<PAGE>

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

                                   ----------

                                    FORM 10-K

(Mark one)

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

     For the Fiscal year ended January 31, 2002.

                                       OR

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

     For the transition period from __________________ to ___________________.

                          Commission File Number 0-2180

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

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

                  4803 Highway 58 North, Chattanooga, TN 37416
               --------------------------------------------------
               (Address of principal executive offices)(Zip Code)

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

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

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

Indicate by check mark whether Covista Communications, Inc. ("Covista" or the
"Company")(1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that Covista was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
                                 Yes [X] No [_]

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

Aggregate market value (based upon a $4.29 closing price) of the voting stock
held by nonaffiliates of Covista as of April 30, 2002: $16,360,911

Number of shares of Common Stock outstanding on April 30, 2002: 12,636,949

                      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 Covista "believes",
"anticipates", "expects", or words of similar import. Similarly, statements
which describe Covista's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which are described in close proximity to such
statements and which could cause actual results to differ materially from those
anticipated as of the date of this Report. Shareholders, potential investors and
other readers are urged to consider these factors in evaluating the
forward-looking statements and are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements included herein are
only made as of the date of this Report and Covista undertakes no obligation to
publicly update such forward-looking statements to reflect subsequent events or
circumstances.

ITEM 1. Business

General

          Covista was incorporated in 1959 as Faradyne Electronics Corp. In
November 1991, Covista changed its name from Faradyne Electronics Corp. to
Total-Tel USA Communications, Inc. In September, 2000, Covista adopted its
present name, Covista Communications, Inc.

          Covista is a long distance telecommunications, Internet and data
services provider. Covista operates two distinct business segments: retail and
wholesale. The retail segment provides long distance, data and internet services
to small and medium sized businesses, principally in the Northeast region of the
United States. The wholesale segment sells long distance telecommunication
services to other carriers for resale. Covista utilizes its own switching
equipment and leased fiber optic transmission cable. Covista's products and
services include a broad range of voice, data and Internet solutions, including
long distance and toll-free services, calling cards, data, Internet access,
virtual private network, directory assistance and teleconferencing services. The
wholesale division provides domestic and international termination services to
carriers worldwide at competitive rates. Covista currently owns and operates
three switches, one in New York City , one in Newark, New Jersey, and one in
Philadelphia Pennsylvania and announced plans to expand to additional switch
sites in Minneapolis, Dallas and Chattanooga. In July 2001, Covista
announced that it had acquired long-term access to nationwide network facilities
comprising 2,822,400,000 channel miles of telecommunications capacity measured
by length of voice-grade circuits. In addition, Covista currently offers
Internet services using two routers that it owns and operates located in New
York City and Northern New Jersey. Covista processes approximately 85 percent of
all its call volume through its own facilities. Covista also operates a network
operations center in Northern New Jersey to monitor and control its New Jersey
network and to coordinate its various services. In October, 2001, Covista
announced the opening of a new call center facility in Chattanooga, Tennessee,
and that it is planning to relocate its corporate headquarters to Chattanooga
from Little Falls, New Jersey. Covista previously was known as Total-Tel USA
Communications, Inc.

          In the retail market, Covista has segmented potential customers and
tailored its service offerings, sales, marketing approach and network
development to provide service in a cost-effective manner. Covista believes its
customer service to be one of its principal competitive advantages. Covista
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. Covista intends to continue to focus its
efforts on small to medium-sized businesses with sales of $1 million to $60
million and monthly communications bills that range from $500 to $30,000.
Covista's focus on customer service has also enabled it to attract larger
customers. During the fourth quarter 2002, Covista continued expanding services
into the residential retail market with a new product offering.

          For Fiscal 2002, Covista had gross revenues of approximately $95
million, derived approximately 50% from wholesale and 50% from retail services.
For Fiscal 2001, Covista's gross revenues were approximately $134 million.
Covista's retail sales activities have been concentrated in Northern New Jersey
and New York City, where, Covista 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
continue 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.

          Covista's principal executive offices are located at 4803 Highway 58
North, Chattanooga, TN, 37416, and its telephone number is (423) 648-9700.


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                                INDUSTRY OVERVIEW

History and Industry Development

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

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

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

          Covista 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, Covista
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. Covista has also entered the residential long distance
business which Covista had not previously concentrated its marketing efforts.


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Network

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

Current Network

          Switches. Currently, Covista operates an advanced telecommunications
network that includes three Alcatel switches, located in New York City, Newark,
New Jersey and Philadelphia, Pennsylvania. The Philadelphia switch was acquired
from a merger with Capsule Communications (see Subsequent Events). Covista has
installed Alcatel DEX 600 switches in Newark and Philadelphia and a Megahub
DEX600E switch in New York, which provides interexchange switching capabilities
and is currently being used as Covista's international gateway switching
platform. Covista is installing three Alcatel DEX 600 switches, one in
Minneapolis, one in Dallas and one in Chattanooga which are scheduled to be
operational in FY 2003.

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

          During Fiscal 2002, Covista billed approximately 1.08 billion minutes,
with approximately 85% of its minutes over its own switches. Covista believes
that increasing the traffic carried on its own network would improve operating
margins.

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

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

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

          Security and Reliability. Covista has a Network Operating Center (NOC)
in Northern New Jersey, which monitors and controls Covista's network and
coordinates its various services from a central location, increasing the
security, reliability and efficiency of Covista's operations. Centralized
electronic monitoring and control of Covista's network allows Covista to avoid
duplication of this function in each switch site. The NOC also helps reduce
Covista's per-customer monitoring and customer service costs. In addition,
Covista's network employs an "authorized access" architecture. Unlike many
telecommunications companies, which allow universal access to their network,
Covista utilizes an automatic number identification security screening
architecture which ensures only the Automatic Number Identification (ANIs) of
those users who have subscribed to Covista's services and have satisfied
Covista's credit and provisioning criteria have access to the network. Covista
believes that this architecture provides Covista the ability to better control
bad debt and fraud in a manner which is invisible and nonintrusive to the
customer. This architecture also allows Covista to better manage network
capacity, as unauthorized and unplanned users cannot access the network. Covista
plans to relocate the NOC to the Corporate Headquarters in Chattanooga TN in
Fiscal Year 2003.

                         PRINCIPAL PRODUCTS AND SERVICES

Product and Service Offerings

          Covista offers retail telecommunications services primarily to small
and medium-sized businesses and residential long distance users. Covista'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. Covista's wholesale services include domestic and
international termination and transport services to domestic and international
telecommunications carriers.


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Current Services

          Retail Services. Covista provides telecommunications services to over
10,000 commercial customers, primarily small and medium-sized businesses located
in the Northeastern region of the United States. Covista sells retail services
through its independent marketing representatives. Retail commercial
communications services accounted for approximately 50% of Covista's Fiscal 2002
revenues, and produced revenues of approximately $47,423,000 in Fiscal 2002 and
$53,487,000 in Fiscal 2001. Retail revenues fell in fiscal 2002 due to continued
downward pricing pressure and reductions in volume, which Covista attributes to
ever increasing competition within the industry. In addition, the attack on the
World Trade Center on September 11, 2001 had a direct negative impact on the
retail sales of Covista due to damage to the switch located in New York City.
While Covista 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.

Covista's retail services include the following:

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

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

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

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

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

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

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

Wholesale Services. Covista offers the following wholesale services: domestic
and international termination, switch ports, colocation facilities and transport
services to a broad spectrum of domestic and international carriers. Covista
offers international wholesale termination and transport services primarily to
domestic and international telecommunications carriers. Once Covista
interconnects with a carrier customer, the carrier may utilize Covista on an
as-needed basis, depending upon the pricing offered by Covista and its
competitors as well as capacity. Covista 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. Covista's wholesale results were
severely affected by the September 11 terrorist attack. The Company suffered the
temporary loss of its New York City switch, which is situated in the immediate
vicinity of the World Trade Center. As a result, Covista incurred a significant
reduction in wholesale revenues. The impact of the revenue loss, combined with
additional expenses, was in excess of approximately $5,000,000. Covista has
filed an insurance claim for losses and expenses associated with the events of
September 11, and received an initial $1,000,000 in the FY 2002. The total claim
and final settlement cannot be determined at this time. Wholesale revenues were
approximately $47,889,000 and $79,743,000 during Fiscal 2002 and Fiscal 2001,
respectively. As a percentage of total revenue, the Wholesale revenues are
expect to decline, while higher margin retail revenues are expected to increase
as a percent of total revenue.


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                                  CUSTOMER BASE

Telecommunications Services Market

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

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

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

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

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

Market Opportunities

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


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                                   COMPETITION

Overview

          Covista operates in a highly competitive industry and estimates that
it has no greater than a 1% share of the market in which it operates. Covista
expects that competition will continue to intensify in the future due to
regulatory changes, including the continued implementation of the 1996 Act, and
further increases in the size, resources, and number of market participants. In
each of its markets, Covista will face competition from larger, better
capitalized Tier I and Tier II providers and ILECs and CLECs. While new business
opportunities may be made available to Covista through the 1996 Act and other
federal and state regulatory initiatives, regulators are likely to provide ILECs
with an increased degree of flexibility with regard to pricing of their services
as competition increases.

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

Long Distance Market

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

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

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


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<PAGE>

Seasonal Nature of Business

          Company's business is not seasonal.

Patents, Trademarks, Licenses, etc.

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

                             GOVERNMENT REGULATIONS

Overview

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

Federal Regulations - The 1996 Act

          Statutory Requirements. The 1996 Act requires all LECs (including
ILECs and CLECs, (i) not to prohibit or unduly restrict resale of their
services; (ii) to provide local number portability; (iii) to provide dialing
parity and nondiscriminatory access to telephone numbers, operator services,
directory assistance, and directory listings; (iv) to afford access to poles,
ducts, conduits, and rights-of-way; and (v) to establish reciprocal compensation
arrangements for the transport and termination of local telecommunications
traffic. It also requires ILECs to negotiate local interconnection agreements in
good faith and to provide interconnection (a) for the transmission and routing
of telephone exchange service and exchange access, (b) at any technically
feasible point within the ILEC's network, (c) which is at least equal in quality
to that provided by the ILEC to itself, its affiliates, or any other party to
which the ILEC provides interconnection, and (d) at rates and terms and
conditions which are just, reasonable and nondiscriminatory. ILECs also are
required under the 1996 Act to provide nondiscriminatory access to network
elements on an unbundled basis at any technically feasible point, to offer their
local telephone services for resale at wholesale rates, and to facilitate
colocation of equipment necessary for competitors to interconnect with or access
Unbundled Network Elements ("UNEs").

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

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

          FCC Rules Implementing the Local Competition Provisions of the 1996
Act. In August 1996, the FCC released a First Report and Order, a Second Report
and Order and a Memorandum Opinion and Order (combined, the "Interconnection
Orders") which established a framework of minimum, national rules enabling state
Public Utility Commissions ("PUCs") and Public Service Commissions ("PSCs"), and
the FCC to begin implementing many of the local competition provisions of the
1996 Act. In its Interconnection Orders, the FCC prescribed certain minimum
points of interconnection necessary to permit competing carriers to choose the
most efficient points at which to interconnect with the ILECs' networks. The FCC
also adopted a minimum list of UNEs that ILECs must


                                       8




<PAGE>

make available to competitors upon request and a methodology for states to use
in establishing rates for interconnection and the purchase of UNEs. The FCC also
adopted a methodology for States to use when applying the 1996 Act "avoided cost
standard" for setting wholesale prices with respect to retail services.

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

Other Federal Regulations

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

          o    Tariffs. As a non-dominant carrier, Covista may install and
               operate facilities for the transmission of domestic interstate
               communications without prior FCC authorization. Services of
               non-dominant carriers have been subject to relatively limited
               regulation by the FCC, primarily consisting of the filing of
               tariffs and periodic reports. However, non-dominant carriers like
               Covista must offer interstate services on a nondiscriminatory
               basis, at just and reasonable rates, and remain subject to FCC
               complaint procedures. With the exception of informational tariffs
               for operator-assisted services and tariffs for interexchange
               casual calling services, the FCC has ruled that IXCs must cancel
               their tariffs for domestic interstate interexchange services.
               Tariffs continue to be required for international services.
               Pursuant to these FCC requirements, Covista has filed and
               maintains tariffs for its interstate services with the FCC. All
               of the interstate access and retail "basis" services (as defined
               by the FCC) provided by Covista are described therein. "Enhanced"
               services (as defined by the FCC) need not be tariffed. Covista
               believes that its proposed enhanced voice and Internet services
               are "enhanced" services which need not be tariffed. However, the
               FCC is reexamining the "enhanced" definition as it relates to IP
               transport and Covista cannot predict whether the FCC will change
               the classification of such services.

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

          o    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 Covista and could
               have a material adverse effect on Covista. 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 ILECs 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 Covista 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. Covista anticipates
               that this pricing flexibility should result in ILECs lowering
               their prices in high traffic density areas, the probable area of
               competition with Covista. Covista also anticipates that the FCC
               will grant ILECs increasing pricing flexibility as the number of
               interconnections and competitors increases. In May, 1997, the FCC
               took action to reform the current interstate access charge
               system. The FCC adopted an order which makes various reforms to
               existing rate structures for interstate access designed to move
               access charges, over time, to more economically efficient rate
               levels and structures. The FCC recently granted LECs additional
               pricing flexibility. As such, the carriers may offer volume
               discounts which may benefit larger long distance carriers.

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

          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. PICC charges are billed 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
               Covista.

               Covista, 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 Covista, 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. Covista
               has filed its Universal Service Fund worksheet. The amounts
               remitted to the Universal Service Fund are billed to Covista's
               customers. Covista 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.


                                       10




<PAGE>

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

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

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

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

State Regulation

               Some states in which Covista operates are considering legislation
which could impede efforts by new entrants in the local services market to
compete effectively with ILECs. However, Covista does not have any intention to
pursue the local services market.

Compliance with Environmental Provisions

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

Subsequent Events

          A joint proxy statement/prospectus dated January 9, 2002 and mailed to
stockholders on or about January 11, 2002 detailed a merger agreement between
Covista and Capsule Communications, Inc. which had been approved by the Covista
and Capsule boards of directors. Capsule is a telecommunications carrier
providing local and long-distance telephone communications services primarily to
small- and medium-size business customers as well as residential customers
utilizing its own equipment. Capsule provides inbound long-distance services and
local resale services as well as other telecommunications services including
calling cards, cellular, paging, Internet service, dedicated access, data
services, and carrier termination services. Capsule uses its own switch located
in Philadelphia to originate, transport and terminate calls for customers
generally located in the Mid-Atlantic region and in California. For calls
originating or terminating outside its own network, Capsule resells services
provided by other long-distance companies. Capsule is the successor corporation
to US Wats, Inc. During the scheduled annual meeting of stockholders on February
8, 2002, the merger was approved by the requisite vote of stockholders of
Covista and Capsule. The merger was consummated on February 8,2002.

          On February 12, 2002, Covista announced a reduction in force of 26% of
its New York/New Jersey workforce related to a reduction in revenue due to the
decline in the wholesale market and the World Trade Center attack of September
11, 2001 and the move of operations to Tennessee.

                                    PERSONNEL

          As of the April 15, 2002, Covista and its subsidiaries employed 243
full-time and part-time employees in its long distance telecommunication
business, of whom 20 were engaged in sales activities, 82 in customer service
and support, 52 in technical and field services, 22 in data processing, and 67
in general and administrative activities. Covista also utilizes the services of
approximately 950 independent sales agents. Covista considers its relations with
its employees to be satisfactory.


                                       11




<PAGE>

ITEM 2. Properties

          On November 15, 1993, and December 28, 1993, Covista entered into
leases for an aggregate of approximately 3,500 square feet of space at 744 Broad
Street, Newark, New Jersey, for its switching equipment. The lease ran from
January 1, 1994 through December 31, 1998, with an option to renew the lease
through August 31, 2002, which has been exercised. The annual rental of $63,200
also requires the tenant to pay a proportionate share of any increase in the
"Consumer Price Index", U. S. City Average over the base year. Covista does not
have plans to renew the lease and the switching components are to be relocated
to another site.

          On February 22, 1994, Covista entered into a lease, subsequently
modified on April 15, 1994, for approximately 17,700 square feet of space at 150
Clove Road, Little Falls, New Jersey to be used as sales, executive and
administrative offices. The lease provided for a rent holiday until July, 1995,
after which the annual rental would be approximately $360,000. The lease is for
five years and ten months and has been amended by a second lease modification
agreement dated February 9, 1995 whereby Covista leased approximately 6,700
additional square feet of space at the same location at an additional annual
rental of $121,707 for the first four years and $138,154 for the next year and
two months. The modified agreement also extended the term of the existing lease
for an additional two years to August 14, 2002 at a then annual rental of
$563,000. The lease 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. There are no plans to exercise renewal options.

          On January 30, 1997, Covista entered into a third modification of its
lease for approximately 16,640 square feet of additional office space at its
existing facility at 150 Clove Road, Little Falls, New Jersey. The annual rental
on the additional space was $357,760 per annum from July 1, 1997 through
February 14, 1998, is $366,800 per annum from February 15, 1998 through August
14, 2000, and will be $384,820 per annum from August 15, 2000 through August 14,
2002. In addition, Covista 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. There are no
plans to exercise the renewal options. Covista plans to move the existing office
staff to a smaller location in the general area of Little Falls, NJ and certain
operational units of Covista to Chattanooga, Tennessee.

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

          On November 8, 1996, a subsidiary of Covista 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, Covista entered into a lease for approximately
5,000 square feet of space at 28 W. Flagler Street, Miami, Florida. The term of
the lease is 15 years, commencing February 1, 1998. The annual rental is
approximately $116,160, with an annual adjustment based on the Revised Urban
Wage Earners and Clerical Workers Index, capped at a maximum of 3% increase over
the prior year's rental payment. In addition, Covista is liable for its
proportionate share of increases in real estate taxes and operating expenses
over the base year. Covista sublet this space on January 1, 2000 for the balance
of its term, to another tenant at an annual rate of approximately $116,160,
subject to adjustments. The tenant has defaulted on the sublease and Covista is
currently considering utilizing the space.

          On September 1, 1998, Covista 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 Covista 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. Covista has sublet this
space to another tenant.

On August 20, 1999, Covista entered into a three year lease, commencing August
20, 1999 for 2,770 square feet of space at 20 Crossways Park North, Woodbury,
New York. Rental payments were $62,235 per annum from


                                       12




<PAGE>

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. Covista has sublet this space
to another tenant.

On November 17, 1999, Covista entered into a three year lease, commencing
November 17, 1999 for 2,186 square feet of space at One Landmark Square,
Stamford, Connecticut. Rental payments were $50,278 per annum from November
17,1999 to November 16,2000, are $51,371 from November 17,2000 to November 16,
2001, and $51,556 from November 17, 2000 to November 16, 2002. There 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. Covista has sublet
this space to another tenant.

On October 11, 1999, Covista entered into a three year lease, commencing October
11,1999 leasing 1,926 square feet of space at 1810 Chapel Avenue West, Cherry
Hill, New Jersey. Rental payments 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. Covista has sublet this space to another tenant.

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

ITEM 3. Pending Legal Proceedings

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

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

          A joint proxy statement/prospectus dated January 9, 2002 and mailed to
stockholders on or about January 11, 2002 detailed a merger agreement between
Covista and Capsule Communications, Inc. which had been approved by the Covista
and Capsule boards of directors. During the scheduled annual meeting of
stockholders on February 8, 2002, the merger was approved by the requisite vote
of stockholders of Covista and Capsule. The merger was consummated on February
8,2002. Other matters presented to stockholders included election of eight
directors of Covista , adoption of the 2001 Equity Incentive Plan, and to ratify
the selection of Deloitte & Touche LLP as independent auditors of Covista for
the fiscal year ending January 31, 2002.

                                     PART II

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


                                       13




<PAGE>

Common Stock

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

          Effective on July 15, 1998, Covista 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 12,636,949 shares
of Common Stock issued and outstanding, held by 840 persons, as reported by
Covista's transfer agent.

Price Range of the Common Stock

          Covista'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 Covista's Common Stock in such market, as reported by the
National Association of Securities Dealers, Inc.

FISCAL 2002                         HIGH     LOW
-----------                        ------   ------
February 1, 2001 thru April 30     $6.188   $1.547

May 1 thru July 31                   7.25     3.25

August 1 thru October 31            10.25     4.50

November 1 thru January 31, 2002    10.25     5.62

FISCAL 2001                         HIGH     LOW
-----------                        ------   ------
February 1, 2000 thru April 30      15.00   9.1875

May 1 thru July 31                 12.375     6.00

August 1 thru October 31             9.50    3.625

November 1 thru January 31, 2001   4.9375    0.625

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


                                       14




<PAGE>

ITEM 6. Selected Financial Data

<TABLE>
<CAPTION>
                                            (In thousands except per share amounts)

                                                    Year ended January 31,
                                    -------------------------------------------------------
RESULTS OF OPERATIONS:                2002          2001       2000       1999       1998
                                    --------      --------   --------   --------   --------
<S>                                 <C>           <C>        <C>        <C>        <C>
Net sales                           $ 95,313      $133,230   $139,760   $137,283   $123,286

Net (Loss) earnings                 $(11,970)     $ (8,629)  $ (9,414)  $ (3,418)  $  1,094

Weighted average
 common shares
    outstanding (a)

  Basic                               10,204         7,324      7,069      6,818      6,213

  Diluted                             10,204         7,324      7,069      6,818      6,842

(Loss) earnings per common and
    common equivalent shares

Basic (Loss) earnings per share     $  (1.17)     $  (1.18)  $  (1.33)  $  (0.50)  $   0.18

Diluted (Loss) earnings per share   $  (1.17)     $  (1.18)  $  (1.33)  $  (0.50)  $   0.16

Cash dividends per
    common share                        None          None       None       None       None

Additions to property
    & equipment                     $  5,465      $  3,227   $  3,019   $  4,727   $  3,268

Depreciation and
    amortization                    $  4,569      $  3,578   $  2,985   $  2,785   $  2,028

FINANCIAL POSITION:

Working Capital                     $(11,327)     $ (7,734)  $  1,222   $  1,261   $  7,936

Property and equipment - net        $ 12,490      $ 13,021   $ 13,317   $ 14,473   $ 12,406

Total assets                        $ 31,257      $ 39,097   $ 45,184   $ 45,692   $ 40,245

Long-term debt                      $  4,400(b)   $    382   $    997   $  1,566   $  2,092

Shareholders' Equity                $  1,569      $  5,777   $ 14,007   $ 16,442   $ 18,598

Common shares
    outstanding (a)                   10,849         7,969      7,944      7,605      6,679
</TABLE>

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

(b)  $4,400,000 consists of a note from Covistas' Chairman of the Board which is
     planned to be converted to an equity position (see ITEM 13).


                                       15




<PAGE>

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

          The following discussion is presented to assist in assessing the
changes in financial condition and performance of Covista for the fiscal years
ended January 31, 2000 (Fiscal 2000) and January 31, 2001 (Fiscal 2001) and
January 31, 2002 (Fiscal 2002). The following information should be read in
conjunction with the financial statements and related notes and other detailed
information regarding Covista included elsewhere in this report and should not
be construed to imply management's belief that the results, causes or trends
presented will necessarily continue in the future. Certain information contained
below and elsewhere in this annual report, including information with respect to
Covista's plans and strategy for its business, are "forward-looking statements."

Recent Accounting Pronouncements

          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. Covista adopted SFAS 133 effective
February 1, 2001. The adoption of SFAS 133 did not have a significant impact on
the financial position, results of operation, or cash flows of Covista.

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations."
SFAS 141 requires the purchase method of accounting for business combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method.
Covista does not believe that the adoption of SFAS 141 will have a significant
impact on its financial statements, beyond the cessation of goodwill
amortization on future business combinations. As of January 31, 2002 Covista has
no Goodwill recorded on its books.

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

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

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

                              RESULTS OF OPERATIONS

                     FISCAL 2002 AS COMPARED TO FISCAL 2001

Revenues

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


                                       16




<PAGE>

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

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

Cost of Sales

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

Selling, General and Administrative:

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

Stock Compensation Expense

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

Other Income and Expense

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


                                       17




<PAGE>

Net Loss

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

                              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.
Covista 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. Covista 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 Covista believes, will continue.

Cost of Sales

          Cost of sales consists of access fees, line installation expenses,
switch expenses, NOC expenses, network 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 Covista's
switches and 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,
Covista received a cash payment of $1,264,483 from certain Bell Companies in
settlement of a class action suit, to which Covista was a party, filed in 1992
relating to alleged overcharges by those companies. The settlement concluded the
class action with the Bell Companies. Covista'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.

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


                                       18




<PAGE>

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, Covista 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, Covista entered into an agreement with Warren
Feldman, the then Chairman of the Board of Directors and a shareholder of
Covista. 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.
Covista 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. Covista 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 Covista entered into Put Option agreements with Warren
Feldman, Sol Feldman ("the Feldmans") and Leon Genet, ("Genet") a director of
Covista. These Put Option agreements allowed the Feldmans and Genet the right to
sell their shares of Covista 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.
Covista had no obligation to purchase any shares from the Feldmans or Genet. The
closing market price of Covista'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. Covista 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 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.

Net Loss

          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, based on the explanation of
changes above.

                        LIQUIDITY AND CAPITAL RESOURCES

Working Capital

          At January 31, 2002, Covista had negative working capital of
approximately $11,327,000 as compared to approximately $7,734,000 at January 31,
2001, an increased working capital deficit of approximately $3,593,000. The
decrease in working capital in Fiscal 2002 was primarily attributable to a
reduction in cash of approximately $1,313,000; a reduction in investments of
approximately $97,000; a reduction in accounts receivable of approximately
$9,361,000; an increase in prepaid expenses of approximately $149,000; an
increase in allowance for doubtful accounts of


                                       19




<PAGE>

approximately $912,000; and an increase in accrued liabilities of approximately
$1,600,000. Also affecting working capital were an increase in notes receivable
of approximately $500,000 from Capsule Communications Inc.; a reduction in
accounts payables of approximately $8,495,000; a decrease in accrued salaries
and wages of approximately $313,000; and a decrease in current portion of long
term debt of $234,000. The current ratio of 0.5 to 1, decreased from the 0.8 to
1 ratio at the end of Fiscal 2001.

          On February 21, 2002, Covista announced that on February 20, 2002, its
Board of Directors had approved the private sale of additional Common Stock of
up to $12,500,000. The investment will include a cash infusion of $4,800,000
for debt or common stock, contribution of $3,300,000 of fixed assets for debt
or common stock and the conversion of all existing long-term debt to Common
Stock at the rate of $5.00 per share, which was the closing price for the Common
Stock on the date authorized by the Board. The commitment for funding for
the investment and the conversion of the indebtedness is anticipated to come
primarily from the current Chairman of Covista's Board or his designee's and is
subject to shareholder's approval at the next Annual Meeting, or a special
meeting of Shareholders to be convened for such purpose. As of May 14, 2002,
$2,600,000 of cash was received from the Chairman of Covista's Board in
exchange for debt. Finally, the Company is planning to obtain a line of credit
from a bank. If such line of credit is not obtained, the Chairman of the
Board has committed to loaning $2 million to the Company through at least the
second quarter of fiscal 2004.

Cash Flow Statement

          The cash flow statement of Covista for Fiscal 2002 indicated a
decrease in cash and cash equivalents of approximately $1,313,000. Non-cash
adjustments (depreciation, amortization, reserve for bad debt, non-cash
compensation expense, and gain on investments,) of approximately $9,697,000 and
net changes in assets and liabilities of approximately $1,690,000 added back to
the net loss of approximately $11,970,000 resulted in net cash used by
operations of approximately $3,963,000. Cash used in investing activities
amounted to approximately $7,477,000, of which approximately $5,465,000 were
used for the purchase of capital additions and approximately $56,000 was used
for the purchase of additional circuits to build out the network, the proceeds
from sale investments of approximately $116,000, a note from Capsule
Communications, a related party, of $500,000 and payment for prepaid network
capacity of $4,000,000. These additions were partially offset by proceeds from
and the sale of fixed assets of approximately $2,338,000. The cash used in
financing activities of approximately $10,128,000 consisted primarily of the
repayment of bank borrowings of approximately $616,000, offset by cash received
from the exercise of stock options of approximately $43,000, proceeds from the
issuance of Common Stock of $6,300,000, a note payable to a related party of
$4,400,000.

Accounts Receivable

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

          The retail segment of Covista experience an approximate accounts
receivable turnover of 53 days; while the wholesale segment has an accounts
receivable turnover of 64 days.

                          CRITICAL ACCOUNTING POLICIES
Revenue Recognition

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

Deferred Line Installation Costs

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

Long-Lived Assets

          The Company accounts for the impairment of long-lived assets and for
long-lived assets to be disposed of by evaluating the carrying value of its
long-lived assets in relation to the operating performance and future
undiscounted cash flows of the underlying businesses annually and when
indications of impairment are present. Long-lived assets to be disposed of, if
any, are evaluated in relation to the net realizable value. If impairment is
indicated, the amount of the impairment is typically calculated using discounted
expected future cash flows. The discount rate applied to these cash flows is
based on the Company's weighted average cost of capital. If the carrying value
of the asset exceeds the fair value of the asset, the difference will be charged
to the results of operations in the period that the impairment occurred. Based
on the Company's analysis of future undiscounted cash flows which are in excess
of the carrying value of its long-lived assets, there does not appear to be an
impairment as of January 31, 2002.


                                       20




<PAGE>

                              CAPITAL EXPENDITURES

          Capital expenditures for Fiscal 2002 totaled approximately $5,465,000,
and were financed from funds provided from Covista's working capital, sale and
lease back of two switches, and a private sale of equity and a loan. The capital
expenditures were used for the addition of the IP network of approximately
$168,000; upgrades to Covista's switches and switch sites of approximately
$4,439,000; software and hardware upgrades to Covista's computer network of
approximately $304,000; and furniture, fixtures and equipment for new sales
offices of approximately $511,000, and other furniture and fixtures of $43,000.

          Capital expenditures for Fiscal 2003 are estimated at approximately
$5,000,000 and are expected to be financed from funds provided from operations,
and a cash infusion of $4,800,000 from a related party of Covista.

Inflation

          Since inflation has slowed in recent years, Covista does not believe
that its business has been materially affected by the relatively modest rate of
price increases in the economy. However, pressures in the industry to reduce
prices, which have impacted Covista in the past, are expected to continue. Also
the telecommunications industry has recently experienced the failure of several
businesses, some of which are Covista's wholesale customer and suppliers. These
failures not only have affected Covista's FY 2002 results, but may impact future
results. Covista continues to seek improvements in operations and efficiency
through capital expenditures. Expenditures to improve the signaling system,
information systems and the local area network are expected to result in
operating costs savings, which could partially offset any future cost increases.

                              ENVIRONMENTAL MATTERS

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

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

ITEM 8. Financial Statements and Supplementary Data

          The Financial Statements and Supplementary Data are included under
Item 14 of this Report.

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

          Not applicable.


                                       21




<PAGE>

                                    PART III

ITEM 10. Directors and Executive Officers of Covista

The directors and officers of Covista are as follows:

Name                 Age   Position
----                 ---   --------
Henry G. Luken III    40   Chairman of the Board

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

Kevin Alward          35   Chief Operating Officer and Director

Jay J. Miller         68   Director

Nicholas Merrick      38   Director

Walt Anderson         46   Director

Leon Genet            70   Director

Donald Jones          66   Director

Thomas P. Gunning     64   Treasurer, Secretary and Chief Financial Officer

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

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

          Walt Anderson was elected a Director of Covista 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),

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

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


                                       22




<PAGE>

          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 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 Covista. See "Certain Relationships
and Related Transactions."

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

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

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

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

Board of Directors

          Covista's Board of Directors currently consists of eight persons,
two of whom are members of management and six of whom are non-management
directors. During the fiscal year ended January 31, 2002, the Board held two
meetings, each of which was attended by 80% of the directors then serving.

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

          (THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)


                                       23




<PAGE>

ITEM 11. Executive Compensation

The following table sets forth the compensation which Covista paid during the
fiscal years ended January 31, 2002, 2001 and 2000 to its Chief Executive
Officer and to each executive officer of Covista or person performing similar
functions whose aggregate remuneration exceeded $100,000, during Covista's
fiscal year ended January 31, 2001 (the "Named Executives").

Summary Compensation Table

<TABLE>
<CAPTION>
Name and          Fiscal Year     Annual Compensation            Other        Compensation
Principal           Ended       ----------------------           Annual           Awards         All Other
Position          January 31    Salary ($)   Bonus ($)      Compensation($)    Options (1)   Compensation ($)
---------------   -----------   ----------   ---------      ---------------   ------------   ----------------
<S>                   <C>        <C>          <C>                 <C>         <C>               <C>
John Leach            2002       $300,000     $400,000(3)         $0                            $ 5,250(4)
President and         2001       $210,000     $      0            $0                            $15,346(5)
Chief Executive
Officer (2)

Thomas P              2002       $155,000     $ 15,000            $0                            $11,085(6)
Gunning               2001       $147,360     $      0            $0                            $11,427(7)
Vice President,       2000       $140,000     $      0            $0                            $11,179(8)
Treasurer
and Secretary

Kevin Alward          2002       $235,577     $104,167            $0                            $ 3,567(9)
Chief Operating
Officer
</TABLE>

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

(1)  See Option Grant Table below.

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

(3)  The amount shown includes $250,000 in bonus due to Mr. Leach from 05/01/00
     to 04/30/01 but not paid until FY 2002.

(4)  The amount shown represents Covista's contribution under its 401(K)
     Deferred Compensation and Retirement Savings Plan of $5,250.

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

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

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

(8)  The amount shown represents Covista'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.

(9)  The amount shown represents Covista's contribution under its 401(K)
     Deferred Compensation and Retirement Savings Plan of $3,567.


                                       24




<PAGE>

          Compensation Pursuant to Plans

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

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

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

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

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

          For further information related to stock option plans, refer to Item 9
in the Notes to the Consolidated Financial Statements.


                                       25




<PAGE>

                        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)               18.5%               $2.00    Feb 1, 2006   $124,132    $267,322
Kevin Alward              250,000                  16.1%               $2.00    Mar 30,2006   $107,753    $232,050
Thomas P. Gunning          25,000                   1.3%               $2.00    Feb 1, 2006   $  8,620    $ 18,564
Thomas P. Gunning          12,000                   3.2%               $5.65    Feb 1, 2006   $ 60,881    $131,108
</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 following table sets forth information concerning each exercise of
a stock option during Covista's fiscal year ended January 31, 2002 each of the
Named Executives, and the number and value of unexercised options granted by
Covista held by each of the Named Executives on January 31, 2002

                 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            $111,285             18,500/18,500                     $110,159/$110,159

</TABLE>

          Compensation of Directors

          For the fiscal year ended January 31, 2002, each director who was not
an employee of Covista was entitled to receive a director's fee of $15,000 per
year, and to be reimbursed for out-of-pocket expenses incurred in connection
with attendance at meetings. However, Messrs. Anderson and Luken waived the
right to receive such compensation.

          Employment Contracts, Termination of Employment and Change of Control
          Arrangements

          As Covista's Chief Executive Officer, Mr. Leach has a three-year
employment agreement with Covista effective as of May 18, 2000, pursuant to
which Mr. Leach was paid base salary at the rate of $300,000 per annum during
fiscal 2001. Pursuant to this agreement, Mr. Leach was also entitled to receive
a signing bonus in the amount of $25,000 to cover relocation and other expenses,
but to date Mr. Leach has been paid only $15,000 of this amount. Mr. Leach is
also entitled to receive an annual bonus in an amount not to exceed 100 percent
of his then effective base salary, based upon Mr. Leach's attainment of annual
revenue and earnings targets as well as management goals set by the Board of
Directors. Mr. Leach was guaranteed a minimum bonus payment of $150,000 during
the first year of this agreement.

          In connection with his appointment as Chief Executive Officer of
Covista, Mr. Leach was granted an option under Covista's 1996 Stock Option Plan
to purchase 288,000 shares of Covista Common Stock. The option granted to Mr.
Leach was scheduled to vest over a period of three years, in six equal
semi-annual installments, the first of which commenced on November 18, 2000. The
exercise price for the option was $14.25 and was based on the fair market value
of the Covista Common Stock on the date of the grant, and the options expire
after ten years. According to the agreement, in the event that the Covista
Common Stock does not close at or above $14.25 for at least 20 consecutive
trading days between May 18, 2000 and May 18, 2001, a new exercise price would
be


                                       26




<PAGE>

calculated based on the average closing price of the Covista Common Stock for
the 40 trading days prior to May 18, 2001. In lieu of adjusting the exercise
price of Mr. Leach's options in the manner provided in his employment agreement,
on February 1, 2001 Covista granted to Mr. Leach an option to purchase 288,000
shares of Covista Common Stock, vesting over a period of three years, in six
equal semi-annual installments, the first of which commenced on August 1, 2001.
The exercise price for the option is $2.00 per share and is based on the fair
market value of the Covista Common Stock on the date of grant. The option
expires after a term of ten years.

          In the event of a "change of control" of Covista, 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.
Pursuant to the agreement, a "change of control" shall be deemed to occur if:
(i) any "person" or "group" (as such terms are used in Sections 3, 3(a), 9 and
13(d) of the Securities Exchange Act of 1934, as amended (the "Act")) other than
Walt Anderson, Revision LLC or any of their respective affiliates becomes a
beneficial owner (as such term is used in the rules promulgated under the Act),
directly or indirectly, of securities of Covista representing 50 percent or more
of the combined voting power of Covista's then outstanding securities; (ii) a
change in "control" of Covista (as such term is defined in Rule 12b-2) shall
have occurred; (iii) the majority of the Board of Directors, as such entire
Board of Directors was composed as of May 18, 2000, no longer serve as directors
of Covista, except that there shall not be counted toward such majority who no
longer serve as directors Mr. Leach or any director who ceased to serve either
prior to the date of the change in control, for any reason, or at any other time
due to voluntary resignation (other than in connection with an event described
in (iv) or (v) below), death, disability or termination for cause; (iv) the
stockholders of Covista approve a plan of complete liquidation of Covista or an
agreement for the sale or disposition by Covista of all or substantially all of
Covista's assets; or (v) the stockholders of Covista approve a merger or
consolidation of Covista with any other company, other than a merger or
consolidation which would result in the combined voting power of Covista's
voting securities outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50 percent of the combined voting power of the
voting securities of Covista or such surviving entity outstanding immediately
after such merger or consolidation; provided, however, that no change in control
shall be deemed to have occurred in any plan of liquidation, sale of assets,
merger or consolidation provided in (iv) and (v) above is not consummated. In
addition, any transaction involving a leveraged buyout or other acquisition of
Covista which would otherwise constitute a change in control, in which Mr. Leach
participates in the surviving or successor entity (other than solely as an
employee or consultant) will not constitute a change in control.

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

          In connection with his appointment as Chief Operating Officer of
Covista, Mr. Alward was granted an option under Covista's 2001 Equity Incentive
Plan to purchase 250,000 shares of Covista Common Stock. The option granted to
Mr. Alward vests over a period of five years, in ten equal semi-annual
installments, the first of which commenced on September 29, 2001. The exercise
price for the option is $2.00.

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

Compensation Committee Interlocks and Insider Participation

          Jay J. Miller, a director of Covista, provided various legal services
for Covista during fiscal 2002. In fiscal 2002, Covista paid $144,574 to Mr.
Miller for services rendered and accrued during fiscal 2002. As of February 22,
2002, Covista had invoices payable to Mr. Miller totaling $179,316. Covista
believes that Mr. Miller's fees were reasonable for the services performed and
were no less favorable to Covista than could have been obtained from an
unrelated third party.

Report on Executive Compensation


                                       27




<PAGE>

          The following report describes the policies pursuant to which
compensation was paid to executive officers of Covista for performance during
the fiscal year ended January 31, 2002.

          Compensation Philosophy and Approach. Generally, Covista seeks to
attract, retain and motivate its executive officers through a combination of
base salary, incentive awards based upon individual performance and stock option
awards under The Covista Communications, Inc. 2001 Equity Incentive Plan and
otherwise. The Board of Directors believes that a substantial portion of the
aggregate annual compensation of each executive officer should be influenced
by the performance of Covista and the individual contribution of the executive
officer.

          Base Salaries. The Board of Directors believes that the base salaries
of Covista's executive officers for fiscal 2001 were generally below those for
other comparable positions within the telecommunications service industry and
similar industries. However, Covista places significant emphasis on incentive
awards and stock option grants as a means of motivating and rewarding its
management. The Board of Directors believes that this strategy provides optimal
incentives for management to create long-term stockholder value.

          Incentive Compensation Payments. In addition to base pay, some of
Covista's senior executives (including its Chief Executive Officer) are eligible
to receive bonuses and stock option awards. Bonuses and stock options may be
awarded, based upon the individual performance of each executive officer at the
sole discretion of the Board of Directors. During the Fiscal Year 2002 John
Leach received a cash bonus of $400,000 of which $250,000 was payable to Mr.
Leach for the period May 1, 2000 to April 30, 2001 but not paid until FY 2002;
Kevin Alward received a bonus of $104,167; and Thomas Gunning received a bonus
of $15,000. Stock option grants made to the Named Executive Officers during
fiscal 2002 are described in "Option/SAR Grants in Last Fiscal Year."

          Compensation of the Chief Executive Officer. The compensation policies
applicable to Covista's Chief Executive Officer are similar to those applicable
to Covista's other executive officers. Mr. Leach has a three-year employment
agreement with Covista effective as of May 18, 2000, pursuant to which Mr. Leach
was paid base salary at the rate of $300,000 per annum during fiscal 2001.
Pursuant to this agreement, Mr. Leach was also entitled to receive a signing
bonus in the amount of $25,000 to cover relocation and other expenses, but to
date Mr. Leach has been paid only $15,000 of this amount. Mr. Leach is also
entitled to receive an annual bonus in an amount not to exceed 100 percent of
his then effective base salary, based upon Mr. Leach's attainment of annual
revenue and earning targets, as well as management goals set by the Board of
Directors. Mr. Leach was guaranteed a minimum bonus payment of $150,000 during
the first year of this agreement.

(THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)


                                       28




<PAGE>

Stock Performance Chart

The following chart graphs the performance of the cumulative total return to
Covista's stockholders (stock price appreciation), assuming the reinvestment of
dividends, during the previous five years in comparison to returns of the NASDAQ
Stock Market (U.S.) Index and a peer group index. The chart assumes $100 was
invested at the close of trading on the last trading day preceding the first day
of the fifth preceding fiscal year in Covista Common Stock, the NASDAQ Stock
Market (U.S.) Index and the peer group. The peer group index used is the NASDAQ
Telecommunications Stock Index (the "Peer Group").

                          COVISTA COMMUNICATIONS, INC.

                   [Graph]
        Covista     NASDAQ    Peer Group
1997   100         100         100
1998   167.1429    117.9882    152.0086
1999   205.7143    184.644     272.488
2000   168.5714    288.5172    419.5372
2001    17.14286   202.0496    224.9893
2002    79.42857   141.907     100.9326

The stock price performance depicted in the above graph is not necessarily
indicative of future price performance.

                (THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)


                                       29




<PAGE>

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners. The following table sets forth
the beneficial ownership of Covista's Common Stock as of April 30, 2002 by each
person or group known by Covista to be the beneficial owner of five percent or
more of the outstanding shares of Covista Common Stock. Unless otherwise
indicated, each such person (alone or with family members) has sole voting and
dispositive power with respect to the shares listed opposite such person's name.

                                                                  Percentage
Name and Address                        Amount and Nature of          of
Of Beneficial Owner                     Beneficial Ownership(1)    Class(2)
-------------------------------------   -----------------------   ----------

Kevin A. Alward                               1,255,779(3)            9.9%
182 Powell Road
Allendale, NJ 07401

Walt Anderson                                 2,023,125(4)           16.1%
2000 L Street, N.W., #202
Washington, DC 20036

Warren Feldman                                1,119,578(5)            8.9%
45A Samworth Road
Clifton, NJ 07012

Foundation for the International
Non-Governmental Development of Space           923,844(6)            7.3%
1023 31st  Street NW
Suite 300
Washington, DC 20007

Henry G. Luken, III                           4,531,133(7)           35.9%
400 Fairway Lane
Soddy Daisy, TN 37379

(1)  Except as otherwise set forth in the footnotes to this table, all shares
     are beneficially owned and sole investment and voting power is held by the
     persons named above, to the best of Covista's knowledge. Shares of Covista
     Common Stock subject to options that are currently exercisable or
     exercisable within 60 days of December 11, 2001 are deemed to be
     outstanding and to be beneficially owned by the person holding such options
     for the purpose of computing the percentage ownership of such person, but
     are not treated as outstanding for the purpose of computing the percentage
     ownership of any other person.

(2)  Based on 10,819,405 shares outstanding.

(3)  Includes 25,000 shares of Covista Common Stock issuable to Mr. Alward under
     presently exercisable options. Also includes 186,516 shares of Covista
     Common Stock owned by trusts of which Mr. Alward's minor children are
     beneficiaries, as to which Mr. Alward disclaims beneficial ownership. Based
     on the Schedule 13D jointly filed by Mr. Alward and certain related
     entities on November 16, 2001.

(4)  Includes 1,297,796 shares of Covista Common Stock owned of record by
     Revision LLC, a wholly owned subsidiary of Gold & Appel Transfer, S.A., as
     to all of which shares Mr. Anderson exercises sole voting and dispositive
     power. Of the 1,297,796 shares owned of record by Revision LLC, 1,179,732
     are pledged to Donald A. Burns to secure a loan. Also includes 725,329
     shares owned by the Foundation for the International Non-Governmental
     Development of Space, of which Mr. Anderson is the President and a
     director, and as to which Mr. Anderson disclaims beneficial ownership.
     Based on the Schedule 13D/A jointly filed by Walt Anderson, Gold & Appel
     and Revision on November 19, 2001. Notice has been received from Mr. Burns
     legal representative that Mr. Anderson is in default of the loan agreement
     and that Mr. Burns is to exercise his rights as a secured party with
     respect to the pledged shares.

(5)  Includes 300,000 shares of Covista Common Stock owned by The Warren H.
     Feldman Family L.L.C., as to which shares Mr. Feldman disclaims beneficial
     ownership. Based on the Schedule 13D/A filed by Mr. Feldman on August 22,
     2001.

(6)  Of the 923,844 shares of Covista Common Stock owned by the Foundation for
     the International Non-Governmental Development of Space, 703,529 shares are
     pledged to Donald A. Burns to secure a loan. Notice has been received from
     Mr. Burns legal representative that Mr. Anderson is in default of the loan
     agreement and that Mr. Burns is to exercise his rights as a secured party
     with respect to the pledged shares.

(7)  Based on the Schedule 13D/A filed by Mr. Luken on April 13, 2001.


                                       30




<PAGE>

Security Ownership of Management. The following table sets forth as of April 30,
2002, information concerning the beneficial ownership of Covista Common Stock by
each director, each nominee for election as a director, and each Named
Executive, and for all directors, director nominees and executive officers as a
group: Percentage Name and Address Amount and Nature of of Of Beneficial Owner
Beneficial Ownership(1) Class(2)

                                                                  Percentage
Name and Address                        Amount and Nature of          of
Of Beneficial Owner                     Beneficial Ownership(1)   Class(2)
------------------------------------   ------------------------   ----------

Kevin A. Alward                              1,255,779(3)            10.0%
Walt Anderson                                2,946,969(4)            23.3%
Leon Genet                                      41,120                  *
Thomas P. Gunning                               62,300(5)               *
Donald Jones                                     5,000                  *
A. John Leach, Jr.                             438,000(6)             3.5%
Henry G. Luken, III                          4,531,133(7)            35.9%
Nicholas Merrick                                   100                  *
Jay J. Miller                                   35,400(8)               *
All directors, director nominees and
executive officers as a group
(9 persons)                                  9,328,601(3)-(7)        74.0%

----------
* Less than one percent.

(1)  Except as otherwise set forth in the footnotes to this table, all shares
     are beneficially owned and sole investment and voting power is held by the
     persons named above, to the best of Covista's knowledge. Shares of Covista
     Common Stock subject to options that are currently exercisable or
     exercisable within 60 days of December 11, 2001 are deemed to be
     outstanding and to be beneficially owned by the person holding such options
     for the purpose of computing the percentage ownership of such person, but
     are not treated as outstanding for the purpose of computing the percentage
     ownership of any other person.

(2)  Based on 10,819,405 shares outstanding

(3)  Includes 25,000 shares of Covista Common Stock issuable to Mr. Alward under
     presently exercisable options. Also includes 186,516 shares of Covista
     Common Stock owned by trusts of which Mr. Alward's minor children are
     beneficiaries, as to which Mr. Alward disclaims beneficial ownership. Based
     on the Schedule 13D jointly filed by Mr. Alward and certain related
     entities on November 16, 2001.

(4)  Includes 1,297,796 shares of Covista Common Stock owned of record by
     Revision LLC, a wholly owned subsidiary of Gold & Appel Transfer, S.A., as
     to all of which shares Mr. Anderson exercises sole voting and dispositive
     power. Of the 1,297,796 shares owned of record by Revision LLC, 1,179,732
     shares are pledged to Donald A. Burns to secure a loan. Covista has
     received notice from Mr. Burns that the loan is in default and it is Mr.
     Burns' intention to take ownership of the pledged shares. Also includes
     725,329 shares owned by the Foundation for the International
     Non-Governmental Development of Space, of which Mr. Anderson is the
     President and a director, and as to which Mr. Anderson disclaims beneficial
     ownership. Based on the Schedule 13D/A jointly filed by Walt Anderson, Gold
     & Appel Revision on November 19, 2001.

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

(6)  Includes 192,000 shares of Covista Common Stock issuable to Mr. Leach under
     currently exercisable options.

(7)  Based on the Schedule 13D/A filed by Mr. Luken on April 13, 2001.

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


                                       31




<PAGE>

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 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 Covista. Gold & Appel has paid back approximately $4,200,000 of
principal on this loan from Mr. Burns. The current value of the loan with
accrued interest is approximately $9,250,000. Covista has received a
notification from Mr. Burns confirming that it is Mr. Burns' intention to take
ownership of the pledged shares.

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

A change in control of Covista may be deemed to have occurred as a result of the
foregoing transactions, as Walt Anderson now controls 23.3% of the outstanding
Common Stock, and Henry G. Luken III now controls 35.9% of the outstanding
Common Stock

ITEM 13. Certain Relationships and Related Transactions

          Jay J. Miller, a Director of Covista, has provided various legal
services for Covista during Fiscal 2002. In Fiscal 2002, Covista paid $144,574
to Mr., Miller for services rendered and accrued for in Fiscal 2002. As of
January 31, 2002, Covista owed Mr. Miller $179,316. Covista believes that Mr.
Miller's fees were reasonable for the services performed and were no less
favorable to Covista than could have been obtained from an unrelated third
party. In February, 2002, Covista granted to Mr. Miller 35,000 non-statuatory
shares optionable at $2.00 per share.

          Leon Genet, a Director of Covista, has provided agent services for
Covista through his wholly-owned Registrant, LPJ, Inc. During Fiscal 2002, LPJ,
Inc. was paid commissions of $93,066. The commissions paid to LPJ, Inc. were
computed on the same basis as other independent agents retained by Covista.

          Walt Anderson, a Director of Covista, serves on the Board of
Directors' of Capsule Communicationss, as described in ITEM 10. Henry G. Luken
III, the Chariman of the Board of Covista is a major stockholder of Capsule
Communications. Covista both purchases and sells services from Capsule
Communications, Inc. Sales to Capsule in Fiscal 2002 were approximately
$615,000. Purchases from Capsule were approximately $660,000. All transactions
were based on competitive terms obtained on an arm's length basis. Covista has
subsequently merged with Capsule Communications (see Item 1.-Business-Subsequent
Events).

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


                                       32




<PAGE>

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

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

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

On July 24, 2001, the Company issued a note receivable to Capsule
Communications, Inc. of which a director and the chairman of the Company are
principal shareholders. The note was for a total principal of $200,000 with
interest payable of 8 3/4% to be paid no later than July 24, 2002. On August 9,
2001, the Company issued a note receivable to Capsule Communications, Inc. The
note was for a total principal of $300,000 with interest payable of 8 3/4% to be
paid no later than August 9, 2002.

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

                (THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)


                                       33




<PAGE>

                          COVISTA COMMUNICATIONS, INC.

                                AND SUBSIDIARIES

ITEM 14. Exhibits and Financial Statements Schedule Years Ended January 31,
         2002, 2001, and 2000


                                      INDEX

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

         Consolidated Financial Statements:                            Page
         ----------------------------------                            ----

Independent auditors' report                                           F-1

Consolidated balance sheets - January 31, 2002
         and 2001                                                      F-2

Consolidated statements of loss and
         comprehensive loss  - years
         ended January 31, 2002, 2001 and 2000                         F-3

Consolidated statements of shareholders' equity -
         years ended January 31, 2002, 2001, 2000                      F-4

Consolidated statements of cash flows - years
         ended January 31, 2002, 2001, 2000                            F-5

Notes to consolidated financial statements                             F-7

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

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

II      Valuation and Qualifying Accounts (Consolidated)              F-24

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

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)


                                       34




<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. and subsidiaries (the "Company") as of January 31, 2002 and
2001, 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, 2002. 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, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 2002 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 26, 2002
(May 14, 2002 as to Note 21b)


                                      F-1




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            JANUARY 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                                 2002           2001
                                                                             ------------   ------------
<S>                                                                          <C>            <C>
ASSETS
------
CURRENT ASSETS:
  Cash and cash equivalents                                                  $  1,379,038   $  2,691,889
  Investments available for sale                                                  439,773        537,007
  Trade accounts receivable (net of allowance for doubtful
    accounts of ($4,987,130 and $4,075,223 in 2002 and 2001,
    respectively)                                                              10,252,837     20,526,178
  Notes receivable                                                                500,000             --
  Prepaid expenses and other current assets                                     1,373,780      1,225,463
                                                                             ------------   ------------

     Total current assets                                                      13,945,428     24,980,537

Property and equipment, net                                                    12,489,626     13,020,579

Deferred line installation costs (net of accumulated amortization
  of $843,049 and $745,353 in 2002 and 2001, respectively)                        174,785        216,672
Other assets (net of accumulated amortization of $846,452 and $33,761
  In 2002 and 2001, respectively                                                4,646,952        879,614
                                                                             ------------   ------------

                                                                             $ 31,256,791   $ 39,097,402
                                                                             ============   ============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES
  Accounts payable                                                           $ 19,465,274   $ 27,960,046
  Other current and accrued liabilities                                         4,434,795      2,834,557
  Salaries and wages payable                                                      991,012      1,304,818
  Current portion of long-term debt                                               381,405        615,053
                                                                             ------------   ------------

     Total current liabilities                                                 25,272,486     32,714,474
                                                                             ------------   ------------

Other long-term liabilities                                                        15,466        223,788
                                                                             ------------   ------------

Long-term debt                                                                  4,400,000        382,047
                                                                             ------------   ------------

Commitments and contingencies (Note 14)

SHAREHOLDERS' EQUITY:
  Common Stock, par value $.05 per share; authorized 50,000,000
   shares, issued 12,385,757 shares in 2002 and 9,505,824 shares in 2001          619,288        475,291
  Additional paid-in capital                                                   25,650,098     30,016,454
  Accumulated deficit                                                         (23,255,107)   (11,285,519)
                                                                             ------------   ------------

                                                                                3,014,279     19,206,226
  Unearned ESOP shares                                                                 --    (12,225,000)
  Treasury stock-at cost - 1,536,419 shares in 2002 and 2001, respectively     (1,445,440)    (1,445,440)
  Accumulated other comprehensive income                                               --        241,307
                                                                             ------------   ------------

     Total shareholders' equity                                                 1,568,839      5,777,093
                                                                             ------------   ------------

                                                                             $ 31,256,791   $ 39,097,402
                                                                             ============   ============
</TABLE>

See notes to consolidated financial statements


                                      F-2




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
                   YEARS ENDED JANUARY 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                       2002           2001           2000
                                                   ------------   ------------   ------------
<S>                                                <C>            <C>            <C>
NET SALES                                          $ 95,312,696   $133,230,437   $139,760,497
                                                   ------------   ------------   ------------

COSTS AND EXPENSES:
  Cost of sales                                      76,475,802    116,059,002    112,794,378
  Access charge settlement  (Note 18)                        --     (1,264,483)            --
  Selling, general and administrative (excluding
    stock compensation)                              30,986,877     26,902,962     27,990,145
  Restructuring charge                                       --             --       (318,879)
  Other compensation (Note 12)                               --             --      5,770,554
  Stock compensation                                     12,011        266,565        204,015
                                                   ------------   ------------   ------------

     Total costs and expenses                       107,474,690    141,964,046    146,440,213

OPERATING LOSS                                      (12,161,994)    (8,733,609)    (6,679,716)
                                                   ------------   ------------   ------------

OTHER INCOME (EXPENSE):
  Interest income                                       159,996        167,583        115,119
  Other income                                          274,466         41,994          1,105
  Interest expense                                     (242,056)      (105,272)      (147,092)
                                                   ------------   ------------   ------------

     Total other income (expense), net                  192,406        104,305        (30,868)
                                                   ------------   ------------   ------------

LOSS BEFORE INCOME TAXES                            (11,969,588)    (8,629,304)    (6,710,584)
                                                   ------------   ------------   ------------

INCOME TAX PROVISION                                         --             --      2,703,618
                                                   ------------   ------------   ------------

NET LOSS                                            (11,969,588)    (8,629,304)    (9,414,202)
                                                   ------------   ------------   ------------

OTHER COMPREHENSIVE INCOME, NET OF TAX
  Unrealized holding gain                                    --         79,531         61,055
                                                   ------------   ------------    -----------

COMPREHENSIVE LOSS                                 $(11,969,588)  $ (8,549,773)   $(9,353,147)
                                                   ============   ============    ===========

BASIC LOSS PER COMMON SHARE                        $      (1.17)  $      (1.18)   $     (1.33)
                                                   ============   ============    ===========

DILUTED LOSS PER COMMON SHARE                      $      (1.17)  $      (1.18)   $     (1.33)
                                                   ============   ============    ===========
</TABLE>

See notes to consolidated financial statements


                                      F-3




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                   YEARS ENDED JANUARY 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                            Retained
                                                            Additional      Earnings                     Unearned
                                                 Common      Paid-in      (Accumulated     Treasury        ESOP
                                                  Stock      Capital         Deficit)        Stock        Shares
                                                --------   ------------   ------------   -----------   ------------
<S>                                             <C>        <C>            <C>            <C>           <C>
BALANCE AT JANUARY 31, 1999                     $455,739   $ 22,809,518   $  6,757,987   $(1,456,781)  $(12,225,000)
  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)   (12,225,000)
  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)   (12,225,000)
  Sale of Common Stock                           157,500      6,142,500             --            --             --
  Exercise of employee stock options / grants      1,497         41,944             --            --             --
  Issuance of shares for other assets             15,000        885,000             --            --             --
  Cancellation of ESOP                           (30,000)   (12,195,000)            --            --     12,225,000
  Fully vested Stock Grants                           --        759,200             --            --             --
  Realized gain on sale of investments
  Net loss                                            --             --    (11,969,588)           --             --
                                                --------   ------------   ------------   -----------   ------------
BALANCE AT JANUARY 31, 2002                     $619,288   $ 25,650,098   $(23,255.107)  $(1,445,440)  $         --
                                                ========   ============   ============   ===========   ============

<CAPTION>

                                                 Accumulated
                                                    Other
                                                Comprehensive
                                                   Income          Total
                                                -------------   ------------
<S>                                               <C>           <C>
BALANCE AT JANUARY 31, 1999                       $ 100,721     $ 16,442,184
  Unrealized  holding  gain                          61,055           61,055
  Exercise of employee stock options                     --        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                         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                         241,307        5,777,093
  Sale of Common Stock                                   --        6,300,000
  Exercise of employee stock options / grants            --           43,441
  Issuance of shares for other assets                    --          900,000
  Cancellation of ESOP                                   --               --
  Fully vested Stock Grants                                          759,200
  Realized gain on sale of investments             (241,307)        (241,307)
  Net loss                                               --      (11,969,588)
                                                  ---------     ------------
BALANCE AT JANUARY 31, 2002                       $      --     $  1,568,839
                                                  =========     ============
</TABLE>

See notes to consolidated financial statements


                                      F-4




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   YEARS ENDED JANUARY 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                                  2002            2001           2000
                                                                               ------------    -----------    -----------
<S>                                                                            <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                     $(11,969,588)   $(8,629,304)   $(9,414,202)
  Adjustments to reconcile net loss to net
    cash (used in) provided by operating activities:
    Depreciation and amortization                                                 4,568,631      3,577,995      2,985,359
    Provision for doubtful accounts                                               5,382,384      2,346,761      1,074,916
    Non-cash stock compensation expense                                              12,011        266,565      5,324,569
    Deferred income taxes                                                                --             --      2,703,618
    Restructuring (credit) charge, net of cash paid                                      --             --       (318,879)
    Loss on disposal of property and equipment                                           --         88,690         16,236
    (Gain) loss on sale of investments                                             (265,733)         5,317             --
    Change in assets and liabilities:
      (Increase) decrease in assets:
        Trade accounts receivable                                                 4,890,957        789,518     (6,004,893)
        Prepaid expenses and other current assets                                   251,683      1,339,568       (305,546)
        Other assets                                                               (164,300)      (293,584)        52,536
    Increase (decrease) in liabilities:
        Accounts payable                                                         (8,494,772)     3,157,678      4,102,224
        Other current and accrued liabilities                                     2,033,621       (558,312)      (110,787)
        Other long-term liabilities                                                (208,322)       (26,744)       (43,968)
                                                                               ------------    -----------    -----------

    Net cash (used in)  provided by operating activities                         (3,963,428)     2,064,148         61,183
                                                                               ------------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

  Net assets acquired in purchase of Blink Data Corporation                          90,402             --             --
  Proceeds from sales and maturities of
    investments available for sale (net)                                            115,529         86,788             --
  Purchases of property and equipment                                            (5,465,329)    (3,227,593)    (3,018,710)
  Proceeds from sale of property and equipment and leaseback transactions         2,338,038          1,975         17,216
  Notes receivable from related party                                              (500,000)            --             --
  Payments for deferred line installation costs                                     (55,809)       (47,621)       (55,232)
  Payments for prepaid network capacity                                          (4,000,000)            --             --
  Collection on notes receivable from employees                                          --             --         45,402
                                                                               ------------    -----------    -----------

           Net cash used in investing activities                                 (7,477,169)    (3,186,451)    (3,011,324)
                                                                               ------------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from the issuance of Common Stock                                      6,300,000             --             --
  Proceeds from Stock Options exercised                                              43,441          8,437      1,799,149
  Note payable to related party                                                   4,400,000             --             --
  Repayment on bank borrowings                                                     (615,695)      (568,724)      (526,421)
                                                                               ------------    -----------    -----------

           Net cash  provided by (used in) financing activities                  10,127,746       (560,287)     1,272,728
                                                                               ------------    -----------    -----------
</TABLE>

                                                                       Continued


                                      F-5




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
                                   (Continued)

<TABLE>
<CAPTION>
                                                                                   2002           2001           2000
                                                                               ------------    -----------    -----------
<S>                                                                            <C>             <C>            <C>
NET DECREASE IN CASH AND
  CASH EQUIVALENTS                                                             $ (1,312,851)   $(1,682,590)   $(1,677,413)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR                                                               2,691,889      4,374,479      6,051,892
                                                                               ------------    -----------    -----------

CASH AND CASH EQUIVALENTS,
  END OF YEAR                                                                  $  1,379,038    $ 2,691,889    $ 4,374,479
                                                                               ============    ===========    ===========

SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION:
  Cash paid (received) during the year for:
    Interest                                                                   $    242,056    $   105,272    $   147,092
                                                                               ============    ===========    ===========

    Income taxes                                                               $      1,560    $(1,643,227)   $     3,400
                                                                               ============    ===========    ===========

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

Issuance of Common Stock in connection with Blink Data
acquisition for other assets and cash                                          $    900,000    $        --    $        --
                                                                               ============    ===========    ===========
</TABLE>

See notes to consolidated financial statements


                                      F-6




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

1.   NATURE OF OPERATIONS

     Covista Communications, Inc. ("Covista"), and its wholly-owned subsidiaries
     (collectively, the "Company") operates as a switch based resale common
     carrier providing 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, and a rate per
     minute. Access and other service fees charged to customers, typically
     monthly, are recognized in the period in which service is provided.

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

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

         Classification                    Years

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

     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 3 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.
     During fiscal year 2002, the Company acquired a customer list through an
     acquisition by issuing 300,000 shares of its Common Stock at the fair
     market value of the Company's Common Stock on the date of the transaction.
     The excess of the purchase price over the net assets of company acquired
     were allocated 100% to the customer list.


                                      F-7




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

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

     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:

<TABLE>
<CAPTION>
                                             2002                      2001
                                    Carrying       Fair
                                      Value        Value        Value       Value
<S>                                <C>          <C>          <C>          <C>
Assets:
  Cash and cash equivalents        $1,379,038   $1,379,038   $2,691,889   $2,691,889
  Investments available for sale   $  439,773   $  439,773   $  537,007   $  537,007

Liabilities:
    Debt                           $4,781,405   $4,781,405   $  997,100   $  997,100
</TABLE>


                                      F-8




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

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

     Recent Accounting Pronouncements - 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 adopted FAS 133 effective
     February 1, 2001. The adoption of SFAS 133 did not have a significant
     impact on the financial position, results of operation, or cash flows of
     the Company.

     In June 2001, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
     Combinations." SFAS 141 requires the purchase method of accounting for
     business combinations initiated after June 30, 2001 and eliminates the
     pooling-of-interests method. Covista does not believe that the adoption of
     SFAS 141 will have a significant impact on its financial statements, beyond
     the cessation of goodwill amortization on future business combinations. As
     of January 31, 2002 Covista has no Goodwill recorded on its books.

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

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


                                      F-9




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

     In October 2001, the FASB issued Statement of Financial Accounting
     Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal
     of Long Lived Assets", which is effective February 1, 2002. SFAS 144
     replaces the Statement of Financial Accounting Standards No. 121,
     Accounting for the Impairment of Long Lived Assets and for Long-Lived
     Assets to be Disposed Of". SFAS 144 requires that long-lived assets be
     measured at the lower of the carrying amount or fair value, less cost to
     sell, whether included in continuing operations or in discontinued
     operations. Covista is currently assessing but has not yet determined the
     impact of SFAS 144 on its 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.

     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.

<TABLE>
<CAPTION>
                                                       Retail       Wholesale       Total
<S>                                                  <C>           <C>           <C>
2002
  Net sales                                          $47,423,502   $47,889,194   $ 95,312,696
  Gross margin                                       $18,021,471   $   815,423   $ 18,836,894
  Operating loss                                     $(7,013,376)  $(5,148,618)  $(12,161,994)

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                                     $(3,905,664)  $ 2,996,502   $   (909,162)
  Operating (loss) income after other compensation   $(6,760,900)  $    81,184   $ (6,679,716)
</TABLE>


                                      F-10




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

4.   INVESTMENT SECURITIES

     Investments available for sale consist of:

<TABLE>
<CAPTION>
                               2002                                     2001
                          Gross Unrealized                         Gross Unrealized
                          ----------------    Market               ----------------    Market
                 Cost       Gain   Loss        Value      Cost        Gain     Loss    Value
               --------     ----   ----      --------   --------    --------   ----   --------
<S>            <C>           <C>    <C>      <C>        <C>         <C>         <C>   <C>
Bond           $ 25,000      $--    $--      $ 25,000   $ 25,000    $     --    $--   $ 25,000
Mutal Funds     414,773       --     --       414,773    200,000          --    $--    200,000
Common Stock         --       --     --            --     70,700     241,307    $--    312,007
               --------      ---    ---      --------   --------    --------    ---   --------

               $439,773      $--    $--      $439,773   $295,700    $241,307    $--   $537,007
               ========      ===    ===      ========   ========    ========    ===   ========
</TABLE>

     The deferred tax on the net unrealized gains at January 31, 2002 and 2001
     were $0 and $0, respectively; resulting in net amounts of $0 and $241,307
     in Accumulated Other Comprehensive Income.

     The bond will mature in 2005.

5.   PROPERTY AND EQUIPMENT

     Property and equipment consists of:

                                                     2002           2001
                                                 -----------    -----------
Machinery and equipment                          $17,064,974    $16,429,970
Office furniture, fixtures and equipment           2,672,237      2,755,736
Leasehold improvements                             1,497,811      1,375,200
Vehicles                                             181,256        181,256
Computer equipment and software                    7,325,243      6,881,624
Machinery and equipment in progress                2,102,895         93,339
                                                 -----------    -----------

                                                  30,844,416     27,717,125
Less accumulated depreciation and amortization    18,354,790     14,696,546
                                                 -----------    -----------

                                                 $12,489,626    $13,020,579
                                                 ===========    ===========

     Depreciation and amortization expense related to property and equipment for
     the years ended January 31, 2002, 2001 and 2000, was $3,658,244,
     $3,433,004, and $2,862,151, respectively.


                                      F-11




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

6.   INCOME TAXES

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

                        2002   2001      2000
                        ----   ----   ----------
Federal
   Current               $--    $--   $       --
   Deferred               --     --    1,893,850
State income taxes
   Current                --     --           --
   Deferred               --     --      809,768
                         ---    ---   ----------

                         $--    $--   $2,703,618
                         ===    ===   ==========


     Deferred income taxes reflect the net tax effects of temporary differences
     between the carrying amounts of assets and liabilities for financial
     reporting purposes and the amounts used for income tax purposes. Valuation
     allowances are provided against assets that are not likely to be realized.

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

<TABLE>
<CAPTION>
                                                2002                       2001
                                       Current      Long-term      Current      Long-term
                                     -----------   -----------   -----------   -----------
<S>                                  <C>           <C>           <C>           <C>
Deferred tax assets:
   Allowance for doubtful accounts   $ 1,991,860   $        --   $ 1,516,570   $        --
   Accrued compensation expense               --       268,130            --       597,480
   Unamortized lease incentive                --            --            --        89,380
   Accrued expenses                      332,560            --        77,180            --
   Net operating loss carryforward            --    10,877,719            --     6,566,190
   Alternative minimum tax credit                      593,940                     593,940
   Other                                  74,550            --            --            --
                                     -----------   -----------   -----------   -----------

Total gross deferred tax assets        2,398,970    11,739,789     1,593,750     7,846,990
   Less: Valuation allowance          (2,398,970)   (9,530,179)   (1,593,750)   (5,812,790)
                                     -----------   -----------   -----------   -----------
Total net deferred tax asset                  --     2,209,610            --     2,034,200
                                     -----------   -----------   -----------   -----------

Deferred tax liabilities:
   Property and equipment                     --    (2,209,610)           --    (1,937,820)
   Other                                      --            --            --       (96,380)
                                     -----------   -----------   -----------   -----------

Total deferred tax liabilities                --    (2,209,610)           --    (2,034,200)
                                     -----------   -----------   -----------   -----------

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


                                      F-12




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

     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>
                                                       2002          2001          2000
                                                    -----------   -----------   -----------
<S>                                                 <C>           <C>           <C>
Computed expense at statutory rates                 $(4,069,660)  $(2,933,963)  $(2,281,599)
(Reductions) increase in taxes resulting from:
    Tax exempt interest income                             (550)       (3,140)       (3,320)
    State taxes (benefit), net of federal income
       tax benefit                                     (708,853)     (513,164)     (191,230)
    Put agreement                                            --            --     1,219,549
    Valuation allowance                               4,522,609     3,703,659     3,702,881
    Other                                              (256,454)     (253,392)      257,337
                                                    -----------   -----------   -----------
                                                    $        --   $        --   $ 2,703,618
                                                    ===========   ===========   ===========
</TABLE>

     At January 31, 2002, for Federal income tax purposes, the Company had net
     operating loss carryforwards of approximately $24.4 million which will
     begin to expire in stages in the year 2020, and alternative minimum tax
     credit carryforwards of approximately $594,000. 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, 2002, 2001 and 2000, the Company paid
     rent of $21,530, $49,479 and $62,848, respectively to the partnership. The
     lease expired on November 30, 1998, and has been renewed subject to
     termination upon 120-days prior written notice by either party. The lease
     was amended on August 31, 1999 to provide an annual rate of $47,980. The
     lease terminated during the fiscal year ending January 31, 2002.

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


                                      F-13




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

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

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

     Future minimum annual rentals on these leases as of January 31, 2002 are as
     follows:

                      Year ending January 31,
                      2003                        $1,919,281
                      2004                         1,213,050
                      2005                         1,090,740
                      2006                           426,640
                      2007                           366,640
                      2008 and thereafter          1,504,391
                                                  ----------
                                                  $6,520,742
                                                  ==========

     Rental expense for the years ended January 31, 2002, 2001 and 2000 was
     approximately $2,355,000, $1,500,000, and $1,377,000, 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 $162,000, $95,000, and $125,000, for the years ended January
     31, 2002, 2001 and 2000, respectively.

9.   STOCK OPTION PLANS

     The Company has four 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. The 2001 Equity Incentive Plan (the "2001 Plan") provides for the
     issuance of an aggregate of not more than 900,000 shares of the Company's
     Common Stock.

     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


                                      F-14




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

     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 49,350 at January 31,
     2002, must be granted by October 10, 2006. All options available to be
     granted under the 1999 Plan, totaling 242,667 at January 31, 2002, must be
     granted by February 23, 2009. All options available to be granted under the
     2001 Plan, totaling 47,400 at January 31, 2002, must be granted by February
     8, 2012.

     At January 31, 2002, shares under the 2001 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
     one to four years from the date of the grant.

     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, 2002 and January 31, 2001 due to the
     decrease in the Company's stock price below the new exercise price.

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

     Information regarding options under the 1987 Plan is as follows:

<TABLE>
<CAPTION>

                                                                         Weighted
                           Option Price                                  Average
                             Per Share     Outstanding   Exercisable   Exercise Price
                           -------------   -----------   -----------   --------------
<S>                        <C>              <C>           <C>               <C>
January 31, 1999 balance   $0.51 - $4.81     310,000       310,000          $1.77
Exercised                  $0.51 - $4.81    (211,000)     (211,000)         $2.25
                           -------------    --------      --------          -----

January 31, 2000 balance   $0.51 - $1.00      99,000        99,000          $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
Exercised                  $        1.00     (16,500)      (16,500)         $1.00
Cancelled                  $0.51 - $1.00     (66,000)      (66,000)         $0.80
                           -------------    --------      --------          -----
January 31, 2002 balance              --          --            --          $  --
                           =============    ========      ========          =====
</TABLE>


                                      F-15




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

     Information regarding options under the 1996 Plan is as follows:

<TABLE>
<CAPTION>
                                                                            Weighted
                             Option Price                                   Average
                              Per Share      Outstanding   Exercisable   Exercise Price
                           ---------------   -----------   -----------   --------------
<S>                        <C>                <C>           <C>              <C>
January 31, 1999 balance   $ 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
Granted                             $ 2.00     523,000            --         $ 2.00
Became Exercisable                  $ 2.00          --       101,000         $ 2.00
Cancelled                  $ 2.00 - $14.25    (259,400)      (51,367)        $ 5.74
Exercised                           $ 2.00      (5,000)       (5,000)        $ 2.00
                           ---------------    --------      --------         ------

January 31, 2002 balance            $ 2.00     343,000        96,000         $ 2.00
                           ===============    ========      ========         ======
</TABLE>

     Information regarding options under the 1999 Plan is as follows:

<TABLE>
<CAPTION>
                                                                           Weighted
                            Option Price                                   Average
                             Per Share      Outstanding   Exercisable   Exercise Price
                           --------------   -----------   -----------   --------------
<S>                        <C>               <C>            <C>             <C>
January 31, 1999 balance           $   --          --            --         $   --
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
Granted                    $2.00 - $ 7.00     558,400            --         $ 3.76
Became Exercisable         $2.00 - $ 3.50          --         8,433         $ 2.02
Cancelled                  $3.00 - $14.25    (573,000)      (89,175)        $12.93
Exercised                  $2.00 - $ 3.50      (8,433)       (8,433)        $ 2.02
                           --------------    ---------      -------         ------

January 31, 2002 balance   $2.00 - $14.25     490,467         3,200         $ 4.00
                           ==============    =========      =======         ======
</TABLE>


                                      F-16




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

     Information regarding options under the 2001 Plan is as follows:

                                                                       Weighted
                           Option Price                                Average
                             Per Share     Outstanding   Exercisable   Exercise
                           -------------   -----------   -----------   --------
January 31, 2001 balance   $          --          --            --       $  --
Granted                    $2.00 - $6.71     855,500            --       $4.02
Became Exercisable         $2.00 - $5.65          --       213,899       $4.26
Cancelled                  $        5.65      (2,900)           --       $5.65
                           -------------     -------       -------       -----

January 31, 2002 balance   $2.00 - $6.71     852,600       213,899       $4.02
                           =============     =======       =======       =====

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

                     Options Outstanding                  Options Exercisable

                                  Average     Weighted                 Weighted
                    Number of    Remaining     Average    Number of     Average
   Range of          Shares     Contractual   Exercise     Shares      Exercise
exercise prices   outstanding      Life        Price     outstanding    Price
---------------   -----------   -----------   --------   -----------   ---------

 $ 2.00 - $7.00    1,672,867       5.23        $ 3.52      309,899      $ 3.56
 $7.01 - $14.25       13,200       3.07        $14.25        3,200      $14.25

     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, 2002, 2001 and 2000,
     consistent with the provisions of SFAS No. 123, the Company's net loss
     and basic and diluted loss per share would have been $10,837,464, $1.06
     and $1.06 for 2002; $8,886,465, $1.23 and $1.23 for 2001; $10,068,538,
     $1.43 and $1.43 for 2000.

     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 2002, 2001, and
     2000: dividend yield of 0.00% for the three years; expected volatility of
     165.18%, 62.23% and 46.11%, respectively; risk-free interest rate of 6.47%,
     7.85% and 6.02% 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, 0 shares, and 1,000 shares of its Common Stock and
     recorded compensation expense of $ 12,011, $266,565, and $204,015 for the
     years ended January 31, 2002, 2001 and 2000, respectively.

     Shares cancelled by the Company due to termination or resignation of the
     recipients for the years ended January 31, 2002, 2001 and 2000 totaled 0,
     4,000 and 35,383 respectively, which amounts have been excluded from the
     above compensation expense.


                                      F-17




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

11.  LONG-TERM DEBT

     On July 2, 2001 , Covista received a loan from Henry G. Luken III, its
     Chairman of the Board and principal shareholder, in the amount of
     $4,000,000. The loan matures on February 1, 2003 together with accumulated
     interest at a rate of 8% per annum. The proceeds of the loan were used to
     purchase a 10-year commitment for approximately 2.8 billion DS-0 channel
     miles of telecommunications network capacity from an unaffiliated party.
     This prepaid network capacity is included in prepaid expenses (current
     portion of $400,000) and other assets (long term portion of $3,600,000, net
     of current year amortization of $233,000). The cost will be amortized to
     operations based upon the greater of capacity use or straight line over the
     term of the agreement. The unaffiliated party has recently filed for
     Chapter 11 reorganization; however at the time of this filing is continuing
     to perform under the agreement. Mr. Luken also advanced the Company,
     $400,000, the proceeds of which were used for construction of new
     facilities. The agreement calls for interest to be accrued at a rate of 8%
     per annum. The total balance of the liability is $4,400,000 plus accrued
     interest at January 31, 2002. (see Note 21b)

     As of January 31, 2002, Covista owes a remaining balance of $381,405 loan
     payable to a New Jersey bank, all of which is classified as current. The
     interest rate on the term loan is 7.71% and is payable the scheduled
     monthly installments of $55,923. The term loan requires the Company to meet
     certain covenants. The term loan is collateralized by certain of the
     Company's machinery and equipment. At January 31, 2002, the Company was
     not in compliance with these covenants.

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 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.


                                      F-18




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

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.

     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. After restructuring charges incurred, the balance in the
     reserve at January 31, 2000, of approximately $12,000, consisted of the
     settlement of the lease in Fort Lauderdale, Florida.

     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.

14.  COMMITMENTS AND CONTINGENCIES

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

15.  LOSS PER SHARE

     Basic loss per share was computed by dividing net loss by the weighted
     average number of shares of Common Stock outstanding during each year.
     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-19




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

The reconciliation of the loss and common shares included in the computation of
basic loss per common share and diluted loss per common share for the years
ended January 31, 2002, 2001 and 2000 is as follows:

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

---------------------------------------------------------------------------------------------------
Basic Loss
 Per share:       (11,969,588)    10,203,610     $(1.17)     (8,629,304)    7,324,085       $(1.18)
---------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------
Effect of
 dilutive
 securities:
 Stock options
---------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------
Diluted loss
 per share       $(11,969,588)    10,203,610     $(1.17)    $(8,629,304)    7,324,085       $(1.18)
                 ============                    ======     ===========     =========       ======
---------------------------------------------------------------------------------------------------

<CAPTION>
--------------------------------------------------------
                                   2000
--------------------------------------------------------
                    Loss           Shares      Per Share
                 (Numerator)   (Denominator)     Amount
--------------------------------------------------------
<S>              <C>             <C>            <C>
Net Loss         $(9,414,202)
                 -----------
--------------------------------------------------------

--------------------------------------------------------
Basic Loss
 Per share:       (9,414,202)    7,068,875      $(1.33)
--------------------------------------------------------

--------------------------------------------------------
Effect of
 dilutive
 securities:
 Stock options
--------------------------------------------------------

--------------------------------------------------------
Diluted loss
 per share       $(9,414,202)    7,068,875      $(1.33)
                 ===========     =========      ======
--------------------------------------------------------
</TABLE>

Outstanding stock options to purchase shares of Common Stock were not included
in the computation of diluted loss per share for the fiscal years ended January
31, 2002, 2001 and 2000 because to do so would have been antidilutive.


                                     F-20




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

16.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

                   Amounts in thousands except per share data.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                           April 30, 1999   July 31, 1999   October 31, 1999   January 31, 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, 2000   July 31, 2000   October 31, 2000   January 31, 2001
---------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>              <C>                <C>
Net sales                                      $31,792         $34,108          $33,903            $33,427
---------------------------------------------------------------------------------------------------------------
Operating income (loss)                         (1,606)         (1,405)          (2,417)            (3,306)
---------------------------------------------------------------------------------------------------------------
Net earnings (loss)                             (1,514)         (1,366)          (2,403)            (3,346)
---------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per common share           (0.21)          (0.19)           (0.33)             (0.45)
---------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per common share         (0.21)          (0.19)           (0.33)             (0.45)
---------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                           April 30, 2001   July 31, 2001   October 31, 2001   January 31, 2002
---------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>              <C>                <C>
Net sales                                      $29,444         $28,892          $20,467            $16,510
---------------------------------------------------------------------------------------------------------------
Operating income (loss)                         (4,863)             42           (1,790)            (5,551)
---------------------------------------------------------------------------------------------------------------
Net earnings (loss)                             (4,592)             86           (1,859)            (5,605)
---------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per common share           (0.56)            .01            (0.17)             (0.52)
---------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per common share         (0.56)            .01            (0.17)             (0.52)
---------------------------------------------------------------------------------------------------------------
</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 was to be administered
     through a trust by a trustee designated by the Board of Directors

     In February 1999, the Company's Board of Directors authorized the
     termination of the ESOP Plan. The IRS gave its approval to terminate the
     ESOP, and the Company officially terminated this plan during 2002, and the
     entire 600,000 shares of Common Stock were returned to authorized but
     unissued shares of Common Stock.


                                      F-21




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

18.  ACCESS CHARGE SETTLEMENT

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

19.  RELATED PARTY TRANSACTIONS

     A director of the Company serves on the Board of Directors of Capsule
     Communications, Inc. ("Capsule") (see Note 21). Also the Chairman of the
     Company is the majority shareholder of Capsule. The Company purchases and
     sells services to Capsule. Sales to Capsule in the years ended January 31,
     2002, 2001 and 2000 were approximately $615,000, $532,000 and $681,000,
     respectively. Purchases from Capsule in the years ended January 31, 2002,
     2001 and 2000 were approximately $660,000, $544,000 and $291,000
     respectively. All transactions were based on competitive terms obtained in
     arm's length transactions.

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

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

     On July 24, 2001 and August 9, 2001, the Company issued notes receivable to
     Capsule for a total principal of $200,000 and $300,000, respectively with
     interest payable at 8 3/4% to be paid no later than one year from each note
     issuance.

     Jay J. Miller, a Director of Covista, has provided various legal services
     for Covista during Fiscal 2002. In Fiscal 2002, Covista paid $144,574 to
     Mr., Miller for services rendered and accrued for in Fiscal 2002. As of
     January 31, 2002, Covista owed Mr. Miller $179,316. Covista believes that
     Mr. Miller's fees were reasonable for the services performed and were no
     less favorable to Covista than could have been obtained from an unrelated
     third party.

     Leon Genet, a Director of Covista, has provided agent services for Covista
     through his wholly-owned Registrant, LPJ, Inc. During Fiscal 2002, LPJ,
     Inc. was paid commissions of $93,066. The commissions paid to LPJ, Inc.
     were computed on the same basis as other independent agents retained by
     Covista.


                                      F-22




<PAGE>

                  COVISTA COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
               FOR THE YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

20.  EMPLOYEE RECEIVABLES

     Included in prepaid expenses and other current assets is a note receivable
     totaling $262,500 evidencing a loan to a former 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. The Company
     is in the process of negotiating collection of the note.

     An additional approximate $179,000 of employee receivables is included in
     prepaid expenses and other current assets. This remaining balance
     represents loans and payroll advances to various employees.

21.  SUBSEQUENT EVENTS

     a.   On February 8, 2002, the Company acquired Capsule Communications, Inc.
          ("Capsule") for 1,724,311 shares of Common Stock. Capsule is a
          telecommunications carrier providing local and long-distance telephone
          communications services to small and medium size business customers
          and residential customers generally located in the Mid-Atlantic region
          and in California. Capsule is a related party of which both Henry G.
          Luken III, the Chairman and shareholder of the Company, and Walter
          Anderson, a director and shareholder of the Company, each of whom were
          the two major shareholders' in Capsule. The terms of the acquisition
          were that all shareholders with the exception of Henry Luken received
          0.0917 shares of Covista Common Stock for each share of Capsule Common
          Stock, and Mr. Luken received 0.0688 shares of Covista Common Stock
          for each share of Capsule Common Stock. The total value of the
          acquisition was approximately $11,000,000.

     b.   On February 20, 2002 the Board of Directors approved the private sale
          of additional Common Stock of up to $12,500,000. The investment would
          include a cash infusion of $4,800,000 for debt or common stock,
          contribution of $3,300,000 of fixed assets for debt or common stock
          and the conversion of all existing long-term debt to Common Stock at
          $5.00 per share. The commitment for funding for the investment is
          anticipated to come primarily from the current Chairman of Covista's
          Board and is subject to shareholder's approval at the next annual or
          scheduled meeting of stockholders. As of May 14, 2002, $2,600,000 of
          cash was received from the Chairman of Covista's board in exchange for
          debt. Finally, the Company is planning to obtain a line of credit
          from a bank. If such line of credit is not obtained, the Chairman
          of the Board has committed to loaning $2 million to the Company
          through at least the second quarter of fiscal 2004.


                                      F-23




<PAGE>

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

      Valuation reserve on
      deferred tax asset              $7,406,540    $4,618,990        $--      $       --      $12,025,530

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
</TABLE>

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


                                      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 fifteenth day of
May, 2002

                                                    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.

      Signature                   Title                            Date
      ---------                   -----                            ----


/S/ Henry G. Luken III   Chairman of the Board                May 15, 2002
----------------------
Henry G. Luken III


/S/ Walt Anderson        Director                             May 15, 2002
----------------------
Walt Anderson


/S/ Kevin Alward         Director,                            May 15, 2002
----------------------   Chief Operating Officer
Kevin Alward


/S/ Leon Genet           Director                             May 15, 2002
----------------------
Leon Genet


/S/ Donald Jones         Director                             May 15, 2002
----------------------
Donald Jones


/S/ A. John Leach        Director, President and              May 15, 2002
----------------------   Chief Executive Officer
A. John Leach


/S/ Nicholas Merrick     Director                             May 15, 2002
----------------------
Nicholas Merrick


/S/ Jay J. Miller        Director                             May 15, 2002
----------------------
Jay J. Miller


/S/ Thomas P. Gunning    Vice President, Treasurer and        May 15, 2002
----------------------   Secretary, Chief Financial Officer
Thomas P. Gunning        and Principal Accounting Officer


                                       35




<PAGE>

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

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

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

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

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

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

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

(10)(a) (1)      Assignment of lease from Mansol Realty 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, 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 and United Jersey Bank in the principal amount of $1,192,320.
                 Incorporated by reference to Exhibit 10 (e) to Registrants Annual
                 Report on Form 10-K for the year ended January 31, 1983.

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


                                       36




<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                             Description of Document
-----------                             -----------------------
<S>              <C>
(10)(h)          Master Lease Agreement between Mansol Ceramics 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 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, 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 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 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 (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 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. 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 (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>


                                       37




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


                                       38



<PAGE>

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

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

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

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

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

(10)(AJ)         Employment agreement of A. John Leach

(10)(AK)         Lease of premises of 4803 Highway 58 North, Chattanooga, TN 37416 between
                 Covista Communications, Inc. and Henry G. Luken III; dated September 1, 2001.

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

(10)(AM)         Sale and Lease/Back Master Lease agreement for Alcatel phone switch between
                 Covista and Applied Financial dated July 25, 2001.

(10)(AO)         Sale and Lease/Back Schedule 1 agreement for Alcatel phone switch between
                 Covista and Applied Financial dated July 25, 2001.

(10)(AP)         Sale and Lease/Back Schedule 2 agreement for Alcatel phone switch between
                 Covista and Applied Financial dated July 25, 2001.

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

(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
</TABLE>


                                       39