<PAGE>
================================================================================


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

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

                                    FORM 10-Q
                               -------------------


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2002

                         COMMISSION FILE NUMBER 0-21785

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


                             NEW VISUAL CORPORATION
             (Exact name of registrant as specified in its charter)


            UTAH                                            95-4545704
(State or other jurisdiction of                         (I.R.S. employer
incorporation or organization)                         identification no.)

       5920 FRIARS ROAD, SUITE 104
       SAN DIEGO, CALIFORNIA 92108                       (619) 692-0333
(Address of principal executive offices,         (Registrant's telephone number,
         including zip code)                            including area code)


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


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                  Yes  X     No
                                      ---       ---


     The number of shares of the issuer's Common Stock, par value $.001 per
share, outstanding as of June 10, 2002 was 47,513,735.

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

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.


                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                               INDEX TO FORM 10-Q
                                 APRIL 30, 2002


                                                                      Page Nos.
                                                                      --------


PART I - FINANCIAL INFORMATION:

    ITEM I - CONSOLIDATED FINANCIAL STATEMENTS


    CONSOLIDATED BALANCE SHEETS                                              1
        At April 30, 2002 (Unaudited) and October 31, 2001


    CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)                        2
        For the Six Months Ended April 30, 2002 and 2001
        For the Period from November 1, 1999 to April 30, 2002


    CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)                        3
        For the Three Months Ended April 30, 2002 and 2001


    CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)              4-5
        For the Six Months Ended April 30, 2002


    CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)                       6-7
        For the Six Months Ended April 30, 2002 and 2001
        For the Period from November 1, 1999 to April 30, 2002


    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)                8 - 23


    ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS                                   24


PART II - OTHER INFORMATION                                                   33



<PAGE>

<TABLE>
                                  NEW VISUAL CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                                        CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                   ASSETS
                                                   ------
                                                                                At April 30,   At October 31,
                                                                                    2002            2001
                                                                               -------------   -------------
                                                                                (Unaudited)
<S>                                                                            <C>             <C>

Current Assets:
   Cash                                                                        $    354,345    $    294,802
   Notes receivable from related party                                              173,404         100,708
   Other receivable from officers                                                    38,019          70,183
   Other current assets                                                              27,439          94,416
                                                                               -------------   -------------

       Total Current Assets                                                         593,207         560,109

Property and Equipment - Net                                                        242,362         284,896
Technology License - Net of accumulated amortization of $34,232 and
   $-0- at April 30, 2002 and October 31, 2001, respectively                      5,716,768              --
Other Assets                                                                         33,640          33,642
Projects under Development                                                        2,036,810       1,912,650
                                                                               -------------   -------------

       Total Assets                                                            $  8,622,787    $  2,791,297
                                                                               =============   =============

                                   LIABILITIES AND STOCKHOLDERS' EQUITY
                                   ------------------------------------

Current Liabilities:
   Convertible notes payable                                                   $    337,500    $    615,000
   Accounts payable and accrued expenses                                            907,594       1,435,024
   License and development fees payable                                           1,559,000              --
                                                                               -------------   -------------

       Total Current Liabilities                                                  2,804,094       2,050,024
                                                                               -------------   -------------

Long-Term Debt                                                                      256,886         256,886
                                                                               -------------   -------------

       Total Liabilities                                                          3,060,980       2,306,910
                                                                               -------------   -------------

Redeemable Series B Preferred Stock (Note 8)                                      3,192,000              --
                                                                               -------------   -------------

Commitments, Contingencies and Other Matters (Notes 6, 7, 8, 9 and 10)

Stockholders' Equity:
   Preferred stock - $0.01 par value; 15,000,000 shares authorized; Series A
       Junior Participating preferred stock; -0- shares issued and
       outstanding                                                                       --              --
   Common stock - $0.001 par value; 100,000,000 shares authorized;
       47,145,691 and 30,003,681 shares issued and outstanding at
       April 30, 2002 and October 31, 2001, respectively                             47,144          30,003
   Additional paid-in capital                                                    44,922,472      38,478,279
   Subscription receivable                                                               --        (103,500)
   Unearned financing fees                                                         (376,166)       (537,380)
   Unearned compensation                                                           (198,734)       (481,751)
   Accumulated deficit at October 31, 1999                                      (12,300,033)    (12,300,033)
   Deficit accumulated during the development stage                             (29,724,876)    (24,601,231)
                                                                               -------------   -------------

       Total Stockholders' Equity                                                 2,369,807         484,387
                                                                               -------------   -------------

       Total Liabilities and Stockholders' Equity                              $  8,622,787    $  2,791,297
                                                                               =============   =============

See notes to consolidated financial statements.

                                                      1
</TABLE>


<PAGE>

<TABLE>
                            NEW VISUAL CORPORATION AND SUBSIDIARIES
                   (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                             CONSOLIDATED STATEMENTS OF OPERATIONS
                                          (UNAUDITED)
<CAPTION>

                                                     For the Six Months Ended
                                                             April 30,          For the Period from
                                                  ----------------------------- November 1, 1999 to
                                                       2002            2001       April 30, 2002
                                                  -------------   -------------   -------------
<S>                                               <C>             <C>             <C>
REVENUES                                          $         --    $         --    $     12,200
                                                  -------------   -------------   -------------

OPERATING EXPENSES:
   Cost of sales                                            --              --          21,403
   Projects costs written-off                               --              --         114,613
   Acquired in-process research and
       development expenses                                 --              --       6,050,000
   Compensatory element of stock issuances           1,462,153              --       8,279,589
   Research and development                          1,278,931         662,094       2,933,695
   Selling, general and administrative expenses      1,409,940       1,206,653       7,538,677
   Litigation settlement in shares of common
       stock                                                --       1,000,000       1,000,000
   Loss on disposal of equipment                            --              --           7,500
                                                  -------------   -------------   -------------

       TOTAL OPERATING EXPENSES                      4,151,024       2,868,747      25,945,477
                                                  -------------   -------------   -------------

OPERATING LOSS                                      (4,151,024)     (2,868,747)    (25,933,277)
                                                  -------------   -------------   -------------

OTHER EXPENSES:
   Interest expense                                    449,309          18,430         805,667
   Amortization of unearned financing costs            523,312         500,000       2,985,932
                                                  -------------   -------------   -------------

       TOTAL OTHER EXPENSES                            972,621         518,430       3,791,599
                                                  -------------   -------------   -------------

NET LOSS                                          $ (5,123,645)   $ (3,387,177)   $(29,724,876)
                                                  =============   =============   =============

BASIC AND DILUTED NET LOSS PER
   COMMON SHARE                                   $      (0.14)   $      (0.14)
                                                  =============   =============

WEIGHTED AVERAGE NUMBER OF COMMON
   SHARES OUTSTANDING                               35,487,526      24,614,754
                                                  =============   =============

See notes to consolidated financial statements.

                                               2
</TABLE>


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                    For the Three Months Ended
                                                            April 30,
                                                  -----------------------------
                                                       2002            2001
                                                  -------------   -------------

REVENUES                                          $         --    $         --
                                                  -------------   -------------

OPERATING EXPENSES:
   Compensatory element of stock issuances             759,746              --
   Research and development                            949,818         299,392
   Selling, general and administrative expenses        738,326         671,301
                                                  -------------   -------------

       TOTAL OPERATING EXPENSES                      2,447,890         970,693
                                                  -------------   -------------

OPERATING LOSS                                      (2,447,890)       (970,693)
                                                  -------------   -------------

OTHER EXPENSES:
   Interest expense                                    291,466          10,986
   Amortization of unearned financing costs            442,705         250,000
                                                  -------------   -------------

       TOTAL OTHER EXPENSES                            734,171         260,986
                                                  -------------   -------------

NET LOSS                                          $ (3,182,061)   $ (1,231,679)
                                                  =============   =============

BASIC AND DILUTED LOSS PER SHARE                  $      (0.08)   $      (0.05)
                                                  =============   =============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING                                       39,967,547      24,940,678
                                                  =============   =============

See notes to consolidated financial statements.

                                       3


<PAGE>

<TABLE>
                             NEW VISUAL CORPORATION AND SUBSIDIARIES
                    (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                         CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                           (UNAUDITED)
                             FOR THE SIX MONTHS ENDED APRIL 30, 2002
<CAPTION>

                                            Common Stock              Additional                      Unearned         Unearned
                                    -----------------------------      Paid-in       Subscription     Financing      Compensation
                                        Shares          Amount         Capital        Receivable        Costs           Expense
                                    -------------   -------------   -------------   -------------   -------------   -------------
<S>                                 <C>             <C>             <C>             <C>             <C>             <C>
Six Months Ended April 30, 2002:
-------------------------------

Balance - October 31, 2001            30,003,681    $     30,003    $ 38,478,279    $   (103,500)   $   (537,380)   $   (481,751)
Issuance of common stock
   under consulting agreement
   ($.40 to $.66 per share)            1,256,250           1,256         625,142              --              --              --
Issuance of common stock
   for cash ($.25 to $1.00
   per share)                          5,569,004           5,569       1,679,156              --              --              --
Cash received for
   subscription receivable                    --              --              --         103,500              --              --
Issuance of common stock in
   connection with the exercise
   of warrants ($.25 per share)        2,912,000           2,912         725,088              --              --              --
Cashless exercise of warrants            736,008             736            (736)             --              --              --
Issuance of common stock for
   conversion of promissory
   notes ($.40 to $.70 per share)      3,797,322           3,797       1,753,078              --              --              --
Issuance of common stock for
   release of claims ($.34 per
   share)                              1,261,946           1,262          (1,262)             --              --              --
Issuance of common stock for
   technology license acquisition        624,480             624         749,376              --              --              --
Issuance of common stock for
   consideration of services             985,000             985         302,753              --              --              --
Value assigned to beneficial
   conversion                                 --              --         362,098              --        (362,098)             --
Value assigned to warrants
   issued to consultants                      --              --          66,000              --              --              --
Value assigned to options
   issued to consultants                      --              --         183,500              --              --              --
Amortization of unearned
   compensation expense                       --              --              --              --              --         283,017
Amortization of unearned
   financing costs                            --              --              --              --         523,312              --
Net loss                                      --              --              --              --              --              --
                                    -------------   -------------   -------------   -------------   -------------   -------------

Balance - April 30, 2002              47,145,691    $     47,144    $ 44,922,472    $         --    $   (376,166)   $   (198,734)
                                    =============   =============   =============   =============   =============   =============


See notes to consolidated financial statements.

                                               4
</TABLE>


<PAGE>

<TABLE>
                            NEW VISUAL CORPORATION AND SUBSIDIARIES
                   (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                        CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                          (UNAUDITED)
                            FOR THE SIX MONTHS ENDED APRIL 30, 2002
<CAPTION>

                                                                                      Total
                                                                  Accumulated     Stockholders'
                                                                    Deficit          Equity
                                                                 -------------   -------------
<S>                                                              <C>             <C>

Six Months Ended April 30, 2002:
-------------------------------

Balance - October 31, 2001                                       $(36,901,264)   $    484,387
Issuance of common stock under consulting agreement
   ($.40 to $.66 per share)                                                --         626,398
Issuance of common stock for cash ($.25 to $1.00 per share)                --       1,684,725
Cash received for subscription receivable                                  --         103,500
Issuance of common stock in connection with the exercise
   of warrants ($.25 per share)                                            --         728,000
Cashless exercise of warrants                                              --              --
Issuance of common stock for conversion of promissory
   notes ($.40 to $.70 per share)                                          --       1,756,875
Issuance of common stock for release of claims
   ($.34 per share)                                                        --              --
Issuance of common stock for technology license acquisition                --         750,000
Issuance of common stock for consideration of services                     --         303,738
Value assigned to beneficial conversion                                    --              --
Value assigned to warrants issued to consultants                           --          66,000
Value assigned to options issued to consultants                            --         183,500
Amortization of unearned compensation expense                              --         283,017
Amortization of unearned financing costs                                   --         523,312
Net loss                                                           (5,123,645)     (5,123,645)
                                                                 -------------   -------------
                                                                 $(42,024,909)   $  2,369,807
                                                                 =============   =============

Balance - April 30, 2002


Accumulated deficit as of October 31, 1999                       $(12,300,033)

Accumulated deficit during development stage (November 1, 1999
  to April 30, 2002)                                              (29,724,876)
                                                                 -------------

Total accumulated deficit as of April 30, 2002                   $(42,024,909)
                                                                 =============

See notes to consolidated financial statements.

                                              5
</TABLE>


<PAGE>

<TABLE>
                                NEW VISUAL CORPORATION AND SUBSIDIARIES
                       (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (UNAUDITED)
                            FOR THE SIX MONTHS ENDED APRIL 30, 2002 AND 2001
                         AND THE PERIOD FROM NOVEMBER 1, 1999 TO APRIL 30, 2002
<CAPTION>

                                                            For the Six Months Ended
                                                                    April 30,           For the Period from
                                                          ----------------------------- November 1, 1999 to
                                                               2002           2001        April 30, 2002
                                                          -------------   -------------   -------------
<S>                                                       <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                               $ (5,123,645)   $ (3,387,177)   $(29,724,876)
   Adjustments to reconcile net loss to net cash used
       in operating activities:
          Consulting fees and other compensatory
             elements of stock issuances                     1,462,153              --       8,279,589
          Stock issued for acquired in-process
             research and development                               --              --       6,050,000
          Stock issued for litigation settlement                    --       1,000,000       1,000,000
          Projects costs written-off                                --              --         114,613
          Amortization of unearned financing costs             523,312         500,000       2,985,932
          Depreciation and amortization                         75,683          69,813         291,548
          Disposal of property and equipment                     3,596              --           3,596
          Loss on disposal of equipment                             --              --           7,500
          Interest charges related to convertible notes        403,125              --         403,125

   Changes in Assets (Increase) Decrease:
       Other current assets                                     66,977          21,833         (27,439)
       Due from related parties                                (40,530)        (41,448)       (179,999)
       Projects under development                             (124,160)       (445,000)     (2,017,678)
       Other assets                                                 --         (37,799)        (28,642)
   Changes in Liabilities Increase (Decrease):
       Accounts payable and accrued expenses                  (344,930)       (123,336)        669,396
                                                          -------------   -------------   -------------

   NET CASH USED IN OPERATING ACTIVITIES                    (3,098,419)     (2,443,114)    (12,173,335)
                                                          -------------   -------------   -------------

CASH USED IN INVESTING ACTIVITIES
   Acquisition of property and equipment                        (2,513)         (3,567)       (408,548)
   Acquisition of license and related development fee         (250,000)             --        (250,000)
                                                          -------------   -------------   -------------

   NET CASH USED IN INVESTING ACTIVITIES                      (252,513)         (3,567)       (658,548)
                                                          -------------   -------------   -------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of common stock                    1,788,725       2,314,679      10,364,720
   Proceeds from loan payable                                       --              --         756,886
   Proceeds from exercise of warrants                          728,000              --         993,000
   Proceeds from convertible notes payable                     893,750              --       1,508,750
   Repayment of long-term debt                                      --              --        (500,000)
                                                          -------------   -------------   -------------

   NET CASH PROVIDED BY FINANCING ACTIVITIES                 3,410,475       2,314,679      13,123,356
                                                          -------------   -------------   -------------

INCREASE (DECREASE) IN CASH                                     59,543        (132,002)        291,473

CASH AND CASH EQUIVALENTS - BEGINNING                          294,802         189,234          62,872
                                                          -------------   -------------   -------------

CASH AND CASH EQUIVALENTS - ENDING                        $    354,345    $     57,232    $    354,345
                                                          =============   =============   =============

See notes to consolidated financial statements.

                                                   6
</TABLE>


<PAGE>

<TABLE>
                                NEW VISUAL CORPORATION AND SUBSIDIARIES
                       (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (UNAUDITED)
                            FOR THE SIX MONTHS ENDED APRIL 30, 2002 AND 2001
                         AND THE PERIOD FROM NOVEMBER 1, 1999 TO APRIL 30, 2002
<CAPTION>

                                                          For the Six Months Ended
                                                                  April 30,         For the Period from
                                                          ------------------------  November 1, 1999 to
                                                             2002         2001        April 30, 2002
                                                          -----------  -----------      -----------
<S>                                                       <C>          <C>              <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
   Interest                                               $       --   $       --       $      526
                                                          ===========  ===========      ===========

   Income taxes                                           $       --   $       --       $       --
                                                          ===========  ===========      ===========

Non-cash investing and financing activities:
   Convertible notes satisfied by issuance of stock       $1,171,250   $       --       $1,171,250
                                                          ===========  ===========      ===========

   Issuance of 3,192 shares of Series B Preferred Stock
   and 624,480 shares of common stock for acquisition
   of license                                             $3,942,000   $       --       $3,942,000
                                                          ===========  ===========      ===========

See notes to consolidated financial statements.

                                                   7
</TABLE>


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  1-          PRINCIPLES OF CONSOLIDATION AND BUSINESS AND CONTINUED
                  OPERATIONS

                  PRINCIPLES OF CONSOLIDATION

                  The consolidated financial statements include the accounts of
                  New Visual Corporation and its wholly-owned operating
                  subsidiaries, NV Entertainment, Inc., Impact Multimedia, Inc.
                  and NV Technology, Inc. (formerly New Wheel Technology, Inc.)
                  ("New Wheel") (collectively, the "Company"). All significant
                  intercompany balances and transactions have been eliminated.

                  BUSINESS AND CONTINUED OPERATIONS

                  New Visual Corporation was incorporated under the laws of the
                  State of Utah on December 5, 1985.

                  In November of 1999, the Company began to focus its business
                  activities on the development of new content
                  telecommunications technologies. Pursuant to such plan, in
                  February of 2000, the Company acquired New Wheel Technology,
                  Inc., a development stage, California-based, technology
                  company, which now operates as the Company's wholly-owned
                  subsidiary, NV Technology, Inc., a Delaware corporation. As a
                  result of the change in business focus, the Company became a
                  development stage entity commencing November 1, 1999. The
                  Company also produces and distributes 2-D and 3-D filmed
                  entertainment.

                  The accompanying consolidated financial statements have been
                  prepared in conformity with accounting principles generally
                  accepted in the United States of America, which contemplate
                  continuation of the Company as a going concern. However, for
                  the six months ended April 30, 2002, the Company incurred a
                  net loss of $5,123,645 and had a working capital deficiency of
                  $2,210,887. The Company has limited finances and requires
                  additional funding in order to accomplish its growth
                  objectives and marketing of its products and services. There
                  is no assurance that the Company can reverse its operating
                  losses, or that it can raise additional capital to allow it to
                  expand its planned operations. There is also no assurance that
                  even if the Company manages to obtain adequate funding to
                  complete any contemplated acquisition, such acquisition will
                  succeed in enhancing the Company's business and will not
                  ultimately have an adverse effect on the Company's business
                  and operations. These factors raise substantial doubt about
                  the Company's ability to continue as a going concern.

                  The Company operates in two business segments, the production
                  of motion pictures, films and videos (entertainment segment)
                  and development of new content telecommunications technologies
                  (telecommunication segment). The success of the Company's
                  entertainment business is dependent on future revenues from
                  the Company's current joint venture production agreement to
                  produce a feature-length film for theatrical distribution.

                                        8


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  1-          PRINCIPLES OF CONSOLIDATION AND BUSINESS AND CONTINUED
                  OPERATIONS (CONTINUED)

                  BUSINESS AND CONTINUED OPERATIONS (CONTINUED)

                  The success of the Company's telecommunication segment is
                  dependent upon the successful completion of development and
                  testing of its broadband technology currently under
                  development by its wholly owned subsidiary, NV Technology,
                  Inc. No assurance can be given that the Company can complete
                  development of such technology, or that with respect to such
                  technology that is fully developed, it can be commercialized
                  on a large scale basis or at a feasible cost. No assurance can
                  be given that such technology will receive market acceptance.

                  Until the commencement of sales from either segment, the
                  Company will have no operating revenues, but will continue to
                  incur substantial operating expenses, capitalized costs and
                  operating losses.

                  Management's business plan will require additional financing.
                  To support its operations during the six months ended April
                  30, 2002, the Company borrowed $893,750 from various trusts
                  and individuals and issued convertible promissory notes.

                  During the six months ended April 30, 2002, the Company
                  received $ 1,684,725 from the sale of 5,569,004 shares of its
                  common stock and $728,000 from the exercise of 2,912,000
                  warrants. The Company is exploring other financing
                  alternatives, including private placements and public
                  offerings.

                  The Company's ability to continue as a going concern is
                  dependent upon obtaining additional financing. These
                  consolidated financial statements do not include any
                  adjustments relating to the recoverability of recorded asset
                  amounts that might be necessary as a result of the above
                  uncertainty.

                  The accompanying unaudited consolidated financial statements
                  have been prepared in accordance with generally accepted
                  accounting principles for interim financial information and
                  with the instructions to Form 10-Q and Article 10 of
                  Regulation S-X. Accordingly, they do not include all of the
                  information and footnotes required by generally accepted
                  accounting principles for complete financial statements. In
                  the opinion of management, all adjustments (consisting of
                  normal recurring accruals) considered necessary for a fair
                  presentation, have been included. Operating results for the
                  six-month period ended April 30, 2002 are not necessarily
                  indicative of the results that may be expected for the year
                  ending October 31, 2002.

                  The consolidated balance sheet at October 31, 2001 has been
                  derived from the audited consolidated financial statements at
                  that date, but does not include all of the information and
                  footnotes required by generally accepted accounting principles
                  for complete financial statements.

                                       9


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  1 -         PRINCIPLES OF CONSOLIDATION AND BUSINESS AND CONTINUED
                  OPERATIONS (CONTINUED)

                  BUSINESS AND CONTINUED OPERATIONS (CONTINUED)

                  For further information, refer to the consolidated financial
                  statements and footnotes thereto included in the Registrant's
                  Annual Report on Form 10-K for the year ended October 31,
                  2001.

NOTE  2 -         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                  USE OF ESTIMATES

                  The preparation of financial statements in conformity with
                  accounting principles generally accepted in the United States
                  of America requires management to make estimates and
                  assumptions that affect the reported amounts of assets and
                  liabilities and disclosure of contingent assets and
                  liabilities at the date of the financial statements and the
                  reported amounts of revenues and expenses during the reporting
                  period. Actual results could differ from those estimates.

                  RESEARCH AND DEVELOPMENT

                  Research and development costs are charged to expense as
                  incurred. Amounts allocated to acquired-in-process research
                  and development costs from business combinations are charged
                  to earnings at the consummation of the acquisition.

                  LOSS PER SHARE

                  Basic earnings per share ("Basic EPS") is computed by dividing
                  net income available to common stockholders by the weighted
                  average number of common shares outstanding during the period.
                  Diluted earnings per share ("Diluted EPS") gives effect to all
                  dilutive potential common shares outstanding during a period.
                  No effect has been given to outstanding options, warrants or
                  convertible notes in the diluted computation, as their effect
                  would be antidilutive.

                  STOCK-BASED COMPENSATION

                  As permitted by SFAS No. 123, "Accounting for Stock-Based
                  Compensation," the Company accounts for its stock-based
                  compensation arrangements pursuant to APB Opinion No. 25,
                  "Accounting for Stock Issued to Employees." In accordance with
                  the provisions of SFAS No. 123, the Company discloses the pro
                  forma effects of accounting for these arrangements using the
                  Black-Scholes option pricing model to determine fair value.

                                       10


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  2 -         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                  IMPAIRMENT OF LONG-LIVED ASSETS

                  The Company reviews long-lived assets and certain identifiable
                  intangibles for impairment whenever events or changes in
                  circumstances indicate that the total amount of an asset may
                  not be recoverable. An impairment loss is recognized when
                  estimated future cash flows expected to result from the use of
                  the asset and its eventual disposition are less than its
                  carrying amount.

                  SEGMENT REPORTING

                  Effective January 1, 1998, the Company adopted the provisions
                  of SFAS No. 131, "Disclosures About Segments of an Enterprise
                  and Related Information." SFAS No. 131 establishes standards
                  for the way public enterprises report information about
                  operating segments in annual financial statements and requires
                  those enterprises to report selected information about
                  operating segments in interim financial reports issued to
                  stockholders.

                  RECLASSIFICATIONS

                  Certain prior year balances have been reclassified to conform
                  with the current year presentation.

                  IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

                  In July 2001, the Financial Accounting Standards Board
                  ("FASB") issued Statement of Financial Accounting Standards
                  No. 141 ("SFAS 141"), "Business Combinations," which
                  supercedes Accounting Principles Board ("APB") Opinion No. 16,
                  "Business Combinations." SFAS No. 141 requires the purchase
                  method of accounting for business combinations initiated after
                  June 30, 2001 and eliminates the pooling-of-interests method.
                  The provisions of SFAS 141 have been adopted as of July 1,
                  2001. The implementation of this standard did not have an
                  impact on the Company's results of operations and financial
                  position.

                  In July 2001, the FASB issued Statement of Financial
                  Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
                  Intangible Assets," which is effective for fiscal years
                  beginning after December 15, 2001. Certain provisions shall
                  also be applied to acquisitions initiated subsequent to June
                  30, 2001. SFAS 142 supercedes APB Opinion No. 17, "Intangible
                  Assets," and requires, among other things, the discontinuance
                  of amortization related to goodwill and indefinite lived
                  intangible assets. These assets will then be subject to an
                  impairment test at least annually. The implementation of this
                  standard did not have an impact on the Company's results of
                  operations and financial position.

                                       11


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  2 -         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                  IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)

                  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 supercedes
                  Statement of Financial Accounting Standards No. 121 ("SFAS
                  121"), "Accounting for the Impairment of Long-Lived Assets and
                  for Long-Lived Assets to be Disposed Of" and certain
                  provisions of APB Opinion No. 30, "Reporting Results of
                  Operations - Reporting the Effects of Disposal of a Segment of
                  a Business and Extraordinary, Unusual and Infrequently
                  Occurring Events and Transactions." SFAS 144 requires that
                  long-lived assets to be disposed of by sale, including
                  discontinued operations, be measured at the lower of carrying
                  amount or fair value, less cost to sell, whether reported in
                  continuing operations or in discontinued operations. SFAS 144
                  also broadens the reporting requirements of discontinued
                  operations to include all components of an entity that have
                  operations and cash flows that can be clearly distinguished,
                  operationally and for financial reporting purposes, from the
                  rest of the entity. The provisions of SFAS 144 are effective
                  for fiscal years beginning after December 15, 2001. The
                  implementation of this standard did not have an impact on the
                  Company's results of operations and financial position.

NOTE  3 -         NOTES RECEIVABLE FROM RELATED PARTY

                  On September 6, 2001, the Company converted advances made to
                  an officer in the amount of $99,656 into a promissory note,
                  which is payable on demand and bears an interest rate of 7.0%
                  per annum.

                  On January 1, 2002, the Company converted advances made to an
                  officer in the amount of $67,631 into a promissory note, which
                  is payable on demand and bears an interest rate of 7.0% per
                  annum.

                  As of April 30, 2002, the outstanding amount from the above
                  notes was $173,404, of which $6,117 represented accrued
                  interest.

                                       12


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  4 -         PROPERTY AND EQUIPMENT, NET

                  Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                At April 30,      At October 31,
                                                                    2002               2001
                                                              ----------------   ----------------
<S>                         <C>                               <C>                <C>
                            Furniture and fixtures            $        54,097    $        51,584
                            Camera equipment                          540,168            544,664
                            Office equipment                          109,430            109,460
                                                              ----------------   ----------------
                                                                      703,695            705,708
                            Less:  Accumulated depreciation           461,333            420,812
                                                              ----------------   ----------------

                                   Total                      $       242,362    $       284,896
                                                              ================   ================
</TABLE>

                  For the six months ended April 30, 2002 and 2001, depreciation
                  expense was $41,451 and $35,696, respectively.

NOTE  5 -         DEVELOPMENT AND LICENSE AGREEMENT

                   On April 17, 2002, the Company entered into a development and
                  license agreement with Adaptive Networks, Inc. ("ANI") to
                  acquire a worldwide, perpetual license to ANI's Powerstream
                  technology, intellectual property, and patent portfolio for
                  use in products relating to all applications in the field of
                  the copper telephone wire telecommunications network. In
                  consideration of the grant of the license, the Company assumed
                  certain debt obligations of ANI to Zaiq Technologies, Inc.
                  ("Zaiq") and TLSI, Inc. ("TLSI"). The Company then issued
                  3,192 shares of its Series B Preferred Stock with a
                  liquidation preference of $1,000 per share and paid $250,000
                  in cash to Zaiq in satisfaction of the Zaiq debt. The Company
                  also issued 624,480 shares of common stock to TLSI in
                  satisfaction of the TLSI debt. The Company also agreed to pay
                  ANI a development fee of $1,559,000 for additional development
                  services and to pay ANI a royalty equal to a percentage of the
                  net sales of products sold by the Company and license revenue
                  received by the Company.

                  The license fee of $4,192,000 is payable as follows:

<TABLE>
<CAPTION>
<S>                         <C>                                                               <C>
                            Cash to Zaiq ($100,000 paid as of April 30, 2002)                 $      250,000

                            3,192 shares issued to Zaiq of the Company's Series B
                            Preferred Stock with liquidation preference of $1,000 per share        3,192,000

                            624,480 shares issued to TLSI of the Company's common stock
                            valued at                                                                750,000
                                                                                              ---------------
                                                                                              $    4,192,000
                                                                                              ===============
</TABLE>

                                       13


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  5 -         DEVELOPMENT AND LICENSE AGREEMENT (CONTINUED)

                  The Company capitalized the payments due for the license fee
                  and development fee totaling $5,751,000. These capitalized
                  costs are being amortized on a straight-line basis over seven
                  years commencing April 17, 2002. Amortization expense related
                  to this intangible asset was $34,232 for the period ended
                  April 30, 2002.

NOTE  6 -         ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                  Accounts payable and accrued expenses consist of the
                  following:

                                               At April 30,      At October 31,
                                                   2002               2001
                                             ----------------   ---------------

                         Professional fees   $       417,628    $      606,807
                         Interest payable            225,350           356,601
                         Consulting fees              84,447           204,192
                         Miscellaneous               180,169           267,424
                                             ----------------   ---------------

                                             $       907,594    $    1,435,024
                                             ================   ===============

NOTE  7 -         CONVERTIBLE NOTES PAYABLE

                  As of April 30, 2002, the Company entered into sixteen
                  convertible promissory note agreements with various trusts and
                  individuals, totaling $1,508,750. The Company agreed to pay
                  the principal and an amount equal to 50% of the principal sum
                  if the Company reaches certain milestone from the distribution
                  of its motion picture, which is currently in production. The
                  notes may be converted at any time, in whole or in part, into
                  that number of fully paid and non-assessable shares of common
                  stock at a conversion price ranging from $.40 to $.70. In
                  March 2002, thirteen convertible promissory notes were
                  converted to 3,797,322 shares of the Company's common stock,
                  totaling $1,756,875, of which $585,625 represented accrued
                  interest.

                                       14


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  7 -         CONVERTIBLE NOTES PAYABLE (CONTINUED)

                  As of April 30, 2002, the outstanding amount for the above
                  notes was $506,250, of which $168,750 was recorded as interest
                  expense.

                  Several of the above convertible note agreements that were
                  entered into during the quarter ended April 30, 2002 were
                  convertible into common stock at a conversion rate lower than
                  the market price at the issuance of the convertible notes.
                  Therefore, as of April 30, 2002, $362,098 was charged to
                  financing costs due to the beneficial conversion feature.

NOTE  8 -         REDEEMABLE SERIES B PREFERRED STOCK

                  On April 10, 2002, the Company amended its Articles of
                  Incorporation and designated 4,000 of its authorized preferred
                  stock as a Series B Preferred Stock, par value $.01 per share,
                  with a liquidation preference of $1,000 per share.

                  The Series B preferred shares are mandatorily redeemable by
                  the Company at the liquidation preference as follows:

                  (i)      Closing of financing transaction of at least $15
                           million.

                  (ii)     Closing of a corporate transaction (such as a merger,
                           consolidation, reorganization, sale of significant
                           assets, etc.) resulting in a change of control.

                  (iii)    In the event the Company completes a financing, which
                           is at least $3 million but less than $15 million, the
                           Company must partially redeem the Series B preferred
                           shares based on a fraction, the numerator of which is
                           the net cash proceeds received by the Company, as a
                           result of the financing transaction, and the
                           denominator of which is $15 million.

                  (iv)     The Company is obligated to redeem any outstanding
                           Series B Preferred Stock at its liquidation
                           preference, in eight equal quarterly payments,
                           commencing on March 31, 2005 and ending on December
                           31, 2006.

                  Holders of Series B Preferred are entitled to receive
                  dividends if, as and when declared by the Company's Board of
                  Directors in preference to the holders of its common stock and
                  of any other stock ranking junior to the Series B Preferred
                  with respect to dividends.

                  The Company cannot declare or pay any dividend or make any
                  distribution on its common stock unless a dividend or
                  distribution of at least two times the dividend paid on the
                  common stock is also paid on the Series B Preferred. Holders
                  of Series B Preferred are also entitled to share pro rata
                  (based on the aggregate liquidation preference) in any
                  dividend, redemption or other distribution made to any other
                  series of the Company's preferred stock. The Series B
                  Preferred Stock does not have voting rights except as required
                  by law.

                                       15


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  8 -         REDEEMABLE SERIES B PREFERRED STOCK (CONTINUED)

                  Each share of the Series B Preferred stock is convertible into
                  shares of the Company's common stock by dividing $1,000 by the
                  conversion price. The conversion price is the fair market of
                  the Company's common stock at the time of conversion, but not
                  to be less than $.34 per share, subject to adjustment, and not
                  to exceed $4.00 per share, subject to adjustment. Holders of
                  the Series B Preferred stock were granted piggy-back
                  registration rights to register common shares reserved for
                  such conversion.

                  In April 2002, the Company issued 3,192 shares of its Series B
                  Preferred stock in connection with a development and license
                  agreement discussed in Note 5. As of April 30, 2002, there
                  were 4,000 authorized Series B Preferred shares and 3,192
                  issued and outstanding.

NOTE  9 -         STOCKHOLDERS' EQUITY

                  SIGNIFICANT COMMON STOCK ISSUANCES DURING THE SIX MONTHS ENDED
                  APRIL 30, 2002

                  In February 2002, the Company issued an aggregate of 1,261,946
                  restricted shares of its common stock to seven individuals who
                  purchased common stock of the Company in a private placement
                  completed in March 2001 and contended that they were entitled
                  to receive these additional shares in connection with their
                  initial purchase agreements. The parties reached an amicable
                  resolution of the matter and the Company received a full and
                  complete release from each investor.

                  On February 25, 2002, the Company issued a restricted stock
                  award of 500,000 shares of common stock to an executive
                  officer in consideration of his services to the Company. The
                  restricted stock award was granted pursuant to the Company's
                  2000 Plan. The executive officer purchased the shares for
                  $.001 per share, which are subject to a risk of forfeiture
                  until they vest. The executive officer will not receive
                  possession of the certificates representing the shares, and
                  may not sell any of the shares until such shares vest, which
                  will occur quarterly, 125,000 shares per quarter, beginning
                  April 30, 2002. The Company has the right, pursuant to the
                  terms of the restricted stock award, to repurchase any
                  unvested shares issued pursuant to the award for $.002 per
                  share in the event the executive officer is terminated, or if
                  there is a change of control of the Company. The compensatory
                  value assigned to the common stock totaled $125,000.

                  On February 25, 2002, the Company issued 485,000 shares of
                  restricted common stock to two employees in consideration of
                  their past services to the Company. The compensatory value
                  assigned to the common stock totaled $178,238.

                  As of April 30, 2002, the Company issued 1,256,250 shares of
                  its common stock as consideration for consulting services
                  performed by various consultants at prices ranging from $.40
                  to $.66 per share, totaling $626,398.

                  As of April 30, 2002, the Company issued 5,569,004 shares of
                  restricted common stock to investors for cash proceeds of
                  $1,684,725.

                                       16


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  9 -         STOCKHOLDERS' EQUITY (CONTINUED)

                  STOCK OPTION PLANS

                  During 2000, the Board of Directors and the stockholders of
                  the Company approved the 2000 Omnibus Securities Plan (the
                  "2000 Plan"), which provides for the granting of incentive and
                  non-statutory options and restricted stock for up to 2,500,000
                  shares of common stock to officers, employees, directors and
                  consultants of the Company.

                  During August of 2001, the Board of Directors of the Company
                  approved the 2001 Stock Incentive Plan (the "2001 Plan" and
                  together with the 2000 Plan, the "Plans"), which provides for
                  the granting of incentive and non-statutory options,
                  restricted stock, dividend equivalent rights and stock
                  appreciation rights for up to 2,500,000 shares of common stock
                  to officers, employees, directors and consultants of the
                  Company.

                  On February 25, 2002, the Company granted non-qualified stock
                  options under its 2000 Plan to purchase 862,500 shares of
                  common stock to employees and employee directors of the
                  Company at an exercise price of $.42 per share. The options
                  vest in four equal quarterly installments starting April 30,
                  2002. All options expire on February 25, 2012.

                  On February 25, 2002, the Company granted two directors
                  options under its 2000 Plan to purchase 400,000 shares of its
                  common stock at an exercise price of $.42. The options vest in
                  four equal quarterly installments starting April 30, 2002.
                  These options also expire on February 25, 2012.

                  On February 25, 2002, the Company granted to a director and
                  consultant to the Company (who became its Chief Executive
                  Officer on June 1, 2002) options outside the Company's stock
                  option plans to purchase 500,000 shares of its common stock at
                  $.39. The options vest in four equal quarterly installments
                  starting April 30, 2002. These options expire on February 25,
                  2012.

                  On February 25, 2002, the Company granted an advisory board
                  member options under the Company's 2000 Omnibus Securities
                  Plan to purchase 40,000 shares of its common stock at $.42.
                  The options vest immediately and expire ten years from the
                  grant date. The fair value of stock options estimated on the
                  date of grant using the Black-Scholes option pricing model was
                  $.30, or $12,000.

                  On February 22, 2002, the Company granted non-qualified stock
                  options to purchase 250,000 shares of common stock to a
                  consultant at an exercise price of $.40 per share. The options
                  vest in five equal quarterly installments starting February
                  22, 2002. These options expire on February 22, 2012. The fair
                  value of stock options estimated on the date of grant using
                  the Black-Scholes option pricing model was $.32, or $80,000.

                                       17


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  9 -         STOCKHOLDERS' EQUITY (CONTINUED)

                  STOCK OPTION PLANS (CONTINUED)

                  On March 22, 2002, the Company granted, outside the Company's
                  stock option plans to a director and employee who became its
                  Chief Executive Officer on June 1, 2002, options to purchase
                  1,500,000 shares of its common stock at $1.02. The options
                  vest in four equal quarterly installments starting June 1,
                  2002. These options expire on March 22, 2012.

                  On March 22, 2002, the Company granted its Chief Executive
                  Officer on that date options outside the Company's stock
                  option plans to purchase 100,000 shares of its common stock at
                  $1.02. The options vest immediately and expire on March 22,
                  2012.

                  On March 22, 2002, the Company granted two consultants options
                  outside the Company's stock option plans to purchase 75,000
                  shares of its common stock at $1.02. The options vest
                  immediately and expire on March 22, 2012. The fair value of
                  stock options estimated on the date of grant using the
                  Black-Scholes option pricing model was $1.16, or $87,000.

                  STOCK OPTIONS

                  A summary of the Company's stock option activity and related
                  information follows:

<TABLE>
<CAPTION>
                                                                          Weighted                         Weighted
                                                         In the Plan       Average     Outside the Plan     Average
                                                       Stock Options  Exercise Price     Stock Options  Exercise Price
                                                       -------------  --------------     -------------  --------------

<S>               <C>                                     <C>            <C>               <C>              <C>
                  Outstanding - October 31, 2001            512,250      $   3.92          1,938,750        $   3.96

                  Options granted - 11/01 - 04/30/02:
                     In the Plans                         1,302,500           .42                 --              --
                  Options granted - 11/01 - 04/30/02:
                     Outside the Plans                           --            --          2,425,000             .83
                  Options expired/cancelled:
                     In the Plans                           (28,500)         3.92                 --              --
                     Outside the Plans                           --            --           (120,000)           4.86
                                                        ------------     ---------       ------------       ---------

                  Outstanding - April 30, 2002            1,786,250      $   1.37          4,243,750        $   2.15
                                                        ============     =========       ============       =========

                  Exercisable at April 30:
                     2002                                   633,750      $   1.96          1,604,375        $   3.24
                     2003                                 1,470,938      $   1.33          3,953,230        $   2.03
                     2004                                 1,673,750      $   1.43          4,227,085        $   2.15
                     2005                                 1,786,250      $   1.37          4,243,750        $   2.15
</TABLE>

                  The exercise price for options outstanding as of April 30,
                  2002 ranged from $.39 to $4.40.

                  Had the Company elected to recognize compensation cost based
                  on the fair value of the options at the date of grant, as
                  prescribed by Statement of Financial Accounting Standards No.
                  123, "Accounting for Stock-Based Compensation," net loss as of
                  April 30, 2002 would have been $7,523,395, or $.21 per share.

                                       18


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  9 -         STOCKHOLDERS' EQUITY (CONTINUED)

                  EXPIRED OPTIONS

                  In November 2001, an aggregate of 78,500 options to purchase
                  the Company's common stock held by four former employees of NV
                  Technology, Inc. were terminated. Under the terms of the
                  option agreements with these employees, the options terminated
                  three months after the employees were terminated.

                  In January 2002, the Company cancelled its employment
                  agreement with an Executive Vice President which in turn
                  cancelled 70,000 unvested options.

                  WARRANTS

                  At April 30, 2002, the Company had outstanding warrants to
                  purchase shares of common stock as follows:

<TABLE>
<CAPTION>
                                                    Number of         Exercise         Expiration
                             Grant Date               Shares            Price             Date
                             ----------               ------            -----             ----
<S>                     <C>                          <C>          <C>               <C>
                        June 7, 2000                    50,000     $       7.00     June 7, 2003
                        June 7, 2000                    50,000             8.50     June 7, 2003
                        June 7, 2000                    50,000            10.00     June 7, 2003
                        June 7, 2000                    50,000            11.50     June 7, 2003
                        November 17, 2000            1,000,000             6.00     November 17, 2003
                        November 17, 2000               88,000    Lesser of $6.00   November 17, 2003
                                                                     or 50% of
                                                                   market ($.54
                                                                   at 04/30/02)
                        March 12, 2001                  67,586             5.10     March 12, 2004
                        March 12, 2001                  87,357             4.02     March 12, 2004
                        May 3, 2001                    500,000             2.50     May 3, 2006
                        May 3, 2001                    250,000             5.00     May 3, 2006
                        May 3, 2001                    250,000            10.00     May 3, 2006
                        June 14, 2001                   50,000             2.50     June 14, 2006
                        June 14, 2001                   25,000             5.00     June 14, 2006
                        June 14, 2001                   25,000            10.00     June 14, 2006
                        November 5, 2001               200,000              .51     November 5, 2005

                        February 11, 2002               50,000              .75     February 11, 2004
                        February 11, 2002               50,000             1.25     February 11, 2004
                        February 11, 2002              100,000             1.75     February 11, 2004
                        February 11, 2002              100,000             2.25     February 11, 2004
                                                  -------------    -------------

                                                     3,042,943     $0.20-$11.50     June 7, 2003 - October 1, 2006
                                                  =============    =============

                        Exercisable at
                          April 30, 2002             3,042,943
                                                  =============
</TABLE>

                                       19


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  9 -         STOCKHOLDERS' EQUITY (CONTINUED)

                  WARRANTS EXERCISED

                  During the six months ended April 30, 2002, 2,912,000 warrants
                  were exercised at $.25 per share, totaling $728,000.

                  During March 2002, 1,000,000 warrants were exercised on a
                  cashless basis and the Company issued 736,008 shares of common
                  stock.

NOTE 10 -         COMMITMENTS AND CONTINGENCIES

                  WARRANTS GRANTED

                  On November 5, 2001, the Company granted two companies
                  warrants to purchase 200,000 shares of its common stock at an
                  exercise price of $.51. The warrants vested immediately and
                  expire on November 5, 2005. The fair value of stock warrants
                  estimated on the date of grant using the Black-Scholes option
                  pricing model is $.33, or $66,000.

                  On February 11, 2002, the Company granted a company warrants
                  to purchase 300,000 shares of its common stock at an exercise
                  price ranging from $.75 to $2.25. The fair value of stock
                  warrants estimated on the date of grant using the
                  Black-Scholes option pricing model is $4,500.

                  NET LOSS PER SHARE

                  Securities that could potentially dilute basic earnings per
                  share ("EPS") in the future that were not included in the
                  computation of diluted EPS because to do so would have been
                  anti-dilutive for the periods presented consist of the
                  following:

<TABLE>
<CAPTION>
<S>                      <C>                                                       <C>
                         Warrants to purchase common stock                          3,042,943
                         Options to purchase common stock                           6,030,000
                         Convertible notes payable and accrued interest             1,246,875
                         Series B Preferred stock                                   2,955,556
                                                                                  ------------

                         Total as of April 30, 2002                                13,275,374
                                                                                  ============


</TABLE>

                                       20
<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 10 -         COMMITMENTS AND CONTINGENCIES (CONTINUED)

                  NEW EMPLOYMENT AGREEMENTS

                  On January 1, 2002, the Company entered into a new one-year
                  employment agreement with an Executive Vice President,
                  replacing the Executive Vice President's former employment
                  agreement. Under the terms of the new agreement, the Executive
                  Vice President receives a base salary of $10,417 per month. In
                  addition, the employment agreement provides that the Executive
                  Vice President will receive an annual bonus that will be
                  applied to two promissory notes he made in favor of the
                  Company. The Executive Vice President owed $100,708 under the
                  first promissory note at October 31, 2001. The second note was
                  issued to the Company on January 1, 2002 for $67,631. All
                  options granted and vested to the Executive Vice President
                  under the former agreement were retained (140,000 options) and
                  all unvested options granted under the former agreement were
                  cancelled.

                  On February 25, 2002, the Company entered into a one year
                  employment agreement with its Vice President and Secretary.
                  The agreement provides for the Company to pay a base salary of
                  $13,383.33 per month. The employee may receive an annual bonus
                  to be determined at the sole discretion of the Board of
                  Directors.

                  On March 22, 2002, the Company entered into a new three-year
                  employment agreement with its Chief Executive Officer at the
                  time, Ray Willenberg, Jr. Pursuant to the agreement, Mr.
                  Willenberg continued to serve as the Company's Chief Executive
                  Officer until June 1, 2002, at which time Mr. Willenberg
                  stepped down as CEO and became an Executive Vice President of
                  the Company. In addition, the employment agreement provides
                  for a base salary of $14,583 per month and options to purchase
                  100,000 shares of common stock at $1.02 per share. All options
                  are exercisable immediately and expire ten years from the
                  grant date.

                  On March 22, 2002, the Company entered into a three-year
                  employment agreement with its current Chief Executive Officer,
                  Thomas Cooper. Pursuant to the agreement, Mr. Cooper worked
                  part-time until June 1, 2002, at which time he assumed the
                  role of Chief Executive Officer. The Company agreed to pay a
                  base salary of $10,417 per month prior to June 1, 2002 and
                  $20,833 per month after June 1, 2002. In addition, Mr. Cooper
                  may receive an annual bonus based on his performance as
                  determined at the sole discretion of the Board of Directors.
                  Pursuant to the terms of the agreement, Mr. Cooper was issued
                  options to purchase 1,500,000 shares of the Company's common
                  stock at $1.02 per share. The options vest in twelve equal
                  quarterly installments starting June 1, 2002. These options
                  expire on March 22, 2012.

                                       21


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 10 -         COMMITMENTS AND CONTINGENCIES (CONTINUED)

                  CONSULTING AGREEMENT

                  On February 11, 2002, the Company entered into a one-year
                  consulting agreement for financial communications services,
                  pursuant to which the Company agreed to pay the consultant
                  $10,000 in cash per month. The consulting agreement provides
                  that the Company may terminate the consulting services at any
                  time following 90 consecutive days of representation by the
                  consultant. Pursuant to the agreement, the Company granted the
                  consultant warrants to purchase 300,000 shares of its common
                  stock at exercise prices ranging from $.75 to $2.25. All of
                  the warrants are exercisable immediately, hold piggy-back
                  registration rights and expire two years from the grant date.
                  The fair value of stock options estimated on the date of grant
                  using the Black-Scholes option pricing model is $4,500.

                  On March 22, 2002, the Company entered into a consulting
                  agreement with an individual for advisory services relating to
                  the Company's technology for transmitting high speed data over
                  extended ranges of copper telephone wire. The Company agreed
                  to pay the consultant $15,000 per month and options to
                  purchase 50,000 shares of its common stock at an exercise
                  price of $1.02. All of the options are exercisable immediately
                  and expire ten years from the grant date. The fair value of
                  stock options estimated on the date of grant using the
                  Black-Scholes option pricing model is $1.16, or $58,000.

                  ROYALTY PAYMENTS

                  The Company's projects under development stipulate royalty
                  payments that are based on percentages of revenue.

                  JOINT VENTURE PRODUCTION AGREEMENT

                  In April 2000, the Company entered into a joint venture
                  production agreement to produce a feature length film for
                  theatrical distribution. The Company will provide the funding
                  for the production in the amount of $2,250,000 and, in
                  exchange, will receive a 50% share in all net profits from
                  worldwide distribution and merchandising, after receiving
                  funds equal to its initial investment of up to $2,250,000. The
                  Company's management currently expects to receive revenue from
                  the film in three categories. These categories are upfront
                  distribution licenses, product or title sponsorships, and, of
                  course, box-office ticket sales. Initial revenues are expected
                  late in calendar 2002 or early 2003. The Company has agreed to
                  deposit into a separate account, on a monthly basis, funds to
                  assure a minimum balance of $200,000 at the beginning of each
                  month, until the total of $2,250,000 has been deposited into
                  the account. As of April 30, 2002, the Company has funded
                  approximately $1,980,000 of production and other costs, which
                  was included in projects under development in the accompanying
                  consolidated balance sheet. In addition, approximately
                  $266,000 was funded to purchase camera equipment.

                                       22


<PAGE>

                     NEW VISUAL CORPORATION AND SUBSIDIARIES
            (A DEVELOPMENT-STAGE COMPANY COMMENCING NOVEMBER 1, 1999)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 10 -         COMMITMENTS AND CONTINGENCIES (CONTINUED)

                  LEGAL PROCEEDINGS

                  On February 4, 2002, a lawsuit was filed against the Company
                  by Creditors Adjustment Bureau, Inc., a California
                  corporation, who was allegedly assigned rights to any
                  judgement collected on amounts allegedly owed to Arter &
                  Hadden, LLP, the Company's former legal counsel. The plaintiff
                  seeks damages in the amount of $110,559.86, plus 10% interest,
                  costs of the suit and reasonable attorney's fees. The Company
                  does not believe the resolution of this matter will have a
                  material adverse effect on the Company's financial position or
                  results of operation.

                  On March 20, 2002, Allan L. Blevins and Michael Shepperd,
                  former officers of the Company, filed a lawsuit in California
                  Superior Court against the Company and one of its directors
                  and executive officers, in which Messrs. Blevins and Shepperd
                  contend that the Company breached a February 2000 merger
                  agreement. They also claim that the defendants breached
                  fiduciary duties owed to them and engaged in tortious
                  interference with prospective economic advantage. The claims
                  stem from a dispute regarding three million shares of the
                  Company's common stock issued to Messrs. Blevins and Shepperd
                  under the merger agreement. The plaintiffs seek injunctive and
                  declaratory relief, compensatory and punitive damages, costs
                  and attorney's fees. They also seek to compel arbitration of
                  their claims. The Company intends to vigorously defend this
                  matter and does not believe that resolution of this dispute
                  will have a material adverse effect on its financial condition
                  or results of operations.

NOTE 11 -         SEGMENT INFORMATION

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

                  For the Six Months Ended April 30, 2002:

<TABLE>
<CAPTION>
                                                  Telecommunication   Entertainment      Unallocable
                                                       Business          Business         Expenses        Totals
                                                       --------          --------         --------        ------
<S>                 <C>                            <C>                <C>              <C>             <C>
                    Net Sales                      $          --      $         --     $         --    $        --

                    Operating Loss                 $  (1,278,931)     $         --     $ (3,844,714)   $(5,123,645)

                    Depreciation and
                      Amortization                 $     202,887      $    369,747     $     26,361    $   598,995

                    Interest Expense                          --      $    449,309     $         --    $   449,309

                    Total Identifiable Assets      $   5,769,651      $  2,192,313     $    660,823    $ 8,622,787
</TABLE>

NOTE 12 -         SUBSEQUENT EVENTS

                  On May 21, 2002, the Company entered into five convertible
                  promissory note agreements with various trusts and
                  individuals, totaling $250,000. The Company agreed to pay the
                  principal and an amount equal to 50% of principal sum if the
                  Company reaches certain milestone from the distribution of its
                  motion picture, which is currently in production. The note may
                  be converted at any time, in whole or in part, into that
                  number of fully paid and non-assessable shares of common stock
                  at a conversion price of $1.00.



                                       23
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         The following is a discussion and analysis of our financial condition
and results of operations and should be read in conjunction with the financial
statements and related notes contained in this Form 10-Q. This discussion
contains forward-looking statements that involve risks and uncertainties. You
should exercise extreme caution with respect to all forward-looking statements
in this report. Specifically, the following statements are forward-looking:

                  statements regarding development and deployment of our
                  technology, including without limitation our intended markets,
                  competition and future projects;

                  statements regarding our research and development efforts and
                  expenses;

                  statements regarding our selling, general and administrative
                  expenses;

                  statements regarding our capital resources sufficiency;

                  any statements using the words "anticipate," "believe,"
                  "estimate," "expect," "intend," and similar words; and

                  any statements other than historical fact.

         We believe that it is important to communicate our future expectations
to our shareholders. Forward-looking statements reflect the current view of
management with respect to future events and are subject to numerous, risks,
uncertainties and assumptions, including without limitation the factors listed
below in "Factors You Should Consider Before Investing in New Visual." Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to be
correct or that unforeseen developments will not occur. Should any one or more
of these or other risks or uncertainties materialize, or should any underlying
assumptions prove incorrect, actual results are likely to vary materially from
those described in this report. We undertake no duty to update or revise any
forward-looking statements.

OVERVIEW

         New Visual Corporation is a late development-stage fabless
semiconductor company. By "fabless," we mean that we design and develop
semiconductor chips, but intend to outsource the fabrication of our own
semiconductor chips. We are developing advanced technology to enable data to be
transmitted across copper telephone wire at speeds and over distances that
exceed those offered by other semiconductor companies. We intend to market our
products globally to leading chipmakers and equipment makers in the
telecommunications industry. Our technology is designed to dramatically increase
the capacity of the copper telephone network, allowing telephone companies to
provide data, voice and video services over the existing copper
telecommunications infrastructure - reducing costs, increasing revenue per line,
and reducing or eliminating the need to install fiber optic technology in the
access, or "last mile," portion of the network.

         Currently, we are building an FPGA-based (field programmable gate
array) hardware implementation of our initial product for field testing. We
expect to complete this prototype in the next three or four months and expect to
release a first generation ASIC (application specific integrated circuit) by the
second quarter of 2003.

         During the 2000 fiscal year, we entered into a joint venture to produce
a feature length film for mainstream theatrical release. The film has the
working title STEP INTO LIQUID and is almost completed.


                                       24
<PAGE>

RESULTS OF OPERATIONS

COMPARISON OF THE SIX MONTHS ENDED APRIL 30, 2002 AND 2001


         REVENUES. We are a development-stage company. There were no revenues
for the six months ended April 30, 2002 or the six months ended April 30, 2001.

         OPERATING EXPENSES. Operating expenses included the compensatory
element of stock issuances, research and development expenses, the costs of a
litigation settlement in shares of common stock and selling, general and
administrative expenses. Total operating expenses increased to approximately
$4,151,000 for the six months ended April 30, 2002, from approximately
$2,869,000 for the six months ended April 30, 2001. The increase resulted
primarily from the issuance of common stock for consulting services during the
six month period ended April 30, 2002 of approximately $1,462,000 compared to
$-0- for the six months ended April 30, 2001. In addition, research and
development expenses increased to approximately $1,279,000 during the six month
period ended April 30, 2002 from approximately $662,000 during the six months
ended April 30, 2001 as we increased our technology development activities.
Selling, general and administrative expenses increased from approximately
$1,207,000 for the six months ended April 30, 2001 to approximately $1,410,000
for the six months ended April 30, 2002. These increases were offset by a
decrease in operating expenses related to the costs of a litigation settlement
in shares of common stock in February 2001. We issued 250,000 shares of common
stock valued at $1,000,000 in a February 2001 settlement with Astounding.com,
Inc. and Jack Robinson in connection with certain disputes arising from a
non-consummated merger between us and Astounding.com, Inc.

         OTHER EXPENSES. Other expenses included amortization of unearned
financing costs and interest expense. Total other expenses increased to
approximately $973,000 for the six months ended April 30, 2002 from
approximately $518,000 for the six months ended April 30, 2001.. The increase
was primarily due to an increase in interest expense of approximately $447,000
resulting from the interest component of convertible notes issued during the six
months ended April 30, 2002. In addition, several of these convertible notes
were convertible into common stock at a conversion rate lower than the market
price at the time of issuance of the notes. As a result, there was an additional
charge to amortization of unearned financing costs of approximately $362,000.
The increases in these expenses were offset by a reduction in the costs of
amortization of unearned financing costs of approximately $339,000 in connection
with a long-term debt financing arrangement. During the year ended October, 31,
2001 we paid down long-term debt in connection with this financing arrangement
amounting to $500,000.

COMPARISON OF THE THREE MONTHS ENDED APRIL 30, 2002 AND 2001

         REVENUES. We are a development-stage company. There were no revenues
for the three months ended April 30, 2002 or the three months ended April 30,
2001.

         OPERATING EXPENSES. Operating expenses included the compensatory
element of stock issuances, research and development expenses and selling,
general and administrative expenses. Total operating expenses increased to
approximately $2,448,000 for the three months ended April 30, 2002, from
approximately $971,000 for the three months ended April 30, 2001. The increase
resulted primarily from the issuance of common stock issued for consulting
services during the three month period ended April 30, 2002 of approximately
$760,000 compared to $-0- for the three months ended April 30, 2001. In
addition, research and development expenses increased by approximately $650,000
to approximately $950,000 for the three month period ended April 30, 2002 as we
increased our technology development activities. Also, selling, general and
administrative expenses increased by approximately $67,000 to approximately
$738,000 for the three months ended April 30, 2002.

         OTHER EXPENSES. Other expenses included amortization of unearned
financing costs and interest expense. Total other expenses increased to
approximately $734,000 for the three months ended April 30, 2002 from
approximately $261,000 for the three months ended April 30, 2001. The increase
was principally due to an increase in interest expense of approximately $291,000
resulting from the interest component of convertible notes issued during the
three months ended April 30, 2002. In addition, several of these convertible
notes were convertible into common stock at a conversion rate lower than the
market price at the time of issuance of the notes. As a result, there was an
additional charge to amortization of unearned financing costs of approximately
$362,000. The increases in these expenses were offset by a reduction in the
costs of amortization of unearned financing costs of approximately $169,000 in
connection with a long-term debt financing arrangement. During the year ended
October, 31, 2001 we paid down long-term debt in connection with this financing
arrangement amounting to $500,000.

                                       25
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Net cash used in operating activities was approximately $3,098,000 and
$2,443,000 for the six months ended April 30, 2002 and April 30, 2001,
respectively. Cash balances totaled approximately $354,000 and $295,000 as of
April 30, 2002 and October 31, 2001, respectively.

         Operations have been financed principally through sales of common
stock, related the exercise of warrants to purchase common stock, loans and the
issuance of convertible notes payable. Net proceeds from financing activities
amounted to approximately $3,410,000 for the six months ended April 30, 2002,
including sales of common stock of approximately $1,789,000, exercise of
warrants of approximately $728,000 and the issuance of convertible notes payable
of approximately $894,000. Net proceeds from financing activities amounted to
approximately $2,315,000 for the six months ended April 30, 2001 and was solely
the result of issuances of common stock.

         Stock was issued in payment of expenses amounting to approximately
$1,462,000 for the six month period ended April 30, 2002 and in settlement of
litigation in the amount of $1,000,000 during the six months ended April 30,
2001.

         In April 2000, we entered into a joint venture production agreement to
produce a feature length film for theatrical distribution. Under the agreement,
we are providing the funding for the production in the amount of $2,250,000 and,
in exchange, we will receive a 50% share in all net profits from worldwide
distribution and merchandising, after receiving funds equal to our initial
investment of up to $2,250,000. As of April 30, 2002, we had funded
approximately $2,246,000 of the production costs towards this project, which
included the purchase of camera equipment of approximately $266,000.

         Research and development expenses totaled approximately $1,279,000 and
$662,000 for the six months ended April 30, 2002 and the six months ended April
30, 2001, respectively.

         During the six months ended April 30, 2002, we issued convertible notes
totaling $893,750. We agreed to pay the principal and an amount equal to 50% of
the principal if certain milestones are reached from the distribution of the
feature length film currently in production. Because several of the notes were
convertible into common stock at a conversion rate lower than the market price
at the time of issuance of the notes, additional expense was recorded in the
approximate amount of $362,000. The notes are convertible at any time, in whole
or in part, into shares of common stock at conversion prices ranging from $0.40
to $0.70 per share. In March 2002, thirteen convertible notes were converted
into 3,797,322 shares of our common stock, resulting in the cancellation of
$1,756,875 in principal and interest that would have been outstanding under the
notes.

         In June 2000, we entered into five long-term credit facilities,
pursuant to which we borrowed $750,000. We repaid $500,000 of these borrowings
during fiscal 2001. The remaining principal and interest at 6% per year will be
due in June 2003.

         In April 2002, we entered into an agreement with Adaptive Networks,
Inc. for development services relating to our FPGA-based prototype. We agreed to
pay Adaptive an aggregate of $1,559,000 for these services.

         In April 2002, we issued 3,192 shares of Series B Preferred Stock to
Zaiq Technologies, Inc. in connection with our purchase of a receivable due to
Zaiq from Adaptive Networks, Inc. We then forgave the receivable as partial
payment for a worldwide, perpetual technology license from Adaptive. We must
offer to redeem all of the Series B Preferred Stock if we close a corporate
transaction resulting in a change of control or a financing transaction of at
least $15 million. If we close a financing transaction of at least $3 million
but less than $15 million, we must offer to redeem a portion of the Series B
Preferred Stock based on a fraction, the numerator of which is the cash proceeds
we receive in the financing transaction and the denominator of which is $15
million. We are also required to offer to redeem the outstanding Series B
Preferred Stock in eight equal quarterly payments beginning March 31, 2005 and
ending December 31, 2006.

                                       26
<PAGE>

         Management believes funds on hand and available sources of financing
will enable the Company to meet its liquidity needs for at least the next three
months. Additional cash, however, must be raised in order to continue to meet
liquidity needs, satisfy the Company's proposed business plan and expand
operations. Management is presently investigating potential financing
transactions that it believes can provide additional cash for operations and be
profitable in both the short and long-term. Management also intends to attempt
to raise funds through private sales of common stock and borrowings. Although
management believes these efforts will enable the Company to meet liquidity
needs in the future, there can be no assurance that these efforts will be
successful.

GOING CONCERN CONSIDERATION

         We have continued losses in each of our years of operation, negative
cash flow and liquidity problems. These conditions raise substantial doubt about
our ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments relating to the
recoverability of reported assets or liabilities should we be unable to continue
as a going concern.

         We have been able to continue based upon our receipt of funds from the
issuance of equity securities and borrowings, and by acquiring assets or paying
expenses by issuing stock. Our continued existence is dependent upon our
continued ability to raise funds through the issuance of our securities or
borrowings, and our ability to acquire assets or satisfy liabilities by the
issuance of stock. Management's plans in this regard are to obtain other debt
and equity financing until profitable operation and positive cash flow are
achieved and maintained. Although management believes, based on the fact that it
raised approximately $10,365,000 through sales of common stock and $2,266,000
from borrowings from November 1, 1999 through April 30, 2002, that it will be
able to secure suitable additional financing for the company's operations, there
can be no guarantee that such financing will continue to be available on
reasonable terms, or at all.

FACTORS YOU SHOULD CONSIDER BEFORE INVESTING IN NEW VISUAL

         Our company is subject to a number of risks. You should carefully
consider all of these risks and the other information in this report before
investing in our securities. As a result of these risks, our business, financial
condition or results of operations could be materially adversely affected. This
could cause the trading price of our securities to decline and you could lose
part or all of your investment.

THE GENERAL ECONOMIC SLOWDOWN, AND SLOWDOWN IN SPENDING IN THE
TELECOMMUNICATIONS INDUSTRY SPECIFICALLY, MAY ADVERSELY AFFECT OUR BUSINESS AND
OPERATING RESULTS.

         The worldwide telecommunications industry has experienced and may
continue to experience further reductions in component inventory levels and
equipment production volumes and delays in the build-out of new infrastructure.
This slowdown has resulted in a decrease in spending on data equipment by
service providers and lower-than-expected sales volume for data equipment
manufacturers. If any of these trends continue, it could result in lower than
expected demand for our products under development and could have a material
adverse effect on our revenues and results of operations generally and cause the
market price of our common stock to decline.

OUR OPERATING RESULTS MAY VARY SIGNIFICANTLY DUE TO THE CYCLICALITY OF THE
SEMICONDUCTOR INDUSTRY. ANY SUCH VARIATIONS COULD ADVERSELY AFFECT THE MARKET
PRICE OF OUR COMMON STOCK.

         We operate in the semiconductor industry, which is cyclical and subject
to rapid technological change. Recently, the semiconductor industry has
experienced significant downturns characterized by diminished product demand,
accelerated erosion of prices and excess production capacity. The current
downturn and future downturns in the semiconductor industry may be severe and
prolonged. Future downturns in the semiconductor industry, or any failure of
this industry to fully recover from its recent downturn, could seriously impact
our revenues and harm our business, financial condition and results of
operations. This industry also periodically experiences increased demand and
production capacity constraints, which may affect our ability to ship products
in future periods. Accordingly, our quarterly results may vary significantly as
a result of the general conditions in the semiconductor industry, which could
cause our stock price to decline.

                                       27
<PAGE>

BECAUSE WE HAVE NOT YET BEGUN TO SELL OUR PRODUCTS, WE CANNOT BE SURE THAT WE
CAN SUCCESSFULLY IMPLEMENT OUR BUSINESS STRATEGY.

         We have not yet begun to sell the products we are developing, and
therefore have not generated any revenues from our fabless semiconductor
business. As a result, we have no historical financial data that can be used in
evaluating our business prospects and in projecting future operating results.
For example, we cannot forecast operating expenses based on our historical
results, and we are instead required to forecast expenses based in part on
future revenue projections. In addition, our ability to accurately forecast our
revenue going forward is limited.

         You must consider our prospects in light of the risks, expenses and
difficulties we might encounter because we are at an early stage of development
in a new and rapidly evolving market. Many of these risks are described under
the sub-headings below. We may not successfully address any or all of these
risks and our business strategy may not be successful.

WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT.

         Since inception, we have incurred significant operating losses. We
incurred operating losses of $4,151,024, $9,492,584 and $12,289,669 for the six
months ending April 30, 2002 and the years ending October 31, 2001 and 2000,
respectively. As of April 30, 2002, we had an accumulated deficit of
$42,024,909. We cannot assure you that we will achieve or sustain profitability
or that our operating losses will not increase in the future. If we do achieve
profitability, we cannot be certain that we can sustain or increase
profitability on a quarterly or annual basis in the future. We expect to expend
substantial financial resources on research and development, engineering,
manufacturing, marketing, sales and administration as we continue to develop and
begin to deploy our products. These expenditures will necessarily precede the
realization of substantial revenues from sales of our products, which may result
in future operating losses.

WE WILL NEED ADDITIONAL CAPITAL FINANCING IN THE FUTURE.

         We anticipate that our available sources of financing will be
sufficient to fund our current level of operations and capital requirements for
at least the next three months. Thereafter, implementation of our business plan,
or acceleration of such implementation, is likely to require funds not currently
available to us. We also may be required to seek additional financing in the
future to respond to increased expenses or shortfalls in anticipated revenues,
accelerate product development and deployment, respond to competitive pressures,
develop new or enhanced products, or take advantage of unanticipated acquisition
opportunities. We cannot be certain we will be able to find such additional
financing on reasonable terms, or at all. If we are unable to obtain additional
financing when needed, we could be required to modify our business plan in
accordance with the extent of available financing. We also may not be able to
accelerate the development and deployment of our products, respond to
competitive pressures, develop or enhance our products or take advantage of
unanticipated acquisition opportunities.

BECAUSE WE WILL DEPEND ON THIRD PARTIES TO MANUFACTURE, ASSEMBLE AND TEST OUR
PRODUCTS, WE MAY EXPERIENCE DELAYS IN RECEIVING SEMICONDUCTOR DEVICES.

         We do not own or operate a semiconductor fabrication facility. Rather,
our semiconductor devices will be manufactured at independent foundries. We
intend to rely solely on third-party foundries and other specialist suppliers
for all of our manufacturing, assembly and testing requirements. However, these
parties may not be obligated to supply products to us for any specific period,
in any specific quantity or at any specific price, except as may be provided in
a particular purchase order that has been accepted by one of them. As a result,
we will not directly control semiconductor delivery schedules, which could lead
to product shortages, poor quality and increases in the costs of our products.
In addition, we may experience delays in receiving semiconductor devices from
foundries due to foundry scheduling and process problems. We cannot be sure that
we will be able to obtain semiconductors within the time frames and in the
volumes required by us at an affordable cost or at all. Any disruption in the
availability of semiconductors or any problems associated with the delivery,
quality or cost of the fabrication assembly and testing of our products could
significantly hinder our ability to deliver our products to our customers and
may result in a decrease in sales of our products.

                                       28
<PAGE>

WE MAY INCUR SUBSTANTIAL EXPENSES DEVELOPING PRODUCTS BEFORE WE EARN ASSOCIATED
NET REVENUES AND MAY NOT ULTIMATELY SELL A LARGE VOLUME OF OUR PRODUCTS.

         We are developing products based on forecasts of demand and will incur
substantial product development expenditures prior to generating associated net
revenues. We will receive limited orders for products during the period that
potential customers test and evaluate our products. This test and evaluation
period typically lasts from three to six months or longer, and volume production
of the equipment manufacturer's product that incorporates our products typically
would not begin until this test and evaluation period has been completed. As a
result, a significant period of time may lapse between our product development
and sales efforts and the realization of revenues from volume ordering of
products by customers. In addition, achieving a design win with a customer does
not necessarily mean that this customer will order large volumes of our
products. A design win is not a binding commitment by a customer to purchase
products. Rather, it is a decision by a customer to use our products in the
design process of that customer's products. A customer can choose at any time to
discontinue using our products in that customer's designs or product development
efforts. Even if our products are chosen to be incorporated into a customer's
products, we may still not realize significant net revenues from that customer
if that customer's products are not commercially successful.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS OR MAY BE SUED BY
THIRD PARTIES FOR INFRINGEMENT OF THEIR PROPRIETARY RIGHTS.

         Our success depends significantly on our ability to obtain and maintain
patent, trademark and copyright protection for our intellectual property, to
preserve our trade secrets and to operate without infringing the proprietary
rights of third parties. If we are not adequately protected, our competitors
could use the intellectual property that we have developed to enhance their
products and services, which could harm our business.

         We will rely on patent protection, as well as a combination of
copyright and trademark laws, trade secrets, confidentiality provisions and
other contractual provisions, to protect our proprietary rights, but these legal
means afford only limited protection. Despite any measures taken to protect our
intellectual property, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as proprietary. In
addition, the laws of some foreign countries may not protect our proprietary
rights as fully as do the laws of the United States. If we litigated to enforce
our rights, it would be expensive, divert management resources and may not be
adequate to protect our intellectual property rights.

         The telecommunications industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of trade
secret, copyright or patent infringement. We may inadvertently infringe a patent
of which we are unaware. In addition, because patent applications can take many
years to issue, there may be a patent application now pending of which we are
unaware that will cause us to be infringing when it is issued in the future.
Although we are not currently involved in any intellectual property litigation,
we may be a party to litigation in the future to protect our intellectual
property or as a result of our alleged infringement of another's intellectual
property, forcing us to do one or more of the following:

         o        Cease selling, incorporating or using products or services
                  that incorporate the challenged intellectual property;

         o        Obtain from the holder of the infringed intellectual property
                  right a license to sell or use the relevant technology, which
                  license may not be available on reasonable terms; or

         o        Redesign those products or services that incorporate such
                  technology.

         A successful claim of infringement against us, and our failure to
license the same or similar technology, could adversely effect our business,
asset value or stock value. Infringement claims, with or without merit, would be
expensive to litigate or settle, and would divert management resources.

                                       29
<PAGE>

OUR MARKET IS HIGHLY COMPETITIVE AND OUR PRODUCTS, TECHNOLOGY AND BUSINESS MAY
NOT BE ABLE TO COMPETE EFFECTIVELY WITH OTHER PRODUCTS OR TECHNOLOGIES.

         The markets for semiconductors and other high-speed telecommunications
products are highly competitive, and we expect that they will become
increasingly competitive in the future. Our potential competitors operate their
own fabrication facilities, have longer operating histories and possess
substantially greater name recognition, financial, sales and marketing,
manufacturing, technical, personnel, and other resources than we have. As a
result, these competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements. They may also be able to
devote greater resources to the promotion and sale of their products. We will
compete with numerous companies with well-established reputations in the
broadband telecommunications industry, such as GlobespanVirata, Alcatel,
PMC-Sierra, Texas Instruments, Infineon Technologies, Motorola and Broadcom. In
all of our target markets, we also may face competition from newly established
competitors, suppliers of products based on new or emerging technologies, and
customers who choose to develop their own silicon solutions. We also expect to
encounter further consolidation in markets in which we compete. Although we
believe we will be able to compete based on the special features of our
products, our products will incorporate new concepts and may not be successful
even if they are superior to those of our competitors.

         In addition to facing competition from the above-mentioned suppliers,
our products will compete with products using other broadband technologies, such
as cable modems, wireless, satellite and fiber optic telecommunications
technology. Commercial acceptance of any one of these competing solutions, or
new technologies, could decrease demand for our products. We cannot assure you
that we will be able to compete successfully or that competitive pressures will
not materially and adversely affect our business, financial condition and
results of operations.

WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES IN THE SEMICONDUCTOR INDUSTRY
AND BROADBAND COMMUNICATIONS MARKET IN ORDER TO REMAIN COMPETITIVE.

         Our future success will depend on our ability to anticipate and adapt
to changes in technology and industry standards. We will also need to develop
and introduce new and enhanced products to meet our customers' changing demands.
The semiconductor industry and broadband communications market are characterized
by rapidly changing technology, evolving industry standards, frequent new
product introductions and short product life cycles. In addition, this industry
and market continues to undergo rapid growth and consolidation. A continued
slowdown in the seminconductor industry or other broadband communications
markets could materially and adversely affect our business, financial condition
and results of operations. Our success will also depend on the ability of our
future customers to develop new products and enhance existing products for the
broadband communications markets and to introduce and promote those products
successfully. The broadband communications markets may not continue to develop
to the extent or in the timeframes that we anticipate. If new markets do not
develop as we anticipate, or if upon their deployment our products do not gain
widespread acceptance in these markets, our business, financial condition and
results of operations could be materially and adversely affected.

BECAUSE OUR BUSINESS IS DEPENDENT UPON THE BROAD DEPLOYMENT OF DATA SERVICES BY
TELECOMMUNICATIONS SERVICE PROVIDERS, WE MAY NOT BE ABLE TO GENERATE SUBSTANTIAL
SALES OF OUR PRODUCTS IF SUCH DEPLOYMENT DOES NOT OCCUR.

         Our products will be incorporated in equipment that is targeted at
end-users of data services offered by wireline telecommunications carriers.
Consequently, the success of our products depends upon the decision by
telecommunications service providers to broadly deploy data technologies and the
timing of such deployment. If service providers do not offer data services on a
timely basis, or if there are technical difficulties with the deployment of
these services, sales of our products would be adversely affected, which would
have a negative effect on our results of operations. Factors that may impact
data deployment include:

         o        a prolonged approval process, including laboratory tests,
                  technical trials, marketing trials, initial commercial
                  deployment and full commercial deployment;

         o        the development of a viable business model for data services,
                  including the capability to market, sell, install and maintain
                  data services;

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<PAGE>

         o        cost constraints, such as installation costs and space and
                  power requirements at the telecommunications service
                  provider's central office;

         o        evolving industry standards; and

         o        government regulation.

THE COMPLEXITY OF OUR PRODUCTS COULD RESULT IN UNFORESEEN DELAYS OR EXPENSE AND
IN UNDETECTED DEFECTS, WHICH COULD ADVERSELY AFFECT THE MARKET ACCEPTANCE OF NEW
PRODUCTS AND DAMAGE OUR REPUTATION WITH PROSPECTIVE CUSTOMERS.

         Highly complex products such as the semiconductors that we will offer
frequently contain defects and bugs when they are first introduced or as new
versions are released. If our products contain defects, or have reliability,
quality or compatibility problems, our reputation may be damaged and customers
may be reluctant to buy our semiconductors, which could materially and adversely
affect our ability to retain existing customers or attract new customers. In
addition, these defects could interrupt or delay sales to our customers. In
order to alleviate these problems, we may have to invest significant capital and
other resources. Although our products will be tested by our suppliers, our
customers and ourselves, it is possible that these tests will fail to uncover
defects. If any of these problems are not found until after we have commenced
commercial production of our products, we may be required to incur additional
development costs and product recall, repair or replacement costs. These
problems may also result in claims against us by our customers or others. In
addition, these problems may divert our technical and other resources from other
development efforts. Moreover, we would likely lose, or experience a delay in,
market acceptance of the affected product, and we could lose credibility with
our prospective customers.

IF LEADING EQUIPMENT MANUFACTURERS DO NOT INCORPORATE OUR PRODUCTS INTO
SUCCESSFUL PRODUCTS, SALES OF OUR PRODUCTS WILL SIGNIFICANTLY DECLINE.

         Our products will not be sold directly to the end-user; rather, they
will be components of other products. As a result, we must rely upon equipment
manufacturers to design our products into their equipment. We must further rely
on this equipment to be successful. If equipment that incorporates our products
is not accepted in the marketplace, we may not achieve adequate sales volume of
products, which would have a negative effect on our results of operations.
Accordingly, we must correctly anticipate the price, performance and
functionality requirements of these data equipment manufacturers. We must also
successfully develop products that meet these requirements and make such
products available on a timely basis and in sufficient quantities. Further, if
there is consolidation in the data equipment manufacturing industry, or if a
small number of data equipment manufacturers otherwise dominate the market for
data equipment, then our success will depend upon our ability to establish and
maintain relationships with these market leaders. If we do not anticipate trends
in the market for products enabling the digital transmission of data, voice and
video to homes and business enterprises over existing copper wire telephone
lines and meet the requirements of equipment manufacturers, or if we do not
successfully establish and maintain relationships with leading data equipment
manufacturers, then our business, financial condition and results of operations
will be seriously harmed.

WE CANNOT PREDICT THE EFFECT FUTURE SALES OF OUR COMMON STOCK WILL HAVE ON THE
MARKET PRICE OF OUR COMMON STOCK.

         We cannot predict the effect, if any, that future sales of our common
stock will have on the market price of our common stock prevailing from time to
time. Sales of substantial amounts of common stock or the perception that such
sales could occur may adversely affect prevailing market prices for our common
stock.

OUR STOCK PRICE MAY BE VOLATILE.

         The market price of our common stock will likely fluctuate
significantly in response to the following factors, some of which are beyond our
control:

         o        Variations in our quarterly operating results;


                                       31
<PAGE>

         o        Changes in financial estimates of our revenues and operating
                  results by securities analysts;

         o        Changes in market valuations of telecommunications equipment
                  companies;

         o        Announcements by us of significant contracts, acquisitions,
                  strategic partnerships, joint ventures or capital commitments;

         o        Additions or departures of key personnel;

         o        Future sales of our common stock;

         o        Stock market price and volume fluctuations attributable to
                  inconsistent trading volume levels of our stock;

         o        Commencement of or involvement in litigation; and

         o        Announcements by us or our competitors of technological
                  innovations or new products.

         In addition, the equity markets have experienced volatility that has
particularly effected the market prices of equity securities issued by high
technology companies and that often has been unrelated or disproportionate to
the operating results of those companies. These broad market fluctuations may
adversely effect the market price of our common stock.

WE DO NOT ANTICIPATE PAYING ANY DIVIDENDS ON OUR COMMON STOCK.

         We have not paid any dividends on our common stock since our inception
and do not anticipate paying any dividends on our common stock in the
foreseeable future. Instead, we intend to retain any future earnings for use in
the operation and expansion of our business.

BECAUSE WE ARE SUBJECT TO SEC REGULATIONS RELATING TO LOW-PRICED STOCKS, THE
MARKET FOR OUR COMMON STOCK COULD BE ADVERSELY EFFECTED.

         The Securities and Exchange Commission has adopted regulations
concerning low-priced (or "penny") stocks. The regulations generally define
"penny stock" to be any equity security that has a market price less than $5.00
per share, subject to certain exceptions. If our shares continue to be offered
at a market price less than $5.00 per share, and do not qualify for any
exemption from the penny stock regulations, our shares will continue to be
subject to these additional regulations relating to low-priced stocks.

         The penny stock regulations require that broker-dealers who recommend
penny stocks to persons other than institutional accredited investors make a
special suitability determination for the purchaser, receive the purchaser's
written agreement to the transaction prior to the sale and provide the purchaser
with risk disclosure documents that identify risks associated with investing in
penny stocks. Furthermore, the broker-dealer must obtain a signed and dated
acknowledgment from the purchaser demonstrating that the purchaser has actually
received the required risk disclosure document before effecting a transaction in
penny stock. These requirements have historically resulted in reducing the level
of trading activity in securities that become subject to the penny stock rules.

         The additional burdens imposed upon broker-dealers by these penny stock
requirements may discourage broker-dealers from effecting transactions in the
common stock, which could severely limit the market liquidity of our common
stock and our shareholders' ability to sell our common stock in the secondary
market.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         There have been no material changes to the Company's market risk for
the three months ended April 30, 2002. See the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 2001 for additional discussions
regarding quantitative and qualitative disclosures about market risk.


                                       32
<PAGE>


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         On March 20, 2002, Allan L. Blevins and Michael Shepperd, former
officers of the Company, filed a lawsuit in California Superior Court against us
and Ray Willenberg, our Chairman and an executive officer, in which Messrs.
Blevins and Shepperd contend that we breached a February 2000 merger agreement
we entered into with them. They also claim that the defendants breached
fiduciary duties owed to them and engaged in tortious interference with
prospective economic advantage. The claims stem from a dispute regarding three
million shares of our common stock issued to Messrs. Blevins and Shepperd under
the merger agreement. The plaintiffs seek injunctive and declaratory relief,
compensatory and punitive damages, costs and attorney's fees. They also seek to
compel arbitration of their claims. We intend to vigorously defend this matter
and do not believe that resolution of this dispute will have a material adverse
effect on our financial condition or results of operations.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

(b) In April 2002, the Board of Directors filed a Certificate of Designation
with the Utah Secretary of State designating 4,000 shares of Series B Preferred
Stock. On April 17, 2002, we issued 3,192 shares of Series B Preferred Stock,
with a stated value of $3,192,000, to Zaiq Technologies, Inc. The creation and
issuance of the Series B Preferred Stock could have a material impact upon the
rights of the holders of our registered securities because holders of Series B
Preferred Stock are entitled to (i) receive dividends, if, as and when declared
in preference to the holders of our common stock and of any other stock ranking
junior to the Series B Preferred Stock with respect to dividends, (ii) share pro
rata (based on the aggregate liquidation preference) in any dividend, redemption
or other distribution made to holders of any other series of our preferred stock
and (ii) a liquidation preference of $1,000 per share, plus an amount equal to
the amount of all dividends declared and unpaid on each share, before any
distribution is made to the holders of our common stock or any other stock that
ranks junior to the Series B Preferred Stock. Furthermore, we may not declare or
pay any dividend or make any distribution on our common stock unless a dividend
of at least two times the dividend paid on the common stock is also paid on the
Series B Preferred Stock.

(c) During the three months ended April 30, 2002, we issued unregistered
securities as follows:

         1.       In February 2002, we:
                  o   issued an aggregate of 1,261,946 restricted shares of
                      common stock to nine individuals who purchased common
                      stock in a private placement completed in March 2001 and
                      contended that they were entitled to receive these
                      additional shares in connection with their initial
                      purchase agreements. We reached an amicable resolution of
                      the matter and received a full and complete release from
                      each investor;
                  o   sold an aggregate of 504,000 shares of common stock to 10
                      investors for aggregate proceeds of $126,000;
                  o   issued 150,000 shares of common stock, valued at $69,000,
                      to one individual in connection with services provided to
                      us; and
                  o   sold 10,000 shares of common stock to one investor for
                      aggregate proceeds of $3,400.

         2.       In March 2002, we:
                  o   sold an aggregate of 4,102,031 shares of common stock to
                      20 investors for total proceeds of $1,204,246; o issued an
                      aggregate of 485,000 shares of common stock to two
                      executive officers of the Company in consideration of past
                      services rendered;
                  o   issued a restricted stock award of 500,000 shares of
                      common stock, a portion of which is subject to risk of
                      forfeiture, to an executive officer in consideration of
                      his services for us;
                  o   issued 736,008 shares of common stock upon the cashless
                      exercise of a warrant issued to a consultant for services
                      rendered to us;
                  o   issued 156,250 shares of common stock, valued at $62,500,
                      to an individual in connection with services rendered to
                      us;

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<PAGE>

                  o   issued a total of 2,571,875 shares of common stock upon
                      the conversion of convertible notes held by 7 investors,
                      resulting in the cancellation of $1,128,750 in principal
                      and interest that would have been outstanding under the
                      notes.

         3.       In April 2002, we:

                  o   sold a total of 107,958 shares of common stock to 6
                      investors for total proceeds of $91,575; o issued a total
                      of 1,225,447 shares of common stock upon conversion of
                      convertible promissory notes held by 6 investors,
                      resulting in the cancellation of $628,125 in principal and
                      interest that would have been outstanding under the notes;
                  o   issued 3,192 shares of Series B Preferred Stock valued at
                      $3,192,000 to Zaiq Technologies, Inc. to purchase a
                      receivable due to Zaiq from Adaptive Networks, Inc. We
                      then forgave the receivable as partial payment for the
                      license we acquired from Adaptive Networks on April 17,
                      2002; and
                  o   issued a total of 624,480 shares of common stock valued at
                      $750,000 to TLSI, Inc. to purchase a receivable due to
                      TLSI from Adaptive Networks, Inc. We then forgave the
                      receivable as partial payment for the license we acquired
                      from Adaptive Networks on April 17, 2002.

         4.       Following the quarter ended April 30, 2002, during May 2002,
                  we:
                  o   issued 9,500 shares of common stock to one individual for
                      services rendered;
                  o   issued 234,375 shares of common stock upon conversion of a
                      convertible note held by one investor, resulting in the
                      cancellation of $93,750 in principal and interest that
                      would have been outstanding under the note;
                  o   sold 84,337 shares of common stock to one investor for
                      total proceeds of $70,000; and
                  o   issued an aggregate of $250,000 principal amount of
                      convertible promissory notes to five investors, which
                      notes are convertible into our common stock at a
                      conversion price of $1.00 per share.

         All of the securities issued in the transactions described above were
issued without registration under the Securities Act in reliance upon the
exemption provided in Section 4(2) of such Securities Act. The recipients of
securities in each such transaction acquired the securities for investment only
and not with a view to or for sale in connection with any distribution thereof
and appropriate legends were affixed to the share certificates issued in such
transactions. The Company believes the recipients were all "accredited
investors" within the meaning of Rule 501(a) of Regulation D under the
Securities Act, or had such knowledge and experience in financial and business
matters as to be able to evaluate the merits and risks of an investment in its
common stock. All recipients had adequate access, through their relationships
with the Company and its officers and directors, to information about the
Company. None of the transactions described above involved general solicitation
or advertising.

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

(a)      Exhibits:

         Exhibit      Description
         -------      -----------

         3.1          Certificate of Designation of Series B Preferred Stock.*

         10.1         Warrant Agreement dated February 11, 2002, by and between
                      New Visual Corporation and Elite Financial Communications,
                      LLC (incorporated by reference to Exhibit 10.6 of the
                      Company's Quarterly Report on Form 10-Q for the period
                      ended January 31, 2002 (the "January 2002 10-Q")).

         10.2         Stock Option Agreement dated February 25, 2002, by and
                      between New Visual Corporation and Ray Willenberg, Jr.
                      (incorporated by reference to Exhibit 10.7 of the January
                      2002 10-Q).

         10.3         Stock Option Agreement dated February 25, 2002, by and
                      between New Visual Corporation and C. Rich Wilson III
                      (incorporated by reference to Exhibit 10.8 of the January
                      2002 10-Q).

         10.4         Stock Option Agreement dated February 25, 2002, by and
                      between New Visual Corporation and Ivan Berkowitz
                      (incorporated by reference to Exhibit 10.9 of the January
                      2002 10-Q).

         10.5         Stock Option Agreement dated February 25, 2002, by and
                      between New Visual Corporation and Bruce Brown
                      (incorporated by reference to Exhibit 10.10 of the January
                      2002 10-Q).


                                       34
<PAGE>

         10.6         Employment Agreement dated February 25, 2002, by and
                      between New Visual Corporation and C. Rich Wilson III
                      (incorporated by reference to Exhibit 10.11 of the January
                      2002 10-Q)

         10.7         Restricted Stock Award Agreement dated as of February 25,
                      2002, by and between New Visual Corporation and John
                      Howell (incorporated by reference to Exhibit 10.12 of the
                      January 2002 10-Q).

         10.8         Consulting Agreement dated February 26, 2002, by and
                      between New Visual Corporation and Thomas J. Cooper
                      (incorporated by reference to Exhibit 10.13 of the January
                      2002 10-Q).

         10.9         Stock Option Agreement dated February 26, 2002, by and
                      between New Visual Corporation and Thomas J. Cooper
                      (incorporated by reference to Exhibit 10.14 the January
                      2002 10-Q).

         10.10        Employment Agreement dated March 22, 2002, by and between
                      New Visual Corporation and Thomas J. Cooper.*

         10.11        Stock Option Agreement dated March 22, 2002, by and
                      between New Visual Corporation and Thomas J. Cooper.*

         10.12        Employment Agreement dated March 22, 2002, by and between
                      New Visual Corporation and Ray Willenberg, Jr.*

         10.13        Stock Option Agreement dated March 22, 2002, by and
                      between New Visual Corporation and Ray Willenberg, Jr.*

         10.14        Stock Option Agreement dated March 22, 2002, by and
                      between New Visual Corporation and Brad Ketch.*

         10.15        Development and License Agreement dated as of April 17,
                      2002, by and between Adaptive Networks, Inc. and New
                      Visual Corporation.* (Confidential treatment has been
                      requested with respect to certain portions of this
                      exhibit. Omitted portions have been filed separately with
                      the Commission.)

         10.16        Right of First Refusal, Credit of Payments and Revenue
                      Sharing Agreement dated as of April 17, 2002, by and among
                      New Visual Corporation, Adaptive Networks and Certain
                      Shareholders of Adaptive Networks, Inc.*

         10.17        Receivables Purchase and Stock Transfer Restriction
                      Agreement dated as of April 17, 2002, by and among New
                      Visual Corporation, Zaiq Technologies, Inc. and Adaptive
                      Networks, Inc.*

         10.18        Receivables Purchase and Stock Transfer Restriction
                      Agreement dated as of April 17, 2002, by and among New
                      Visual Corporation, TLSI, Inc. and Adaptive Networks,
                      Inc.*

         10.19        Consulting Agreement dated February 22, 2002, by and
                      between New Visual Corporation and Bruce McLeod.*


         *  Filed herewith.

(b)      Reports on Form 8-K:

         Form 8-K dated March 14, 2002, was filed pursuant to Item 5 (Other
Events).


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<PAGE>

                                   SIGNATURES

         Pursuant to the requirements 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.

                                    NEW VISUAL CORPORATION
                                    (Registrant)


Dated:   June 14, 2002              By:  /s/ THOMAS J. COOPER
                                    --------------------------------------------
                                    THOMAS J. COOPER
                                    Chief Executive Officer
                                    (PRINCIPAL EXECUTIVE OFFICER)


Dated:   June 14, 2002              By:  /s/ THOMAS J. SWEENEY
                                    --------------------------------------------
                                    THOMAS J. SWEENEY
                                    Chief Financial Officer
                                    (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)