999
<S>                                                      <C>                <C>                <C>
NET SALES                                                 $133,230,437       $139,760,497       $137,282,870
                                                          ------------       ------------       ------------
COSTS AND EXPENSES:
  Cost of sales                                            116,059,002        112,794,378        111,500,082
  Access charge settlement (Note 18)                        (1,264,483)             -                  -
  Selling, general and administrative (excluding
    stock compensation)                                     26,902,962         27,990,145         28,912,440
  Restructuring charge                                           -               (318,879)         2,367,910
  Other compensation   (Note 12)                                 -              5,770,554             -
  Stock compensation                                           266,565            204,015            423,588
                                                          ------------       ------------       ------------
           Total costs and expenses                        141,964,046        146,440,213        143,204,020
                                                          ------------       ------------       ------------

OPERATING  LOSS                                             (8,733,609)        (6,679,716)        (5,921,150)
                                                          ------------       ------------       ------------
OTHER INCOME (EXPENSE):
  Interest income                                              167,583            115,119             93,708
  Other income                                                  41,994              1,105            154,491
  Interest expense                                            (105,272)          (147,092)          (186,095)
                                                          ------------       ------------       ------------
        Total other income (expense)                           104,305            (30,868)            62,104
                                                          ------------       ------------       ------------
LOSS BEFORE INCOME TAXES                                    (8,629,304)        (6,710,584)        (5,859,046)

INCOME TAX PROVISION (BENEFIT)                                  -               2,703,618         (2,441,249)
                                                          ------------       ------------       ------------
NET LOSS                                                    (8,629,304)        (9,414,202)        (3,417,797)

OTHER COMPREHENSIVE INCOME (LOSS),
  NET OF TAX:
  Unrealized holding gain (loss)                                79,531             61,055             (5,160)
                                                          ------------       ------------       ------------
COMPREHENSIVE LOSS                                        $ (8,549,773)      $ (9,353,147)      $ (3,422,957)
                                                          ============       ============       ============
BASIC LOSS PER COMMON SHARE                               $      (1.18)      $      (1.33)      $      (0.50)
                                                          ============       ============       ============
DILUTED LOSS PER COMMON SHARE                             $      (1.18)      $      (1.33)      $      (0.50)
                                                          ============       ============       ============
</TABLE>

See notes to consolidated financial statements.


                                       F-3




<PAGE>

COVISTA COMMUNICATIONS, INC. (f.k.a. TOTAL-TEL USA COMMUNICATIONS, INC.)
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                               Additional
                                                  Common        Paid-in        Retained        Treasury
                                                  Stock         Capital        Earnings          Stock

<S>                                               <C>         <C>              <C>           <C>
BALANCE AT FEBRUARY 1, 1998                       $414,118    $ 9,449,429    $ 10,175,784    $ (1,547,331)
  Unrealized holding loss                             --              --             --               --
  Exercise of employee stock options                11,621        850,130            --               --
  Issuance of employee stock grants                   --          109,136            --            90,550
  Tax benefit due to exercise of nonqualified
    stock options                                     --          205,823            --               --
  Adoption of employee stock ownership plan         30,000     12,195,000            --               --
  Net loss                                            --              --       (3,417,797)            --
                                                  --------    -----------    ------------    ------------
BALANCE AT JANUARY 31, 1999                        455,739     22,809,518       6,757,987      (1,456,781)
  Unrealized  holding  gain                           --              --             --               --
  Exercise of employee stock options                18,727      1,780,422            --               --
  Capital contribution (NOTE 12)                                  250,000
  Put Agreement (NOTE 12)                                       4,870,554
  Forfeiture of stock grants                          --              --                           (1,769)
  Net loss                                            --              --       (9,414,202)            --
                                                  --------    -----------    ------------    ------------
BALANCE AT JANUARY 31, 2000                        474,466     29,710,494      (2,656,215)     (1,458,550)
  Unrealized  holding  gain
  Exercise of employee stock options / grants          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                       $475,291    $30,016,454    $(11,285,519)   $ (1,445,440)
                                                  ========    ===========    ============    ============

<CAPTION>

                                                                   Accumulated
                                                    Unearned          Other
                                                      ESOP        Comprehensive
                                                     Shares           Income          Total
<S>                                                <C>         <C>              <C>
BALANCE AT FEBRUARY 1, 1998                               --         $105,881      $18,597,881
  Unrealized holding loss                                 --           (5,160)          (5,160)
  Exercise of employee stock options                      --             --            861,751
  Issuance of employees stock grants                      --             --            199,686
  Tax benefit due to exercise of nonqualified
    stock options                                         --             --            205,823
  Adoption of employee stock ownership plan       $(12,225,000)          --              --
  Net loss                                                --             --         (3,417,797)
                                                  ------------       --------      -----------
BALANCE AT JANUARY 31, 1999                        (12,225,000)       100,721       16,442,184
  Unrealized  holding  gain                               --           61,055           61,055
  Exercise of employee stock options / grants             --             --          1,799,149
  Capital contribution (NOTE 12)                                                       250,000
  Put Agreement (NOTE 12)                                                            4,870,554
  Forfeiture of stock grants                              --             --            (1,769)
  Net loss                                                --             --        (9,414,202)
                                                  ------------       --------     -----------
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
                                                  ============       ========     ===========

</TABLE>



See notes to consolidated financial statements.

                                       F-4






<PAGE>

COVISTA COMMUNICATIONS, INC. (f.k.a. TOTAL-TEL USA COMMUNICATIONS, INC.)
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 2001, 2000 AND 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                            2001               2000               1999
<S>                                                                         <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                  $(8,629,304)       $(9,414,202)       $(3,417,797)
  Adjustments to reconcile net loss to net
    cash  provided by operating activities:
    Depreciation and amortization                                             3,577,995          2,985,359          2,784,883
    Provision for doubtful accounts                                           2,346,761          1,074,916            878,628
    Tax benefit of options exercised                                                  -                  -            205,823
    Noncash stock compensation expense                                          266,565          5,324,569            423,588
    Deferred income taxes                                                             -          2,703,618         (2,952,266)
    Restructuring (credit) charge, net of cash paid                                   -           (318,879)         2,128,000
    Loss on disposal of property and equipment                                   88,690             16,236                  -
    Loss on sale of investments                                                   5,317                  -                  -
    Change in assets and liabilities:
      (Increase) decrease in assets:
        Trade accounts receivable                                               789,518         (6,004,893)           735,880
        Prepaid expenses and other current assets                             1,339,568           (305,546)           696,497
        Other assets                                                           (293,584)            52,536            (55,900)
    Increase (decrease) in liabilities:
        Accounts payable                                                      3,157,678          4,102,224          4,343,446
        Other current and accrued liabilities                                  (558,312)          (110,787)         1,282,261
        Other long-term liabilities                                             (26,744)           (43,968)           (37,254)
                                                                            -----------        -----------        -----------

    Net cash  provided by operating activities                               2,064,148             61,183          7,015,789
                                                                            -----------        -----------        -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales and maturities of short-term
    investments available for sale                                               86,788                  -             23,521
  Purchases of property and equipment                                        (3,227,593)        (3,018,710)        (4,727,130)
  Proceeds from sale of property and equipment                                    1,975             17,216              7,147
  Payments for deferred line installation costs                                 (47,621)           (55,232)          (281,008)
  Collection on notes receivable from employees                                      -             45,402             22,188
                                                                            -----------        -----------        -----------

           Net cash used in investing activities                             (3,186,451)        (3,011,324)        (4,955,282)
                                                                            -----------        -----------        -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Stock options exercised                                                         8,437          1,799,149          1,061,437
  Repayment on bank borrowings                                                 (568,724)          (526,421)          (486,956)
                                                                            -----------        -----------        -----------

           Net cash (used in) provided by financing activities                 (560,287)         1,272,728            574,481
                                                                            -----------        -----------        -----------


</TABLE>

                                                                     (Continued)


                                       F-5





<PAGE>

COVISTA COMMUNICATIONS, INC. (f.k.a. TOTAL-TEL USA COMMUNICATIONS, INC.)
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 2001, 2000 AND 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                                                         2001             2000             1999
<S>                                                   <C>              <C>              <C>
NET (DECREASE) INCREASE  IN CASH AND
  CASH EQUIVALENTS                                    $(1,682,590)     $(1,677,413)     $ 2,634,988

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR                                     4,374,479        6,051,892        3,416,904
                                                      -----------      -----------      -----------

CASH AND CASH EQUIVALENTS,
  END OF YEAR                                         $ 2,691,889      $ 4,374,479      $ 6,051,892
                                                      ===========      ===========      ===========

SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION:
  Cash paid (received) during the year for:

    Interest                                          $   105,272      $   147,092      $   186,901
                                                      ===========      ===========      ===========

    Income taxes                                      $(1,643,227)     $     3,400      $    66,603
                                                      ===========      ===========      ===========

Non-cash:
    Issuance of treasury stock for customer lists
    included in other assets                          $   184,153      $      --        $      --
                                                      ===========      ===========      ===========

</TABLE>

                                                                     (Concluded)

See notes to consolidated financial statements.


                                       F-6




<PAGE>



COVISTA COMMUNICATIONS, INC. (f.k.a. TOTAL-TEL USA COMMUNICATIONS, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 2001, 2000 AND 1999
--------------------------------------------------------------------------------
1. NATURE OF OPERATIONS

   Covista Communications, Inc. ("Covista"), with its wholly-owned subsidiaries
   Covista, Inc., Covista of New York, Inc., Total-Tel Southeast Inc., Covista
   Carrier Services, Inc., Total-Tel Sarasota, Inc., and Total-Tel Services,
   Inc. (collectively, the "Company") operates as a switch based resale common
   carrier providing twenty-four hour, seven day a week, domestic and
   international long distance telecommunications service to customers
   throughout the United States. The Company's principal customers are 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.

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 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, times a rate per
   minute.

   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               7 - 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 which cover the cost of installing telephone transmission
   facilities (lines). Amortization of these costs is provided using the
   straight-line method over the contract life of the lines ranging from three
   to five years.

   Customer Lists - Customer lists, included in other assets, represents the
   fair value of the customer base acquired and is being amortized using an
   accelerated method over a period of 5 years. The carrying value of the
   customer list is reviewed on a quarterly basis for the existence of facts or
   circumstances, both internally and externally, that may suggest impairment.
   During fiscal year 2001, the Company acquired a customer list through the
   issuance of 14,234 shares of treasury stock valued at the fair market value
   of the Company's common stock on the date of the transaction.


                                       F-7




<PAGE>


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

   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.

   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 and fair values of financial instruments are as follows:

                                      F-8




<PAGE>


<TABLE>
<CAPTION>
                                                   2001                          2000
                                        -------------------------      ------------------------
                                         Carrying        Fair          Carrying         Fair
                                          Value          Value          Value          Value
<S>                                    <C>            <C>             <C>            <C>
Assets:
  Cash and cash equivalents             $2,691,889    $2,691,889      $4,374,479     $4,374,479
  Investments available for sale           537,007       537,007         549,580        549,580

Liabilities:
  Debt                                     997,100       997,100       1,565,824      1,565,824
</TABLE>

   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 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 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.

   New Accounting Pronouncements - Statement of Financial Accounting Standards
   (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities,
   is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as
   amended, establishes accounting and reporting standards for derivative
   instruments, including certain derivative instruments embedded in other
   contracts and for hedging activities. Under SFAS 133, certain contracts that
   were not formerly considered derivatives may now meet the definition of a
   derivative. The Company will adopt SFAS 133 effective February 1, 2001.
   Management does not expect the adoption of SFAS 133 to have a significant
   impact on the financial position, results of operation, or cash flows of the
   Company.

   In December 1999, the Securities and Exchange Commission issued Staff
   Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
   Statements", which was adopted during the quarter ending January 31,2001. The
   implementation of SAB 101 did not have a material effect on the Company's
   financial position and results of operations.

3. SEGMENT REPORTING

   The Company sells telecommunication services to two distinct segments: a
   retail segment, consisting primarily of small to medium size businesses
   within the Northeastern United States, and a wholesale segment, with sales to
   other telecommunications carriers throughout North America and Europe.

   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. Assets are held at the consolidated level and are not allocable to the
   operating segments. Management evaluates performance on operating results of
   the two business segments.

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

                                      F-9




<PAGE>


<TABLE>
<CAPTION>

                                                              Retail             Wholesale               Total
<S>                                                        <C>                  <C>                  <C>
2001

Net Sales                                                  $53,487,012          $79,743,425          $133,230,437
Gross margin                                                13,082,019            5,353,899            18,435,918
Operating loss                                              (6,541,566)          (2,192,043)           (8,733,609)

2000

Net Sales                                                  $69,023,194          $70,737,303          $139,760,497
Gross margin                                                20,712,262            6,253,857            26,966,119
Operating (loss) income                                     (3,905,664)           2,996,502              (909,162)
Operating (loss) income after other compensation            (6,760,900)              81,184            (6,679,716)

1999

Net Sales                                                  $72,555,692          $64,727,178          $137,282,870
Gross margin                                                22,143,818            3,638,970            25,782,788
Operating loss                                              (4,985,480)            (935,670)           (5,921,150)

</TABLE>


4. INVESTMENT SECURITIES

   Investments available for sale consist of:

<TABLE>
<CAPTION>
                                             2001                                        2000
                          --------------------------------------------  -------------------------------------------
                                        Gross Unrealized                           Gross Unrealized
                                     ----------------------  Market              ---------------------     Market
                             Cost       Gain       Loss      Value         Cost       Gain      Loss       Value
    <S>                    <C>         <C>         <C>     <C>           <C>        <C>        <C>        <C>
    Bonds                  $ 25,000    $   -       $ -     $ 25,000      $ 25,000   $    -     $  -       $ 25,000
    Mutual  funds           200,000        -         -      200,000       292,104        -      7,226      284,878
    Common  stock            70,700     241,307      -      312,007        70,700    169,002      -        239,702
                           --------    --------    ----    --------      --------   --------   ------     --------
                           $295,700    $241,307    $ -     $537,007      $387,804   $169,002   $7,226     $549,580
                           ========    ========    ====    ========      ========   ========   ======     ========
</TABLE>


   The deferred tax on the net unrealized gains at January 31, 2001, and 2000
   were $0 and $0, respectively; resulting in net amounts of $241,307 and
   $161,776 in Accumulated Other Comprehensive Income.

      Maturity dates of the bond as of January 31, 2001 is as follows:

<TABLE>
<CAPTION>
    Maturing Within                                            Cost           Market Value
    <S>                                                       <C>                <C>
    After 1 year through 5 years                              $25,000            $25,000
                                                              -------            -------
                                                              $25,000            $25,000
                                                              =======            =======
</TABLE>

                                      F-10




<PAGE>



5. PROPERTY AND EQUIPMENT

   Property and equipment consists of:

<TABLE>
<CAPTION>
                                                                                        2001               2000

    <S>                                                                              <C>                <C>
    Machinery and equipment                                                          $16,429,970        $13,795,682
    Office furniture, fixtures and equipment                                           2,755,736          2,362,982
    Leasehold improvements                                                             1,375,200          1,203,042
    Vehicles                                                                             181,256            200,317
    Computer equipment and software                                                    6,881,624          5,578,022
    Leasehold improvements in progress                                                      -               149,725
    Machinery and equipment in progress                                                   93,339          1,314,602
                                                                                     -----------        -----------
                                                                                      27,717,125         24,604,372

    Less accumulated depreciation and amortization                                    14,696,546         11,287,717
                                                                                     -----------        -----------

                                                                                     $13,020,579        $13,316,655
                                                                                     ===========        ===========
</TABLE>


   Depreciation and amortization expense related to property and equipment for
   the years ended January 31, 2001, 2000 and 1999, was $3,433,004, $2,862,151,
   and $2,652,796, respectively.

6. INCOME TAXES

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

<TABLE>
<CAPTION>
                                                  2001               2000                1999
<S>                                              <C>               <C>               <C>
Federal:
  Current                                        $  -              $     -           $   276,691
  Deferred                                          -               1,893,850         (2,190,605)
State income taxes:
  Current                                           -                    -               234,326
  Deferred                                          -                 809,768           (761,661)
                                                 ----              ----------        -----------
                                                 $  -              $2,703,618        $(2,441,249)
                                                 ====              ==========        ===========
</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.

                                      F-11




<PAGE>


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


<TABLE>
<CAPTION>
                                                         2001                                 2000
                                               Current           Long-term          Current            Long-term

    <S>                                      <C>                <C>                <C>               <C>
    Deferred tax assets:
      Allowance for doubtful accounts        $ 1,516,570        $      --          $ 363,930         $      --
      Accrued compensation expense                  --              597,480             --               587,176
      Unamortized lease incentive                   --               89,380             --               100,060
      Restructuring reserve                         --                 --              4,910                --
      Accrued expenses                            77,180               --            112,920                --
      Net operating loss carryforward               --            6,566,190             --             3,805,318
      Put agreement                                 --                 --               --               512,688
      Alternative minimum tax credit                --              593,940             --               172,589
                                             -----------        -----------        ---------         -----------
    Total gross deferred tax assets            1,593,750          7,846,990          481,760           5,177,831
      Less: Valuation allowance               (1,593,750)        (5,812,790)        (481,760)         (3,221,121)
                                             -----------        -----------        ---------         -----------
    Total net deferred tax asset                    --            2,034,200             --             1,956,710
                                             -----------        -----------        ---------         -----------
    Deferred tax liabilities:
      Property and equipment                        --           (1,937,820)            --            (1,892,100)
      Other                                         --              (96,380)            --               (64,610)
                                             -----------        -----------        ---------         -----------

    Total deferred tax liabilities                  --           (2,034,200)            --            (1,956,710)
                                             -----------        -----------        ---------         -----------

    Net deferred tax asset (liability)       $      --          $      --          $    --           $      --
                                             ===========        ===========        =========         ============
</TABLE>

                                        F-12




<PAGE>

   A reconciliation from the U.S. statutory tax rate of 34% to the effective tax
   rate for income taxes on the consolidated statements of (loss) earnings is as
   follows:

<TABLE>
<CAPTION>

                                                                       2001                2000               1999

<S>                                                                 <C>                <C>                <C>
Computed expense at statutory rates                                 $(2,933,963)       $(2,281,599)       $(1,992,076)
(Reductions) increase in taxes resulting from:
  Tax-exempt interest income                                             (3,140)            (3,320)            (4,776)
  State taxes (benefit), net of federal
    income tax benefit                                                 (513,164)          (191,230)          (350,215)
  Put agreement                                                               -          1,219,549                  -
  Valuation allowance                                                 3,703,659          3,702,881                  -
  Other                                                                (253,392)           257,337            (94,182)
                                                                    -----------        -----------        -----------
  Actual (benefit) expense                                          $         -        $ 2,703,618        $(2,441,249)
                                                                    ===========        ===========        ===========

</TABLE>

   At January 31, 2001, for Federal income tax purposes, the Company had net
   operating loss carryforwards of approximately $14.6 million which will begin
   to expire in stages in the year 2020, and alternative minimum tax credit
   carryforwards of approximately $593,000. The alternative minimum tax credit
   does not expire.

7. LEASE COMMITMENTS

   The Company rents various facilities under lease agreements classified as
   operating leases. Several of the underlying agreements contain 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 leases 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, 2001, 2000 and 1999, the Company paid rent
   of $49,479, $62,848 and $65,482, respectively to the partnership. The lease
   expired on November 30, 1998, and has been renewed subject to termination
   upon120-days prior written notice by either party. The lease was amended on
   August 31, 1999 to provide an annual rate of $47,980.



                                      F-13






<PAGE>

   Future minimum annual rentals on these leases as of January 31, 2001 are as
   follows:

<TABLE>
<CAPTION>
Year Ending
January 31,

<S>                                            <C>
2002                                           $ 1,606,423
2003                                             1,070,952
2004                                               315,178
2005                                               282,640
2006                                               282,640
2007 and thereafter                              1,787,031
                                               -----------

                                               $ 5,344,864
                                               ===========
</TABLE>

   Rental expense for the years ended January 31, 2001, 2000 and 1999 was
   approximately $1,500,000, $1,377,000, and $1,615,000, respectively.

8. 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
   six years for the Company's contributions. Company contributions were
   approximately $95,000, $125,000, and $192,000, for the years ended January
   31, 2001, 2000 and 1999, respectively.

9. STOCK OPTION PLANS

   The Company has three stock option plans authorizing the granting of either
   Incentive Stock Options or Nonqualified Stock Options. The 1987 Stock Option
   Plan (the "1987 Plan") provided for the issuance of an aggregate of not more
   than 1,329,800 shares of the Company's Common Stock. 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.

   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 1987 Plan were granted prior to September 1, 1997. All
   options available to be granted under the 1996 Plan, totaling 318,350 at
   January 31, 2001, must be granted by October 10, 2006. All options available
   to be granted under the 1999 Plan, totaling 236,500 at January 31, 2001, must
   be granted by February 23, 2009. At January 31, 2001, shares under the 1999
   Plan had not been registered by the Company. The options currently
   outstanding have terms that expire between five and ten years from the date
   of grant and vest over a period of three to four years from the date of the
   grant.




                                      F-14






<PAGE>

   On February 23, 2000, the Board of Directors passed a resolution allowing the
   Company to reprice all outstanding options granted under the 1996 Plan and
   the 1999 Plan. 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, 2001 due to the decrease in the Company's stock price below
   the new exercise price.

   Information regarding options under the 1987 Plan is as follows:

<TABLE>
<CAPTION>

                                                                                                        Weighted
                                                     Option                                              Average
                                                     Price                                              Exercise
                                                   Per Share           Outstanding       Exercisable      Price

<S>                                             <C>                      <C>               <C>           <C>
January 31, 1998 balance                        $0.51  -  $4.81          558,800           558,800       $2.36

Exercised                                        1.36  -   4.75         (248,800)         (248,800)       3.17
                                                ---------------         --------          --------        ----

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            99,000        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
                                                ===============         ========          ========        ====
</TABLE>







                                      F-15






<PAGE>

   Information regarding options under the 1996 Plan is as follows:

<TABLE>
<CAPTION>

                                                                                                     Weighted
                                                   Option                                             Average
                                                    Price                                            Exercise
                                                  Per Share        Outstanding     Exercisable        Price

<S>                                             <C>                   <C>              <C>            <C>
January 31, 1998 balance                       $ 7.25 - $10.00        370,000          43,750         $  8.70
                                               ---------------       --------        --------         -------
  Granted                                                14.25        263,900            -              14.25
  Became Exercisable                             7.25 -  10.00            -           141,250            8.03
  Exercised                                               7.25        (10,000)        (10,000)           7.25
  Cancelled                                      7.25 -  14.25       (281,800)           -              11.17
                                               ---------------       --------        --------         -------

January 31, 1999 balance                         7.25 -  14.25        342,100         175,000           10.99

  Granted                                                14.25        261,500            -              14.25
  Became Exercisable                                     14.25           -             87,683           14.25
  Exercised                                      7.25 -  14.25       (165,500)       (165,500)           7.90
  Cancelled                                      7.25 -  14.25        (94,100)           -              14.25
                                               ---------------       --------        --------         -------

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
                                               ===============       ========        ========         =======

</TABLE>


   Information regarding options under the 1999 Plan is as follows:

<TABLE>
<CAPTION>

                                                                                                           Weighted
                                                        Option                                              Average
                                                        Price                                              Exercise
                                                      Per Share     Outstanding       Exercisable           Price
January 31, 1999 balance                                $     -                 -                 -        $     -
                                                        -------          --------           -------        -------
<S>                                                     <C>              <C>                <C>            <C>
   Granted                                                14.25           684,500                 -          14.25
   Became Exercisable                                     14.25                 -            48,000          14.25
   Cancelled                                              14.25          (163,500)                -          14.25
                                                        -------          --------           -------        -------
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
                                                        =======          ========           =======        =======

</TABLE>



                                      F-16





<PAGE>

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

<TABLE>
<CAPTION>

                                         Options Outstanding                           Options Exercisable
                            -----------------------------------------------      -----------------------------
                                                Average        Weighted-                            Weighted-
     Range of                  Number of       Remaining        Average              Number of       Average
     Exercise                   Shares        Contractual      Exercise               Shares        Exercise
      Prices                  Outstanding         Life           Price              Outstanding       Price
<S>                            <C>              <C>             <C>
$  0.51 - $ 1.00                 82,500         2.19 years      $ 0.80                 82,500       $ 0.80
          $10.00                 15,000         1.59 years      $10.00                 15,000       $10.00
          $14.25                582,900         3.26 years      $14.25                128,742       $14.25
                                -------                         ------                -------       ------

$ 0.51 -  $14.25                680,400         3.44 years      $12.53                226,242       $ 8.99
                                =======                         ======                =======       ======

</TABLE>

      Compensation expense related to the Nonqualified Stock Options was $0, $0,
      $6,006 for the years ended January 31, 2001, 2000 and 1999, respectively.

      The Company has adopted the disclosure-only provision of SFAS No. 123,
      "Accounting for Stock-Based Compensation." Had compensation cost for the
      Company's plans been determined based on the fair value at the grant date
      for awards in the fiscal years ended January 31, 2001, 2000 and 1999,
      consistent with the provisions of SFAS No. 123, the incremental effect on
      the Company's net loss and basic and diluted loss per share would have
      been $336,692, $0.05 and $0.05 for 2001; $715,391, $0.10 and $0.10 for
      2000 and $280,260, $0.04 and $0.04 for 1999.

      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 2001, 2000 and
      1999: dividend yield of 0.00% for the three years; expected volatility of
      62.23%, 46.11% and 64.00%, respectively; risk-free interest rate of 7.85%,
      6.02% and 5.29% respectively; and expected lives of 3 to 5 years for each
      of the three years.

10.   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, 1,000 shares, and 220,850 shares of its Common Stock and
      recorded compensation expense of $266,565, $204,015, and $417,582 for the
      years ended January 31, 2001, 2000 and 1999, respectively.

      Shares cancelled by the Company due to termination or resignation of the
      recipients for the years ended January 31, 2001, 2000 and 1999 totaled
      4,000, 35,383 and 111,900, which amounts have been excluded from the above
      compensation expense.

11.   LONG-TERM DEBT

      On August 23, 1996, the Company entered into an Equipment Facility and
      Revolving Credit Agreement (the "Facility") with a major New Jersey bank.
      This Facility provided the Company with an unsecured line of credit of
      $4,000,000 and a $6,000,000 facility for the purchase of machinery and
      equipment, primarily telecommunications switching equipment, and was
      secured by the Company's machinery and equipment.



                                      F-17





<PAGE>

      The Company had drawn down $2,000,000 of the $6,000,000 in the fiscal year
      ended January 31, 1997. In the fiscal year ended January 31, 1998, the
      Company converted the balance to a term loan (the "term loan") payable in
      monthly installments of $55,923 including principal and interest payable
      over a term of 60 months. The remaining balance on this term loan as of
      January 31, 2001 was $997,100, of which $615,053 was classified as
      current. The interest rate on the term loan is 7.71%. The term loan is
      secured by certain fixed assets of the Company.

      The Facility requires the Company to meet certain covenants. At January
      31, 2001, the Company was not in compliance with the covenants of the
      Facility. (see Note 21)

      On March 16, 1998, the Company entered into an Amended and Restated
      Equipment Facility and Revolving Credit Agreement (the "Amended Facility")
      with the same bank. This Amended Facility increased the unsecured line of
      credit to $8,000,000 and the Facility for the purchase of machinery and
      equipment to $5,000,000. On November 1, 1998, the Company entered into an
      Amendment to the Amended and Restated Credit Agreement (the "Second
      Amended Facility") with the same bank. This Amendment increased the
      Facility for the purchase of machinery and equipment to $10,000,000 and
      decreased the unsecured line of credit to $5,000,000. In May of 2000, the
      Second Amended Facility expired and was not renewed.

      Scheduled maturities of notes payable during the next five years and
      thereafter are as follows:

<TABLE>
<CAPTION>
Years Ending
January 31,
<S>                                          <C>
2002                                        $ 615,053
2003                                          382,047
                                            ---------

                                            $ 997,100
                                            =========

</TABLE>

12. OTHER COMPENSATION

On September 21, 1999, the Company entered into an agreement with Warren
Feldman, Chairman of the Board of Directors and a shareholder of the Company. As
part of this agreement, a lump sum in the amount of $900,000 was paid to Mr.
Feldman in settlement of his employment agreement. The Company paid $650,000 and
Mr. Walt Anderson, a major shareholder, paid $250,000. Mr. Feldman's Employment
Agreement would have been in effect until December 31, 2001. The Company
expensed the $900,000 with the $250,000 being accounted for as a capital
contribution.

Simultaneously, Revision LLC and Mr. Walt Anderson ("Revision/Anderson") and the
Company entered into put option agreements with Warren Feldman, Sol Feldman
("the Feldmans") and Leon Genet, ("Genet") a director of the Company. These Put
Option agreements allowed the Feldmans and Genet the right to sell their shares
of the Company to Revision/Anderson at a price of $16.00 per share and obligate
Revision/Anderson to purchase the shares during an exercise period beginning on
December 11, 1999 and ending on February 10, 2000. Revision/Anderson purchased
the shares under the put option agreements prior to the deadline, with the
exception of 100,778 shares still held by the Feldman's. The Company had no
obligation to purchase any shares from the Feldmans or Genet. The closing market
price of the Company's shares on September 21, 1999, the date of the agreements,
was $12.25, and the total number of shares covered by the agreements was
1,208,137. Using a binomial valuation model with an interest rate of 5% and a
volatility rate of 50%, the fair





                                      F-18






<PAGE>

value of the Put Option agreements was determined to be approximately $4.03 per
share or $4,870,554. In accordance with the Securities and Exchange Commission
Staff Accounting Bulletin No. 83, the Company accounted for this non-cash
transaction as a charge to expense and a credit to paid-in capital during the
quarter ended October 31, 1999.

13. RESTRUCTURING

During the fourth quarter of fiscal 1999, the Company recorded a restructuring
charge of approximately $2,368,000 related to the adoption by the Company of a
formal plan for restructuring its focus of operations. The restructuring was
adopted in an effort to concentrate the Company's efforts on the Northeastern
United States market. Elements of the Company's restructuring plan included
eliminating the sales offices in Florida, Atlanta, Georgia, Washington D.C. and
the United Kingdom as well as the Miami switch.

The write downs incurred in connection with the restructuring included a charge
of approximately $1,280,000 associated with the planned disposal of the Miami
switch and switch site, a charge of approximately $723,000 associated with the
termination costs to reduce employee headcount and sales offices. A charge of
approximately $265,000 for the cost associated with the balance on the Fort
Lauderdale lease, and a charge of approximately $100,000 to write off line
installation costs associated with the Florida network. In the fiscal year
ending January 31, 1999, amounts paid included approximately $240,000 for
severance and termination costs. The balance of approximately $2,128,000 was
included on the balance sheet at January 31, 1999 as accrued restructuring
costs.

The January 31, 1999 reserve included an amount of approximately $1,280,000 for
the abandonment of the Miami switch (total book value of approximately
$1,713,000 less the fair value of approximately $433,000). The fair value of the
switch equipment retained was based on the best estimates of the replacement
cost of the switch hardware which could be used in the Company's other switch
sites. Also included in the reserve were amounts for the severance of
approximately 25 employees of approximately $427,000, a reserve for the balance
due on the Fort Lauderdale lease of approximately $265,000, a reserve to close
the UK office of approximately $57,000, and line installation costs of
approximately $99,000.

The balance in the reserve at January 31, 2000, of approximately $12,000,
consists of the settlement of the lease in Fort Lauderdale, Florida. For the
fiscal year ended January 31, 2000, amounts aggregating approximately $1,797,000
applied against the accrual consisted of approximately $1,280,000 for the write
down of the Miami switch, approximately $99,000 for the line installation costs,
approximately $51,000 for payments made on the Fort Lauderdale lease,
approximately $327,000 for severance payments and approximately $40,000 for
payments made to shut down the U.K. operation. Additionally, an aggregate of
approximately $319,000 which is reflected as a credit through the restructuring
charge line in the fiscal 2000 consolidated financial statements consisted of
approximately $97,000 reduction in the severence accrual, approximately $20,000
for the reduction of the fringe benefit accrual and $202,000 reduction in the
accrual on the Fort Lauderdale lease, due to revisions in the lease. The
salvageable components of the switch were relocated to the Company's New York
City switch in the third quarter of fiscal 2000.

In the fiscal year ended January 31, 2001, the Company settled, for
approximately $12,000, the balance on the lease in Fort Lauderdale, Florida,
which was charged against the restructuring reserve.




                                      F-19




<PAGE>


14.   COMMITMENTS AND CONTINGENCIES

The Company is a defendant in a law suit, filed by one of its customers for
alleged breach of contract, which seeks compensatory and punitive damages of
$1,300,000. Management believes that the suit is without merit and is vigorously
defending it. However, the outcome cannot be determined at this time.

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.

The Company has commitments with several vendors for the purchase of
telecommunications services.

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. Diluted loss per
share was computed on the assumption that all stock options converted or
exercised during each year or outstanding at the end of each year were converted
at the beginning of each year or at the date of issuance or grant, if dilutive.

                                      F-20



<PAGE>


The reconciliation of the earnings and common shares included in the computation
of basic earnings per common share and diluted earnings per common share for the
years ended January 31, 2001, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                              2001                                       2000
                         -------------------------------------------  ------------------------------------------
                            Earnings         Shares      Per-Share       Earnings        Shares       Per-Share
                          (Numerator)     (Denominator)    Amount      (Numerator)    (Denominator)    Amount
<S>                        <C>               <C>            <C>         <C>              <C>             <C>
Net Loss                   $ (8,629,304)                                $ (9,414,202)
                           --------------                               --------------
Basic Loss
  Per Share:               $ (8,629,304)      7,324,085     $ (1.18)      (9,414,202)     7,068,875      $(1.33)
Effect of Dilutive
  Securities:
  Stock Options                                      --                                      --
                           ------------      ---------      -------     ------------     ---------       ------
Diluted Loss
  Per Share                $ (8,629,304)     7,324,085      $ (1.18)    $ (9,414,202)    7,068,875       $(1.33)
                           ============      =========      =======     ============     =========       ======
</TABLE>


<TABLE>
<CAPTION>
                                             1999
                         -------------------------------------------
                            Earnings         Shares      Per-Share
                          (Numerator)     (Denominator)    Amount
<S>                        <C>               <C>             <C>
Net Loss                   $ (3,417,797)
                           ------------
Basic Loss
  Per Share:                 (3,417,797)      6,817,701      $(0.50)
Effect of Dilutive
  Securities:
  Stock Options
                           ------------       ---------      ------
Diluted Loss
  Per Share                $ (3,417,797)      6,817,701      $(0.50)
                           ============      ==========      ======
</TABLE>



Outstanding stock options to purchase shares of Common stock were not included
in the computation of diluted earnings per share for the fiscal years ended
January 31, 2001, 2000 and 1999 because to do so would have been antidilutive.

                                      F-21



<PAGE>


16.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

      Amounts in thousands except per share data.

<TABLE>
<CAPTION>
                                                            April 30,      July 31,     October 31,   January 31,
                                                              1998           1998          1998           1999
<S>                                                         <C>            <C>           <C>            <C>
Net sales                                                   $31,882        $33,556       $41,260        $30,585
Operating income (loss)                                         411            368        (1,504)        (5,196)
Net earnings (loss)                                             263            277          (927)        (3,031)
Basic earnings (loss) per common share                         0.04           0.04         (0.12)         (0.44)
Diluted earnings (loss) per common share                       0.03           0.04         (0.12)         (0.44)
</TABLE>

<TABLE>
<CAPTION>
                                                            April 30,      July 31,     October 31,   January 31,
                                                              1999           1999          1999           2000
<S>                                                         <C>            <C>           <C>            <C>
Net sales                                                   $33,530        $36,617       $36,988        $32,625
Operating income (loss)                                         519            590        (5,954)        (1,834)
Net earnings (loss)                                             296            339        (5,539)        (4,510)
Basic earnings (loss) per common share                         0.04           0.05         (0.77)         (0.63)
Diluted earnings (loss) per common share                       0.03           0.05         (0.77)         (0.63)
</TABLE>

<TABLE>
<CAPTION>
                                                            April 30,      July 31,     October 31,   January 31,
                                                              2000           2000          2000           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)
</TABLE>

17.   EMPLOYEE STOCK OWNERSHIP PLAN

      On September 1, 1998, the Company established the Covista Communications,
      Inc. Employee Stock Ownership Plan (the "ESOP Plan"). Concurrently with
      the establishment of the nonleveraged ESOP Plan, the Company contributed
      600,000 shares of its Common Stock to the ESOP Plan. The common shares
      were recorded at fair value at the date contributed to the ESOP, totaling
      approximately $12.2 million, with an offset to Unearned ESOP Shares in the
      Statement of Shareholders' Equity. The ESOP Plan is administered through a
      trust by a trustee designated by the Board of Directors. No shares have
      been allocated from the ESOP Plan as of January 31, 2001.

      In February 1999, the Company's Board of Directors authorized the
      termination of the ESOP Plan. The IRS has given its approval to terminate
      the ESOP, and the Company is in process of doing so. Upon termination of
      the ESOP Plan, the Company will receive the shares from the Trust and
      return the shares to authorized but unissued Common Stock.

                                      F-22




<PAGE>


18.      ACCESS CHARGE SETTLEMENT

         In the second quarter of the current fiscal year, 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.

19.      RELATED PARTY TRANSACTIONS

         A director of the Company serves on the Board of Directors of a
         competitor of the Company. The Company purchases and sells services to
         this competitor. Sales to this competitor in the years ended January
         31, 2001, 2000 and 1999 were approximately $532,000, $681,000 and
         $722,000 respectively. Purchases from this competitor in the years
         ended January 31, 2001, 2000 and 1999 were approximately $544,000,
         $291,000 and $443,000 respectively. All transactions were based on
         competitive terms obtained in arm's length transactions.

20.      EMPLOYEE RECEIVABLES

         Included in prepaid expenses and other current assets is a partially
         secured note receivable totaling $262,500 evidencing a loan to an
         executive employee of the Company. The note bears interest at 11.5% per
         annum, and is payable in monthly installments with the last payment due
         on January 1, 2004.

21.      SUBSEQUENT EVENTS

         a. 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 to be issued to Messrs. Alward, Leach and Luken is
         $2.00 per share, based on the fair market value of shares at February
         2, 2001. The stock sale was consummated in April 2001 and the proceeds
         which were added to the general funds of the Company, will be used to
         finance operations of the Company.

         b. 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. The
         transaction was completed on March 29, 2001

         c. On April 24, 2001 the Company obtained a waiver on the covenants in
         default from the bank in connection with the term loan

                                     ******

                                      F-23



<PAGE>


COVISTA COMMUNICATIONS, INC. (f.k.a. TOTAL-TEL USA COMMUNICATIONS, INC.) AND
SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(CONSOLIDATED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Column A                                 Column B                   Column C                   Column D              Column E
                                    -----------------------------------------------------------------------------------------------
                                                                   Additions
                                                          ----------------------------
                                                             Charged        Charged to
                                        Balance at        (Credited) to        Other                                  Balance
                                         Beginning           Cost and        Accounts-       Deductions-             at End of
            Description                  of Period           Expenses         Describe         Describe               Period
<S>                                         <C>                <C>                    <C>           <C>                 <C>
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                    $ -

YEAR ENDED JANUARY 31,
  2000:
  Reserves and allowances
    deducted from asset accounts:
    Allowance for uncollectible
      accounts                              $ 1,230,483        $ 1,074,916            $ -          $ 478,139            $ 1,827,260
    Valuation reserve on deferred tax asset                    $ 3,702,881                                              $ 3,702,881
  Allowances not deducted:
    Restructuring reserve                   $ 2,128,000         $ (318,879)           $ -        $ 1,797,126               $ 11,995

YEAR ENDED JANUARY 31,
  1999:
  Reserves and allowances
    deducted from asset accounts:
    Allowance for uncollectible
      accounts                                $ 866,421          $ 878,628            $ -          $ 514,566            $ 1,230,483
  Allowances not deducted:
    Restructuring reserve                           $ -        $ 2,367,910            $ -          $ 239,910            $ 2,128,000
</TABLE>

                                      F-24




<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 twenty-seventh day
of April, 2001

                                                   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                       April, 27, 2001
----------------------------
Henry G. Luken III


 /S/ Walt Anderson                        Director                                    April 27, 2001
----------------------------
Walt Anderson


 /S/ Jay J. Miller                        Director                                    April 27, 2001
----------------------------
Jay J. Miller


 /S/ Leon Genet                           Director                                    April 27, 2001
----------------------------
Leon Genet


 /S/ A. John Leach                        Director, President and                     April 27, 2001
----------------------------              Chief Executive Officer
A. John Leach


 /S/ Thomas P. Gunning                    Vice President, Treasurer and               April 27, 2001
----------------------------              Secretary, Chief Financial Officer
Thomas P. Gunning                         and Principal Accounting Officer
</TABLE>

                                       31




<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 Registrant and Mansol Ceramics Registrant,
              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 Registrant 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 Registrant, 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 Registrant and United Jersey Bank in the
              principal amount of $1,192,320. Incorporated by reference to
              Exhibit 10 (e) to Registrants Annual Reporton Form 10-K for the
              year ended January 31, 1983.

(10)(e)(ii)   Installment Note and Equipment Loan and Security Agreement of
              Mansol Ceramics Registrant 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).

(10)(f)       Lease of premises at 17-25 Academy Street, Newark, New Jersey
              between Mansol Ceramics Registrant 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>
                                       32




<PAGE>


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Exhibit No.                       Description of Document
-----------                       -----------------------
<S>           <C>
(10)(h)       Master Lease Agreement between Mansol Ceramics Registrant 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 Registrant 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 Registrant,
              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 Registrant 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 Registrant
              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
              Registrant (Mortgagee) dated August 1, l990, extending the term of
              the Note and Mortgage and modifying the interest provision.

(10)(o)       Asset Purchase Agreement between Registrant, Mansol Ceramics
              Registrant 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 Registrant. 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 Registrant (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>

                                       33




<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
              Registrant 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
              Registrant 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 Registrant, L. P., successor to the Prudential
              Insurance Registrant 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 Registrant, L. P., successor to the Prudential Insurance
              Registrant 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
              Registrant 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>

                                       34




<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 10-K for the year ending 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 10-K
              for the year ending 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 10-K
              for the year ending 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

(22)          Subsidiaries of Registrant. Incorporated by reference to Exhibit
              22 to Registrant's Annual Report on Form 10-K for the year ended
              January 31, 1996.

(23)          Consent of Deloitte & Touche LLP

(27)          Financial Data Schedules.

</TABLE>


                                       35