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[Amend]Current report pursuant to Section 13 or 15(d)

8-K/A


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                   FORM 8-K/A

                                (Amendment No. 3)

                                 CURRENT REPORT


                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934


Date of Report (Date of Earliest Event Reported):                 April 3, 2003



                      FRONTLINE COMMUNICATIONS CORPORATION
             (Exact name of registrant as specified in its charter)


           Delaware                     001-15673                13-3950283
(State or other jurisdiction of        (Commission           (I.R.S. Employer
        incorporation)                 File Number)          Identification No.)



             One Blue Hill Plaza, Pearl River, New York        10965
               (Address of principal executive offices)      (Zip Code)

Registrant's telephone number, including area code:    (845) 623-8553



           Former name or former address, if changed since last report







Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. The following financial statements and pro forma financial information omitted from the Company's Reports on Form 8-K for the event dated April 3, 2003 filed with the Commission on April 18, 2003 and May 6, 2003 in reliance upon instructions 7(a) (4) and 7(b)(2) of Form 8-K, are filed herewith. (a) Financial Statements of Business Acquired. Financial Statements of Proyecciones y Ventas Organizadas, S.A. de C.V, as of December 31, 2002 and 2001. (i) Report of Independent Auditors. (ii) Financial Statements as of December 31, 2002 and 2001 and for the years ended December 31, 2002 and 2001. (b) Pro Forma Financial Information. Unaudited Pro Forma Condensed Combined Financial Information for Proyecciones y Ventas Organizadas, S.A. de C.V and Frontline Communications Corporation . (i) Introduction (ii) Pro Forma Combined Balance Sheet as of December 31, 2002 (iii)Pro Forma Combined Statements of Operations for the year ended December 31, 2002 (iv) Notes to Pro Forma Combined Statements of Operations (c) Exhibits Reference is made to exhibits previously filed with the Securities and Exchange Commission, as Exhibits to the Company's Reports on Form 8-K filed with the Commission on April 18, 2003 and May 6, 2003.

Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. Dated: June 17, 2003 By: /s/ Vasan Thatham ------------------ Vasan Thatham Principal Financial Officer and Vice President

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES ----------------------------------------------- Combined Financial Statements Years Ended December 31, 2002 and 2001

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES CONTENTS - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT AUDITORS 3-4 COMBINED FINANCIAL STATEMENTS: Balance Sheets as of December 31, 2002 and 2001 5-6 Statements of Operations for the years ended December 31, 2002 and 2001 7 Statements of Shareholders' Equity and Comprehensive Income for the years ended December 31, 2002 and 2001 8 Statements of Cash Flows for the years ended December 31, 2002 and 2001 9-10 Notes to Combined Financial Statements 11-27 2

REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of Proyecciones y Ventas Organizadas, S.A. de C.V. and Affiliated Companies We have audited the accompanying combined balance sheets of Proyecciones y Ventas Organizadas, S. A. de C. V. and affiliated companies as of December 31, 2002 and 2001 and the related combined statements of operations, shareholders' equity and comprehensive income and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We did not audit the financial statements of one of the Company's unconsolidated subsidiaries, which statements reflect total assets of $1,488,000 as of December 31, 2001, and total revenues of $5,921,000 for the year then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such subsidiary, is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. These standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 11, on April 3, 2003, all of the Company's issued and outstanding common stock was acquired by an unrelated entity in a transaction treated as a reverse acquisition, pursuant to which the Company will be the acquiror for financial reporting purposes. 3

In our opinion, based on our audits and the report of other auditors, the combined statements referred to above present fairly, in all material respects, the combined financial position of Proyecciones y Ventas Organizadas, S. A. de C. V. and affiliated companies, at December 31, 2002 and 2001, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ BDO International Mexico City, Mexico May 30, 2003, except for Note 11 which is dated June 2, 2003. 4

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

December 31, 2002 2001 - -------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash $ 293,594 $ 648,334 Accounts receivable: Trade, net of allowance for doubtful accounts of $252,470 and $280,417, respectively 8,170,269 11,093,610 Related parties (Note 7) 1,124,340 1,796,557 Other 184,242 76,208 - -------------------------------------------------------------------------------------------------------------------- Total accounts receivable 9,478,851 12,966,375 Value-added tax recoverable 635,276 429,575 Inventory 2,273,682 2,642,799 Prepaid expenses 636,398 452,914 Real estate held for sale (Note 2) 3,724,145 - - -------------------------------------------------------------------------------------------------------------------- Total current assets 17,041,946 17,139,997 REAL ESTATE HELD FOR SALE (Notes 2 and 5) 422,566 422,566 INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (Note 3) - 187,203 PROPERTY AND EQUIPMENT, net (Note 4) 632,472 632,108 DEFERRED INCOME TAXES (Note 9) 260,883 254,507 OTHER ASSETS 170,319 28,983 - -------------------------------------------------------------------------------------------------------------------- $ 18,528,186 $ 18,665,364 - --------------------------------------------------------------------------------------------------------------------
5

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES COMBINED BALANCE SHEETS ================================================================================

December 31, 2002 2001 - -------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt (Note 6) $ 562,424 $ 1,093,817 Payable under supplier credit facility (Note 5) 9,678,012 10,805,631 Related parties (Note 7) 1,114,197 598,083 Accounts payable and accrued expenses 220,219 481,570 Income taxes payable 165,379 114,330 Deferred income taxes (Note 9) 706,261 781,085 - -------------------------------------------------------------------------------------------------------------------- Total current liabilities 12,446,492 13,874,516 LONG-TERM DEBT, less current maturities (Note 6) 1,376,970 1,203,198 Payable under supplier credit facility, less current portion (Note 5) 2,171,715 1,487,153 - -------------------------------------------------------------------------------------------------------------------- Total liabilities 15,995,177 16,564,867 Minority interest 92,556 (56,493) - -------------------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (Note 10) SHAREHOLDERS' EQUITY (Note 8) Capital stock 1,058,309 1,058,309 Retained earnings 1,527,028 1,114,274 Accumulated other comprehensive loss, net of taxes (144,884) (15,593) - -------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 2,440,453 2,156,990 - -------------------------------------------------------------------------------------------------------------------- $ 18,528,186 $ 18,665,364 - -------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
6

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES COMBINED STATEMENTS OF OPERATIONS ================================================================================

For the years ended December 31, 2002 2001 - --------------------------------------------------------------------------------------------------------------------- REVENUE $ 101,550,659 $ 119,766,884 COST OF REVENUE 96,866,869 115,100,882 - --------------------------------------------------------------------------------------------------------------------- GROSS PROFIT 4,683,790 4,666,002 OPERATING COSTS AND EXPENSES: Selling 657,993 884,032 General and administrative 2,930,585 3,268,131 Depreciation and amortization 86,425 70,410 - --------------------------------------------------------------------------------------------------------------------- Total operating costs and expenses 3,675,003 4,222,573 - --------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 1,008,787 443,429 INTEREST INCOME (97,256) (244,549) INTEREST EXPENSE 419,345 448,584 OTHER (INCOME) EXPENSES, net (69,881) (485,605) - --------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAX, EARNINGS OF UNCONSOLIDATED SUBSIDIARY AND MINORITY INTEREST 756,579 724,999 INCOME TAXES (Note 9) 148,395 291,065 - --------------------------------------------------------------------------------------------------------------------- INCOME BEFORE MINORITY INTEREST 608,184 433,934 EQUITY IN , EARNINGS OF UNCONSOLIDATED SUBSIDIARY (Note 3) - 129,976 MINORITY INTEREST (149,280) 20,771 - --------------------------------------------------------------------------------------------------------------------- NET INCOME $ 458,904 $ 584,681 - --------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
7

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY ================================================================================

Common Stock Retained Cumulative Total Translation Earnings Adjustment - -------------------------------------------------------------------------------------------------------------------- BALANCE, December 31, 2000 $ 800,363 $ 663,718 $ (61,873) $ 1,402,208 Cash contributions to capital stock 123,821 - - 123,821 Stock dividend 134,125 (134,125) - - Net income - 584,681 - 584,681 Translation gain (loss), net of tax - - 46,280 46,280 - -------------------------------------------------------------------------------------------------------------------- BALANCE, December 31, 2001 1,058,309 1,114,274 (15,593) 2,156,990 Non-Cash Distribution to the majority shareholder (Note 3) - (46,150) - (46,150) Net income - 458,904 - 458,904 Translation gain (loss), net of tax - - (129,291) (129,291) - -------------------------------------------------------------------------------------------------------------------- BALANCE, December 31, 2002 $ 1,058,309 $ 1,527,028 $ (144,884) $ 2,440,453 ==================================================================================================================== COMBINED STATEMENTS OF COMPREHENSIVE INCOME - -------------------------------------------------------------------------------------------------------------------- For the years ended December 31, 2002 2001 - -------------------------------------------------------------------------------------------------------------------- Net income $ 458,904 $ 584,681 Comprehensive income (loss): Translation gain (loss), net of taxes (129,291) 46,280 - -------------------------------------------------------------------------------------------------------------------- Total comprehensive income $ 329,613 $ 630,961 - -------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
8

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES COMBINED STATEMENTS OF CASH FLOWS ================================================================================

Increase (Decrease) in Cash Years Ended December 31, 2002 2001 - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 458,904 $ 584,681 Adjustments to reconcile net income to cash provided by operating activities: Minority interest 149,280 (20,771) Equity in the net earnings of unconsolidated subsidiary - (129,976) Depreciation and amortization 86,425 70,410 Bad debt expense 16,388 72,618 Deferred income taxes (81,200) 50,196 CHANGES IN OPERATING ASSETS AND LIABILITIES: Accounts receivable 2,083,717 (2,033,552) Value-added tax recoverable (205,701) (144,308) Inventory 369,117 492,852 Prepaid expenses (183,487) (27,945) Accounts payable and accrued expenses (1,894,746) 577,555 Income taxes payable 51,049 47,660 - -------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 849,746 (460,580) - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment (86,674) (29,698) Other assets (141,334) 103 - -------------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by investing activities (228,008) (29,595) - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable, net - 682,374 Capital contribution - 123,821 Net cash distribution to the majority shareholder (46,382) - Payments of long-term debt (357,748) - Supplier credit facility (443,057) (114,229) - -------------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities (847,187) 691,966 Effects of changes in foreign currency exchange rate changes on cash (129,291) 46,510 - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash (354,740) 248,301 Cash, beginning of year 648,334 400,033 - -------------------------------------------------------------------------------------------------------------------- Cash, end of year 293,594 648,334
9

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES COMBINED STATEMENTS OF CASH FLOWS ================================================================================

Years Ended December 31, 2002 2001 - -------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL CASH FLOW DATA: Interest paid 301,194 361,087 Income tax paid 29,692 246,101 - -------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES - $ 1,915,300 $ - Assignment of receivable collection rights to related party Acquisition of properties in settlement of trade accounts receivable 3,724,145 - Deemed distribution to majority shareholder through sale of unconsolidated subsidiary for consideration less than carrying value 46,150 - - -------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these combined financial statements.
10

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ 1. SUMMARY OF Nature of Operations & Basis of Presentation SIGNIFICANT ACCOUNTING POLICIES Proyecciones y Ventas Organizadas, S.A. de C.V. (collectively with its affiliated companies, the "Company" or "Provo") is engaged in the distribution of prepaid public telephone cards in Mexico ("LADATEL", "TELCEL Amigo" and "Multifon") for Telefonos de Mexico, S.A. ("TELMEX") and Radiomovil Dipsa, S.A. de C.V. ("TELCEL"), telephone communications companies operating in Mexico. The combined financial statements include the accounts of the following Mexican companies under common control: Proyecciones y Ventas Organizadas, S.A. de C.V., ("Provo") Proyecciones y Ventas Organizadas del DF, S.A. de C.V., ("ProvoDF") Proyecciones y Ventas Organizadas de Occidente, S.A. de C.V., ("ProvoC") FS Provo, S.A. de C.V., ("FSProvo") PTL Administradora, S.A. de C.V., ("PTLA") TILGO, S.A. de C.V., ("TILGO") Commercializadora TARNOR, S.A. de C.V. ("TARNOR") The combined financial statements of these commonly and majority-owned entities were prepared on this basis to reflect their combined financial position and results of operations as an integrated group, since each entity is engaged in the distribution of prepaid public telephone cards in different regions of Mexico. Intercompany balances and transactions have been eliminated in the combination. In March 2003, the common controlling shareholders sold their shares in ProvoDF, ProvoC, FSProvo, PTLA, TILGO and TARNOR to Provo, formally integrating all operations into a single entity. 11

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ Management's estimates and assumptions 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 effect 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. The actual results could differ from those estimates. Allowance for Doubtful Accounts The Company records an allowance for doubtful accounts based on specifically identified amounts that it believes to be uncollectible. If actual collections experience changes, revisions to the allowance may be required. The Company has a limited number of customers with individually large amounts due at any given balance sheet date. Any unanticipated change in one of those customer's credit could have a material effect on the Company's results of operations in the period in which such changes or events occur. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Inventory Inventory consists of prepaid phone cards purchased for resale. Inventory is valued at the lower of cost ("first-in, first-out") or market. Real estate held for sale These real estate properties represent non-operating assets, purchased or acquired in settlement of trade accounts receivable, and are valued at the lower of cost or market (See Note 2). 12

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ Property and equipment Property and equipment is stated at cost. Depreciation is computed over the estimated useful lives of the assets by the straight-line method. The Company records impairments to property and equipment when it becomes probable that the carrying values of the assets will not be fully recovered over their estimated lives. Impairments are recorded to reduce the carrying value of the assets to their estimated fair values determined by the Company based on facts and circumstances in existence at the time of the determination, estimates of probable future economic conditions and other information. No impairment adjustments were required for the two years ended December 31, 2002. Foreign currency translation The Company has determined that the Mexican Peso is the functional currency. Assets and liabilities denominated in the Mexican Peso are translated into US. Dollars at the rates in effect at the balance sheet date. Revenues and expenses are translated at average rates for the year. The net exchange differences resulting from these translations are recorded as a separate component of shareholders' equity, accumulated other comprehensive income, which is excluded from net income. Fair Market Value of Financial Instruments The Company's financial instruments consist of accounts receivable, notes payable and long-term debt. The carrying value of accounts receivable approximates market value because of their short term maturity and because the carrying value reflects a reasonable estimate of losses for uncollectible accounts. The carrying value of notes payable and long-term debt approximates market value as the interest rates on substantially all of the Company's borrowings are adjusted regularly to reflect current market rates. Revenue recognition Revenues from the sale of prepaid phone cards are recorded when the phone cards are delivered to the purchaser. 13

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ Income taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets to the extent realization is not judged to be more likely than not. New accounting pronouncements In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment of Long-Lived Assets." This statement superceded SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", ("APB No. 30") for the disposal of a segment of a business. The Statement was required to be adopted by the Company during 2002. The adoption of SFAS No. 144 did not have a material effect on the Company's financial statements. 14

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145"). SFAS 145 prohibits the classification of gains or losses from debt extinguishments as extraordinary items unless the criteria outlined in APB No. 30, are met. SFAS 145 also eliminates an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 is effective for fiscal years beginning after May 15, 2002, with early adoption encouraged. The Company intends to adopt the provisions of SFAS 145 effective January 1, 2003 and does not expect this pronouncement to have a material effect on its financial position or results of operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 replaces Emerging Issues Task Force (EITF) Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity". This standard requires recognition of costs associated with exit or disposal activities as they are incurred, rather than at the date of commitment to an exit or disposal plan. This statement is effective for exit or disposal activities that are initiated after December 31, 2002. The Company's management believes that the adoption of this standard will not have a material effect on the Company's financial statements. In November 2002, the FASB issued FIN No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". The interpretation requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken by issuing the guarantee. FIN No. 45 also requires additional disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees it has issued. The accounting requirements for the initial recognition of guarantees are applicable on a prospective basis for guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for all guarantees outstanding, regardless of when they were issued or modified, during the first quarter of fiscal 2003. The adoption of FIN No. 45 did not have a material effect on the accompanying financial statements. 15

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51". This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. The adoption of this Interpretation did not have a material effect on the Company's financial statements. 2. REAL ESTATE HELD FOR The Company has purchased or obtained real estate SALE properties as part of settlements reached with some of its customers. These properties have been classified as short-term or long-term assets, depending on the Company's plans for their sale or disposition. As of December 31, 2002 and 2001, these investments are as follows:

2002 2001 -------------------------------------------------------------------------------- Short term: Los Cabos Properties $ 728,521 $ - La Providencia Ranch 2,995,624 - -------------------------------------------------------------------------------- Total short-term 3,724,145 - Long-term San Gabriel Ranch 422,566 422,566 -------------------------------------------------------------------------------- Total $ 4,146,711 $ 422,566 --------------------------------------------------------------------------------
A description of each real estate transaction is as follows: o On September 28, 2000, the Company purchased from a non-related party the San Gabriel undeveloped property located in Ciudad del Maiz county State of San Luis Potosi, Mexico, for $422,566 (4,000,000 Mexican Pesos). 16

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ o On April 24, 2002, the Company reached an agreement of receipt for partial payment with a customer in which Provo received three condominiums, a residence and 12 land lots located in a tourist development section in Los Cabos, State of Baja California Sur, Mexico, in settlement of $728,521 (8,700,000 Mexican Pesos) of the total indebtedness 12,980,000 Mexican Pesos. The customer is continuing to pay the balance of amounts owed. o On December 12, 2002, the Company reached a settlement for payment in full with another customer in which, Provo received real estate property, "Rancho la Providencia" located in Coatepec, State of Mexico, Mexico, as payment of the customer's indebtedness of $173,884 (1,793,177 Mexican Pesos) to Provo. This agreement also involved the settlement with the customer of other indebtedness to Mr. Ventura Martinez del Rio, Provo's majority shareholder for $1,086,061 (11,200,000 Mexican Pesos), and amounts owed to various other companies owned by Mr. Martinez del Rio, not part of the combining companies totaling $1,688,138 (15,587,754 Mexican pesos. (See Note 7). The total amount of the transaction with the customer, was $2,995,624 (30,402,000 Mexican Pesos). 3. EQUITY IN EARNINGS OF During the year ended December 31, 2001, UNCONSOLIDATED SUBSIDIARY until divestiture in January 2002, the Company owned a 50% interest in Provoloto, S.A. de C.V., a lottery company controlled by Provo's majority shareholder. The investment was accounted for on the equity method of accounting as Provo's majority shareholder, not Provo, exercised control over the operations of Provoloto. During 2001, the Company recorded $129,976 equity in the earnings of Provoloto, representing its percentage interest in the Provoloto's total earnings. As of December 31, 2001, the Company's investment in Provoloto was $187,203, representing its initial investment plus its share of cumulative Provoloto earnings. 17

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ In January 2002, the Company's investment in Provoloto was transferred to its majority shareholder for cash consideration of $141,053. In connection with this transfer, the difference between the Company's investment and cash consideration received was treated as a distribution to the majority shareholder of $46,150. Subsequent to the divestiture of Provoloto, the Company has no ongoing involvement with Provoloto, its lottery operations or commitments for its future obligations. The financial statements of Provoloto, from which the above amounts were derived, were audited by other auditors whose report has been furnished to us. Our opinion, insofar as it relates to the amounts included for Provoloto, is based solely on the report of the other auditors. 4. PROPERTY AND EQUIPMENT Major classes of property and equipment at December 31, together with their estimated useful lives, consisted of the following:

Useful Life 2002 2001 (Years) ------------ --------------- ----------- Land $151,320 $ 151,320 - Building 306,102 296,881 20 Office furniture and equipment 168,538 166,617 10 Transportation equipment 135,016 66,385 4 Computer equipment 103,158 96,258 3 ------------------------------------------------------------------ 864,134 777,461 Less accumulated depreciation (231,662) (145,353) ------------------------------------------------------------------ Net property and equipment $632,472 $ 632,108 ------------------------------------------------------------------
On March 10, 2003, as part of the settlement agreement with Telmex (See Note 5), the Company transferred its ownership in its corporate headquarters in Mexico City to Telmex for $667,445 in liquidation of amounts owed to Telmex. 18

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ 5. PAYABLE UNDER SUPPLIER Provo has relied on Telmex to finance its CREDIT FACILITY inventory purchases, with a line of credit of approximately $12,315,000 (127,000,000 Mexican Pesos) (the "Supplier Credit Facility"). Various non-operating properties owned by Provo, properties owned by the majority shareholder's family and properties of related parties, have been pledged to guarantee Provo's credit line with Telmex. As of December 31, 2002 and 2001, the outstanding balance with Telmex is as follows:

2002 2001 -------------------------------------------------------------------- Accounts payable $4,061,857 $ 10,062,054 Short-term financing 3,878,788 - Long-term financing 3,909,082 2,230,730 -------------------------------------------------------------------- 11,849,727 12,292,784 Less non-current maturities (2,171,715) (1,487,153) -------------------------------------------------------------------- Total current maturities $9,678,012 $ 10,805,631 --------------------------------------------------------------------
On December 7, 2001, Provo reached an agreement with Telmex, to restructure $2,756,921 (25,204,600 Mexican Pesos) of its total indebtedness. This agreement included the following terms: 1. Telmex agreed to pay Provo a fee of $526,191 (4,810,600 Mexican Pesos) in consideration for Provo's assignment of the distribution rights to certain of its distributors directly to Telmex, subject to compliance with the payment terms referred to in this agreement, as described below. This fee was used to offset against the payable to Telmex. 2. The financing of $2,230,730 (20,394,000 Mexican Pesos) is payable in 36 equal monthly payments, commencing January 7, 2002, with a final due date on December 7, 2004. 19

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ 3. The abovementioned financing bears interest at an annual variable rate under the Mexican Interbank Equilibrium Rate ("TIIE") times 1.3 on the outstanding balance, payable monthly. 4. This financing is collateralized with the San Gabriel Ranch property described in Note 2. 5. Should Provo default on payment, the outstanding balance would bear default interest at TIIE times 2.5. In the event of default by Provo, Telmex also has the right to accelerate full payment of the outstanding balance. On March 10, 2003, Provo entered into a new settlement agreement with Telmex, the terms of which are described below: (1) Transfer of Provo's corporate headquarters in Mexico City where its operating offices are located, for $667,445 (6,915,600 Mexican Pesos) consideration applied against the amounts due Telmex. (2) Provo transferred to Telmex ownership of certain of its non-revenue generating real estate properties, including "Rancho la Providencia", described in Note 2, in satisfaction of a portion of the balance due to Telmex at December 31, 2002 in the amount of $3,834,934 (39,734,904 Mexican Pesos). (3) The remaining balance of $7,787,870 (80,312,406 Mexican Pesos) was restructured as follows: a. $3,878,788 (40,000,000 Mexican Pesos), due and payable on or before September 9, 2003; bearing interest at TIIE times 1.3. b. $3,909,082 (40,312,406 Mexican Pesos), is payable in 54 equal monthly payments, due and payable by Provo to Telmex commencing on July 10, 2003 with a final due date on January 10, 2008, bearing interest at TIIE times 1.3. (4) Should Provo default on payment, the outstanding balance would bear default interest at TIIE multiplied by 1.8. In the case of default by Provo, Telmex may demand acceleration of the outstanding balance. 20

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ At December 31, 2002, the applicable TIIE interest rate, payable by Provo, was 11.09% per annum. 6. NOTES PAYABLE Notes payable consisted of the following at December 31:

2002 2001 -------------------------------------------------------------------------------- Provo BBVA Bancomer, S.A. (1) $ 387,879 $ 437,527 BBVA Bancomer, S.A. (2) 581,818 656,290 BBVA Bancomer, S.A. (3) 581,818 656,290 ProvoDF SCOTIABANK Inverlat, S.A. (4) 387,879 546,908 -------------------------------------------------------------------------------- Total notes payable 1,939,394 2,297,015 Less short-term (562,424) (1,093,817) -------------------------------------------------------------------------------- Long-term bank loans $1,376,970 $ 1,203,198 --------------------------------------------------------------------------------
(1) An available revolving line of credit of $387,879 (4,000,000 Mexican Pesos) from BBVA Bancomer, S.A. secured by real estate of the majority shareholder's family. The interest rate on this line of credit is TIIE plus 4% (12.53% at December 31, 2002). The line of credit is available through September 2005 with proceeds due and payable 90 days after the funds are received. (2) An available revolving line of credit of $581,818 (6,000,000 Mexican Pesos) from BBVA Bancomer, S.A. secured by real estate of the majority shareholder's family. The interest rate on this line of credit is TIIE plus 6% (14.53% at December 31, 2002). The proceeds are due and payable 60 days after the funds are received. (3) A loan from BBVA Bancomer, S.A. for $581,818 (6,000,000 Mexican Pesos) secured by real estate of the majority shareholder's family. This loan is payable in 36 monthly installments, bearing interest at TIIE plus 4% (12.53% at December 31, 2002). The last payment is due on September 24, 2005. 21

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ (4) An available revolving line of credit of $387,879 (4,000,000 Mexican Pesos) from Scotiabank Inverlat, S.A., secured by real estate of the majority shareholder's family. The interest rate on this line is TIIE plus 3.5% (12.03% at December 31, 2002). The proceeds are due and payable 60 days after the funds are received. 7. TRANSACTIONS WITH Balances with related parties are as follows: RELATED PARTIES

2002 2001 -------------------------------------------------------------------------------- Accounts receivable: Desarrollo Arboledas $ - $ 891,022 Comercializadora VGI, S.A. de C.V. 584,048 693,578 SAPROV 235,252 106,952 Mr. Ventura Martinez del Rio Sr. - Majority shareholder - 98,443 Other minority shareholders 92,444 6,562 Tarpa, S.A. de C.V. 212,596 - -------------------------------------------------------------------------------- Total related party receivables $ 1,124,340 $ 1,796,557 -------------------------------------------------------------------------------- Accounts payable: Mr. Ventura Martinez del Rio Sr. - Majority shareholder $ (124,858) $ - ProvoLOTO (403,879) (88,490) PRODIES (585,460) (481,660) Tarpa, S.A. de C.V. - (27,933) -------------------------------------------------------------------------------- Total related party payables $ (1,114,197) $ (598,083) --------------------------------------------------------------------------------
The Company has entered into certain transactions with related parties as follows:
2002 2001 -------------------------------------------------------------------------------- Purchases of properties and receivables $ 2,774,199 $ - Sales of properties and receivables 194,416 - Personnel services (1,599,702) (1,745,748) Loans received (984,748) (306,462) Sales of telephone cards 697,854 604,710 Interest earned 49,805 53,745 Other (72,984) 74,041 --------------------------------------------------------------------------------
22

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ Provo, which has no employees, leases employee personnel from a related party company. Such personnel services are provided by SAPROV, S. C., a partnership created by the officers of Provo and of other related parties. For the year ended December 31, 2002 and 2001, total personnel services expenses of $1,599,702 and $1,745,748 paid to SAPROV are included in general and administrative expenses in the accompanying statement of operations. In 1999, the Company loaned Desarrollo Arboledas, a related party $735,146 (7,000,208 Mexican Pesos at the exchange rate prevailing as of December 31, 1999 of 9.52/$1.00). This loan accrued interest at 7% per annum, which was paid monthly. In December 2002, this loan was sold to Mr. Ventura Martinez del Rio, Sr., as a payment to Mr. Martinez del Rio for collection rights from Mr. Jose L. Alfaro Manzano (See Note 2). In December 2002, the Company received real estate properties, valued at approximately $3.0 million, from a customer. The properties were received in settlement of trade payables due to the Company of approximately $0.2 million. The receipt of these properties also settled approximately $2.8 million of indebtedness from the same customer to several affiliates, including the Company's majority shareholder and companies owned by that shareholder, for which the collection rights had been assigned to the Company in September 2002. In connection with the receipt of these properties, the Company transferred collection rights to certain of its receivables, principally related party receivables, to the shareholder totaling approximately $1.9 million and settled existing related party receivables of approximately $0.3 million. As of December 31, 2002, approximately $0.6 million of related party payables resulting from the September assignment of collection rights remains unsettled and is reflected in the accompanying balance sheet. The terms of the transactions with affiliates described above are not necessarily indicative of terms that could have been obtained had the transactions been with unrelated parties. In March 2003, the Company transferred the properties described above, and additional properties owned by the Company valued at $0.9 million, to settle amounts owed by the Company under the Supplier Credit Facility totaling approximately $3.9 million (see Note 4). 23

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ On March 10, 2003, the Company purchased a rustic property from Inmobiliaria Nextar, S.A. de C.V. (related party). The price for this transaction was approximately $1,592,000 (16,500,000 Mexican Pesos) of which approximately $1,433,000 was paid with aged accounts receivable and $159,000 in cash. Such receivables had a allowance for doubtful accounts for $109,280, when the receivables were sold, such reserve was considered as an additional paid-in capital. 8. SHAREHOLDERS' EQUITY Common Stock: The Companies' common stock is represented by registered shares, as follows: 24

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================

CAPITAL STOCK (1) TOTAL TOTAL DECEMBER 31, FIXED VARIABLE 2002 2001 - ------------------------------------------------------------------------------------------------------------- Shares: Provo 20,000 116,200 136,200 ProvoDF (30% minority interest - see Note 11) 2,100 5,600 7,700 7,700 FSProvo 1,000 - 1,000 ProvoC 1,000 - 1,000 PTLA 2,000 - 2,000 TILGO (5% minority interest at December 31, 2002 and 2001(2)) 950 8,550 9,500 9,500 TARNOR (34% minority interest in 2002 and 2001) 660 - 660 660 - ------------------------------------------------------------------------------------------------------------- TOTAL OUTSTANDING SHARES 27,710 130,350 158,060 158,060 - ------------------------------------------------------------------------------------------------------------- Par value $6.70 $6.70 - ------------------------------------------------------------------------------------------------------------- TOTAL NOMINAL VALUE $1,058,309 $1,058,309 - -------------------------------------------------------------------------------------------------------------
Retained earnings: The year's net income is subject to the statutory requirement which states that 5% of each year's income must be set aside to increase the legal reserve, until such time as the reserve constitutes 20% of the Company's capital stock. Under Mexico's current Income Tax Law, dividends paid out of the Net Fiscal Profit account, "CUFIN" - previously taxed earnings, are tax-free. If any dividends are paid in excess of the balance of CUFIN, the Company must pay 35% tax multiplied by a factor of 1.5385 (34% in 2003, 33% in 2004 and 32% in 2005 and subsequent years). - ------------ (1) Fixed capital stock represents shares originally authorized in the Company's by-laws and are not changed unless formally amended in the by-laws through shareholders' approval. The variable capital stock requires only shareholder approval for changes in the number of shares authorized. (2) In September 2001, the shareholders' of the Company resolved that Mr. Ventura Martinez del Rio, Sr., the Company's majority shareholder, to increase his equity in Tilgo from 50% to 95% through an increase in capital stock, which was paid in cash by Mr. Martinez del Rio, Sr.; the minority shareholders did not participate in the capital increase. 25

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ In the event of a reduction in capital, the excess of shareholders' equity over the restated contributions will be treated as a taxable dividend, in accordance with Mexico's current Income Tax Law. 9. INCOME TAXES Taxable income differs from accounting income due to permanent differences, principally on items in the income statement to reflect the effects of inflation, and to timing differences affecting accounting and taxable income in different periods. In accordance with Mexico's current Income Tax Law, the income tax rate is 35% for years 2001 and 2002, 34% for 2003, 33% for 2004 and 32% for 2005 and subsequent years. In accordance with Mexico's Income Tax Law, tax losses are subject to restatement by inflation and may be carried forward against future taxable income over the 10 years following their generation. As of December 31, 2002, the Company's restated cumulative tax loss carryforwards were as follows:

Fiscal year Amount Expiration Year ----------------------------------------------------------------- 2001 $ 277,571 2011 2002 77,569 2012 ----------------------------------------------------------------- $ 355,140 -----------------------------------------------------------------
A reconciliation of the statutory rate to the effective income tax rate for the years ending December 31, 2002 and 2001 is as follows:
2002 2001 -------------------------------------------------------------------------------- Statutory tax rate 35.0% 35.0% Recognition of the effects of inflation 5.0% 37.0% Non deductible expenses 3.0% 3.0% Net effect of variance of inventories 1.0% (1.0% Utilization of tax loss carryforwards (24.0%) (34.0%) -------------------------------------------------------------------------------- Effective income tax rate 20.0% 40.0% --------------------------------------------------------------------------------
26

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ The provision for income tax for the years ended December 31, 2002 and 2001 is as follows:

2002 2001 -------------------------------------------------------------------------------- Current $ 229,595 $ 240,869 Deferred (81,200) 50,196 -------------------------------------------------------------------------------- Total $ 148,395 $ 291,065 --------------------------------------------------------------------------------
The determination of deferred income taxes was made through the assets and liabilities method, which recognizes the income tax effects of the differences in bases of assets and liabilities between financial accounting and accounting for tax reporting purposes. The tax rates used to compute deferred taxes on those temporary differences are the rates expected to apply when such differences are recovered or settled. The deferred taxes resulting from such timing differences at December 31, 2002 and 2001 are as follows:
2002 2001 -------------------------------------------------------------------------------- Deferred income taxes current: Inventories $ (825,696) $ (874,772) Allowance for bad debts 119,435 93,687 -------------------------------------------------------------------------------- Net deferred income tax liability current (706,261) (781,085) -------------------------------------------------------------------------------- Long-term deferred income tax liability Property and equipment 147,240 135,073 Tax loss carryforward 113,643 119,434 -------------------------------------------------------------------------------- Total long-term deferred tax asset 260,883 254,507 -------------------------------------------------------------------------------- $ (445,378) $ (526,578) --------------------------------------------------------------------------------
In accordance with Mexico's Income Tax Law, if, in any given year, the Company is subject to tax on assets in excess of the amount of income tax payable, this excess may be used to offset income taxes payable in excess of tax on assets payable in any of the ten years following such year. As of December 31, 2002, the Company did not have any excess of tax on assets. 27

PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V. AND AFFILIATED COMPANIES NOTES TO COMBINED FINANCIAL STATEMENTS ================================================================================ 10. COMMITMENTS AND The Company maintains Mexican Peso CONTINGENCIES denominated operating leases on buildings and transportation equipment. The Company recorded leasing expenses of $141,038 and $187,001 in 2002 and 2001. The schedule of estimated future minimum lease payments is as follows: 2002 -------------------------------------------- 2003 $ 148,090 2004 154,014 2005 158,634 2006 163,393 2007 and thereafter 168,295 -------------------------------------------- $ 792,426 -------------------------------------------- 11. SUBSEQUENT EVENTS On April 3, 2003, all of the Company's common stock was acquired by Frontline Communications Corporation, a U.S. public company, pursuant to the terms of an Amended and Restated Stock Purchase Agreement (the "Agreement"). Under the Agreement, in consideration for the Company's shares, the former shareholders of Provo received 220,000 shares of Frontline's Series C Convertible Preferred Stock. The preferred shares are convertible to 33 million shares of Frontline's common stock upon approval of certain actions by Frontline's shareholders. Upon conversion, the former shareholders of Provo will own approximately 66% of Frontline's common stock. Accordingly, the transaction will be accounted for as a reverse acquisition in which the Company will be the acquiror for financial reporting purposes. In the event Frontline does not obtain the required shareholder approvals for conversion of the Preferred C shares prior to July 18, 2003, the consideration paid to the former shareholders of Provo will be increased by $20 million, in the form of a promissory note from Frontline. On June 2, 2003, Provo purchased the minority interest owners' shares of the Comercializadora Tarnor, S.A. de C.V. and of the Provecciones y Ventas Organizadas del DF, S.A. de C.V. capital stock from the respective minority shareholder. With this purchase, Provo obtained control of 100% of the shares of TARNOR and of ProvoDF. 28

Proyecciones y Ventas Organizadas, S.A. de C.V and Frontline Communications Corporation Unaudited Pro Forma Combined Financial Information On April 3, 2003 (the "Closing Date"), the Registrant ("Frontline") completed the acquisition (the "Acquisition") of all of the issued and outstanding stock of Proyecciones y Ventas Organizadas, S.A. de C.V., a corporation organized under the laws of the Republic of Mexico ("Provo"). The acquisition was consummated pursuant to the terms and provisions of an Amended and Restated Stock Purchase Agreement dated April 3, 2003 (the "Agreement") among Frontline, Provo and Ventura Martinez del Rio Requejo ("Requejo") and Ventura Martinez del Rio Arrangoiz ("Arrangoiz") ( Requejo and Arrangoiz are collectively referred to as the "Sellers"). As a consideration for the stock in Provo, Frontline issued to the Sellers a total of 220,000 shares of Frontline's Series C Convertible Preferred Stock (the "Series C Preferred"). Each share of Series C Preferred automatically converts to 150 shares of common stock of Frontline upon receipt of the approval of Frontline's stockholders (the "Requisite Approvals") of (i) the issuance of shares of common stock upon the conversion of the Series C Preferred; (ii) an increase in Frontline's authorized common stock to 75 million; and (iii) a 1 for 1.5 share reverse split of Frontline's common stock. If the Requisite Approvals are obtained, Frontline will issue 33 million shares of common stock (before giving effect to the proposed reverse split) (the "Conversion Shares") to the Sellers and a change of control of Frontline will occur. Upon conversion of the Series C Preferred, the Sellers will own approximately 66% of the common stock of Frontline. In the event Frontline shareholders do not approve the conversion of Series C Preferred into Frontline's common stock, Frontline will be obligated to pay $20,000,000 to the Series C Preferred Stockholders. In connection with the Acquisition, Frontline issued to 18 individuals an aggregate of 35,500 shares of Series D Convertible Preferred Stock ( the "Series D Preferred"), including 27,500 shares to officers and employees and 8,000 shares to brokers and finders. Each share of Series D Preferred is convertible into 150 shares of common stock upon receipt of the Requisite Approvals. The following unaudited pro forma combined condensed financial information sets forth certain historical financial information of Frontline and Provo on an unaudited pro forma basis after giving effect to the Acquisition as a "reverse acquisition" with Provo as the acquirer of Frontline for accounting purposes (see Note1 to the unaudited pro forma combined condensed financial information). The acquisition will be accounted for using the purchase method of accounting, and accordingly, the purchase price will be allocated to tangible and intangible assets of Frontline acquired and the liabilities of Frontline assumed, on the basis of their fair values as of the acquisition date. -1-

The balance sheets of Provo and Frontline at December 31, 2002 have been combined as if the Acquisition had occurred on December 31, 2002. For purposes of pro forma information, the Provo and the Frontline statements of operations for the year ended December 31, 2002 have been combined as if the Acquisition had occurred on January 1, 2002. The unaudited pro forma combined condensed financial information has been included as required and allowed by the rules of the Commission and is presented for illustrative purposes only and is not necessarily indicative of the financial position or operating results that would have actually occurred had the Acquisition been completed at the beginning of the periods or on the dates indicted, nor is it necessarily indicative of future financial position or operating results. The allocation of the purchase price reflected in the unaudited pro forma combined condensed financial information is preliminary. The actual purchase price allocation to reflect the fair values of assets acquired and liabilities assumed will be based upon the combined organization management's evaluation of such assets and liabilities upon completion of the Acquisition. Accordingly, the adjustments included herein may change based upon the final allocation of the purchase price, as adjusted to reflect the actual assets and liabilities at the date upon which the Acquisition is completed, stock values and transaction costs incurred. That allocation may differ significantly from preliminary allocation included herein. -2-

UNAUDITED PRO FORMA COMBINED BALANCE SHEET DECEMBER 31, 2002

Historical Pro forma Pro forma Provo Frontline Adjustments Note Combined ------------ ----------- ------------ -------- ------------ ASSETS Current: Cash and cash equivalents $293,594 $208,502 $502,096 Accounts receivable: Trade, net of allowance for doubtful accounts 8,170,269 212,397 8,382,666 Related parties 1,124,340 1,124,340 Other 184,242 184,242 ------------ ----------- ------------ Total accounts receivable 9,478,851 212,397 9,691,248 Value-added tax recoverable 635,276 635,276 Inventory 2,273,682 2,273,682 Prepaid expenses 636,398 57,778 694,176 Real estate held for sale 3,724,145 3,724,145 ------------ ----------- ------------ Total current assets 17,041,946 478,677 17,520,623 Real estate held for sale 422,566 422,566 Property and equipment, net 632,472 671,013 1,303,485 Deferred income taxes 260,883 260,883 Costs in excess on net assets acquired, goodwill 4,237,824 2 4,237,824 Other assets 170,319 108,877 279,196 ------------ ----------- ------------ ------------ $18,528,186 $1,258,567 $4,237,824 $24,024,577 ============ =========== ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current maturities of long-term debt $562,424 940,202 1,502,626 Payable under supplier credit facility 9,678,012 9,678,012 Related parties 1,114,197 1,114,197 Accounts payable and accrued expenses 220,219 1,669,459 (250,000) 2 1,639,678 Income taxes payable 165,379 165,379 Deferred taxes 706,261 706,261 Deferred revenue 524,738 524,738 ------------ ----------- ------------ ------------ Total current liabilities 12,446,492 3,134,399 (250,000) 15,330,891 Long-term debt, less current maturities 1,376,970 153,120 1,530,090 Payable under supplier credit facility, less current maturities 2,171,715 2,171,715 ------------ ----------- ------------ ------------ Total long-term debt 3,548,685 153,120 0 3,701,805 ------------ ----------- ------------ ------------ Total liabilities 15,995,177 3,287,519 (250,000) 19,032,696 Minority Interest 92,556 92,556 Stockholder's Equity (deficiency) Preferred stock 4,964 (4,964) 3 Common stock 99,404 233,618 3 333,022 Additional paid in capital 1,058,309 36,204,292 (32,456,404) 3 4,806,197 Retained earning (accumulated deficit) 1,527,028 (37,466,196) 37,466,196 3 776,406 (750,622) 4 Accumulated other comprehensive loss (144,884) (144,884) Treasury stock, at cost (871,416) (871,416) ------------ ----------- ------------ ------------ Total stockholders' equity 2,440,453 (2,028,952) 4,487,824 4,899,325 ------------ ----------- ------------ ------------ $18,528,186 $1,258,567 $4,237,824 $24,024,577 ============ =========== ============ ============
-3-

PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2002 (Unaudited)

ProtFormal Pro Forma Provo Frontline Adjustments Note Combined -------------- ----------- ------------- ------- -------------- Revenues $101,550,659 $5,047,098 $106,597,757 Costs and expenses: Cost of revenues 96,866,869 2,493,337 99,360,206 Selling, general and administrative 3,588,578 2,446,816 6,035,394 Depreciation and amortization 86,425 745,135 831,560 Non-cash compensation charge 58,500 750,622 4 809,122 -------------- ----------- ------------- -------------- 100,541,872 5,743,788 750,622 107,036,282 -------------- ----------- ------------- -------------- Loss from operations 1,008,787 (696,690) (750,622) (438,525) Other income (expense): Interest expense (419,345) (95,417) (514,762) Interest income 97,256 7,796 105,052 Other income (expense) 69,881 (3,214) 66,667 -------------- ----------- ------------- -------------- Net income (loss) before income tax and minority interest 756,579 (787,525) (750,622) (781,568) -------------- ----------- ------------- -------------- Income tax 148,395 148,395 -------------- ----------- ------------- -------------- Income ( loss) before minority interest 608,184 (787,525) (750,622) (929,963) Minority interest 149,280 149,280 -------------- ----------- ------------- -------------- Net income (loss) 458,904 (787,525) (750,622) (1,079,243) -------------- ----------- ------------- -------------- Preferred dividends 297,867 (297,867) 5 -------------- ----------- ------------- -------------- Net loss applicable to common shareholders $458,904 ($1,085,392) ($452,755) ($1,079,243) ============== =========== ============= ============== Loss per common share-basic and diluted ($0.12) ($0.03) =========== ============== Weighted average number of common shares outstanding- basic and diluted 9,119,533 6 32,754,964 =========== ==============
-4-

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION 1. The Acquisition The Acquisition will be treated as a reverse acquisition, pursuant to which, Provo is treated as the acquirer of Frontline for financial reporting purposes. Under this method, the purchase price for accounting purposes is established using the fair market value of 10,982,885 shares of outstanding (as of March 31, 2003) Frontline's common stock valued at $0.204, which represents the average quoted market price of Frontline's stock during the time the Acquisition was signed and announced. Outstanding shares of Frontline include assumed conversion of 496,445 shares of series B Convertible Redeemable preferred stock into 1,687,913 shares of common stock. Fair value of Frontline common stock, including assumed Conversion of Series B Convertible preferred stock $2,240,509 Acquisition related costs. Fair value of 1,200,000 shares of Frontline common stock to be issued upon conversion 8,000 shares of Series D Preferred issued to brokers and finders 218,363 ---------- Total purchase price $2,458,872 ========== 2. The fair values of Frontline's assets and liabilities have been estimated for the purpose of allocating the purchase price of the deemed acquisition. The significant adjustments comprising the purchase price allocation are as follows: Book value of Frontline's assets at December 31, 2002 $1,258,567 Book value of Frontline's liabilities at December 31, 2002 (3,287,519) Fair value adjustments to accounts payable 250,000 Goodwill, costs in excess of net assets acquired 4,237,824 ----------- Total purchase price $2,458,872 =========== The allocation of the purchase price is preliminary. The actual purchase price allocation to reflect the fair values of assets acquired and liabilities assumed will be based upon the combined organization's management evaluation of such assets and liabilities upon completion of the Acquisition. Accordingly, the adjustments included herein will change based upon the final allocation of the purchase price, as adjusted to reflect the actual assets and liabilities at the date upon which the Acquisition is completed, stock values and transaction costs incurred. That allocation may differ significantly from preliminary allocation included herein. Provo has adopted the Statement of Financial Accounting Standard No. 142, " Goodwill and Other Intangible Assets" ("SFAS No. 142"). In accordance with the statement, goodwill associated with this transaction will not be amortized, but will be periodically assessed for impairment. Such an assessment will be at least on an annual basis. -5-

3. Reflects the par value of the issued stock of Frontline after giving effect to 33,000,000 shares of common stock to be issued upon conversion of 220,000 shares of Series C Preferred issued to the Sellers in the reverse acquisition; 1,200,000 shares of common stock to be issued upon conversion of 8,000 shares of Series D Preferred issued to brokers and finders; 4,125,000 shares of common stock to be issued upon conversion of 27,500 shares of Series D Preferred issued to certain officers and employees and 1,687,913 shares of common stock issued upon the assumed conversion of 496,445 shares of series B Convertible Redeemable preferred stock. As a result, issued shares of 9,940,424 (9,294,972 outstanding) at December 31, 2002 results in post acquisition issued shares of 49,953,337 (49,307,885 outstanding) on a pre-split basis. Adjusting for a proposed 1 for 1.5 share reverse split of Frontline's common stock results in issued shares of 33,302,225 (32,871,923 outstanding) on a post-split basis. In addition, this pro forma adjustment records the effect of noncash compensation (see Note 4) and eliminates the applicable Frontline equity accounts and reflects the retained earning of Provo, the accounting acquirer. 4. Too record noncash compensation based on the fair value of 4,125,000 shares of common stock to be issued upon conversion of 27,500 shares of Series D Preferred issued to certain officers and employees. 5. To eliminate the dividends on series B Convertible Redeemable preferred stock pursuant to the assumed conversion of them into shares of common stock. 6. The weighted average number of shares have been adjusted for; 33,000,000 shares of common stock to be issued upon conversion of 220,000 shares of Series C Preferred issued to the Sellers in the reverse acquisition; 1,200,000 shares common stock to be issued upon conversion of 8,000 shares of Series D Preferred issued to brokers and finders; 1,687,913 shares of common stock issued upon the assumed conversion of 496,445 shares of series B Convertible Redeemable preferred stock and 4,125,000 shares of common stock to be issued upon the conversion of 27,500 shares of Series D Preferred issued to certain officers and employees. In addition, this pro forma adjustment records the effect of a proposed 1 for 1.5 share reverse split of Frontline's common stock. -6-