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Amendment to a previously filed 8-K

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-