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Proxy soliciting materials. Revised preliminary material

PRER14A






                                 14A INFORMATION

                PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

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    Rule 14a-6(e)(2))

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[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12


                      Frontline Communications Corporation
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                (Name of Registrant as Specified In Its Charter)


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     (Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

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                      FRONTLINE COMMUNICATIONS CORPORATION
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

                         To Be Held on November 10, 2003


To the stockholders of Frontline Communications Corporation:


             Notice is hereby given that the annual meeting of stockholders of
Frontline Communications Corporation will be held on November 10, 2003 at 11:00
a.m. local time at the Board Room of the American Stock Exchange, 86 Trinity
Place, New York, New York, for the following purposes:

       1. To approve the proposal (a) to issue shares of our common stock to the
holders of our Series C convertible preferred stock issued to the former
stockholders of Proyecciones y Ventas Organizadas, S.A. de C.V., a company
organized under the laws of Mexico ("Provo"), in connection with our acquisition
of Provo, and (b) to issue shares of our common stock to the holders of our
Series D convertible preferred stock issued to certain of our executive officers
and directors, certain Provo employees and other third parties in connection
with the closing of our acquisition of Provo ("Proposal 1");

       2. To approve the proposal (a) to amend the certificate of designations
pertaining to our Series B convertible redeemable preferred stock to provide for
the mandatory conversion of all Series B convertible redeemable preferred stock
upon the election of the holders of a majority of the Series B convertible
redeemable preferred stock, and (b) to effectuate the mandatory conversion of
all the Series B convertible redeemable preferred stock at a conversion ratio of
six shares of common stock for each share of Series B convertible redeemable
preferred stock (four shares after giving effect to the proposed two-for-three
reverse split of our common stock) ("Proposal 2");


       3. To approve the proposal to amend our certificate of incorporation (a)
to effect a two-for-three reverse split of our outstanding common stock and (b)
to increase the number of authorized shares of our common stock from 25,000,000
shares to 100,000,000 shares ("Proposal 3");

       4. To approve the proposal to amend our certificate of incorporation to
change our name from Frontline Communications Corporation to Provo
International, Inc. ("Proposal 4");

       5. To approve the proposal to elect nine directors for a term of one year
and until their successors are duly elected and qualified ("Proposal 5");

       6. To approve the proposal to enter into a common stock purchase
agreement with Fusion Capital Fund II, LLC ("Proposal 6");

       7. To approve the proposal to ratify the appointment of BDO Hernandez
Marron y Cia. S.C. as our independent auditors ("Proposal 7"); and

       8. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.


       Approval of Proposal 3 is necessary in order for Frontline to undertake
Proposal 1 and Proposal 2. In addition, approval of Proposal 1 is necessary in
order for Frontline to undertake Proposal 4. The board of directors has fixed
the close of business on August 28, 2003 as the record date for the
determination of stockholders entitled to notice of and to vote at the annual
meeting and at any adjournment or postponement thereof.


                                         By Order of the Board of Directors,


                                         Amy Wagner-Mele
                                         Secretary


Pearl River, New York

October __, 2003

       All stockholders are cordially invited to attend the annual meeting in
person. Whether or not you expect to attend the meeting, please complete, date,
sign and return the enclosed proxy as promptly as possible in order to ensure
your representation at the meeting. A return envelope (which is postage prepaid
if mailed in the United States) is enclosed for that purpose. You may also
submit your proxy through the Internet, by visiting a website established for
that purpose located at www.voteproxy.com and following the on-screen
instructions. Even if you have given your proxy, you may still vote in person if
you attend the meeting. Please note, however, that if your shares are held of
record by a broker, bank or other nominee and you wish to vote at the meeting,
you must obtain from the record holder a proxy issued in your name.







 








                                TABLE OF CONTENTS




                                                                                                           
INTRODUCTION......................................................................................................1
QUESTIONS AND ANSWERS ABOUT PROPOSALS 1, 2 AND 3..................................................................1
RISK FACTORS......................................................................................................8
   Risks Related to Our Acquisition of Provo......................................................................8
   Risks Related to Our Business..................................................................................9
   Risks Related to Our Stock....................................................................................12
   Risks Related to Operating in Foreign Markets.................................................................15
FORWARD LOOKING STATEMENTS.......................................................................................16
INFORMATION CONCERNING SOLICITATION AND VOTING...................................................................16
   Record Date; Outstanding Shares...............................................................................16
   Purpose of the Annual Meeting; Board Recommendation...........................................................16
   Quorum; Vote Required.........................................................................................17
   Voting of Proxies.............................................................................................18
   Authorization to Vote on Adjournment and Other Matters........................................................19
   Revocability of Proxies.......................................................................................19
   Solicitation..................................................................................................19
   Presence of Auditors..........................................................................................19
PROPOSAL 1.......................................................................................................20
   Introduction..................................................................................................20
   American Stock Exchange Requirements..........................................................................20
   Interests of Certain Persons in Approval of Conversion of Series C Convertible Preferred Stock and Series D
   Convertible Preferred Stock...................................................................................21
   Series C Convertible Preferred Stock Rights and Preferences...................................................24
   Secured Note Rights and Preferences...........................................................................24
   Series D Convertible Preferred Stock Rights and Preferences...................................................25
   Required Vote.................................................................................................25
   Board Recommendation..........................................................................................25
THE ACQUISITION TRANSACTION......................................................................................25
   General.......................................................................................................25
   Background of Our Acquisition of Provo........................................................................26
   Reasons for the Transaction...................................................................................26
   Factors Considered by Our Board of Directors..................................................................27
   Description of Frontline's Business...........................................................................28
   Description of Provo's Business...............................................................................29
   No Vote Required; No Appraisal Rights.........................................................................31
   Material Terms of the Stock Purchase Agreement and other Transaction Documents................................31
   Accounting Treatment..........................................................................................33
   Certain Federal Tax Consequences..............................................................................33
   Regulatory Approvals..........................................................................................34
   Opinion of GunAllen Financial, Inc............................................................................34
SELECTED HISTORICAL FINANCIAL DATA OF FRONTLINE..................................................................38
SELECTED HISTORICAL FINANCIAL DATA OF PROVO......................................................................39
SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION.............................................40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE PROVO BUSINESSES....41
   Overview......................................................................................................41
   Results of Operations.........................................................................................41
   Liquidity and Capital Resources...............................................................................43
   Critical Accounting Policies..................................................................................44
   New Accounting Pronouncements.................................................................................45
PROPOSAL 2.......................................................................................................47
   Introduction..................................................................................................47
   Existing Terms of the Series B Convertible Redeemable Preferred Stock.........................................47
   Specifics of the Series B Mandatory Conversion Proposal.......................................................48










 







                                                                                                           
   Purpose and Background of the Series B Mandatory Conversion Proposal..........................................48
   Interests of Certain Persons in Approval of the Series B Mandatory Conversion Proposal........................50
   Consequences of the Series B Mandatory Conversion Proposal....................................................51
   Resale of Common Stock Exchanged for Series B Convertible Redeemable Preferred Stock..........................52
   Certain Federal Tax Consequences..............................................................................52
   Accounting Treatment of the Preferred Conversion..............................................................54
   Dissenters' Rights of Appraisal...............................................................................54
   Board Recommendation..........................................................................................54
PROPOSAL 3.......................................................................................................55
   General.......................................................................................................55
   The Reverse Split.............................................................................................55
   Increase in Authorized Shares of Common Stock.................................................................58
   Dissenters' Rights of Appraisal...............................................................................60
   Required Vote.................................................................................................60
   Board Recommendation..........................................................................................60
PROPOSAL 4.......................................................................................................61
   General.......................................................................................................61
   Required Vote.................................................................................................61
   Board Recommendation..........................................................................................61
PROPOSAL 5.......................................................................................................62
   General.......................................................................................................62
   Required Vote.................................................................................................62
   Board Recommendation..........................................................................................62
   Nominees......................................................................................................62
   Board Committees and Meetings.................................................................................64
   Executive Compensation........................................................................................65
   Employment Agreements.........................................................................................66
   Director Compensation.........................................................................................66
   1997 Stock Option Plan........................................................................................66
   2001 Stock Incentive Plan.....................................................................................67
   Voting Security Ownership of Certain Beneficial Owners and Management.........................................67
   Section 16(a) Beneficial Ownership Reporting Compliance.......................................................69
   Certain Relationships and Related Transactions................................................................69
PROPOSAL 6.......................................................................................................73
   Introduction..................................................................................................73
   American Stock Exchange Requirements..........................................................................73
   The Fusion Transaction........................................................................................73
   Required Vote.................................................................................................76
   Board Recommendation..........................................................................................76
PROPOSAL 7.......................................................................................................77
   General.......................................................................................................77
   Former Accountants............................................................................................77
   Audit Committee Report........................................................................................77
   Required Vote.................................................................................................78
   Board Recommendation..........................................................................................78
INCORPORATION OF OTHER DOCUMENTS BY REFERENCE....................................................................79
OTHER MATTERS....................................................................................................79

INDEX OF FINANCIAL STATEMENTS...................................................................................F-1

ANNEX A  Series C Certificate of Designation....................................................................A-1
ANNEX B  Series D Certificate of Designation....................................................................B-1
ANNEX C  Note...................................................................................................C-1
ANNEX D  Series B Certificate of Designation....................................................................D-1
ANNEX E  Opinion of Gun Allen Financial, Inc....................................................................E-1
ANNEX F  Certificate of Amendment to Certificate of Designation of Series B.....................................F-1
ANNEX G  Fourth Amendment to of Incorporation...................................................................G-1








 




                      FRONTLINE COMMUNICATIONS CORPORATION
                               One Blue Hill Plaza
                                  P.O. Box 1548
                           Pearl River, New York 10965

               PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
                         To Be Held on November 10, 2003

                                  INTRODUCTION

       The enclosed proxy is solicited on behalf of the board of directors of
Frontline Communications Corporation, a Delaware corporation, for use at our
Annual Meeting of Stockholders to be held on November 11, 2003, at 11:00 a.m.
local time, or at any adjournment or postponement thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting. The annual
meeting will be held at the Board Room of the American Stock Exchange, 86
Trinity Place, New York, New York. We intend to mail this proxy statement and
accompanying proxy card on or about October   , 2003 to all stockholders
entitled to vote at the annual meeting.

       On April 3, 2003, we acquired all of the outstanding stock of
Proyecciones y Ventas Organizadas, S.A. de C.V., a company organized under the
laws of Mexico ("Provo"), in exchange for 220,000 shares of our Series C
convertible preferred stock. The purpose of the annual meeting is to obtain
stockholder approval of seven proposals relating to our acquisition of Provo,
including approval of the conversion of the Series C convertible preferred stock
issued to the former stockholders of Provo into 22,000,000 shares of our common
stock. If such approval is obtained, there will be a change in control of
Frontline. Specifically, the former stockholders of Provo will own approximately
62.7% of our outstanding common stock after the conversion. We are not seeking
stockholder approval of our acquisition of Provo, which will remain effective
regardless of the outcome of the stockholder vote. Our board of directors
recommends that the stockholders vote FOR each of the seven proposals.


                QUESTIONS AND ANSWERS ABOUT PROPOSALS 1, 2 AND 3

       This summary describes the material terms of Proposal 1, Proposal 2 and
Proposal 3 that you will be voting on at the annual meeting.


Why did we acquire Provo?

       In 2000, the downturn in the stock market relating to Internet stocks,
the growth of our competitors, and the introduction of new Internet access
products, such as high-speed cable access, began to have a negative impact on
our business. Specifically, we found it increasingly difficult to raise money in
the equity marketplace, and the resulting lack of capital impeded the growth of
our business. After engaging in an aggressive restructuring program during 2000
and 2001, our board of directors determined in 2002 that the best alternative to
attempt to preserve our continued economic viability was to acquire or merge
with a company with a larger revenue base and greater potential for growth.
Provo had 2002 audited revenues of over $100 million and an expanding product
line, and thus met our criteria for an acquisition candidate. Provo desired to
enter into an acquisition transaction with us because it was seeking access to
the U.S. capital markets. After several weeks of arm's length negotiations, in
the fourth quarter of 2002, we entered into an agreement to acquire 100% of the
stock of Provo in exchange for 220,000 shares of our Series C convertible
preferred stock. See "The Acquisition Transaction - Background of Our
Acquisition of Provo" on page 26.


What is Proposal 1?

       Proposal 1 relates to:


       o      the issuance of shares of our common stock to the holders of our
              Series C Convertible Preferred Stock, which we issued to the
              former stockholders of Provo in connection with our acquisition of
              Provo; and

       o      the issuance of shares of our common stock to the holders of our
              Series D Convertible Preferred Stock, which we issued to certain
              of our executive officers and directors, certain Provo employees
              and other third parties in connection with the closing of our
              acquisition of Provo.


                                       1






 




What is Proposal 2?

       Proposal 2 relates to:


       o      the amendment of the certificate of designations pertaining to our
              Series B convertible redeemable preferred stock to provide for the
              mandatory conversion of all of the outstanding Series B
              convertible redeemable preferred stock upon the election of the
              holders of a majority of the outstanding Series B convertible
              redeemable preferred stock; and

       o      the election by the holders of the Series B convertible redeemable
              preferred stock to effectuate the mandatory conversion of all of
              the outstanding Series B convertible redeemable preferred stock at
              a conversion ratio of six shares of common stock for each share of
              Series B convertible redeemable preferred stock (four shares after
              giving effect to the proposed two-for-three reverse split of our
              common stock).


What is Proposal 3?

       Proposal 3 relates to the adoption of amendments to our certificate of
incorporation authorizing the following:

       o      a reverse stock split in which all outstanding shares of our
              common stock would be exchanged at a ratio of two-for-three; and

       o      an increase in the number of authorized shares of common stock
              from 25,000,000 shares to 100,000,000 shares.

How are Proposals 1, 2 and 3 related?


       If Proposal 1 or Proposal 2 but not Proposal 3 were to be approved by the
stockholders, we would lack sufficient authorized and unissued common stock to
permit the conversion of all of the outstanding Series C convertible preferred
stock, Series D convertible preferred stock or Series B convertible redeemable
preferred stock. Accordingly, unless our stockholders approve Proposal 3, we
will be unable to effect Proposal 1 or Proposal 2. Failure to obtain approval of
Proposals 1, 2 and 3 will have no effect on our acquisition of Provo, which has
already been completed.

Into how many shares of common stock will the Series C convertible preferred
stock and Series D convertible preferred stock be converted?

       Upon approval by our stockholders of Proposal 1 and Proposal 3, all
outstanding shares of Series C convertible preferred stock will be converted
into 22,000,000 shares of common stock, which reflects a conversion rate of 100
shares of common stock per share of Series C convertible preferred stock (after
giving effect to the proposed two-for-three reverse stock split). Upon approval
by our stockholders of Proposal 1 and 3, all outstanding shares of Series D
convertible preferred stock will be converted into 3,550,000 shares of common
stock, which reflects a conversion rate of 100 shares of common stock per share
of Series D convertible preferred stock (after giving effect to the proposed
two-for-three reverse stock split). Upon approval by our stockholders of
Proposal 1 and Proposal 3, former Series C convertible preferred stockholders
will own approximately 62.7% of our outstanding common stock, and former Series
D convertible preferred stockholders will own approximately 10.2% of our
outstanding common stock.

Why are we soliciting stockholder approval of the conversion of the Series C
convertible preferred stock and Series B convertible redeemable preferred stock
into common stock?

       The rules of the American Stock Exchange require us to obtain stockholder
approval prior to approving the listing of additional stock to be issued in
connection with an acquisition of the stock or assets of another company where
the issuance of common stock could result in an increase in our outstanding
common stock of 20% or more. Our proposed issuance of shares of common stock
upon conversion of the Series C convertible preferred stock and Series D
convertible preferred stock falls under this rule because the issuance of such
shares will result in an increase in outstanding common stock of more than 20%.


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Who are the current owners of the Series B and D preferred stock?

       In February 2000, we issued approximately 1,200,000 shares of Series B
convertible redeemable preferred stock in an underwritten public offering in
order to raise capital. Our Series B convertible redeemable preferred stock is
currently traded on the American Stock Exchange under the symbol FNT.PR. As of
August 28, 2003, there were 14 holders of record of our Series B convertible
redeemable preferred stock and approximately 248 beneficial owners of our Series
B convertible redeemable preferred stock. In addition, certain of our officers
and directors own shares of Series B convertible redeemable preferred stock. See
"Proposal 2 - Interests of Certain Persons in Series B Mandatory Conversion
Proposal" on page 50.

       In April 2003, we issued 35,500 shares of Series D Convertible Preferred
stock to four of our executive officers, as well as certain employees of
Frontline and Provo, in order to provide them with an incentive to continue
their service on behalf of Frontline and Provo following the completion of the
acquisition. We also issued shares of Series D convertible preferred stock to
certain third parties to compensate them for services they provided in arranging
for and assisting with the completion of the acquisition. See "Proposal 1 -
Interests of Certain Persons in Approval of Conversion of Series C Convertible
Preferred Stock and Series D Convertible Preferred Stock" on page 21.

Why is our acquisition of Provo discussed in this proxy statement?

       You will not be voting on our acquisition of Provo itself, which has been
completed. Because the shares that are the subject of Proposal 1 are issuable in
connection with our acquisition of Provo, we are including a discussion of the
material terms of our acquisition of Provo and the business and operations of
Provo. Please see the section entitled "The Acquisition Transaction" beginning
on page 25 for information on our acquisition of Provo.


When did we acquire Provo?


       On April 3, 2003, we acquired all of the outstanding capital stock of
Provo, and Provo became our wholly owned subsidiary.


What was the purchase price for Provo?


       We acquired Provo for consideration consisting of 220,000 shares of our
Series C convertible preferred stock and a $20,000,000 note (the "note"). The
note will be payable only if our common stockholders fail to approve the
proposed issuance of common stock upon conversion of the Series C convertible
preferred stock. The Series C convertible preferred stock had a value of $6.6
million based on the closing price of the common stock on January 24, 2002, the
date we executed the stock purchase agreement. See "The Acquisition Transaction
-- General" on page 26.

Do our stockholders have appraisal rights with respect to our acquisition of
Provo?

       No. Our stockholders do not have any "dissenters' rights" or rights to an
appraisal of the value of their shares in connection with our acquisition of
Provo. See "The Acquisition Transaction -- No Vote Required; No Appraisal
Rights" beginning on page 31.

What was the accounting treatment of our acquisition of Provo?

       Our acquisition of Provo was accounted for under the purchase method of
accounting. See "The Acquisition Transaction -- Accounting Treatment" on page
33.

What were the material federal tax consequences of our acquisition of Provo?

       No gain or loss will be recognized by Provo or Frontline in connection
with our acquisition of Provo or upon the conversion of Frontline Series C
convertible preferred stock into Frontline common stock. The authorization by
stockholders to issue common stock to the former stockholders of Provo upon the
conversion of the Series C convertible preferred stock will result in a change
in ownership of Frontline. Specifically, the former stockholders of Provo will
own approximately 62.7% of our outstanding common stock. As a result, the
utilization of Frontline's net operating loss carryforwards of approximately
$22,500,000 will be subject to an annual limitation


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pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, equal
to approximately 4.5% of the value of Frontline immediately prior to the
ownership change.

       The federal income tax consequences of our acquisition of Provo are
discussed more fully beginning on page 33 under "The Acquisition Transaction --
Certain Federal Tax Consequences."

What regulatory approvals were required in connection with our acquisition of
Provo?

       No significant regulatory approvals were required for our acquisition of
Provo. See "The Acquisition Transaction -- Regulatory Approvals" on page 34.

Was a fairness opinion delivered in connection with our acquisition of Provo?

       Yes. GunAllen Financial, Inc. delivered to us its opinion as to the
fairness from a financial point of view of the consideration to be paid by us in
our acquisition of Provo. See "The Acquisition Transaction -- Opinion of
GunAllen Financial, Inc." beginning on page 34.

What were the conditions to our acquisition of Provo?

       The stock purchase agreement with respect to our acquisition of Provo
contained customary conditions to closing, including the following: receipt of
regulatory approvals, securing a bridge loan in the aggregate principal amount
of not less than $550,000 to finance certain expenses related to our acquisition
of Provo, absence of material litigation, absence of any material adverse change
in the Provo and Frontline businesses, accuracy of representations and
warranties and no objection by the American Stock Exchange. On April 3, 2003,
all of the closing conditions set forth in the stock purchase agreement were
satisfied or waived. See "The Acquisition Transaction -- Material Terms of the
Stock Purchase Agreement" beginning on page 31.

Why are we seeking to convert all of the Series B convertible redeemable
preferred stock into common stock?

       The Series B convertible redeemable preferred stock currently is traded
on the American Stock Exchange under the symbol "FNT.PR." In order to maintain
the listing of the Series B convertible redeemable preferred stock on the
American Stock Exchange, we must meet the standards for continued listing
established by the American Stock Exchange. We are not in compliance with the
American Stock Exchange listing standard that requires that the aggregate market
value of the publicly held shares of the Series B convertible redeemable
preferred stock not fall below $1,000,000 for more than 90 consecutive days. We
are proposing to convert the Series B convertible redeemable preferred stock
into common stock to avoid having the Series B convertible redeemable preferred
stock delisted from the American Stock Exchange. See "Proposal 2 - Purpose and
Background of the Series B Mandatory Conversion Proposal" beginning on page 48.

Why is it important to avoid having the Series B convertible redeemable
preferred stock delisted from the American Stock Exchange?

       If the Series B convertible redeemable preferred stock is delisted from
the American Stock Exchange, it could have adverse consequences for us,
including a loss of investor interest in our securities. In addition, holders of
the Series B convertible redeemable preferred stock may have greater difficulty
in trading shares of the Series B convertible redeemable preferred stock. This
lack of liquidity may also make it more difficult for us to raise capital. In
addition, pursuant to our agreement with our underwriters in connection with the
initial offering of the Series B convertible redeemable preferred stock, we must
use our best efforts to maintain the listing of the Series B convertible
redeemable preferred stock on the American Stock Exchange. See "Proposal 2 -
Purpose and Background of the Series B Mandatory Conversion Proposal" beginning
on page 48.


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What are the specifics of the Series B convertible redeemable preferred stock
conversion?

       At present, each share of Series B convertible redeemable preferred stock
is convertible into 3.4 shares of common stock at the election of each
individual holder of Series B convertible redeemable preferred stock. The
amendment in this Proposal 2 would amend the certificate of designation
pertaining to the Series B convertible redeemable preferred stock to provide
that if the holders of a majority of the outstanding Series B convertible
redeemable preferred stock elect to convert their shares of Series B convertible
redeemable preferred stock to common stock, then all of the outstanding Series B
convertible redeemable preferred stock will automatically and without any
further action convert into shares of our common stock at a conversion ratio of
six shares of common stock for each share of Series B convertible redeemable
preferred stock (four shares after giving effect to the proposed two-for-three
reverse split of our common stock). Such conversion ratio provides for the
accrued and unpaid dividends on the Series B convertible redeemable preferred
stock in shares of common stock.

       Adoption of Proposal 2 (after giving effect to the proposed two-for-three
reverse stock split) will result in a conversion ratio of four shares of common
stock for each share of the Series B convertible redeemable preferred stock, and
the conversion of all 496,445 shares of Series B convertible redeemable
preferred stock outstanding as of August 28, 2003 into an aggregate of 1,985,780
shares of common stock.

       By Proposal 2, in addition to amending the certificate of designation
pertaining to the Series B convertible redeemable preferred stock to provide for
its mandatory conversion upon the approval of the holders of a majority of the
outstanding Series B convertible redeemable preferred stock, Frontline is
requesting that the holders of the Series B convertible redeemable preferred
stock elect to effectuate the mandatory conversion of all of the outstanding
Series B convertible redeemable preferred stock to our common stock. Thus, if
Proposal 2 is adopted, all of the Series B convertible redeemable preferred
stock will automatically be converted to common stock. See "Proposal 2 -
Specifics of the Series B Mandatory Conversion Proposal" on page 48.

What are the material federal income tax consequences of the Series B
convertible redeemable preferred stock conversion?

       Frontline believes that the conversion of the Series B convertible
redeemable preferred stock pursuant to Proposal 2 will constitute a
recapitalization for federal income tax purposes, and that a holder of shares of
Series B convertible redeemable preferred stock who receives shares of common
stock in exchange for shares of the Series B convertible redeemable preferred
stock in connection with the conversion of the Series B convertible redeemable
preferred stock pursuant to Proposal 2 will not recognize gain or loss upon such
exchange.

       The federal income tax consequences of the Series B convertible
redeemable preferred stock conversion are discussed more fully beginning on page
54 under "Proposal 2 -- Certain Federal Tax Consequences."


What are the material federal income tax consequences of the reverse stock
split?


       Frontline believes that the reverse stock split pursuant to Proposal 3
will constitute a recapitalization for federal income tax purposes, and that
holders of Frontline common stock will not recognize gain or loss in connection
with the reverse stock split, except to the extent of cash received in lieu of
fractional shares of Frontline common stock. The federal income tax consequences
of reverse stock split are discussed more fully beginning on page 61 under
"Proposal 3 -- The Reverse Split -- Certain Federal Tax Consequences."


What effects will the proposed issuances of common stock have on stockholders?


       The proposed issuance of common stock upon conversion of the Series B
convertible redeemable preferred stock, Series C convertible preferred stock and
Series D convertible preferred stock will dilute the percentage ownership
interest of our existing stockholders. Assuming the effectiveness of the
proposed two-for-three reverse stock split, as of August 28, 2003, we had
7,544,987 shares of common stock outstanding, and if our stockholders approve
Proposal 1, Proposal 2 and Proposal 3, the Series C convertible preferred stock
will be converted into 22,000,000 shares of our common stock, the Series D
convertible preferred stock will be converted into 3,550,000 shares of our
common stock and the Series B convertible redeemable preferred stock will be
converted into 1,985,780 shares of our common stock. Again assuming the
effectiveness of the proposed two-for-three reverse stock split, we will then
have 35,080,767 shares of common stock outstanding; the common stock issued upon
conversion of the Series C convertible preferred stock will represent
approximately 62.7% of the outstanding


                                       5






 





common stock; the common stock issued upon conversion of the Series D
convertible preferred stock will represent approximately 10.1% of the
outstanding common stock; and the common stock issued upon conversion of the
Series B convertible redeemable preferred stock will represent approximately
5.7% of the outstanding common stock. On a pro forma combined basis, the diluted
net loss per common share for the six months ended June 30, 2003 would have been
$0.01, and the diluted net income per common share for the year ended December
31, 2002 would have been $0.03 (after giving effect to Proposals 1, 2 and 3).
See "Unaudited Pro Forma Combined Statement of Operations for the Six Months
Ended June 30, 2003" on page F-62 and "Unaudited Pro Forma Combined Statement of
Operations for the Year Ended December 31, 2002" on page F-63. Please see the
section entitled "Proposal 5 - Voting Security Ownership of Certain Beneficial
Owners and Management" beginning on page 67 for further information on the
effects of the conversion of the Series B convertible redeemable preferred
stock, Series C convertible preferred stock and the Series D convertible
preferred stock.

       The following table illustrates the dilutive effects upon the holders of
our common stock of the conversion of our Series B convertible redeemable
preferred stock, Series C convertible preferred stock and the Series D
convertible preferred stock.






                                                      Number of Shares Owned        Percentage of ownership
                                                    -------------------------     ---------------------------
                                                     Actual     As Adjusted(1)      Actual     As Adjusted(1)
                                                     ------     --------------      ------     --------------
                                                                                          
Existing common stockholders                       11,317,480      7,544,987       100.0%           21.5%
Series B convertible redeemable preferred            -             1,985,780       -                 5.7%
stockholders
Series C convertible preferred stockholders          -            22,000,000       -                62.7%
Series D convertible preferred stockholders          -             3,550,000       -                10.1%

                                                   ----------     ----------       -----           -----
Total shares issued and outstanding                11,123,305     34,080,767       100.0%          100.0%
                                                   ==========     ==========       =====           =====



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

(1) As adjusted to give effect to the conversion of the Series B convertible
redeemable preferred stock, Series C convertible preferred stock and Series D
convertible preferred stock and the proposed two-for-three- reverse split.

       The following table sets forth certain information relating to the
beneficial ownership of shares of our common stock by each person or entity
known by us who will own beneficially 5% or more of the outstanding common stock
after the conversion of Series B convertible redeemable preferred stock, Series
C convertible preferred stock and Series D convertible preferred stock and the
proposed two-for-three reverse split.






                                                       Percentage of
              Beneficial Owner                           Ownership
              ----------------                           ---------
                                                          
              Ventura Martinez Del Rio, Sr.                47.0%
              Stephen J.  Cole-Hatchard (1)                5.1%
              Ventura Martinez Del Rio, Jr.                15.7%



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

  (1) Includes 201,333 shares (on a post reverse-split basis) issuable upon
exercise of options.


What will happen if Proposal 1, Proposal 2 and Proposal 3 are not approved?


       If our stockholders do not approve Proposal 1 and Proposal 3 by November
15, 2003, the Series C convertible preferred stock will remain outstanding on a
non-convertible, non-voting basis, and the $20,000,000 note issued to the former
Provo stockholders will become due and payable in accordance with its terms. As
described in more detail below under "Proposal 1 - Secured Note Rights and
Preferences," beginning on page 24, the note will have economic terms which we
believe are considerably less favorable to us than the terms of our common
stock.

       If our stockholders do not approve Proposal 1 and Proposal 3 by November
15, 2003, the Series D convertible preferred stock will remain outstanding on a
non-convertible, non-voting basis, but no other consideration will accrue to the
holders of the Series D convertible preferred stock.


                                       6






 





       If our stockholders do not approve Proposal 2 and Proposal 3, the Series
B convertible redeemable preferred stock will remain outstanding in accordance
with its existing terms and conditions. If the Series B convertible redeemable
preferred stock remains outstanding, we do not expect that we will be able to
maintain the listing of the Series B convertible redeemable preferred stock on
the American Stock Exchange.


Who is entitled to vote on Proposal 1, Proposal 2 and Proposal 3?


       Only the holders of shares of our common stock as of August 28, 2003, the
record date for the annual meeting, are entitled to vote on Proposal 1 and
Proposal 3. No one else is entitled to vote on Proposal 1 or Proposal 3. Both
the holders of shares of our common stock and our Series B convertible
redeemable preferred stock as of August 28, 2003 are entitled to vote on
Proposal 2. No one else is entitled to vote on Proposal 2.


What vote is required to approve Proposal 1, Proposal 2 and Proposal 3?


       Under the certificates of designation of the Series C convertible
preferred stock and the Series D convertible preferred stock, and under the
American Stock Exchange rules, approval of Proposal 1 requires the affirmative
vote of the majority of the votes cast on the proposal, provided that the total
votes cast on the proposal represent a majority of all outstanding securities
entitled to vote on the proposal.

         Under Delaware law, approval of Proposal 2 requires the affirmative
vote of the holders of not less than a majority of the outstanding Series B
convertible redeemable preferred stock, voting separately as a class, and the
affirmative vote of the holders of not less than a majority of the outstanding
common stock, voting separately as a class.


       Under Delaware law, approval of Proposal 3 requires the affirmative vote
of the holders of not less than a majority of the outstanding common stock.

What is our board of directors' recommendation on how to vote?


       Our board of directors unanimously recommends a vote FOR Proposal 1, FOR
Proposal 2 and FOR Proposal 3.


What do I need to do now?

       First, read this proxy statement carefully. Then, as soon as possible,
you should submit your proxy by executing and returning the enclosed proxy card.
Your shares represented by proxy will be voted in accordance with your
directions. If you submit a proxy, but have not specified any directions, your
shares will be voted FOR approval of Proposal 1, FOR approval of Proposal 2 and
FOR approval of Proposal 3.

Who can help answer questions I may have?

       If you have any questions concerning Proposal 1, Proposal 2, Proposal 3
or the annual meeting, if you would like additional copies of the proxy
statement or if you will need special assistance at the meeting, please call Amy
Wagner-Mele, our Secretary, at (845) 623-8553.

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

       The information provided above is merely a brief description of material
information contained in this proxy statement. You should read this proxy
statement in its entirety.

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





                                       7






 




                                  RISK FACTORS


       In addition to the other information provided or incorporated by
reference in this document, you should consider the following information
carefully.

Risks Related to Our Acquisition of Provo

If our stockholders fail to approve Proposal 1 and Proposal 3, we will incur
significant additional liabilities.

       If our stockholders do not approve Proposal 1 and Proposal 3 by November
15, 2003, the Series C preferred stock will remain outstanding on a
non-convertible, non-voting basis, and the $20,000,000 note issued to the former
stockholders of Provo will become due and payable in accordance with its terms.
The note will become due and payable in full on the fifteenth day following the
earlier of (i) November 15, 2003; or (ii) the failure of our stockholders to
approve Proposal 1 and Proposal 3. The note is secured by substantially all of
our assets, including the capital stock of Provo. In the event that we are
unable to pay the note as it becomes due, the former stockholders of Provo may
initiate actions against us, which may include foreclosure on their collateral
consisting of substantially all of our assets. We do not believe that the
collateral underlying the $20,000,000 note is sufficient to satisfy the note. If
the collateral is insufficient to satisfy our obligation under the note, and we
are unable to negotiate a settlement with the former stockholders of Provo, we
may be forced to seek bankruptcy protection. We believe that the significant
additional liabilities that we will incur if our stockholders fail to approve
Proposal 1, 2 and 3 will have a material adverse effect on our business and the
interests of our stockholders.

The former stockholder of Provo will control a substantial majority of our
common stock.

       If our stockholders approve Proposal 1 and Proposal 3, approximately
47.0% of our common stock will be held by Ventura Martinez del Rio, Sr. and
approximately 15.7% of our common stock will be held by his son, Ventura
Martinez del Rio, Jr. On a combined basis, these two stockholders would gain
effective control over most facets of our business through joint majority
ownership control, operational control and board of directors control.


We may not successfully integrate and manage the operations of Provo, which
could adversely affect future earnings.


       As a result of our acquisition of Provo, Frontline has acquired Provo and
Provo has become a wholly-owned subsidiary of Frontline. Provo has an operating
history, but not under Frontline management. Failure to manage the combined
company successfully may negatively affect our operating results. The risks of
this acquisition include the following:


       o      management will have to divert time, attention and resources to
              integrate the businesses;

       o      Provo may have unexpected problems or risks in operations,
              personnel, technology or credit;

       o      we may lose Provo's current customers or employees;

       o      new management may not work smoothly with existing employees or
              customers;

       o      the assimilation of new operations, sites and personnel could
              divert resources from existing operations;

       o      management may be unable to operate successfully in an
              international environment; and

       o      we may have trouble instituting and maintaining uniform standards,
              controls, procedures and policies.

       We can make no assurances that we will be able to successfully integrate
acquired businesses or operations that we have acquired, including Provo, or
that we may acquire in the future. In addition, we may not achieve the
anticipated benefits from our acquisitions. If we fail to achieve the
anticipated benefits from such acquisitions, we may incur increased expenses and
experience a shortfall in our anticipated revenues and we may not obtain a
satisfactory return on our investment.

We have a history of losses prior to the acquisition of Provo and anticipate
that we may incur losses in the future.

                                       8






 





       Since our inception and prior to our acquisition of Provo, we have
incurred significant losses. For the years ended December 31, 2001 and 2002, our
net losses were $7,029,287 and $787,525, respectively. Although Provo has been a
profitable company for a number of years, we have little experience as a
combined company and we may not be able to achieve profitability as a combined
business. Moreover, we intend to engage in additional strategic acquisitions in
the future. Future acquisitions may reduce our profitability. We can make no
assurances that we will achieve or sustain profitability as a combined company
or generate sufficient operating income to meet our working capital, capital
expenditure and debt service requirements, and if we are unable to do so, this
would have a material adverse effect on our business, financial condition and
results of operations.


We may not realize anticipated operating efficiencies, which could hurt our
profitability.


       As a result of our acquisition of Provo, we expect to improve our
operations by reducing costs, expanding services and integrating administrative
functions. We may not realize these operating efficiencies or may not realize
them as soon as anticipated. If we do not realize operating efficiencies as
anticipated, our profitability may be adversely affected.

Unanticipated costs relating to our acquisition of Provo could reduce our future
results of operations.


       We believe that we have reasonably estimated the likely costs of
integrating the operations of Frontline and Provo. However, the possibility
exists that unexpected transaction costs such as taxes, fees or professional
expenses, or unexpected future operating expenses such as increased personnel
costs or increased taxes, as well as other types of unanticipated adverse
developments, could have a material adverse effect on the results of operations
and financial condition of the combined company. If unexpected costs are
incurred, the acquisition could adversely affect our results of operations and
earnings per share.

Frontline and Provo have incurred and will continue to incur significant
transaction expenses and integration-related costs in connection with the
acquisition transaction.


       Frontline and Provo expect to incur charges to operations to reflect
costs associated with combining the operations of the two companies and
transaction fees and other costs related to our acquisition of Provo. Some of
these costs will be expenses subsequent to the consummation of our acquisition
of Provo and will adversely affect the results of the combined company and could
adversely impact the market price of our common stock. In connection with the
transaction, Frontline and Provo anticipate expenses of approximately $500,000.
Integration-related costs will be recognized as those actions take place
subsequent to our acquisition of Provo. There can be no assurance that
realization of efficiencies anticipated from the integration of the businesses,
will offset additional expenses in the near term, or at all.

Risks Related to Our Business


Competition is significant in all of our lines of business and is expected to
intensify.

       The market for each of our current and expected products and services is
intensely competitive, and we expect that competition will intensify in the
future. There are no substantial barriers to entry, and these industries are
characterized by rapidly increasing numbers of new market entrants and new
products and services.


       Provo's three closest competitors in Mexico - Tarjetas del Noreste,
Impulsora de Mercados and Distribuidora Dana - each account for approximately
6-7% of the market share for prepaid calling cards in Mexico, compared to
Provo's 10% market share. More than 100 resellers of prepaid calling time
currently canvass the market in Mexico. Our competitors for Internet access
services in the United States include international and national
telecommunications providers, such as America Online, Time Warner Cable,
Verizon, Earthlink, United Online (NetZero and Juno brands) and Covad
Communications, as well as regional Internet service providers, such as Best Web
Corporation, Fastnet Inc. and LogicalNet Corporation. Our national competitors
have significantly greater financial, technical, marketing and other resources
than we do, and our share of the market is relatively small compared to theirs.
Our regional competitors have market shares that are comparable to ours. Many of
our current and future competitors possess a wide range of products and
collective new product development capabilities that exceed ours. For example,
some of our competitors, such as Time Warner Cable, offer access to the Internet
via cable modem. We do not possess the technical capability to offer such a
service.


                                       9






 




       Increased competition could result in significant price competition,
which in turn could result in significant price reductions in some of our
product offerings, most notably Internet access and web hosting. In addition,
increased competition for new customers could result in increased sales and
marketing expenses and related customer acquisition costs, which could
materially adversely affect our operating results. We may not have the financial
resources, technical expertise or marketing and support capabilities to compete
successfully, and the software, services or technologies developed by others may
render our products, services or technologies obsolete or less marketable.

We are dependent on many vendors and suppliers and their financial difficulties
may adversely affect our business.


       We depend on many vendors and suppliers to conduct our business. For
example, Provo purchases prepaid calling cards exclusively from Telmex and
Telcel. If either entity terminated its relationship with Provo, Provo would not
have access to its principal products and its primary source of revenue would be
adversely affected. While Provo may be able to purchase prepaid calling cards
from other regional Mexican telecommunications providers, it is unlikely that
they could re-establish themselves as a leading distributor of prepaid calling
cards if Telmex or Telcel refused to do business with them.

       We purchase telecommunications services from various telecommunications
companies and competitive local exchange carriers in the United States, such a
Covad Communications, Focal Communications and DSL.net, Inc. Many of these third
parties have experienced substantial financial difficulties in recent months,
including difficulty in raising the necessary capital to maintain their
operations and in some cases leading to bankruptcies and liquidations. To the
extent that we rely on these third parties for services we need in order to sell
our products, the financial difficulties of these companies could have a
material adverse effect on our business and prospects. While we may be able to
obtain comparable services from other telecommunications providers in the event
any of our suppliers ceased to supply us with services, there can be no
assurance that we could obtain replacement services at prices which would allow
us to maintain our profit margins.


We may not be able to maintain our profitability if our suppliers reduce their
commissions or if they cease doing business with us.

       Our business substantially depends on the availability of pre-paid
calling cards and the discounts and commissions given to us by Telmex and
Telcel. Access to calling-cards is obtained through short-term agreements that
our providers can terminate, significantly modify or elect not to renew.

       Our operating margins are sensitive to variations in whole-sale
commissions given by Telmex and Telcel. Any or all of our current suppliers
could decide to reduce whole-sale commissions, which would prevent us from
distributing large numbers of cards and would materially reduce our business
operations and profitability.

Our sales could be adversely affected if we lose any of our largest customers,
if they materially reduce their reliance on distributors or if they are unable
to pay amounts due.

       If any of our largest customers in Mexico were to stop or materially
reduce their purchasing from us, or were unable to pay our invoices, our
financial results could be adversely affected. During fiscal 2002, Provo's top
five customers in the aggregate accounted for approximately 17% of Provo's
sales. We generally do not have long term contracts with our retailer customers
or minimum purchase requirements. In addition, there is the possibility that our
larger customers could bypass distributors and begin purchasing calling cards
directly from Telmex or Telcel. The concentration of sales to our largest
customers also exposes us to credit risks associated with the financial
viability of our customers. We believe that our sales to our largest customers
will continue to represent a significant portion of our sales.

We depend on strategic relationships with third parties.


       We depend on agreements and arrangements with a variety of third party
partners, including, Telmex, Telcel and our network of distributors in Mexico as
well as certain providers of high-speed access capability and other competitive
local exchange carriers in the United States. The loss of any of our existing
strategic relationships or any inability to create new strategic partnerships in
the future would cause disruptions to our business, reduce any competitive
advantages that these relationships may provide over our competitors and
adversely affect our ability to


                                       10






 




expand our operations. In addition, some of the third parties with which we seek
to enter into relationships may view us as a competitor and refuse to do
business with us.

We have numerous sub-distributors in Mexico and they may divert or delay net
sales receipts from the point of sale.

       Provo relies on its large network of sub-distributors to collect a
substantial portion of its revenues. Should any of these sub-distributors decide
to or attempt to divert or delay their remittance to Provo, Provo's need for
consistent interim cash flow would be adversely affected. Moreover, we may not
be able to recover the diverted funds. Significant diversions or delays in
receipts of funds by Provo, could have a material adverse effect on our
business, financial condition and results of operations.

A disruption in the operations of our key shippers could cause a decline in our
sales or a reduction in our earnings.

       We are dependent on a number of commercial freight carriers to deliver
our products to our sub-distributors and customers. If the operations of these
carriers are disrupted for any reason, we may be unable to deliver our products
to our customers on a timely basis. If we cannot deliver our products in an
efficient and timely manner, our sales and profitability will suffer. While the
choice of carriers is a fact based determination depending on a customer's
characteristics, we currently rely on Autobuses Estrella Blanca, S.A. de C.V. to
deliver approximately 42% of our products.

We are dependent on effective billing, customer service and information systems
and we may have difficulties in developing, maintaining and enhancing these
systems.

       Sophisticated back office information and processing systems are vital to
our growth and our ability to control and monitor costs, bill and service
customers, initiate, implement and track customer orders and achieve operating
efficiencies. Since our inception, we have also been engaged in developing and
integrating our essential information systems consisting of our billing system,
our sales order entry system and our customer implementation system. In
addition, we continue to integrate the systems of each of our acquired
businesses, including Provo. These are challenging projects because all of these
systems were developed by different vendors and must be coordinated through
custom software and integration processes. Our sales and other core operating
and financial data are generated by these systems and the accuracy of this data
depends on the quality and progress of the system integration project. Although
we have made progress in our system integration efforts, we have not completed
it and we may experience additional negative adjustments to our financial and
operating data as we complete this effort. These adjustments have not had a
material adverse effect on our financial or operating data to date but until we
complete the entire project we cannot assure you that any such adjustments
arising out of our systems integration efforts will not have a material adverse
effect in the future. If we are unable to develop, acquire and integrate our
operations and financial systems, our customers could experience delays in
delivery of products or services, billing issues and/or lower levels of customer
service. We also cannot assure you that any of our systems will be successfully
implemented on a timely basis or at all or will perform as expected. Our failure
to successfully implement these systems would have a material adverse effect on
our business and prospects.

In order to remain profitable, we will need to implement our business plan
successfully, including increasing our customer bases in Mexico and the United
States and incorporating new lines of business in an effective manner.

       The success of our business plan depends upon our ability to retain and
increase our customer base for prepaid calling cards; attract and retain
significant numbers of customers for our Internet business; and consolidate new
lines of business on a timely and cost effective basis. At the same time, we
will need to hire and retain skilled management, technical, marketing and other
personnel and continue to expand our product and service offerings. We may not
be able to implement our business plan successfully, and we may also encounter
unanticipated expenses, problems or technical difficulties which could
materially delay the implementation of our business plan.

       We have recently expanded our marketing focus and have begun to offer
additional products and services, both of which may place a significant strain
on us. The expansion of our product offerings will continue to place significant
demands on the time and attention of our senior management and involve
significant financial and other costs, including marketing and promoting our new
products and services and hiring personnel to provide these new services. We may
not be able to enter new markets and offer new services successfully, and we may
not be able to

                                       11






 




undertake these activities while maintaining sufficient levels of customer
service to retain our existing customers, either of which would have a material
adverse effect on us, our reputation and our operations.

Our inability to manage our growth effectively could adversely affect our
business.

       Our future performance depends on our ability to continue to sell our
products, effectively roll-out our proposed products and services, implement our
business strategy and effectively manage our growth. Our planned growth and
expansion will place significant demands on our management and operations. Our
ability to manage this growth successfully will depend on:

       o      expanding our management resources, infrastructure, information
              and reporting systems and controls;

       o      expansion, training and management of our employee base, including
              attracting and retaining skilled personnel;

       o      evaluating new markets;

       o      evaluating new acquisition opportunities;

       o      monitoring operations; and

       o      controlling costs.

       If we are not successful in managing our growth effectively or
maintaining the quality of our service, our business, financial condition and
results of operations could be materially adversely affected.

Our Mexican subsidiaries conduct a majority of our operations and own a majority
of our operating assets.

       Our Mexican subsidiaries conduct a majority of our operations, account
for a majority of our revenues and own a majority of our operating assets. As a
result, our ability to make any dividend payments on our common stock depends on
the performance of the businesses owned by our subsidiaries and such
subsidiaries' ability to distribute funds to us. Under Mexican law, Mexican
companies must retain part of their profits to establish certain legal reserves
prior to distributing any dividends to their stockholders. In addition, any
dividends received from our subsidiaries in Mexico may be subject to withholding
taxes in Mexico.


       The rights of holders of our common stock may be subordinated to the
rights of our subsidiaries' lenders. A default by a subsidiary under its debt
obligations would likely result in a block on distributions from the affected
subsidiary to us. In the event of bankruptcy, liquidation or dissolution of a
subsidiary and following payment of its liabilities, our subsidiary may not have
sufficient assets remaining to make payments to us as a stockholder or
otherwise. As of August 31, 2003, Provo and its subsidiaries had outstanding
indebtedness, excluding payables to related parties, of approximately $8.5
million.


We are heavily dependent on our senior management.

       We believe that the success of our business strategy and our ability to
operate profitably depend on the continued employment of our senior management
team. Our business is managed by a small number of key management and operating
personnel who have been involved in our operation in the United States and the
operation of our subsidiaries in Mexico. As we pursue our strategy to grow
through acquisitions our need for qualified personnel may increase further.
Competition for qualified personnel is intense, and we cannot assure you that we
will be able to retain our key employees or that we can attract or retain other
qualified personnel in the future. We only maintain key person life insurance
for $1,000,000 each on the lives of Stephen Cole-Hatchard and Nicko Feinberg.


Risks Related to Our Stock


Our substantial leverage could adversely affect our ability to run our business.


       Our total outstanding indebtedness as of August 31, 2003 was
approximately $9.4 million, substantially all of which is secured indebtedness.
Of this amount, we are obligated to pay approximately $425,000 to IIG Equity
Opportunities Fund, Ltd. on October 3, 2003, and to pay 40,000,000 pesos
($3,666,361 at the current exchange rate) to Telmex on November 10, 2003. We are
currently in negotiations with Telmex to restructure this debt so that it is
payable within a longer term. We lack the funds to pay these obligations when
they become due. If we cannot


                                       12






 




generate sufficient cash flow or otherwise obtain the funds necessary to make
required payments on our indebtedness, or if we otherwise fail to comply with
the various covenants governing our indebtedness, we will be in default under
the terms of our indebtedness. If we are in default, the holders of certain of
our indebtedness may accelerate the maturity of the specific indebtedness which
could cause us to default on other debt obligations. In addition, if we are in
default, Telmex may suspend delivery of prepaid calling cards to us.


       We have entered into a common stock purchase agreement with Fusion
Capital Fund II, LLC, whereby, subject to the approval of Proposal 6 described
herein by our stockholders and the satisfaction of other applicable conditions,
Fusion Capital has agreed to purchase up to $13 million of our common stock over
a 40-month period. The proceeds of the expected sale of our common stock
pursuant to that agreement will not be sufficient to enable us to timely pay the
amounts we owe to IIG Equity and Telmex that are due in October and November
2003 as described in the preceding paragraph. Therefore, in order to satisfy our
debt obligations, we are currently pursuing additional sources of financing,
including potential sources for debt and equity financing (or a combination of
the two), and are exploring the possibility of selling some of our assets (such
as our dial-up subscriber base), so that we will have sufficient funds to pay
our debts as they become due. There can be no assurance, however, that such
financing will be available on terms that are acceptable to us, or on any terms.
Our ability to arrange financing and the cost of the financing will depend on
many factors including:


       o      general economic and capital markets conditions;

       o      conditions in the retail, telecommunications and Internet
              industries;

       o      regulatory developments;

       o      investor confidence and credit availability from banks and other
              lenders;

       o      the success of our business plan; and

       o      tax and securities laws that affect raising capital.

       If we cannot obtain the additional funding we require, we will make
substantial reductions in the scope and size of our operations, in order to
conserve cash until such funding is obtained. We also may be required to seek
protection under the bankruptcy laws.

We have a significant number of outstanding options and warrants which could
depress the market price of our common stock and could interfere with our
ability to raise capital in the future.


       As of August 28, 2003, we had outstanding options and warrants to
purchase 2,992,200 shares of our common stock at exercise prices ranging from
$0.08 to $8.50 per share. To the extent that the outstanding options or warrants
are exercised, dilution to the percentage of ownership of our stockholders will
occur. Any sales in the public market of the shares underlying such options and
warrants may adversely affect prevailing market prices for our common stock.
Moreover, the terms upon which we will be able to obtain additional equity
capital may be adversely affected, since the holders of outstanding options and
warrants can be expected to exercise them at a time when we would in all
likelihood be able to obtain any needed capital on terms more favorable to us
than those provided in the outstanding options and warrants.

Conversion of the Series B convertible redeemable preferred stock, Series C
convertible preferred stock and Series D convertible preferred stock will result
in substantial dilution.

       Under this proxy solicitation we are requesting our stockholders to
consider and vote upon, among other things, the issuance of shares of our common
stock upon conversion of the Series B convertible redeemable preferred stock,
Series C convertible preferred stock and Series D convertible preferred stock.
Subject to such stockholder approval, such Series B convertible redeemable
preferred stock, Series C convertible preferred stock and Series D convertible
preferred stock will be converted into a total of 27,535,780 shares of common
stock (after giving effect to the proposed two-for-three reverse stock split).
Holders of common stock will therefore experience dilution of their investment
upon conversion of our Series B convertible redeemable preferred stock, Series C
convertible preferred stock and Series D convertible preferred stock.

The reverse stock split may have a negative impact on stockholders who own less
than 100 shares.


                                       13






 





       The reverse stock split might result in some stockholders owning "odd
lots" of less than 100 shares of Common Stock. Brokerage commissions and other
costs of transactions in odd lots may be higher, particularly on a per-share
basis, than the cost of transactions in even multiples of 100 shares.


Our stock price has been volatile and future sales of substantial numbers of our
shares could have an adverse affect on the market price of our shares.

       The market price of shares of our common stock has been volatile. The
price of our common stock may continue to fluctuate in response to a number of
events and factors, such as:

       o      our ability to maintain and increase our profitability; 

       o      changes in revenues and expense levels;

       o      the amount of our cash resources and our ability to obtain
              additional funding;

       o      our ability to service our debt;

       o      announcements of new lines of business, business developments,
              technological innovations or new products by us or our
              competitors;

       o      changes in government regulation; and

       o      the success of the integration of past and future acquisitions.

       Any of these events may cause the price of our shares to fall, which may
adversely affect our business and financing opportunities. In addition, the
stock market in general and the market prices for Internet companies in
particular have experienced significant volatility that often has been unrelated
to the operating performance or financial conditions of such companies. These
broad market and industry fluctuations may adversely affect the trading price of
our stock, regardless of our operating performance or prospects.

Future sales of our stock by insiders may adversely affect our stock price.

       Many of our outstanding shares are "restricted securities" under the
federal securities laws, and such shares are or will be eligible for sale
subject to restrictions as to timing, manner, volume, notice and the
availability of current public information regarding Frontline. Upon approval of
Proposal 1, Proposal 2 and Proposal 3, a significant majority of our common
stock will be held by the former stockholders of Provo and by our founding
management team. Sales of substantial amounts of stock in the public market or
sales of stock by our insiders or the perception that these sales could occur,
could depress the prevailing market price for all of our securities. Sales of
substantial amounts of stock by these stockholders in the public market may also
make it more difficult for us to sell equity securities or equity-related
securities in the future at a time and price that we deem appropriate and, to
the extent these sales depress our common stock price.


Our stock may be delisted from the American Stock Exchange, and that could
affect its market price and liquidity.

       We are required to meet certain financial tests to maintain the listing
of our common stock on the American Stock Exchange. The American Stock Exchange
has advised us that, as a result of our acquisition of Provo, we are required to
meet one of the exchange's "new listing" standards in order for our stock to
continue to trade on the exchange. While we believe that we satisfy at least one
of the new listing standards, we have not yet received final approval from the
exchange. In addition, even if we meet the new listing standards, if our stock
price, stockholder's equity, income or market cap were to fall below the
standards set by the exchange, we may not be able to maintain our American Stock
Exchange listing. If we do not remain listed on the American Stock Exchange, the
market price and liquidity of our common stock could be impaired. The delisting
of our common stock could also deter broker-dealers from making a market in or
otherwise generating interest in our common stock and could adversely affect our
ability to attract investors in our common stock and raise additional capital.
As a result of these factors, the value of our common stock could decline
significantly, and our stockholders could lose some or all of their investment.


                                       14






 




Risks Related to Operating in Foreign Markets

Our business in Mexico presents unique economic and regulatory risks.

       A significant portion of our assets and revenues are and will be located
in Mexico. Our business, therefore, is affected by prevailing conditions in the
Mexican economy and is, to a significant extent, vulnerable to economic
downturns and changes in government policies. The Mexican government exercises
significant influence over many aspects of the Mexican economy. Accordingly, the
Mexican government's actions and the policies established by legislative,
executive or judicial authorities in Mexico may affect the Mexican economy. We
cannot assure you that future economic, political or diplomatic developments in
or affecting Mexico will not:

       o      impair our business, results of operations, financial condition
              and liquidity (including our ability to obtain financing);

       o      materially and adversely affect the market price of our securities
              (including the shares of our common stock); or

       o      negatively affect our ability to meet our obligations.

We operate in foreign markets and are exposed to risks in those markets that may
adversely affect our performance.

       Our growth strategy involves operations in several new international
markets. The following are certain risks inherent in doing business on an
international level, any of which could have a material adverse effect on our
business, financial condition and results of operations:

       o      regulatory limitations restricting or prohibiting us from
              providing our services or selling our products;

       o      unexpected changes in regulatory requirements, tariffs, customs,
              duties and other trade barriers;

       o      difficulties in staffing and managing foreign operations;

       o      political risks;

       o      fluctuations in currency exchange rates and restrictions on
              repatriation of earnings;

       o      delays from customers or government agencies;

       o      dependence upon local suppliers in international markets;

       o      potentially adverse tax consequences resulting from operating in
              multiple jurisdictions with different tax laws; and

       o      an economic downturn in the countries in which we expect to do
              business.

A majority of our revenues are received in foreign currencies. Changes in
current exchange rates could adversely affect our business.

       We generate a majority of our revenues in currencies other than the U.S.
dollar, and thus are subject to fluctuations in exchange rates. We may become
subject to exchange control regulations that might restrict or prohibit the
conversion of our revenue into U.S. dollars. The occurrence of any such factors
could have a material adverse effect on our business, financial condition and
results of operations as well as our ability to service our dollar denominated
liabilities.

                                       15





 





                           FORWARD LOOKING STATEMENTS

       This proxy statement contains forward-looking statements, including
statements about the continued strength of our business and opportunities for
future growth. We believe that our expectations are reasonable and are based on
reasonable assumptions. However, such forward-looking statements by their nature
involve risks and uncertainties. We caution that a variety of factors, including
but not limited to the following, could cause our business and financial results
to differ materially from those expressed or implied in forward-looking
statements: our ability to successfully integrate Provo and its business; our
highly leveraged position; our ability to service our debt; deterioration in
current economic conditions; our ability to pursue business strategies; pricing
pressures; changes in the regulatory environment; foreign currency devaluation;
foreign market risk; outcomes of pending and future litigation; our ability to
attract and retain qualified professionals; industry competition; changes in
international trade, monetary and fiscal policies; our ability to integrate
future acquisitions successfully; our ability to successfully integrate our
accounting and management information systems successfully; and other factors
that may be discussed in other reports subsequently filed from time to time with
the Securities and Exchange Commission. We assume no obligation to update any
forward-looking statements.


                 INFORMATION CONCERNING SOLICITATION AND VOTING

Record Date; Outstanding Shares


       Our board of directors has fixed the close of business on August 28, 2003
as the record date for the determination of the holders of our common stock and
Series B convertible redeemable preferred stock entitled to receive notice of
and to vote at the annual meeting or any adjournments or postponement of the
annual meeting. Only stockholders of record on the record date are entitled to
receive notice of and to vote at the annual meeting or any adjournments or
postponement of the annual meeting.

       As of the record date, 11,317,480 shares of common stock were issued and
outstanding, which were held by approximately 234 holders of record, and 496,445
shares of Series B convertible redeemable preferred stock were issued and
outstanding, which were held by approximately 14 holders of record (in each case
without giving effect to the proposed two-for-three reverse stock split).

       Each holder of common stock as of the record date is entitled to one vote
for each share of common stock then held by such stockholder on matters to be
acted upon at the annual meeting. Each holder of Series B convertible redeemable
preferred stock as of the record date is entitled to one vote for each share of
Series B convertible redeemable preferred stock then held by such holder on
matters to be acted upon at the annual meeting with respect to which holders of
Series B convertible redeemable preferred stock are entitled to vote.


Purpose of the Annual Meeting; Board Recommendation

       The purposes of the annual meeting are as follows:



       o    To consider and vote upon the proposal (a) to issue shares of our
            common stock to the holders of our Series C convertible preferred
            stock issued to the former stockholders of Provo in connection
            with our acquisition of Provo, and (b) to issue shares of our
            common stock to the holders of our Series D convertible preferred
            stock issued to certain of our executive officers and directors,
            certain Provo employees and other third parties in connection
            with the closing of our acquisition of Provo ("Proposal 1");

       o    To consider and vote upon the proposal (a) to amend the certificate
            of designations pertaining to our Series B convertible redeemable
            preferred stock to provide for the mandatory conversion of all
            outstanding Series B convertible redeemable preferred stock upon the
            election of the holders of a majority of the outstanding Series B
            convertible redeemable preferred stock, and (b) to effectuate the
            mandatory conversion of all the outstanding Series B convertible
            redeemable preferred stock at a conversion ratio of six shares of
            common stock for each share of Series B convertible redeemable
            preferred stock (four shares after giving effect to the proposed
            two-for-three reverse split of our common stock) ("Proposal 2");






                                       16



 



 



       o    To consider and vote upon the proposal to amend our certificate of
            incorporation (a) to effect a two-for-three reverse stock split of
            our outstanding common stock, and (b) to increase the number of
            authorized shares of our common stock from 25,000,000 shares to
            100,000,000 shares ("Proposal 3");

       o    In the event Proposal 1 is approved, to consider and vote upon the
            proposal to amend our certificate of incorporation to change our
            name from Frontline Communication Corporation to Provo
            International, Inc. ("Proposal 4");

       o    To consider and vote upon the proposal to elect nine directors for a
            term of one year and until their successors are duly elected and
            qualified ("Proposal 5");

       o    To consider and vote upon the proposal to enter into a common stock
            purchase agreement with Fusion Capital Fund II, LLC ("Proposal 6");

       o    To consider and vote upon the proposal to ratify the appointment of
            BDO Hernandez Marron y Cia, S.C. as our independent auditors
            ("Proposal 7"); and

       o    To transact such other business as may properly come before the
            meeting or any adjournment or postponement thereof.


       OUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED, AND UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR, PROPOSAL 1, PROPOSAL 2, PROPOSAL 3,
PROPOSAL 4, PROPOSAL 5, PROPOSAL 6 AND PROPOSAL 7.


Quorum; Vote Required


       A quorum of stockholders is necessary to hold a valid meeting. A quorum
will be present with respect to Proposal 1, Proposal 3, Proposal 4, Proposal 5,
Proposal 6 and Proposal 7 if at least a majority of the outstanding common stock
are represented by votes at the meeting or by proxy. A quorum will be present
with respect to Proposal 2 if at least a majority of the outstanding common
stock and a majority of the outstanding Series B convertible redeemable
preferred stock are represented by votes at the meeting or by proxy. Votes will
be counted by the inspector of election appointed for the meeting, who will
separately count "For" and "Against" votes, abstentions and broker non-votes.
Proxies marked as abstaining as well as broker non-votes will be treated as
"present" for purposes of determining a quorum for the meeting. (A "broker
non-vote" occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power with respect to that proposal and has not received instructions
with respect to that proposal from the beneficial owner (despite voting on at
least one other proposal for which it does have discretionary authority or for
which it has received instructions)).

       Under the certificates of designations for the Series C convertible
preferred stock and the Series D convertible preferred stock and under the
American Stock Exchange rules, approval of the issuance of the common stock upon
conversion of the Series C convertible preferred stock and the Series D
convertible preferred stock (Proposal 1) requires the affirmative vote of a
majority of the votes cast on the proposal by the holders of the common stock,
provided that the total votes cast on the proposal represent over 50% of the
outstanding common stock, which is the only outstanding class of securities
entitled to vote on the proposal.

       Under Delaware law, (i) the amendment of the certificate of incorporation
of designations pertaining to the Series B convertible redeemable preferred
stock to provide for the mandatory conversion of all Series B convertible
redeemable preferred stock upon the election of the holders of a majority of the
Series B convertible redeemable preferred stock requires the affirmative vote of
the holders of a majority of the outstanding shares of the Series B convertible
redeemable preferred stock and of the common stock, each voting separately as a
class and (ii) to effectuate the mandatory conversion of all Series B
convertible redeemable preferred stock requires the affirmative vote of the
holders of a majority of the outstanding shares of the Series B convertible
redeemable preferred stock (Proposal 2).


       Under Delaware law, the affirmative vote of the holders of not less than
a majority of the outstanding shares of common stock is required to approve the
proposed amendments to the certificate of incorporation to effect a
two-for-three reverse split of the common stock and an increase in the number of
authorized shares of common stock from 25,000,000 shares to 100,000,000 shares
(Proposal 3).



                                       17



 



 



       Under Delaware law, the affirmative vote of the holders of not less than
a majority of the outstanding shares of common stock is required to approve the
proposed amendments to the certificate of incorporation to change our name from
Frontline Communications, Inc. to Provo International, Inc. (Proposal 4).

       Under Delaware law, the nine nominees receiving the highest number of
affirmative votes of the shares of common stock present in person or represented
by proxy at the annual meeting and entitled to vote, shall be elected as
directors (Proposal 5).


       Under the American Stock Exchange rules, approval of the issuance of a
number of shares of common stock in excess of 20% of the number of outstanding
shares of our common stock to Fusion Capital Fund II, LLC (Proposal 6) requires
the affirmative vote of a majority of the votes cast on the proposal by the
holders of the common stock, provided that the total votes cast on the proposal
represent over 50% of the outstanding common stock, which is the only
outstanding class of securities entitled to vote on the proposal.

       Ratification of the selection of BDO Hernandez Marron y Cia, S.C. as our
independent auditors (Proposal 7) is not legally required. However, our board of
directors has determined that the affirmative vote of the majority of the votes
cast on the proposal by the holders of the common stock will constitute such
approval.


       Abstentions are counted as "present" for purposes of determining who is
entitled to vote on Proposal 1, Proposal 2, Proposal 3, Proposal 4, Proposal 5,
Proposal 6 and Proposal 7. Abstentions will have the effect of a vote AGAINST
Proposal 1, Proposal 2, Proposal 3, Proposal 4 and Proposal 6 (but will not have
any effect on the outcome of Proposal 5 or Proposal 7). Broker non-votes are
counted as "present" for purposes of determining who is entitled to vote. Broker
non-votes will have the same effect as a vote AGAINST Proposal 1, Proposal 2,
Proposal 3, Proposal 4 and Proposal 6, but will have no effect on the outcome of
the Proposal 5 or Proposal 7.

Voting of Proxies


       If the accompanying proxy card is properly signed and returned to us and
not revoked before a vote is taken at the annual meeting, it will be voted in
accordance with the instructions indicated on the proxy card. If the proxy card
is signed and returned to us without indicating any voting directions, (i)
shares of common stock represented by the proxy will be voted FOR the issuance
of common stock upon conversion of the Series C convertible preferred stock and
the Series D convertible preferred stock (Proposal 1), FOR the amendment of the
certificate of designations pertaining to the Series B convertible redeemable
preferred stock to provide for the mandatory conversion of all Series B
convertible redeemable preferred stock upon the election of the holders of a
majority of the Series B convertible redeemable preferred stock (Proposal 2),
FOR the amendment of our certificate of incorporation to effect a two-for-three
reverse stock split of our outstanding common stock and to increase the number
of our authorized shares of common stock from 25,000,000 shares to 100,000,000
shares (Proposal 3), FOR the amendment of our certificate of incorporation to
change our name from Frontline Communications, Inc. to Provo International, Inc.
(Proposal 4), FOR the election of the nine director nominees identified herein
(Proposal 5), FOR the proposal to enter into a common stock purchase agreement
with Fusion Capital Fund II, LLC and FOR the ratification of the appointment of
BDO Hernandez Marron y Cia, S.C. as our independent auditors (Proposal 7); and
(ii) shares of Series B convertible redeemable preferred stock represented by
the proxy will be voted FOR the amendment of the certificate of designations
pertaining to the Series B convertible redeemable preferred stock to provide for
the mandatory conversion of all Series B convertible redeemable preferred stock
upon the election of the holders of a majority of the Series B convertible
redeemable preferred stock and to effectuate the mandatory conversion of all
Series B convertible redeemable preferred stock (Proposal 2).

       Under American Stock Exchange rules, brokers who hold shares in street
name for customers have the authority to vote such shares on Proposal 5 and
Proposal 7 (but not Proposal 1, Proposal 2, Proposal 3, Proposal 4 or Proposal
6) if they do not receive specific instructions from the beneficial owners. If
you hold shares in street name, please see the voting form provided by your
broker for additional information. We urge you to mark each applicable box on
the proxy card or voting instruction to indicate how to vote your shares.

       If you return to us a properly executed proxy card or voting instructions
and have abstained from voting on a particular matter, the common stock or
Series B convertible redeemable preferred stock represented by the proxy or
voting instructions will be considered present at the annual meeting for
purposes of determining a quorum, but will not be considered to have been voted
in favor of that matter.





                                       18



 



 



       We are not aware of any business to be acted on at the annual meeting,
except as described in this document. If any other matters are properly
presented at the annual meeting, or any adjournment or postponement of the
annual meeting, the persons appointed as proxies or their substitutes will have
discretion to vote or act on the matter according to their best judgment and
applicable law unless the proxy indicates otherwise.

Authorization to Vote on Adjournment and Other Matters


       By signing the proxy, a stockholder authorizes the proxy holder to vote
in his discretion regarding any procedural motions that may come before the
annual meeting. For example, this authority could be used to adjourn the annual
meeting if we believe it is desirable to do so. Adjournment or other procedural
matters could be used to obtain more time before a stockholder vote in order to
solicit additional proxies or to provide additional information to our
stockholders. To the extent a stockholder intends to vote against the proposals
to be submitted at the annual meeting, such stockholder would have no incentive
to vote in favor of discretionary adjournment by our board of directors, which
would allow us to adjourn the annual meeting in order to solicit additional
votes in favor of such proposal. We have no plans to adjourn the annual meeting
at this time, but we intend to attempt to do so if we believe that doing so
would promote stockholder interests.


Revocability of Proxies

       Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. Proxies may be revoked by any of the
following actions: 


       o    filing a written notice of revocation with our Secretary at our
            principal executive office (One Blue Hill Plaza, P.O. Box 1548,
            Pearl River, New York 10965);

       o    filing a properly executed proxy showing a later date with our
            Secretary at our principal executive office (One Blue Hill Plaza,
            P.O. Box 1548, Pearl River, New York 10965); or


       o    attending the meeting and voting in person (attendance at the
            meeting will not, by itself, revoke the proxy).

Solicitation

       We will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of common stock beneficially owned
by others to forward to such beneficial owners. We may reimburse persons
representing beneficial owners of common stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, facsimile or personal
solicitation by our directors, officers or other regular employees.

Presence of Auditors

       Representatives of our auditors for the 2002 fiscal year, Goldstein Golub
Kessler LLP, and of Provo's auditors and our proposed auditors for the 2003
fiscal year, BDO Hernandez Marron y Cia, S.C., are expected to be present at the
annual meeting. They will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.



                                       19



 




 



                                   PROPOSAL 1



                   ISSUANCE OF COMMON STOCK UPON CONVERSION OF
  SERIES C CONVERTIBLE PREFERRED STOCK AND SERIES D CONVERTIBLE PREFERRED STOCK


Introduction

       The background information necessary to understand fully this Proposal 1
and the reasons why Frontline is seeking stockholder approval of this proposal
are set forth above in the section captioned "Questions and Answers About
Proposals 1, 2 and 3". We urge you to read that background section carefully.

       Proposal 1 relates to:


       o    the issuance of 22,000,000 shares of our common stock to the holders
            of our Series C convertible preferred stock, which we issued to the
            former stockholders of Provo as consideration for our acquisition of
            Provo; and

       o    the issuance of 3,550,000 shares of our common stock to the holders
            of our Series D convertible preferred stock, which we issued to
            certain of our executive officers and directors and certain Provo
            employees to provide them with an incentive to continue their
            service on behalf of Frontline and Provo following the completion of
            our acquisition of Provo, and to certain third parties to compensate
            them for the services they provided in connection with arranging for
            and assisting with the completion of our acquisition of Provo.

       On April 3, 2003, we acquired Provo for consideration consisting of
220,000 shares of our Series C convertible preferred stock, and a $20,000,000
note which will be payable only if the stockholders fail to timely approve the
proposed issuance of common stock upon conversion of the Series C convertible
preferred stock. The Series C convertible preferred stock had a value of $6.6
million based on the closing price of the common stock on January 24, 2003, the
date we executed the stock purchase agreement. In connection with our
acquisition of Provo, we also issued 35,500 shares of our Series D convertible
preferred stock to certain of our executive officers and directors, certain
Provo employees and other third parties.

       Under the terms of the certificate of designations for the Series C
convertible preferred stock, a copy of which is attached as Annex A, upon
approval by our stockholders of Proposal 1 and Proposal 3, all outstanding
shares of Series C convertible preferred stock will be converted into 22,000,000
shares of common stock, which reflects a conversion rate of 100 shares of common
stock per share of Series C convertible preferred stock (after giving effect to
the proposed two-for-three reverse stock split). Under the terms of the
certificate of designations for the Series D convertible preferred stock, a copy
of which is attached as Annex B, upon approval by our stockholders of Proposal 1
and Proposal 3, all outstanding shares of Series D convertible preferred stock
will be converted into 3,550,000 shares of common stock, which reflects a
conversion rate of 100 shares of common stock per share of Series D convertible
preferred stock (after giving effect to the proposed two-for-three reverse stock
split).

       If our stockholders do not approve Proposal 1 and Proposal 3 by November
15, 2003, the Series C convertible preferred stock will remain outstanding on a
non-convertible, non-voting basis, and the note issued to the former Provo
stockholders will become due and payable in accordance with its terms. As
described in more detail below under "Proposal 1 -- Secured Note Rights and
Preferences," on page 25 the note has economic terms that we believe are
considerably less favorable to us than the terms of our common stock.

       If our stockholders do not approve Proposal 1 and Proposal 3 by November
15, 2003, the Series D convertible preferred stock will remain outstanding on a
non-convertible, non-voting basis, but no other consideration will accrue to the
holders of the Series D convertible preferred stock.


American Stock Exchange Requirements


       Our board of directors proposes to issue 22,000,000 shares of common
stock upon conversion of all outstanding shares of Series C convertible
preferred stock issued in connection with our acquisition of Provo, and to issue
3,550,000 shares of common stock upon conversion of all outstanding shares of
Series D convertible preferred stock issued in connection with our acquisition
of Provo (in each case after giving effect to the proposed two-for-




                                       20



 



 




three reverse stock split), and asks for your approval for the issuance in
accordance with the rules of the American Stock Exchange.

       The American Stock Exchange rules require us to obtain stockholder
approval prior to approving the listing of additional stock to be issued in
connection with an acquisition of the stock or assets of another company if the
issuance of common stock could result in an increase in our outstanding common
stock of 20% or more. Our proposed issuance of shares of common stock upon
conversion of the Series C convertible preferred stock and Series D convertible
preferred stock falls under this rule because the issuance of such shares will
result in an increase in outstanding common stock of more than 20%.

Interests of Certain Persons in Approval of Conversion of Series C Convertible
Preferred Stock and Series D Convertible Preferred Stock


       Interests in Frontline's Securities


       In connection with our acquisition of Provo, we issued 220,000 shares of
our preferred stock to the former stockholders of Provo, Ventura Martinez del
Rio, Sr. and Ventura Martinez del Rio, Jr., who became officers and directors of
Frontline upon our closing of our acquisition of Provo. If our stockholders do
not approve the conversion of the Series C convertible preferred stock by
November 15, 2003, the Series C convertible preferred stock will remain
outstanding on a non-convertible, non-voting basis, the purchase price of our
acquisition of Provo will be increased, and the $20,000,000 note issued to these
two former Provo stockholders will become due and payable in accordance with its
terms. For additional information concerning the note, see "Proposal 1 -- Note
Rights and Preferences." In connection with our acquisition of Provo, we also
issued 35,550 shares of our Series D convertible preferred stock to certain of
our executive officers and directors, certain other Frontline and Provo
employees (none of whom is an officer or director of Frontline), and to other
third parties.





                                       21



 



 






       The following table identifies the persons to whom the Series C
convertible preferred stock and Series D convertible preferred stock were
issued, the number of such shares issued to each such person and the number of
shares of common stock into which such shares of Series C convertible preferred
stock and Series D convertible preferred stock will be converted upon approval
of Proposal 1 and Proposal 3 by our stockholders (after giving effect to the
proposed two-for-three reverse stock split):





                                                                                         
                                                Number of    Number of                    
                             Relationship to    Series C     Series D     Number of    % of outstanding Common Stock held
           Name              Frontline/Provo     Shares       Shares    Common Shares          after Conversion (1)
           ----              ---------------     ------       ------    -------------  ---------------------------------
                                                                           
Ventura Martinez del        Director and            165,000           0      16,500,000             47.0%
Rio, Sr.                    executive
                            officer/Former
                            stockholder
Ventura Martinez del        Director and             55,000           0       5,500,000             15.7%
Rio, Jr.                    executive
                            officer/Former
                            stockholder
Stephen J. Cole-            Director and                  0      10,000       1,000,000              5.1%
Hatchard (2)                executive
                            officer/None
Nicko Feinberg (3)          Director and                  0      10,000       1,000,000              4.5%
                            executive
                            officer/None
Amy Wagner-Mele (4)         Executive                     0       1,000         100,000                 *
                            officer/None
Vasan Thatham (5)           Executive                     0       1,000         100,000                 *
                            officer/None
Other Frontline 
Employees                   Employee/None                 0       1,000         100,000                 *
Other Provo Employees       Employee/None                 0       4,500         450,000                 *
Joseph Donahue              Former                        0       5,000         500,000                 *
                            Director/None
Joseph Cavanaugh            None/None                     0       1,250         125,000                 *
William Fritts              None/None                     0       1,000         100,000                 *
Vincent Franzone            None/None                     0         500          50,000                 *
Thomas Biggs                None/None                     0         250          25,000                 *
Total                                               220,000      35,500      25,550,000



------------------------------------
(1) Adjusted to give effect to the conversion of the Series B convertible
redeemable preferred stock, Series C convertible preferred stock and Series D
convertible preferred stock and the proposed two-for-three- reverse split. 
(2) Includes 201,333 shares issuable upon exercise of options.
(3) Includes 83,333 shares issuable upon exercise of warrants and 163,333 shares
issuable upon exercise of options.
(4) Includes 100,000 shares issuable upon exercise of options.
(5) Includes 66,667 shares issuable upon exercise of options.
* Less than 1%


       We issued the Series D convertible preferred stock to our executive
officers and directors, and to the Provo employees, to provide them with an
incentive to continue their service on behalf of Frontline and Provo following
the completion of our acquisition of Provo. We issued the Series D convertible
preferred stock to the third parties to compensate them for the services they
provided in connection with arranging for and assisting with the completion of
our acquisition of Provo.





                                       22



 



 



       Employment Agreements


       Our board of directors has approved the adoption of employment agreements
between Frontline and/or its affiliates and Messrs. Martinez del Rio, Sr.,
Cole-Hatchard, Martinez Del Rio, Jr., Feinberg and Thatham, that provide for an
annual base compensation of not less than $150,000, $150,000, $120,000, $120,000
and $115,000, respectively. The agreements will provide for certain base salary
increases in the event that we complete an equity financing in excess of
$3,000,000, and for certain bonuses in the event that we achieve certain revenue
objectives. The agreements will also allow for such bonuses as our board of
directors may, in its sole discretion, from time to time determine. The
employment agreements with Messrs. Martinez Del Rio, Sr., Cole-Hatchard,
Martinez Del Rio, Jr., Feinberg and Thatham, will expire in April 2005 subject
to automatic successive one-year renewals unless either we or the employee gives
notice of intention not to renew the agreement. With the exception of Mr.
Martinez del Rio Sr., the employment agreements will provide for employment on a
full-time basis, and each of the agreements will contain a provision that the
employee will not compete or engage in a business competitive with our current
or anticipated business during the term of the employment agreement and for a
period of two years thereafter.


       All of the employment agreements will provide that the employees shall be
paid additional compensation equal to 295% of their annual base salary in the
event of a change of ownership or effective control of our company (as defined
in the agreements). The anticipated change in control as a result of the
acquisition of Provo will not trigger the additional compensation clauses of the
employment agreements.


       In the event our stockholders fail to approve the conversion of the
Series C convertible preferred stock as requested hereby, the employment
agreements with Messrs. Martinez del Rio, Sr. and Martinez del Rio, Jr. will
terminate 90 days from the date that the stockholders fail to approve such
conversion.


       Bridge Loan Agreement


       As a condition precedent to the closing of our acquisition of Provo and
in order to finance certain of our expenses relating to our acquisition of
Provo, on April 2, 2003, we entered into a bridge financing whereby we borrowed
$550,000 from IIG Equity Opportunities Fund, Ltd., an unaffiliated lender. The
loan is evidenced by a secured promissory note that bears interest at the rate
of 14% per annum and is secured by substantially all of our assets, other than
the assets of Provo and the Provo stock. Two of our officers, Nicko Feinberg and
Stephen J. Cole-Hatchard pledged shares of our common stock owned by them as
additional collateral to IIG Equity. In addition, Mr. Cole-Hatchard has
personally guaranteed the repayment of the promissory note, and mortgaged
certain personal real estate as collateral for the bridge loan.
Mr. Cole-Hatchard's personal guarantee is limited to the assets mortgaged by
him and IIG Equity has no-recourse against his other assets.

       In connection with the bridge financing, we issued 500,000 shares of our
common stock to IIG Equity as additional consideration. The promissory note is
repayable at the earlier of July 2, 2003 or upon our obtaining financing
collateralized by Provo's accounts receivable. On September 23, 2003, we repaid
$125,000 and amended this agreement to extend its due date from July 2, 2003 to
October 3, 2003. We are presently attempting to negotiate a further extension
with the noteholder. For a further description of the terms of the bridge loan
see "The Acquisition Transaction - Material Terms of the Stock Purchase
Agreement and other Transaction Documents" beginning on page 31.

       Concurrently with the execution of the bridge loan agreement, Frontline
and Provo executed a contribution agreement, whereby each company agreed that it
would be responsible for repaying 50% of the bridge loan. In the event either
Provo or Frontline pays more than its proportionate 50% of the bridge loan, such
payor shall be subrogated in the rights of IIG Equity to collect from the other
party up to its proportionate share. The contribution agreement does not grant
Provo any subrogation rights against the collateral pledged by
Mr. Cole-Hatchard. The contribution agreement will only become effective at the
earlier of November 15, 2003 or if our stockholders fail to approve Proposal 1
and Proposal 2 as requested herein.


       In addition, concurrently with the execution of the bridge loan
agreement, Frontline, Ventura Martinez del Rio, Sr. and Ventura Martinez del
Rio, Jr. entered into a lien subordination agreement whereby the former
stockholders of Provo agreed to subordinate the priority of any liens they may
have over the assets of Frontline, to those liens granted to IIG Equity under
the bridge loan agreement.



                                       23



 



 




Series C Convertible Preferred Stock Rights and Preferences

       The Series C convertible preferred stock has designations, voting rights,
preferences, limitations and special rights as set forth in its Certificate of
Designations, filed with the Secretary of State of Delaware on April 3, 2003.
The following is a summary of the material terms of the Series C convertible
preferred stock. You should read the complete Certificate of Designations which
is included as Annex A to this proxy statement.

       Dividends. The holders of Series C convertible preferred stock are not
entitled to receive any dividends.

       Liquidation Preference. Each share of Series C convertible preferred
stock has a preference over our common stock in all distributions upon
liquidation. The liquidation preference for the Series C convertible preferred
stock is $0.01 per share of Series C convertible preferred stock.

       Conversion Rights. Upon obtaining the required stockholder approval, all
outstanding shares of Series C convertible preferred stock will be converted
into 22,000,000 shares of common stock, at a conversion rate of 100 per share
(after giving effect to the proposed two-for-three reverse stock split).

       Voting Rights. The holders of Series C convertible preferred stock are
entitled to vote as a separate class on certain corporate actions, including,
changes to our certificate of incorporation and by-laws that would adversely
affect the Series C convertible preferred stock, amendments to the Certificates
of Designations for the Series C convertible preferred stock and the creation of
senior or equivalent shares of capital stock. On such matters, and any other
matters on which the holders of Series C convertible preferred stock are
entitled under law or our certificate of incorporation to vote as a separate
class, each holder is entitled to one vote for each share of Series C
convertible preferred stock held.

       Negative Covenants. Prior to November 15, 2003, we may not do any of the
following: (i) authorize any merger or certain other business combination
transactions; (ii) take any action that would result in our voluntary or
involuntary dissolution or winding-up; (iii) amend, repeal or add any provision
to our certificate of incorporation or by-laws if it would materially adversely
effect the holders of Series C convertible preferred stock; (iv) issue any
options, warrants or other securities convertible into or exchangeable for
shares of our capital stock ranking senior to the Class C Stock; (v) incur,
refinance or amend the terms of any indebtedness or any other obligation for the
payment of money in an aggregate amount of $1,000,000 or more; or (vi) enter
into any agreement for the sale of our securities or any capital financing
transaction in which we issue capital stock or other securities at price per
share (or effective per share price) lower than $1.50.


Secured Note Rights and Preferences


       If our stockholders do not approve Proposal 1 and Proposal 2 by November
15, 2003, the Series C convertible preferred stock will remain outstanding on a
non-convertible, non-voting basis and the note issued to the former Provo
stockholders will become due and payable in accordance with its terms. The
following discussion is a summary of the material terms of the note. You should
read the complete form of note, a copy of which is included as Annex C to this
proxy statement.

       The note is a $20,000,000 principal amount promissory note that we issued
to the former Provo stockholders in connection with our acquisition of Provo,
which will become payable only if the Series C convertible preferred stock is
not converted into common stock on or by November 15, 2003. The note will bear
interest at the rate of 8% per annum from November 15, 2003, and will become due
and payable in full on the fifteenth day following the earlier of (i) November
15, 2003, if the stockholders have not approved Proposal 1 and Proposal 2 by
that date; or (ii) the failure of our stockholders to approve the conversion of
the Series C convertible preferred stock as requested in this proxy
solicitation. The note is secured by substantially all of our assets, including
the capital stock of Provo. The note was issued and delivered on April 3, 2003.

       We believe that the issuance and eventual right to collect under the note
is considerably less favorable to us and our stockholders than the issuance of
common stock upon conversion of the Series C convertible preferred stock because
of the following reasons:

       o    The note will be due and payable shortly after November 15, 2003;

       o    The principal amount of the note is a significant liability;




                                       24



 



 




       o    The former stockholders of Provo have a lien on substantially all of
            our assets, including the capital stock of Provo; and

       o    In the event that we are unable to pay the note as it becomes due,
            the former stockholders of Provo may initiate actions against us,
            which may include foreclosure on their collateral consisting of
            substantially all of our assets.

Series D Convertible Preferred Stock Rights and Preferences

       The Series D convertible preferred stock has designations, voting rights,
preferences, limitations and special rights as set forth in its Certificate of
Designations, filed with the Secretary of State of Delaware on April 3, 2003.
The following is a summary of the material terms of the Series D convertible
preferred stock. You should read the complete Certificate of Designations which
is included as Annex B to this proxy statement.

       Dividends. The holders of Series D convertible preferred stock are not
entitled to receive any dividends.

       Liquidation Preference. Each share of Series D convertible preferred
stock has a preference over our common stock in all distributions upon
liquidation. The liquidation preference for the Series D convertible preferred
stock is $0.01 per share of Series C convertible preferred stock.

       Conversion Rights. Upon obtaining the required stockholder approvals, all
outstanding shares of Series D convertible preferred stock will be converted
into 3,550,000 shares of common stock, a conversion rate of 100 per share (after
giving effect to the proposed two-for-three reverse stock split).

       Voting Rights. The holders of Series D convertible preferred stock are
entitled to vote as a separate class on certain corporate actions, including,
changes to the Certificate of Designations for the Series D convertible
preferred stock that would adversely affect the Series D convertible preferred
stock. On such matters, and any other matters on which the holders of Series D
convertible preferred stock are entitled under law or our certificate of
incorporation to vote as a separate class, each holder is entitled to one vote
for each share of Series D convertible preferred stock held.


Required Vote


       Under certificate of designations for the Series C convertible preferred
stock and the Series D convertible preferred stock, and under the American Stock
Exchange rules, approval of the issuance of the common stock upon conversion of
the Series C convertible preferred stock and the Series D convertible preferred
stock (Proposal 1) requires the affirmative vote of the majority of the votes
cast on the proposal, provided that the total votes cast on the proposal
represent a majority of the outstanding common stock, which is the only
outstanding class of securities entitled to vote on the proposal. Abstentions
and broker non-votes will have the same effect as a vote against Proposal 1.


Board Recommendation


       Our board of directors unanimously recommends a vote FOR Proposal 1.


                           THE ACQUISITION TRANSACTION

General


       In 2002, our deteriorating financial condition and resultant lack of
growth led our board of directors to evaluate several alternatives for
restructuring our business, including further cost cutting efforts, divesting
certain assets, seeking additional sources of capital and merging with or
acquiring another entity. After careful consideration, our board of directors
determined that the acquisition of Provo presented the best alternative for
preserving stockholder value. The background of our acquisition of Provo is set
forth below. The acquisition was approved by our board of directors prior to its
consummation. No stockholder approval of our acquisition of Provo was or is
required under applicable law or under our organizational documents. Our
acquisition of Provo is effective regardless of whether the stockholders approve
Proposal 1. We are seeking stockholder approval of Proposal 1 to satisfy the
stockholder approval requirements of the American Stock Exchange.




                                       25



 



 




Background of Our Acquisition of Provo

       In 2000, the downturn in the stock market relating to Internet stocks,
the growth of our competitors, and the introduction of new Internet access
products, such as high-speed cable access, began to have a negative impact on
our business. Specifically, we found it increasingly difficult to raise money in
the equity marketplace, and the resulting lack of capital impeded the growth of
our business. After engaging in an aggressive restructuring program during 2000
and 2001, in 2002 our board of directors determined that the best alternative to
attempt to preserve our continued economic viability was to acquire or merge
with a company with a larger revenue base and greater potential for growth 
than us.

       Due to the fact that we had a history of losses, an accumulated deficit
of approximately $37.5 million, declining revenue, a low stock price, a low cash
reserve and a qualified opinion from our auditors, there were very few companies
that were interested in entering into a transaction with us. During the second
half of 2002, our chief executive officer, Stephen Cole-Hatchard, acting on
behalf of our board of directors, met with approximately three entities that
expressed an interest in entering into a transaction with us. In June 2002, we
entered into negotiations for a "reverse merger" with an undisclosed entity.
After approximately three months of negotiations, we were unable to reach a
definitive agreement and negotiations were terminated in late September 2002.

       In early October 2002, our chief executive officer contacted Gary R.
Morris, chairman and chief executive officer of Kiboga Systems, Inc. ("Kiboga"),
a privately held software development company headquartered in Dallas, Texas,
about the possible combination of Frontline, Kiboga and Provo. On October 10,
2002, Mr. Cole-Hatchard and Mr. Morris of Kiboga had an initial meeting during
which a possible combination transaction was discussed in concept.


       On October 10, 2002, Frontline and Kiboga entered into a confidentiality
agreement regarding a possible transaction between the parties. Promptly
following the execution of the confidentiality agreement, the parties began
negotiating a definitive acquisition agreement and related agreements. On
November 22, 2002, Kiboga delivered an initial draft of the stock purchase
agreement to Frontline and Provo. Between November 22, 2002 and December 23,
2002, the parties exchanged multiple revised drafts of the stock purchase
agreement and related agreements and continued to negotiate the stock purchase
agreement and related agreements.


       On December 23, 2002, Frontline, Kiboga, Provo, Ventura Martinez del Rio,
Sr. and Ventura Martinez del Rio Jr., entered into a stock purchase agreement,
which provided, among other things, that the parties would conduct their
respective due diligence reviews before January 24, 2003. During the period from
January 8 to 10, 2003, representatives of Frontline, Kiboga and Provo met in
Dallas, Texas to conduct the due diligence review. On January 17, 2003, counsel
for Kiboga delivered a letter to Frontline and Provo, terminating Kiboga's
participation in the stock purchase agreement. Kiboga's termination was based
upon a clause in the stock purchase agreement which permitted any party to the
agreement to terminate their participation in the transaction if they were not
satisfied with the results of their due diligence investigation by January 24,
2003.

       On January 18, 2003, Mr. Cole-Hatchard and Mr. Martinez del Rio, Jr. held
conversations about continuing the acquisition without Kiboga. Between January
18, 2003 and January 24, 2003 Provo and Frontline continued negotiating a new
acquisition transaction. On January 24, 2003, Frontline, Provo, Ventura Martinez
del Rio, Sr. and Ventura Martinez del Rio, Jr. entered into a new stock purchase
agreement, which provided that the closing would occur upon the satisfaction or
waiver of certain conditions precedent. Our acquisition of Provo was announced
publicly on January 24, 2003.

       On March 13, 2003, our board of directors unanimously approved our
acquisition of Provo and related transactions and authorized the execution and
delivery of the stock purchase agreement. On March 13, 2003, the parties
executed all ancillary documents to the stock purchase agreement and placed the
documents in escrow pending the satisfaction of certain conditions precedent to
the acquisition. On April 3, 2003, Frontline, Provo, Ventura Martinez del Rio
Sr. and Ventura Martinez del Rio, Jr. executed and delivered the amended and
restated stock purchase agreement. Our acquisition of Provo was completed on
April 3, 2003, and was announced publicly on April 7, 2003.




                                       26



 



 




Reasons for the Transaction

       We believe that our acquisition of Provo will enhance our potential to
realize improved long-term operating results and to achieve a stronger financial
position. We believe that our acquisition of Provo will yield the following
potential benefits:

       o    Additional significant yearly revenues and strong operating profits.
            Provo had 2002 audited revenue of approximately $100 million, an
            increase of 20x over Frontline's 2002 audited revenue.

       o    An increased ability to participate in international transactions
            and allow us to expand our service offering. We believe that Provo's
            strong Mexican market presence will enable us to offer our Internet
            access products in Mexico and other Latin American markets. In
            addition, Provo plans to launch additional products in the U.S. and
            Mexico, which we expect will augment our current revenue lines.

       o    An enhanced our ability to raise cash, which has been inhibited by
            the adverse market conditions for technology and Internet companies
            prevailing during the past 24 months. Our acquisition of Provo will
            result in a more diversified product portfolio, which we believe
            will make us more attractive to potential investors. The addition of
            Provo's revenue stream to our current revenue stream will also aid
            us in seeking additional financing.

       o    The transaction will increase our profile as a communications
            company. The combined product offering of Internet service bundled
            with telephone service will make us more competitive in the
            telecommunications market.

       In view of the variety of factors considered in connection with our
acquisition of Provo, we did not quantify or otherwise assign relative weights
to the specific factors considered listed above in reaching our determinations.


Factors Considered by Our Board of Directors


       In approving our acquisition of Provo, our board of directors consulted
with management as well as our outside financial advisors and legal counsel, and
considered the following factors as well as the factors listed under "The
Acquisition Transaction -- Reasons for the Transaction" beginning on page 26:

       (1)   The business, operations, financial condition, earnings and
             prospects of each of Frontline and Provo, and the results of our
             due diligence review of Provo's operations, financial condition,
             earnings and prospects. Our board of directors determined that our
             stockholders would benefit from the Provo acquisition because they
             would own stock in an entity with 2002 combined audited revenue in
             excess of $100 million and operating profits of $750,000 (as
             opposed to Frontline alone, which had 2002 audited revenue of $5
             million and no operating profits);

       (2)   The fact that our ability to grow without access to capital or a
             substantial acquisition transaction was severely limited.
             Specifically, our board of directors determined that Frontline was
             unable to grow its business without the infusion of additional
             capital, and that the addition of Provo's revenue and assets to our
             operation would make our company more attractive to potential
             investors;

       (3)   The anticipated financial impact of the proposed transaction on our
             future financial performance. Specifically, our board of directors
             considered the fact that Provo, while profitable, required
             additional capital in order to increase its profit margin and
             launch new product lines, and that Frontline's access to capital
             would likely increase as a result of its acquisition of Provo.
             These two factors led our board of directors to determine that
             combining the two entities would increase our chances of raising
             capital to fund future growth.

       (4)   The fact that our viability largely depended on finding a suitable
             acquisition target for a reverse merger or other business
             combination. Our board of directors also considered the fact that,
             due to our history of losses, our accumulated deficit of
             approximately $37.5 million, our declining revenue, our low stock
             price, low cash reserve and the fact that we had received a
             qualified opinion from our auditors, there were practically no
             alternatives to pursuing an acquisition of or a business
             combination or joint venture with an entity other than Provo. Our
             board of directors therefore concluded that a transaction with
             Provo was feasible and was expected to yield greater benefits than
             failing to act at that time;

       (5)   The dilutive effect of the issuance of additional stock as
             consideration for our acquisition of Provo. Our board of directors
             ultimately concluded that the benefits expected to result from the
             acquisition outweighed the negative impact our stockholders may
             experience from such dilution;




                                       27



 



 




       (6)   The fact that Ventura Martinez del Rio, Sr. and Ventura Martinez
             del Rio, Jr. would jointly hold, on a fully diluted basis,
             approximately 62.7% of our outstanding common stock after the
             conversion of the Series C convertible preferred stock issued to
             them in the acquisition. Our board of directors concluded that
             given the disparity in revenue and earnings between Frontline and
             Provo, the post-closing ownership percentages were fair and
             reasonable;

       (7)   The analyses and presentations of GunAllen Financial, Inc., and
             GunAllen Financial's written opinion to the effect that, as of
             April 3, 2003, and based upon and subject to the various factors
             and assumptions set forth in its opinion, the consideration to be
             paid by us in our acquisition of Provo was fair from a financial
             point of view to our stockholders. The fact that GunAllen agreed
             with us regarding the value of Provo reinforced our board of
             directors' conclusion that the consideration paid to Provo was
             appropriate;

       (8)   The challenges of combining the businesses and cultures of two
             corporations of this size and the attendant risk of not achieving
             the expected cost savings, revenue and business synergies, and of
             diverting management focus and resources from other strategic
             opportunities and operational matters for an extended period of
             time. Our board of directors concluded that the risk of taking no
             action at all outweighed the risks involved in combining the two
             entities;

       (9)   The fact that we would be more highly leveraged because the Provo
             acquisition was financed in part through the incurrence of
             additional indebtedness. Our board of directors concluded that the
             incurrence of additional indebtedness was necessary in order to
             facilitate future growth; and

       (10)  The likelihood of consummation of our acquisition of Provo. Our
             board of directors considered the fact that the structure of the
             Provo acquisition allowed for a closing prior to the date of the
             stockholders meeting. Our board of directors concluded that we and
             our stockholders would likely benefit if the two companies were
             combined in the second quarter, as opposed to later in the fiscal
             year.

       In view of the wide variety of factors considered in connection with its
evaluation of our acquisition of Provo and the complexity of these matters, our
board of directors did not find it useful to and did not attempt to quantify,
rank or otherwise assign relative weights to these factors. Our board of
directors relied on the experience and expertise of GunAllen Financial, our
financial advisors, for quantitative analysis of the financial terms of our
acquisition of Provo. See "The Acquisition Transaction -- Opinion of GunAllen
Financial, Inc." beginning on page 34. In addition, our board of directors did
not undertake to make any specific determination as to whether any particular
factor, or any aspect of any particular factor, was favorable or unfavorable to
our board of directors' ultimate determination, but rather our board of
directors conducted an overall analysis of the factors described above along
with the factors listed under "The Acquisition Transaction -- Reasons for the
Transaction" beginning on page 26, including thorough discussions with and
questioning of our management and financial, legal and accounting advisors. In
considering the factors described above and under "The Acquisition Transaction
-- Reasons for the Transaction," individual members of our board of directors
may have given different weight to different factors.

       Our board of directors considered all these factors as a whole, and
overall considered the factors to be favorable to and to support its
determination. However, the general view of our board of directors was that
items (5), (6), (8), and (9) above were unfavorable factors relating to the
transaction, and that the other reasons and factors described above and under
"The Acquisition Transaction -- Reasons for the Transaction" on page 26 were
generally considered favorable. Our board of directors determined that,
notwithstanding the unfavorable factors noted above, the favorable factors
outweighed the unfavorable factors, and as a result our board of directors voted
to approve our acquisition of Provo.


Description of Frontline's Business

       We are a regional Internet service provider ("ISP") providing Internet
access, web hosting, website design, and related services to residential and
small business customers throughout the Northeast United States and, through a
network partnership agreement, Internet access to customers nationwide.

       Primarily through 18 acquisitions, we grew our monthly revenue from
$30,000 as of October 1998 to approximately $400,000 as of December 31, 2002.
During that same period, we expanded our owned Internet access geographic
footprint from the New York/New Jersey metropolitan area, to a region that now
includes Delaware, Eastern Pennsylvania and Northern Virginia. At December 31,
2002, we owned and operated 12 points-




                                       28



 



 



of-presence ("POPs") which, when combined with 1,100 POPs licensed from third
parties, provide us with the capability to serve over 75% of the U.S.
population.

       During 2002, we concentrated our efforts and resources primarily on
restructuring our operations to reduce costs, increase operating efficiency and
improve customer service. As a result of our restructuring, we reduced our staff
from approximately 70 employees at March 2001 to 31 as of April 1, 2003, and
closed two regional offices, consolidating those functions into our Pearl River,
New York headquarters.

       We streamlined our product offerings, eliminating certain low margin
products and services, and added a broadband one-way satellite Internet access
product line to our group of services. We also standardized our product pricing,
and raised the monthly rates to most of our dial-up access customers to between
$17.95 and $19.95 per month, depending on the term of service purchased.

       We were formed during February 1997 as a Delaware corporation under the
name Easy Street Online, Inc. We changed our name to Frontline Communications
Corporation in July 1997. Our principal executive offices are located at One
Blue Hill Plaza, Pearl River, New York 10965, and our telephone number is (845)
623-8553. Our corporate websites are located at www.frontline.net and
www.fcc.net. Information on these Websites is not part of this proxy statement.
Unless the context indicates otherwise, the terms "Frontline," "we," "our," "the
Company" and "us" in this proxy statement include the operations of Frontline
Communications Corporation and its wholly owned subsidiaries, WowFactor, Inc.,
FNT Communications Corp., and CLEC Communications Corp.

Description of Provo's Business

       General

       Provo was formed in October 1995 by Ventura Martinez Del Rio, Sr., as a
private company headquartered in Mexico City. Provo was formed to distribute
prepaid (Ladatel) public telephone cards for Telefonos de Mexico, S.A.
("Telmex"), which were introduced in 1995. Telmex is the dominant
telecommunications provider in Mexico. Provo quickly became the leading
distributor of Ladatel cards and has maintained its leading position, which
currently stands at approximately 7% of the nationwide market. Provo also
distributes Multifon prepaid landline telephone time provided by Telmex and
prepaid Digital PCS cellular airtime provided by Radiomovil Dipsa, S.A. de C.V.
("Telcel"). Telcel is the dominant provider of cellular airtime in Mexico.

       Provo rapidly grew its sales of prepaid calling time to more than $101
million in 2002. Currently, Telcel airtime sales represent about 30% of Provo's
total annual sales, up significantly from 10% in 2000. Telcel airtime is
expected to represent an increasing proportion of Provo's sales as Ladatel sales
have begun to level off.

       Provo's principal office is located at Quintana Roo 28, Colonia Roma Sur,
06760, Mexico City, Mexico, and its telephone number is 011 52 55 5264-6442.

       Products

       The purpose of the services that Provo Mexico currently resells in Mexico
is to allow individuals who either do not own a land line phone or cell phone or
are not able to enter into continuous service contracts for these services, to
make calls on an as-needed basis, in a convenient and affordable manner.

        Telmex calling time is offered via Ladatel cards in increments of 30, 50
and 100 pesos. Calling time is stored in a simple, single-purpose smart chip and
"burns off" as it is used. Mechanisms housed within public telephones charge
used calling time against the electronic balance stored in the card until no
calling time remains. At this point, a new card must be purchased. Prior to the
advent of these calling cards in 1995 in Mexico, public phones were coin-based.
Such coin-based phones often broke down or were the subject of significant theft
problems. The prepaid card program implemented by Telmex largely has remedied
these problems.

       Prepaid Multifon calling time is offered via personal identification
number (PIN)-based access. Multifon time is sold to groups of residents who
share a common phone in a building such as an apartment building.

       Telcel calling time is also offered via PIN-based access. Telcel calling
time is sold in increments of 100, 200, or 500 pesos. Users must own or share a
phone to use this service. A PIN must be entered prior to making the first 




                                       29



 



 



call. A central switch maintained by Telcel tracks remaining calling time. Users
must repurchase a new block of time with a new PIN every time they exhaust their
prepaid cellular calling time.

       Description of Commissions

       Provo has relied on Telmex to finance much of its sales growth over the
past eight years, through its provision of a credit line to Provo. Telmex
requires all of its distributors to pay for all resold calling time using cash
or their credit line with Telmex when it is ordered. Various surplus properties
owned by Provo, its principals and its business partners have been pledged to
guarantee Provo's credit lines with Telmex.

       The average discount Provo receives related to purchases of minutes from
Telmex using credit is approximately 10.8% (credit-based discounts for 30-, 50-
and 100-peso cards range from 10.0% to 12.0%). This compares to an average
discount rate of approximately 13.8% related to purchases of minutes paid for
entirely with cash (cash-based discounts for 30-, 50- and 100-pesos cards range
from 13.0% to 15.2%). Starting on March 10, 2003, Provo effectively stopped
purchasing calling cards using its credit lines with Telmex. All of Provo's
purchases from Telmex are currently paid for in cash. The shift from
credit-based purchases to cash-based purchases has increased Provo's profit
margins on the products it purchases from Telmex, however its revenue from these
products has and will continue to decrease due to Provo's current cash
constraints.

       Provo allows its external agent, distributor and point of sale partners
to retain combined commissions or discounts that typically range from 8% to 9%.
Provo pays its internal sales team members commissions of 3% to 5%. Its
distributor network is responsible for collecting approximately 50% of card sale
proceeds and remitting the proper net proceed amounts to Provo within 21 days of
taking delivery of new cards. The other half of Provo's sales are collected
directly by Provo or remitted to Provo via daily deposits by Provo's agents to
company-owned bank accounts. Provo has established strict remittance rules to
ensure that the distributors to whom it extends credit will pay all amounts owed
to Provo on a timely basis.

       Provo's distribution network includes several large retail chains,
including Wal-Mart, Carrefour and Office Max. In addition, Provo distributes its
cards in convenience stores, drug stores, restaurants, lottery stands, newspaper
and magazine stands and other general stores.

       Competition

       Approximately 140 distributors sell prepaid calling time purchased from
Telmex and Telcel in Mexico. Provo currently maintains the largest market share
position for prepaid calling time in Mexico, at approximately 7%. The next two
largest competitors that sell prepaid calling time in Mexico are Tarjetas Del
Noreste and DiCasa, each with a market share position of approximately 5% to 6%.
Telmex has attempted to curb the size of Provo in the past, by converting
sub-distributors of Provo to direct distributors for Telmex. In these instances,
Telmex has agreed to pay Provo royalties to compensate Provo for the migration
of its sub-distributors upstream.

       Subsidiaries

       Provo currently operates as a group of seven affiliated companies. Telmex
required Provo Mexico to form some of the entities because of its dominant
presence in certain markets. On March 31, 2003, Provo acquired from members of
the Martinez del Rio family, the controlling majority of the capital stock of
the following subsidiaries: FS Provo, S.A. de C.V.; Proyecciones y Ventas
Organizadas del D.F., S.A. de C.V.; Proyecciones y Ventas Organizadas de
Occidente, S.A. de C.V.; Tilgo, S.A. de C.V.; Tarnor, S.A. de C.V. and PTL
Administradora, S.A. de C.V. Provo's audited financial statement results include
the combined total of each these companies' results, as an affiliated group.

       In October 2002, Provo formed Provo US, Inc., a Delaware corporation
wholly-owned by Provo. Provo US is currently a shell company with no operations.
It is expected that Provo US will be used for any new projects that Provo may
initiate in the United States.

       Employees

       Provo currently has no direct employees. Provo subcontracts personnel
services from SAPROV, S. C, an affiliated company. Provo currently receives from
SAPROV, S.C. services of approximately 135 full-time employees. In addition,
Provo has a network of 52 independently-owned distributorships that collectively
employ 




                                       30



 



 



more than 400 sales people. Provo, in conjunction with its distributors, has
developed an extensive distribution network that includes more than 20,000
point-of-sale locations.

       Properties

       Provo's executive offices are located in Mexico City, Mexico where Provo
uses approximately 7,700 square feet of office space. Provo's executive offices
were given to Telmex as part of the Telmex settlement described below. Until
September 9, 2003 Provo may use the executive offices free of rent.


       Provo also leases approximately 6,000 square feet of office space in
Mexico City, Mexico, where Provo houses its accounting and human resources
departments. The lease expires on August 31, 2005 and the annual rent is 336,000
pesos ($30,797 at the current exchange rate). Unless otherwise noted, all
exchange rates used herein are made at the official exchange rate on August 28,
2003 equal to 10.91 pesos for each $1.


       In addition, Provo leases small offices in 16 cities throughout Mexico
where it maintains regional sales and distribution offices. Provo's regional
offices are located in the following Mexican cities: Monterrey, Nuevo Leon;
Torreon, Coahuila; Monclova, Coahuila; Chihuahua, Chihuahua; Los Mochis,
Sinaloa; Guamuchil, Sinaloa; Navojoa, Sonora; Ciudad Obregon, Sonora; Agua
Prieta, Sonora; Durango, Durango; Tepic, Nayarit; Jalapa, Veracruz; Cordoba,
Veracruz; Veracruz, Veracruz; Teziutlan, Puebla; and Queretaro, Queretaro. The
aggregate annual rent for these leases is approximately $39,000.

       Provo's subsidiary, FS Provo, S.A. owns approximately 946 acres of forest
land in El Chamal, Tamaulipas, Mexico. The land has been pledged to Telmex to
secure part of Provo's credit lines with Telmex. In addition, Provo and its
subsidiaries Proyecciones y Ventas Organizadas del D.F., S.A. de C.V., F.S.
Provo, S.A. de C.V. and Tilgo, S.A. de C.V., own seven pieces of forest land
totaling approximately 605 acres in San Gabriel, San Luis Potosi, Mexico. This
land also has been pledged to Telmex to secure part of Provo's credit lines with
Telmex.

       Telmex Settlement


       In order to significantly enhance its operating margins and to position
itself for renewed sales growth, on March 10, 2003, Provo entered into a
settlement agreement with Telmex, whereby Provo transferred five non-revenue
generating properties to Telmex in exchange for offsets to its credit lines with
Telmex for 46,650,504 pesos ($4,332,869 at the current exchange rate). The
Telmex settlement agreement also provides for the transfer to Telmex of Provo's
corporate headquarters in Mexico City. The Telmex settlement agreement converted
the balance of Provo's credit line with Telmex into a number of term loans with
varying re-payment schedules. Under the settlement agreement, a payment in the
principal amount of 40,000,000 pesos ($3,666,361 at the current exchange rate)
due and payable on or before September 9, 2003. In September 2003, the agreement
was amended to extend the due date to November 10, 2003. This payment bears
interest at a variable rate equal to the Mexican Interbank Equilibrium Rate
multiplied by a factor of 1.3; the current interest rate is approximately 6.7%
per annum. Finally, the settlement agreement provides for 54 monthly payments of
746,526 pesos each ($68,426 at the current exchange rate), which will be due and
payable by Provo to Telmex commencing on July 10, 2003 and continuing until
January 10, 2008. The monthly payments bear interest at a variable rate equal to
the Mexican Interbank Equilibrium Rate multiplied by a factor of 1.3; the
current interest rate is approximately 6.7% per annum.


No Vote Required; No Appraisal Rights


       Our board of directors unanimously approved our acquisition of Provo on
March 13, 2003 and ratified the acquisition on April 3, 2003. No stockholder
vote was required for our acquisition of Provo to be completed and it was
consummated on April 3, 2003. Under Delaware law, our stockholders do not have
any "dissenters' rights" or rights to an appraisal of the value of their shares
in connection with our acquisition of Provo.


Material Terms of the Stock Purchase Agreement and other Transaction Documents

       Stock Purchase Agreement

       The following is a brief summary of the material terms of the amended and
restated stock purchase agreement, dated as of April 3, 2003, as amended, by and
among Frontline, Provo, Ventura Martinez del Rio, Sr. and Ventura Martinez del
Rio, Jr. The complete text of the stock purchase agreement, which is filed as an
exhibit to our Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 18, 2003, together




                                       31



 



 



with the addendum thereto is filed as an exhibit to our Current Report on Form
8-K/A, filed with the Securities and Exchange Commission on May 6, 2003, is
incorporated by reference into this proxy statement.


       On April 3, 2003, we acquired Provo for consideration consisting of
220,000 shares of our Series C convertible preferred stock, valued at $6.6
million based on the closing price of the common stock on January 24, 2002, the
date we executed the stock purchase agreement. In connection with our
acquisition of Provo, we also issued 35,500 shares of our Series D convertible
preferred stock to certain of our executive officers and directors, certain
Provo employees and other third parties. For information concerning the parties
to whom the Series C convertible preferred stock and Series D convertible
preferred stock was issued, see "Proposal 1 -- Terms of the Series C Convertible
Preferred Stock" and "-- Terms of the Series D Convertible Preferred Stock."

       The stock purchase agreement contained customary representations and
warranties from the parties relating, among other things, to their organization,
capitalization, corporate power and authority, financial statements, material
contracts, absence of undisclosed liabilities and conflicts, litigation, changes
in control, and contracts with respective affiliates. These representations and
warranties survive until April 3, 2005. The respective obligations of the
parties to consummate our acquisition of Provo were conditioned on the
satisfaction or occurrence of certain closing conditions, including, receipt of
regulatory approvals, receipt of proceeds from a bridge loan for no less than
$550,000, receipt of opinions of counsel, absence of material litigation,
absence of any material adverse change in Provo, accuracy of representations and
warranties, and performance of all material obligations required to be performed
by the respective parties. In addition, the stock purchase agreement required us
to cause Messrs. Martinez del Rio, Sr., Martinez del Rio, Jr. and Miguel Madero
to be named to our board of directors. On April 3, 2003, all of the closing
conditions set forth in the stock purchase agreement were satisfied or waived,
and our acquisition of Provo was consummated.


       Under the terms of the stock purchase agreement, we are entitled to
indemnification from the former stockholders of Provo under certain limited
circumstances, including the following: 

       o    certain inaccuracies in, or breaches of, representations and
            warranties by made Provo, Ventura Martinez del Rio, Sr. and Ventura
            Martinez del Rio, Jr. in the stock purchase agreement; and

       o    breaches of covenants of Ventura Martinez del Rio, Sr. and Ventura
            Martinez del Rio, Jr. contained in the stock purchase agreement.

We may not seek indemnification until we have suffered damages of at least
$100,000. Our ability to recover under indemnification claims is limited to an
aggregate of $500,000.

       In addition, we have agreed to indemnify the former stockholders of Provo
under certain limited circumstances, including the following: 

       o    certain inaccuracies in, or breaches of, representations and
            warranties by made us in the stock purchase agreement; and

       o    breaches of any of our covenants contained in the stock purchase
            agreement.

We are not required to indemnify the former stockholders of Provo unless and
until they have suffered damages of at least $100,000. The ability of the former
stockholders of Provo to obtain indemnification is limited to an aggregate of
$500,000.

       Registration Rights Agreement


       Concurrently with the stock purchase agreement, we entered into a
registration rights agreement, whereby we granted certain "piggyback"
registration rights to the former stockholders of Provo with respect to the
shares of common stock issuable to them upon approval of this proxy solicitation
(the "Conversion Shares"). Under the terms of the registration rights agreement,
the former stockholders of Provo may "piggyback" up to 30% of the Conversion
Shares in the event the we file a registration statement during the period
commencing on November 15, 2003 and ending on the one-year anniversary of
November 15, 2003. We also granted the former stockholders of Provo the right to
demand, on up to two occasions and at any time after the first anniversary of
November 15, 2003, that we file a registration statement to register the
Conversion Shares.






                                       32



 



 



       Bridge Loan Agreement


       As a condition precedent to the closing of our acquisition of Provo and
in order to finance certain expenses relating to our acquisition of Provo, on
April 2, 2003 we entered into a bridge financing where we borrowed $550,000 from
IIG Equity Opportunities Fund, Ltd. The loan is evidenced by a secured
promissory note that bears interest at the rate of 14% per annum and is secured
by substantially all of our assets, other than the assets of Provo and the Provo
stock. Two of our officers, Nicko Feinberg and Stephen J. Cole-Hatchard, have
pledged shares of our common stock owned by them as additional collateral to IIG
Equity. In addition, Mr. Cole-Hatchard has personally guaranteed the repayment
of the promissory note, and mortgaged certain personal real estate as collateral
for the bridge loan. Mr. Cole-Hatchard's personal guarantee is limited to the
assets mortgaged by him and IIG Equity has no-recourse against his other assets.

       In connection with the bridge financing, we issued 500,000 shares of our
common stock to IIG Equity as additional consideration. The promissory note is
repayable at the earlier of July 2, 2003 or upon our obtaining financing
collateralized by Provo's accounts receivable. On September 23, 2003, we repaid
$125,000 and executed an addendum to our agreement with IIG extending the
repayment date to October 3, 2003. We are presently attempting to negotiate a
further extension with the noteholder. Out of the proceeds, we used $200,000 to
repay a portion of a $728,000 obligation to Delanet, Inc., which was incurred as
part of a business acquisition. The balance of the obligation was satisfied
through issuance of 375,000 shares of our common stock to the Delanet, Inc. and
its affiliates.


       Concurrently with the execution of the bridge loan agreement, Frontline
and Provo executed a contribution agreement, whereby each company agreed that it
would be responsible for repaying 50% of the bridge loan. In the event either
Provo or Frontline pays more than its proportionate 50% of the bridge loan, such
payor shall be subrogated in the rights of IIG Equity to collect from the other
party up to its proportionate share. The contribution agreement does not grant
Provo any subrogation rights against the collateral pledged by Mr.
Cole-Hatchard.

       In addition, concurrently with the execution of the bridge loan
agreement, Frontline, Ventura Martinez del Rio, Sr. and Ventura Martinez del
Rio, Jr. entered into a lien subordination agreement whereby the former
stockholders of Provo agreed to subordinate the priority of any liens they may
have over the assets of Frontline, to those liens granted to IIG Equity under
the bridge loan agreement.

Accounting Treatment


       Our acquisition of Provo will be treated as an acquisition pursuant to
which Frontline is treated as the acquirer of Provo for financial reporting
purposes. 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 Provo acquired and the liabilities of Provo assumed, on
the basis of their fair values as of the acquisition date in accordance with
Statement of Financial Accounting Standards No. 141, Business Combinations, and
the results of Provo's operations will be included in Frontline's consolidated
financial statements from the date of the acquisition. Allocation of the
purchase price has been made on a preliminary basis and is subject to
adjustments. The excess of the purchase price over the fair value of
identifiable net assets acquired (goodwill) will be subject to a review for
impairment on an annual basis and whenever events or circumstances occur which
indicate that goodwill might be impaired, in accordance with Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
adopted by us in July 2001.


Certain Federal Tax Consequences

       Introduction


       The following discussion summarizes the material United States federal
income tax consequences relevant to Provo and Frontline resulting from the
exchange of shares of the capital stock of Provo for shares of Frontline Series
C convertible preferred stock pursuant to the stock purchase agreement, and the
issuance of shares of Frontline common stock upon the conversion of the Series C
convertible preferred stock and Series D convertible preferred stock.


       No rulings from the Internal Revenue Service or opinions of counsel with
respect to any of the matters discussed herein have been or will be requested
and, as a result, there can be no assurance that the Internal Revenue Service
will not disagree with or challenge any of the conclusions described below. This
discussion is based upon 




                                       33



 



 



the Code, Treasury Regulations, administrative rulings and judicial decisions
currently in effect, all of which are subject to change, possibly with
retroactive effect. Any such change may or may not be retroactive.


       This summary does not purport to be a complete analysis or description of
all potential federal income tax consequences of our acquisition of Provo. In
addition, the summary does not address the tax consequences to holders of Series
C convertible preferred stock or Series D convertible preferred stock. Moreover,
the summary does not address any non-income tax consequences or any state, local
or non-U.S. tax consequence. The summary does not address the tax consequences
of any transaction other than our acquisition of Provo.

       EACH FRONTLINE STOCKHOLDER SHOULD CONSULT HIS, HER OR ITS TAX ADVISOR AS
TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO FRONTLINE AND TO SUCH
STOCKHOLDER OF OUR ACQUISITION OF PROVO. EACH FRONTLINE STOCKHOLDER SHOULD ALSO
CONSULT HIS, HER OR ITS TAX ADVISOR AS TO ANY STATE, LOCAL, NON-U.S. AND
NON-INCOME TAX CONSIDERATIONS RELEVANT TO SUCH STOCKHOLDER AS A RESULT OF OUR
ACQUISITION OF PROVO.

       No gain or loss will be recognized by Provo or Frontline in connection
with our acquisition of Provo or upon the conversion of Frontline Series C
convertible preferred stock and Series D convertible preferred stock into
Frontline common stock.

       As of December 31, 2002, Frontline had net operating loss ("NOL")
carryforwards of approximately $22,500,000, which expire on various dates
through 2022. In addition, for the portion of its taxable year ending on the
date of our acquisition of Provo, Frontline generated losses. For its 2003 tax
year, these losses will comprise a portion of any net operating loss, unless
taxable income for the portion of its 2003 tax year beginning on the day
following our acquisition of Provo exceed the operating losses generated in the
first portion of the year. Under Section 382 of the Code, the use of NOLs (and
certain other tax attributes) of a corporation (a "Loss Corporation") which
undergoes an "ownership change," generally will be subject to an annual
limitation. The limitation is based on a percentage of the value of the Loss
Corporation immediately prior to the ownership change. Our acquisition of Provo
(or, possibly, the authorization by stockholders of Frontline to issue common
stock to upon the conversion of Frontline Series C convertible preferred stock)
resulted (or will result) in an ownership change of Frontline. As a result, the
utilization of Frontline's NOL carryforwards will be subject to an annual
limitation under Section 382 equal to approximately 4.5% of the value of the
outstanding stock of Frontline immediately prior to the transaction.


Regulatory Approvals


       The transaction contemplated by our acquisition of Provo did not require
notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or
any other U.S. laws and regulations. Our acquisition of Provo also did not
require that we make any filings with, or obtain any approvals from, any Mexican
merger control authorities. Subsequent to the closing of our acquisition of
Provo, we registered our acquisition of Provo with the Mexican Foreign
Investment Commission, as required under applicable Mexican law.


Opinion of GunAllen Financial, Inc.

       Overview


       Our board of directors retained GunAllen Financial, Inc. to act as our
financial advisor with respect to our acquisition of Provo. In connection with
that engagement, we requested that GunAllen Financial evaluate the fairness,
from a financial point of view, to us of the consideration to be paid by us in
our acquisition of Provo. On March 13, 2003, GunAllen Financial delivered to our
board of directors its oral opinion, which was subsequently confirmed in writing
on April 3, 2003, to the effect that, based upon and subject to the factors and
assumptions set forth in the opinion, the consideration to be paid by us in our
acquisition of Provo was fair from a financial point of view to us.


       In arriving at its opinion, GunAllen Financial, among other things:

       o    reviewed certain publicly available business and financial
            information relating to us that GunAllen Financial deemed to be
            relevant;



                                       34



 



 



       o    reviewed certain information and financial and operating projections
            and assumptions, relating to the businesses, earnings, cash flow,
            assets, liabilities and prospects of Provo, furnished to GunAllen
            Financial by our senior management and the senior management of
            Provo;


       o    conducted discussions with representatives and members of our senior
            management and representatives and members of the senior management
            and representatives of Provo concerning the above two matters, as
            well as their respective businesses and prospects before and after
            giving effect to our acquisition of Provo;


       o    reviewed the financial condition and results of operations of Provo
            and compared them with those of certain publicly traded companies
            that GunAllen Financial deemed to be relevant;


       o    compared the proposed financial terms of our acquisition of Provo
            with the financial terms of certain other transactions which
            GunAllen Financial deemed to be relevant;


       o    participated in discussions and negotiations among our
            representatives and financial and legal advisors and representatives
            of Provo and its financial and legal advisors;


       o    reviewed the potential pro forma impact of our acquisition of Provo
            on us;

       o    reviewed the stock purchase agreement, the Certificate of
            Designations for the Series C convertible preferred stock and the
            terms of the note; and


       o    conducted such other financial studies and analyses and took into
            account such other matters as GunAllen Financial deemed necessary,
            including GunAllen Financial's assessment of general economic,
            market and monetary conditions.


       In preparing its opinion, GunAllen Financial assumed and relied on the
accuracy and completeness of all information supplied or otherwise made
available to GunAllen Financial, discussed with or reviewed by or for GunAllen
Financial, or publicly available, and GunAllen Financial has not assumed any
responsibility for independently verifying such information or undertaken an
independent evaluation or appraisal of any of our assets or liabilities or those
of Provo or been furnished with any such evaluation or appraisal. In addition,
GunAllen Financial has not assumed any obligation to conduct, nor has it
conducted, any physical inspection of our properties or facilities or those of
Provo. With respect to the financial and operating projections, analyses and
assumptions furnished to or discussed with GunAllen Financial by us, GunAllen
Financial assumed that all such information had been reasonably prepared and
reflected the best estimates and judgments of our senior management and the
senior management of Provo available as of the date of the opinion as to our
expected future financial and operating performance and the expected future
financial and operating performance of Provo and the combined entity. GunAllen
Financial expressed no view with respect to such forecasts, analyses and
assumptions and has made no independent investigation of any legal matters or
accounting advice given to us or to Provo and our respective boards of
directors, including, without limitation, advice as to the accounting and tax
consequences of our acquisition of Provo.


       GunAllen Financial's fairness opinion is necessarily based on market,
economic and other conditions as they existed and could be evaluated on, and on
the information made available to GunAllen Financial as of, the date of the
opinion. For the purpose of rendering its opinion, GunAllen Financial assumed
that; 


       o    our acquisition of Provo would be consummated in a timely manner in
            accordance with the terms set forth in the stock purchase agreement
            and in all related documents and instruments (collectively, the
            "Documents") in all respects material to GunAllen Financial's
            analysis;


       o    the executed versions of the Documents would not differ from the
            drafts reviewed by GunAllen Financial in any respect that is
            material to GunAllen Financial's analysis;

       o    the representations and warranties of each party in the stock
            purchase agreement were true and correct;

       o    each party to the Documents would perform all of the covenants and
            agreements required to be performed by such party under the relevant
            Documents;


       o    all conditions to the consummation of our acquisition of Provo would
            be satisfied without waiver thereof;




                                       35



 



 




       o    our stockholders would approve the issuance of shares of common
            stock upon conversion of the shares of Series C convertible
            preferred stock delivered by us in connection with our acquisition
            of Provo prior to August 20, 2003; and

       o    our acquisition of Provo would qualify as tax-free reorganization
            for United States federal income tax purposes.

       GunAllen Financial also assumed that, in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for our acquisition of Provo, no restrictions, including any divestiture
requirements or amendments or modifications, would be imposed that would have an
adverse effect on the future results of operations or financial condition of us,
Provo or the combined entity, as the case may be, or on the contemplated
benefits of our acquisition of Provo.

       In connection with its presentation to our board of directors advising
the board of its opinion on March 13, 2003, GunAllen performed a variety of
financial and comparative analyses, including those described below. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances, and therefore such an opinion is
not readily susceptible to summary description. GunAllen used several methods to
arrive at a fair value for our common stock, with each method requiring
different assumptions and calculations and, therefore, resulting in different
values. In arriving at its fairness opinion, GunAllen did not attribute any
particular weights to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, GunAllen believes that its analysis must be considered as a
whole and that considering any portions of such analyses and of the factors
considered, without considering all of the analyses and factors, could create a
misleading or incomplete view of the process underlying the opinion. In its
analyses, GunAllen Financial made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond our control. Any estimates contained in these analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth in
the opinion.

       The following is a summary of the material financial and comparative
analyses performed by GunAllen Financial in arriving. The full text of GunAllen
Financial's fairness opinion, which sets forth the assumptions made, matters
considered and qualifications and limitations on the review undertaken by
GunAllen Financial, is attached as Annex E and is incorporated by reference in
this proxy statement. GunAllen Financial has consented to the use of its opinion
in Annex E of this proxy statement. The following is a summary of the material
aspects of GunAllen Financial's fairness opinion, as presented to our board of
directors on March 13, 2003, and we refer you to the full text of GunAllen
Financial's fairness opinion which you should read carefully and in its
entirety.


       Purchase Price Analysis


       GunAllen Financial valued the transaction at $5.9 million based upon the
issuance of 22,000,000 shares at a price of $0.27 per share. The share price was
derived by utilizing a base price of $0.18 per share, which was the closing
price of our common stock on the date our board of directors was presented with
the proposed merger, and adjusting for the two-for-three reverse stock split.
GunAllen Financial opted not to apply a "control premium adjustment", which is
sometimes applied in this type of analysis when the transaction involves a
change of control, because the shares we issued to the Provo stockholders are
not registered. GunAllen Financial also considered the lack of liquidity
associated with the issuance of the stock. GunAllen Financial tested the
accuracy of this analysis by conducting three other financial valuation models:
a weighted average earnings model, a discounted cash flow model and a multiple
of EDIBLE approach.


       Weighted Average Earnings Model

       Under the weighted average earnings model, GunAllen Financial valued
Provo's business at $7.3 million. For the purposes of this valuation method,
GunAllen Financial classified Provo as a communications services provider. It
based its valuation upon a price/earnings ratio of 11.39 (the lowest ratio over
the last five years) and weighted average earnings of $642,000 over the last
three years.



                                       36



 



 



       Discounted Cash Flow Model

       Under this model, GunAllen Financial assumed base earnings of $775,000
and a growth rate of 10% per year. Assuming a 17% discount rate, GunAllen
Financial valued Provo's business at $12.7 million. Utilizing a more
conservative discount rate of 30% yielded a $5.8 million value.

       EBITDA Multiple Approach

       Under the multiple of EBITDA (earnings before income taxes, depreciation
and amortization) method, GunAllen Financial valued Provo's business at $6.0
Million. This valuation was calculated by utilizing an industry multiple of 5X
EBITDA (as articulated by Standard and Poor's) and applying it to Provo's 2002
EBITDA of $1,210,000.

       Given that the valuation of Provo's business ranged from $5.8 million to
$12.7 million under these various approaches, GunAllen opined that the $5.9
million purchase price was fair to our stockholders from a financial point of
view.


       GunAllen Financial's fairness opinion was provided to our board of
directors for its information and is directed only to the fairness from a
financial point of view to us of the consideration to be paid by us in our
acquisition of Provo. GunAllen Financial's fairness opinion does not address any
other aspect of our acquisition of Provo, including the merits of our underlying
decision to engage in our acquisition of Provo or the relative merits of our
acquisition of Provo as compared to any alternative business strategies or
transactions that might exist for us.

       GunAllen Financial neither considered nor expressed any opinion as to the
prices at which our common stock would trade following the announcement or the
consummation of our acquisition of Provo. GunAllen Financial's opinion does not
constitute a recommendation to any of our stockholders as to how such
stockholders should vote with respect to Proposal 1 or the matters related
thereto.

       Pursuant to a letter agreement dated February 3, 2003, we agreed to pay
GunAllen Financial a fee of $35,000 upon delivery of the fairness opinion. We
had no previous financial relationship with GunAllen whatsoever. The fee paid by
us to GunAllen Financial was in no way contingent on the outcome of the
stockholders' vote.


       GunAllen Financial's fairness opinion is based on market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to GunAllen Financial as of, the date of the opinion.








                                       37







 




                 SELECTED HISTORICAL FINANCIAL DATA OF FRONTLINE


       The selected financial information presented below as of and for (i) each
of the fiscal years ended December 31, 2002 is derived from our audited
consolidated financial statements and (ii) each of the six-month periods ended
June 30, 2003 and 2002 is derived from our unaudited financial statements. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included in our unaudited consolidated financial
statements. The three-month results are not necessarily indicative of the
results that may be expected for the full fiscal year. The selected financial
information for Frontline should be read in conjunction with the other
information contained under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our annual report on Form
10-KSB for the year ended December 31, 2002 and our financial statements and the
accompanying notes thereto (as amended by our 10-KSB/A filed October 6, 2003),
and other financial and statistical data included in our quarterly report on
Form 10-QSB for the quarter ended June 30, 2003 (as amended by our 10-QSB/A
filed October 3, 2003).


Consolidated Statement of Operations Data:





                                                     Years ended December 31,          For the six months ended June 30,
                                                 ------------------------------      ------------------------------------
                                                     2002               2001              2003                   2002
                                                 -----------        -----------      --------------          ------------
                                                                                      (unaudited)            (unaudited)
                                                                                                         
Revenues                                          $5,047,098        $ 6,503,120        $21,638,113            $2,639,230

Costs and expenses:
      Cost of revenues                             2,493,337          3,482,954         19,621,304             1,329,860
      Selling, general and administrative          2,446,816          3,860,999          2,172,232             1,299,579
      Depreciation and amortization                  745,135          2,943,678            296,131               387,719
      Impairment of intangibles                                       2,827,993
      Noncash compensation charge                     58,500            206,505
                                                 -----------        -----------        -----------            ----------
                                                   5,743,788         13,322,129         22,089,667             3,017,158
                                                 -----------        -----------        -----------            ----------
Loss from operations                                (696,690)        (6,819,009)          (451,554)             (377,928)

Other income (expense) net                           (90,835)          (210,278)          (296,469)              (40,872)
Gain on debt settlement                                                                    449,850
                                                 -----------        -----------        -----------            ----------
Loss  before tax and minority interest              (787,525)        (7,029,287)          (298,173)             (418,800)
Income taxes                                                                                89,996
Minority interest                                                                              580
                                                 -----------        -----------        -----------            ----------
Net income (loss)                                   (787,525)        (7,029,287)          (388,749)             (418,800)
                                                 -----------        -----------        -----------            ----------
Preferred dividends                                  297,867            320,910            148,934               154,500
                                                 -----------        -----------        -----------            ----------
Net loss available to common stockholders        ($1,085,392)       ($7,350,197)         ($537,683)            ($573,300)
                                                 ===========        ===========        ===========            ==========

Loss per common share-basic and diluted              ($0.12)            ($1.00)            ($0.06)               ($0.06)
                                                 ===========        ===========        ===========            ==========

Weighted average number of  common shares
   outstanding- basic and diluted.                 9,119,533          7,333,221          9,720,386             9,003,304
                                                 ===========        ===========        ===========            ==========




Balance Sheet Data: 





                                                                            As of December 31    As of June 30,
                                                                                  2002          2003 (unaudited)
                                                                            -----------------   ----------------
                                                                                                    
Working capital (deficiency)                                                  ($2,655,722)           $747,463
Total assets                                                                    1,258,567          19,634,209
Total liabilities                                                               3,287,519          14,979,900
Accumulated deficit                                                           (37,466,196)        (38,003,879)
Stockholders' equity (deficiency)                                              (2,028,952)          4,626,326




                                       38





 




                   SELECTED HISTORICAL FINANCIAL DATA OF PROVO


       The selected financial information presented below as of and for (i) each
of the two years ended December 31, 2001 and 2002 is derived from Provo's
audited financial statements and (ii) each of the three -months ended March 31,
2003 and 2002 is derived from Provo's unaudited financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included in the unaudited financial statements. The
three-month results are not necessarily indicative of the results that may be
expected for the full fiscal year. The selected financial information for Provo
should be read in conjunction with the other information contained below under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Provo" and Provo's financial statements and the
accompanying notes thereto, set forth herein beginning on page F-33.


Consolidated/Combined Statement of Operations Data:




                                                       Years ended December 31,       Three months ended March 31,
                                                   --------------------------------  -----------------------------
                                                        2002             2001             2003           2002
                                                   ---------------  ---------------  -------------- --------------
                                                                                       (unaudited)    (unaudited)
                                                                                                  
Revenue                                              $101,550,659     $119,766,884     $19,549,290    $21,826,788
Cost of revenue                                        96,866,869      115,100,882      18,891,342     20,540,329
Gross profit                                            4,683,790        4,666,002         657,948      1,286,459
Operating costs and expenses:
   Selling                                                657,993          884,032          95,777        256,225
   General and administrative                           2,930,585        3,268,131         617,623        671,997
   Depreciation and amortization                           86,425           70,410          30,051         16,099
                                                     ------------     ------------     -----------    -----------
                                                        3,675,003        4,222,573         743,451        944,321
                                                     ------------     ------------     -----------    -----------
Income (loss) from operations                           1,008,787          443,429         (85,503)       342,138
Other income (expense) net                               (252,208)         281,570         182,804        (81,764)
                                                     ------------     ------------     -----------    -----------
Income before income tax, equity in net earnings    
   of Unconsolidated subsidiary and minority          
   interest                                               756,579          724,999          97,301        260,374
                                                     ------------     ------------     -----------    -----------
Income taxes expense                                      148,395          291,065          34,730         82,700
Equity in the net earnings of unconsolidated
   subsidiary                                                  --          129,976              --             --
Minority interest                                        (149,280)          20,771         (15,278)       (32,571)
                                                     ------------     ------------     -----------    -----------
Net income (loss)                                    $    458,904     $    584,681     $    47,293    $   145,103
                                                     ============     ============     ===========    ===========



Balance Sheet Data:





                                                                                  As of December 31   As of March 31
                                                                                         2002        2003 (unaudited)
                                                                                  -----------------  ---------------
                                                                                               
Working capital                                                                      $ 4,595,454       $ 3,822,270
Total assets                                                                          18,528,186        13,315,129
Total liabilities                                                                     15,995,177        11,100,663
Retained earnings                                                                      1,568,653         1,006,369
Stockholders' equity                                                                   2,440,453         2,106,622




                                       39







 





      SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION


       The following selected unaudited pro forma financial information should
be read with the section entitled "Unaudited Pro Forma Combined Financial
Information" beginning on page F-58. For purposes of the pro forma information,
Provo's and Frontline's statements of operations for the year ended December 31,
2002 and the six months ended June 30, 2003 have been combined as if the
acquisition had occurred on January 1, 2002.


       The pro forma data is presented for informational purposes and does not
purport to be indicative of the results of future operations or the operating
results that would have occurred had the acquisition been consummated at the
beginning of the periods indicated. The information set forth below should be
read in conjunction with the historical financial statements and notes thereto
of Frontline, set forth herein beginning on page F-2, and the historical
financial statements and notes thereto of Provo, set forth herein beginning on
page F-33. Neither we nor Provo have paid cash dividends on our respective
common stocks for any of the periods presented.

Combined Condensed Statement of Operations:






                                                                                       Pro forma combined
                                                                                ------------------------------
                                                                                For the year     For the six
                                                                                   ended         months ended
                                                                                December 31,       June30,
                                                                                    2002            2003
                                                                                --------------  -------------
                                                                                           
                                                                                (unaudited)     (unaudited)
Revenues                                                                        $ 106,597,757   $ 41,187,403
Costs and expenses:
   Cost of revenues                                                                99,360,206     38,512,646
   Selling, general and administrative                                              6,035,394      2,885,632
   Depreciation and amortization                                                      831,560        326,182
   Non-cash compensation charge                                                       809,122
                                                                                --------------  -------------
                                                                                  107,036,282     41,724,460
                                                                                --------------  -------------
Loss from operations                                                                 (438,525)      (537,057)
Other income (expense) net                                                           (343,043)      (113,665)
                                                                                --------------  -------------
Gain on debt settlement                                                                              449,850
                                                                                --------------  -------------
Net loss before income tax and minority interest                                     (781,568)      (200,872)
                                                                                --------------  -------------
Income tax                                                                            148,395        124,726
                                                                                --------------  -------------
Income (loss) before minority interest                                               (929,963)      (325,598)
Minority interest                                                                     149,280         15,858
                                                                                --------------  -------------
Net income (loss)                                                                 ($1,079,243)     ($341,456)
                                                                                --------------  -------------
Deemed dividends                                                                       95,317             --
                                                                                --------------  -------------
Net loss applicable to common stockholders                                        ($1,174,560)     ($341,456)
                                                                                ==============  =============
Loss per common share- basic and diluted                                               ($0.03)        ($0.01)
                                                                                ==============  =============
Weighted average number of common shares outstanding- basic and diluted            33,615,469     34,016,037
                                                                                ==============  =============





                                       40



 






   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                       OPERATIONS OF THE PROVO BUSINESSES

Overview


       Provo has determined that the Mexican peso (Ps) is the functional
currency for financial reporting purposes. Assets and liabilities denominated in
the Mexican peso are translated to U.S. dollars ($) at the rates in effect at
the balance sheet date. Revenues and expenses are translated at the average
rates for the year. See note 1 to Provo's Combined and Consolidated Financial
Statements beginning on page F-8.


       The following table sets forth, for the fiscal years indicated,
information concerning the number of Mexican pesos for which one U.S. dollar
could be exchanged.
 




       Period                                                     Period end  Average
       ------                                                     ----------  -------
                                                                            
       Year ended December 31, 2001                                  9.142      9.342
       Year ended December 31, 2002                                 10.313      9.659
       Three months ended March 31, 2002                             9.024      9.115
       Three months ended March 31, 2003                            10.767     10.803




       Provo's primary business is the sale and distribution of prepaid phone
cards in Mexico. Provo sells and distributes Ladatel payphone calling cards,
Multifon prepaid telephone time for Telmex and prepaid PCS cellular airtime for
Telcel, all of which are collectively referred to as prepaid phone cards. Telmex
is the dominant telecommunications provider in Mexico and Telcel is the dominant
provider of cellular airtime in Mexico. Provo's management believes that they
account for nearly 7% of all sales of prepaid phone cards in Mexico.

       Prepaid phone cards are distributed through a vast network of retail
outlets, including convenience stores, drug stores, restaurants, lottery stands,
newspaper and magazine stands and other general stores. Provo purchases large
volumes of prepaid cards from Telmex or Telcel and sells the cards in smaller
quantities to retailers either directly or through agents or distributors.


       Provo purchases prepaid cards at less than the face value of the card, 
and resells them to retailers or distributors at a higher price. The difference 
between the two prices, typically from 1% to 7%, represents the gross margin 
Provo retains. Cash (C.O.D.) purchases result in a higher profit to Provo 
compared to purchases on credit terms from Telmex or Telcel. In addition,
the price obtained by Provo varies by the type of card, face value of the card 
and volume levels met. Similarly, the price offered by Provo to retailers or 
distributors varies by the type of card, face value of the card and volume 
levels of the retailer or distributor. Accordingly, the gross margin attained 
by Provo in any period is impacted by several factors. In addition, Telmex and 
Telcel provide Provo additional discounts and rebates based on certain special 
programs. During fiscal years 2002 and 2001, Provo received approximately 
$500,000 and $400,000, respectively, of such additional incentives. Provo's 
management tries to optimize the gross margins earned by balancing volume 
levels with the working capital availability, and from time to time has had 
to scale back volume levels due to working capital constraints.


Results of Operations


       Comparison of Three Months Ended March 31, 2002 and 2003


       The following table sets forth certain financial data as a percentage of
the revenues for the periods indicated:





                                                 For the three months ended
                                                         March 31,
                                                        (unaudited)
                                                 ---------------------------
                                                     2003          2002
                                                 -------------  ------------
                                                                   
Revenue                                                 100.0%        100.0%
Cost of revenue                                          96.6%         94.1%
Selling expenses                                          0.5%          1.2%
General and administrative expenses                       3.2%          3.1%
Depreciation and amortization                             0.2%          0.1%
                                                 -------------  ------------
Operating (loss) income                                  -0.4%          1.6%
                                                 =============  ============





                                       41


 



 



        Revenue. Revenue decreased for the three months ended March 31, 2003 by
$2,277,498 or 10.4% over the prior year. The revenue decrease was principally
due to a weaker Mexican peso. Excluding the impact of foreign currency
translation, revenue increased 6.1%. Provo believes that the increase in revenue
was due to the availability of a credit line with Telmex and to the absence of
deep discounting by some of its new competitors and their distributors.

       Cost of Revenue. For the three months ended March 31, 2003, cost of
revenue decreased by $1,648,987 or 8.0%. The decrease was principally due to a
weaker Mexican peso. Excluding the impact of foreign currency translation cost
of revenue increased by 9.0%. As a percentage of revenue, cost of revenue
increased from 94.1% in March 2002 to 96.6% in March 2003. In 2003, Provo
purchased a greater amount of prepaid cards on credit terms compared to 2002
resulting in a higher cost of revenue in percentage terms.

       Selling Expenses. For the three months ended March 31, 2003, selling
expenses decreased by $160,448 for the same period last year to $95,777. The
decrease in selling expenses was due to decreased revenue levels attained in
2003. In 2003, selling expenses decreased at a higher percentage than revenue
percentage decreased, as selling expenses in 2002 included approximately $70,000
of non-recurring incentive commission expense.

       General and Administrative Expenses. For the three months ended March 31,
2003, general and administrative expenses decreased by $54,374 for the same
period last year to $617,623. The decrease in general and administrative
expenses was due to a weaker Mexican Peso. Excluding the impact of foreign
currency translation, general and administrative expenses increased by 8.9%.
Increase in insurance expenses, professional fees, communications expenses and
higher payroll costs arising from pay increases effected in the beginning of
2003 were the principal components of expense increase.

       Operating Profit. As result of the foregoing, for the three months ended
March 31, 2003, operating profit decreased by $427,641 for the same period last
year to a loss of $85,503.


       Interest Expense. Interest expense for the three months ended March 31,
2003 was $86,865 compared to an interest expense of $108,453 during the three
months ended March 31, 2002. Excluding the impact of foreign currency
translation, interest expense decreased by 5.1%. The decrease in interest
expense was due to lower debt balance offset partly by higher interest rates in
2003. Interest rates on Provo's debt are based upon the prevailing Mexican
Interbank Equilibrium Rate ("TIIE"). Accordingly, interest expense varies in
line with TIIE. In the first quarter of 2003 the average TIIE was 9.6% compared
to 8.5% in the first quarter of 2002.


       Gain on assets transferred in settlement. In March of 2003, Provo
transferred to Telmex its office building in Mexico City and certain non-revenue
generating real estate properties for an aggregate consideration of $4.5
million. The transfer generated a gain of approximately $245,000, which was
recorded in the results for the three months ended March 31, 2003.

       Income Taxes. For the three months ended March 31, 2003, income tax,
determined in accordance with Mexico's income tax laws, resulted in taxes of
$34,730 compared to a tax expense of $82,700 during the three months ended March
31, 2002. The effective tax rate in 2003 was 36% compared to 32% in 2002.

       Comparison of Years ended December 31, 2002 and 2001

       The following table sets forth certain financial data as a percentage of
the revenues for the periods indicated:
 




                                                             For the year ended
                                                                December 31,
                                                            -------------------
                                                              2002       2001
                                                            ---------   -------
                                                                     
Revenue                                                        100.0%    100.0%
Cost of revenue                                                 95.4%     96.1%
Selling expenses                                                 0.6%      0.7%
General and administrative expenses                              2.9%      2.7%
Depreciation and amortization                                    0.1%      0.1%
                                                            ---------   -------
Operating income                                                 1.0%      0.4%
                                                            =========   =======







                                       42



 



 



       Revenue. Revenue decreased for the year ended December 31, 2002 by
$18,216,225 or 15.2% over the prior year. The revenue decrease, in part, was due
to a weaker Mexican peso. Excluding the impact of foreign currency translation,
revenue decreased by 12.3%. Working capital constraints in 2002 resulted in
decreased levels of prepaid calling card inventory purchases and related
revenue. In addition, Provo believes that the practice of offering deep
discounts to retailers by certain new competitors and their sub-distributors
adversely affected Provo's sales efforts. Telmex has taken corrective action on
the matter of deep discounts. Provo believes that this action will reduce the
amount of deep discounts being offered.

       Cost of Revenue. For the year ended December 31, 2002, cost of revenue
decreased by $18,234,013 or 15.8% over the prior year. The decrease in part was
due to a weaker Mexican peso. Excluding the impact of foreign currency
translation, cost of revenue decreased by 13.0%. As a percentage of revenue,
cost of revenue decreased to 95.4% in 2002 from 96.1% in 2001. In 2002, Provo
purchased a greater amount of prepaid cards on cash terms compared to 2001
resulting in a lower cost of revenue in percentage terms. In addition, Provo's
refusal to match its competitors in offering additional discounts to retailers
during the year resulted in a lower cost of revenue in percentage terms.

       Selling Expenses. For the year ended December 31, 2002, selling expenses
decreased by $226,039 over the prior year to $657,993. The decrease in selling
expenses was due principally to decreased revenue levels attained in 2002.

       General and Administrative Expenses. For the year ended December 31,
2002, general and administrative expenses decreased by 10.3% or $337,546 over
the prior year to $2,930,585. The decrease in general and administrative
expenses was due to the weaker Mexican peso and to certain expense reductions
realized by Provo. Excluding the impact of foreign currency translation, general
and administrative expenses decreased by 7.3%. In 2002, Provo closed two of its
branches and migrated its distribution channel to agents and realized certain
expense savings. In addition, reduction of professional fees and training
expenses resulted in a further decrease in general and administrative expenses.

       Operating Profit. As a result of the foregoing, for the year ended
December 31, 2002, operating profit increased by 127.5% or $565,358 over the
prior year to $1,008,787.

       Interest Expense. Interest expense for 2002 was $419,345 compared to
$448,584 in 2001. In 2002, interest expense decreased due to lower interest
rates and to a reduced debt level (including the interest bearing supplier
credit facility with Telmex). Interest rates on Provo's debt are based upon the
prevailing TIIE. Accordingly, interest expense varies in line with TIIE. In 2002
average TIIE was 8.1 % compared to 12.8% in 2001.

       Income Taxes. In 2002, income tax expense, determined in accordance with
Mexico's income tax laws, was $148,395 compared to $291,065 in 2001. The
effective tax rate in 2002 was 20% compared to 40% in 2001. The decreased effect
of inflation in 2002 primarily resulted in a lower effective tax rate when
compared to the prior year.

Liquidity and Capital Resources


       Provo's working capital at March 31, 2003 was $3,822,270 compared to
$4,595,454 at December 31, 2002. The decrease in working capital was due to the
acquisition of non-current real estate in settlement of accounts receivable of
approximately $1,433,000 and an expenditure of approximately $610,000 incurred
for acquisition of subsidiaries. This was partly offset by net income and
additional non-cash capital contributions from the majority stockholder.


       Provo's primary capital requirements are to fund its working capital. To
date, Provo has financed its capital requirements through equity contributions
from its majority stockholders, lines of credit from banks and a supplier credit
facility from Telmex.


       At March 31, 2003 Provo had aggregate borrowings of $1,894,661 under four
lines of credit with two banks. The lines of credit are secured by real estate
of the majority stockholder's family. At March 31, 2003, the interest rates on
the lines range between 12.8% and 13.3%. The lines of credit expire at various
dates between July 2003 and September of 2005 and one line requires a monthly
payment of approximately $14,000 in 2003.

       Provo has relied on Telmex to finance its inventory purchases with a line
of credit. At December 31, 2002, $11,849,727 was outstanding under this
facility. Various non-operating properties, properties owned by the majority
stockholder's family and properties of related parties, have been pledged to
guarantee Provo's credit line 





                                       43



 



 




with Telmex. For additional information concerning these transactions, see
"Proposal 5 - Certain Relationships and Related Transactions" beginning on page
69. In March of 2003, Provo entered into a settlement agreement with Provo.
Pursuant to the settlement agreement, Provo transferred to Telmex its office
building in Mexico City and certain non-revenue generating real estate
properties for an aggregate consideration of $4.5 million. Out of the remaining
balance of $7.7 million, $3.8 million will be payable on or about November 10,
2003 and the balance of $3.9 million will be payable in 54 monthly installments
commencing in July 2003. All of Provo's purchases from Telmex are currently paid
in cash. The shift from credit-based purchases to cash-based purchases will
increase Provo's profit margins on the products purchased from Telmex, however,
its revenue from these products will continue to decrease due to Provo's current
cash constraints. For further information concerning this transaction, see "The
Acquisition Transaction - Description of Provo's Business - Telmex Settlement"
beginning on page 29.


       In 2002, Provo received real estate properties in the aggregate amount of
$3.7 million in settlement of amounts due to Provo from two of its customers. In
March 2003, Provo transferred the properties with additional properties owned by
it to settle amounts owed by Provo to Telmex. In March 2003, Provo acquired real
estate property in the aggregate amount of approximately $1.6 million in
settlement of amounts owed to Provo. This property is currently securing a line
of credit with Telmex.


       In April of 2003, as more fully described under "The Acquisition
Transaction" beginning on page 25, Frontline acquired all of Provo's common
stock Under the terms of the governing stock purchase agreement, in
consideration for Provo's shares, the former stockholders of Provo received
220,000 shares of Frontline's Series C Convertible Preferred Stock. The shares
are convertible to 33 million shares of Frontline's common stock upon approval
of certain actions by Frontline's stockholders. Upon conversion, the former
stockholders of Provo will own approximately 62.7% of Frontline's common stock.


       Provo together with Frontline plans to raise additional financing in the
United States. The availability of capital resources is dependent upon
prevailing market conditions, interest rates and the combined company's
financial condition. In July 2003, Frontline entered into a common stock
purchase agreement with Fusion Capital Fund II, LLC, whereby, subject to the
approval of Proposal 6 described herein by Frontline's stockholders and the
satisfaction of other applicable conditions, Fusion Capital has agreed to
purchase up to $13 million of Frontline's common stock over a 40-month period.
The transaction is subject to satisfaction of various conditions as described
under "Proposal 6" and there can be no assurance that Frontline will in fact
complete the transaction.


       We believe that our acquisition of Provo will improve our financial
situation in two ways. Frontline's annual expensed related to its status as a
public reporting company total approximately $350,000 per year. With our
acquisition of Provo, these costs will be spread over a considerably larger
revenue base, and Provo, as a profitable stand alone entity, will help to offset
these costs. We also anticipate that our status as a combined entity will
enhance our ability to secure additional debt and/or equity financing so that we
may satisfy our short-term debt obligations and fund the launch of new product
lines. We currently plan to continue both Frontline and Provo operations, and
hopes to grow our long distance voice, dedicated Internet bandwidth and website
development product lines. Our board of directors is currently evaluating the
possibility of divesting one or more of its low profit margin product lines in
order to raise cash.

       Based on current plans, management anticipates that the cash on hand,
cash flow from operations and vendor credit will satisfy Provo's capital
requirements through at least the end of 2003. However, the agreement with
Telmex requires Provo to repay Telmex $3.8 million in November 2003. In
addition, Provo and Frontline are required to repay $425,000 due under a bridge
financing to IIG Equity Opportunities Fund, Ltd. on October 3, 2003. We are
presently attempting to negotiate a further extension with the noteholder. We
currently lack the funds to pay these obligations when they become due.
Therefore, in order to satisfy our debt obligations, we are currently pursuing
additional sources of financing, including potential sources for debt and equity
financing (or a combination of the two), and are exploring the possibility of
selling some of our assets (such as our dial-up subscriber base), so that we
will have sufficient funds to pay our debts as they become due. There can be no
assurance, however, that such financing will be available on terms that are
acceptable to us, or on any terms.


Critical Accounting Policies

       Financial Reporting Release No. 60, published by the Securities and
Exchange Commission, recommends that all companies include a discussion of
critical accounting polices used in the preparation of their financial
statements. 





                                       44



 



 



Provo's significant accounting policies are summarized in note 1 of its
financial statements. While all of these significant accounting policies impact
its financial condition and results of operations, Provo views certain of these
policies as critical. Policies determined to be critical are those policies that
have the most significant impact on Provo's financial statements and require
management to use a greater degree of judgment and/or estimates. Actual results
may differ from those estimates.

       Provo believes that given current facts and circumstances, it is unlikely
that applying any other reasonable judgments or estimate methodologies would
cause a material effect of Provo's results of operations, financial position or
liquidity for the periods presented in this Proxy.

       The accounting policies identified critical are as follows:

       Revenue Recognition. Provo recognizes revenue in accordance with
generally accepted accounting principles as outlined in SAB No. 101, which
requires that four basic criteria be met before revenue can be recognized: (1)
persuasive evidence of an arrangement exists; (2) product delivery, including
customer acceptance, has occurred; (3) the price is fixed or determinable; and
(4) collectibility is reasonably assured. Provo believes that its revenue
recognition policy is critical because revenue is a very significant component
of its results of operations. Decisions relative to criteria (4) regarding
collectibility are based upon management's judgments and should conditions
change in the future and cause management to determine these criteria are not
met; Provo's recognized results may be affected.

       Inventory. Inventory consists of prepaid phone cards, purchased for
resale. Inventory is valued at lower of cost ("first-in, first-out") or market.
On a periodic basis, management compares the amount of inventory on hand and
under commitment with our latest forecasted requirements to determine whether
write-downs for excess inventory are required. Although management considers the
amounts on hand to be realizable, there can be no assurance that these amounts
will prove to be realizable over time.

       Allowance for Doubtful Accounts. Provo performs ongoing credit
evaluations of its customers and adjusts credit limits based upon its customers'
payment history and current credit worthiness, as determined by a review of
their current credit information. Provo continuously monitors collections and an
allowance for estimated credit losses is maintained based upon its historical
experience and any specific customer issues that have been identified. While
such credit losses have historically been within management's expectation and
the allowances that have been established, there cannot be any guarantee that
the credit loss rates will not change in the future. Provo has a limited number
of customers with individually large amounts due at any balance sheet date. Any
unanticipated change in one of those customer's credit position could have a
material effect on Provo's results of operations in the period in which such
changes or events occur.

       Income Taxes. Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for future
tax consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using the enacted tax rates expected to apply to
taxable income during the period in which those temporary differences are
expected to be recovered or settled. Deferred tax assets are periodically
evaluated to determine their recoverability, and where the recovery is not
likely, a valuation allowance is established. In the event that actual results
differ form management's estimates or assumptions change, the provision for
income taxes could be materially impacted.


       Real Estate Held for Sale and Investment Nonproductive Properties.
Provo's real estate held for sale and investment nonproductive properties
represent non-operating assets, purchased or acquired in settlement of trade
accounts receivable and are valued at the lower of cost or market. Although
management considers the amounts to be realizable, there can be assurance that
these amounts will prove to be realizable over time.


New Accounting Pronouncements

       In August 2001, the Financial Accounting Standards Board (the "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 




                                       45



 



 



segment of a business. Provo was required to adopt the Statement during 2002.
The adoption of SFAS No. 144 did not have a material effect on Provo's 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 extinguishment 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. Provo adopted the provisions of SFAS 145
effective January 1, 2003 and this pronouncement did not 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. Provo's management believes that the adoption
of this standard will not have a material effect on Provo'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.

       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 Provo's financial statements.




                                       46



 



 



                                   PROPOSAL 2


   APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF DESIGNATIONS PERTAINING TO
     THE SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK TO PROVIDE FOR THE
                      MANDATORY CONVERSION OF ALL SERIES B
      STOCK UPON THE ELECTION OF THE HOLDERS OF A MAJORITY OF THE SERIES B
                     CONVERTIBLE REDEEMABLE PREFERRED STOCK,
        AND THE EFFECTUATION OF THE MANDATORY CONVERSION OF THE SERIES B
                     CONVERTIBLE REDEEMABLE PREFERRED STOCK


Introduction

       The background information necessary to understand fully this Proposal 2
and the reasons why Frontline is seeking stockholder approval of this proposal
are set forth above in the section captioned "Questions and Answers About
Proposals 1, 2 and 3". We urge you to read that background section carefully.

       Proposal 2 relates to:


       o    approval of an amendment of the certificate of designations
            pertaining to the Series B convertible redeemable preferred stock to
            provide for the mandatory conversion of all outstanding Series B
            convertible redeemable preferred stock upon the election of the
            holders of a majority of the outstanding Series B convertible
            redeemable preferred stock; and

       o    the election by the holders of the Series B convertible redeemable
            preferred stock to effectuate the mandatory conversion of all of the
            outstanding Series B convertible redeemable preferred stock at a
            conversion ratio of six shares of common stock for each shares of
            the Series B convertible redeemable preferred stock (four shares
            after giving effect to the proposed two-for-three reverse split of
            our common stock).

Existing Terms of the Series B Convertible Redeemable Preferred Stock

       In February 2000, we issued approximately 1,200,000 shares of Series B
convertible redeemable preferred stock in an underwritten public offering in
order to raise capital. Our Series B convertible redeemable preferred stock is
currently traded on the American Stock Exchange under the symbol FNT.PR. As of
August 28, 2003, there were 14 record owners and approximately 236 beneficial
owners of our Series B convertible redeemable preferred stock. In addition,
Stephen Cole-Hatchard, our chief executive officer, is the beneficial owner of
10.2% of the outstanding Series B convertible redeemable preferred stock. See
"Interests of Certain Persons in Mandatory Conversion Proposal" on page 50.
Based on our knowledge and the public filings relating to the Series B
convertible redeemable preferred stock, no one else is the beneficial owner of
5% or more of this class of stock.

       Currently, each share of Series B convertible redeemable preferred stock
currently may be converted, at the option of its holder, into 3.4 shares of
common stock. Holders of Series B convertible redeemable preferred stock are
entitled to receive cumulative dividends at the rate of $0.60 per share of
Series B convertible redeemable preferred stock per annum. Payments are to be
made semi-annually in June and December of each year. Only holders of our Series
B convertible redeemable preferred stock as of the record date in June and
December of each year are entitled to receive dividends. The dividends payable
in June 2002, December 2002 and June 2003 are accrued and unpaid, and our
directors have not set a record date for payment of such dividends. Thus, as of
the date hereof, dividends of $0.90 per share of Series B convertible redeemable
preferred stock are accrued and unpaid.

       We may pay the dividends in cash or in shares of common stock, at our
discretion. If the dividends are to be paid in common stock, the amount of
common stock to be received by the holders of our Series B convertible
redeemable preferred stock shall be equal to the average daily closing price of
our common stock on the American Stock Exchange on the five consecutive trading
days immediately preceding the day prior to the record date for the
determination of the stockholders entitled to receive such dividend (the
"Closing Price").





                                       47



 



 




       The certificate of designations for the Series B convertible redeemable
preferred stock does not clearly specify how many shares of common stock are to
be issued in payment of accrued dividends in a case where our board does not
specify a record date with respect to a particular dividend payment date. One
alternative would be to utilize the Closing Prices as of the relevant dividend
payment dates, which would result in the issuance of 3.21 shares of common stock
in payment of the accrued dividends on each share of Series B convertible
redeemable preferred stock, for a conversion ratio of 6.61. A second alternative
would be to utilize the Closing Price as of June 25, 2003, the date on which our
board approved Proposal 2, which would result in the issuance of 2.14 shares of
common stock in payment of the accrued dividends on each share of Series B
convertible redeemable preferred stock, for a conversion ratio of 5.54.

       In an effort to balance the interests of the holders of the Series B
convertible redeemable preferred stock and of our other stockholders, in
approving Proposal 2 our board adopted a conversion of six shares of common
stock for each shares of Series B convertible redeemable preferred stock (four
shares of common stock for each share of Series B convertible redeemable
preferred stock after giving effect to the proposed two-for-three reverse split
of our common stock). Such conversion ratio provides for the payment in full of
all accrued and unpaid dividends on the Series B convertible redeemable
preferred stock in shares of common stock.

Specifics of the Series B Mandatory Conversion Proposal

       At present, the conversion of Series B convertible redeemable preferred
stock into common stock is at the election of each individual holder of Series B
convertible redeemable preferred stock. The amendment in this Proposal 2 would
add a new Section 10 to the terms of the certificate of designations pertaining
to the Series B convertible redeemable preferred stock that would provide that
if the holders of a majority of the outstanding Series B convertible redeemable
preferred stock elect to convert their shares of Series B convertible redeemable
preferred stock to common stock, then all of the outstanding Series B
convertible redeemable preferred stock will automatically and without any
further action convert into six shares of our common stock (four shares after
giving effect to the proposed two-for-four reverse split of our common stock).

       Adoption of Proposal 2 (after giving effect to the proposed two-for-three
reverse stock split) will result in a conversion ratio of four shares of common
stock for each share of the Series B convertible redeemable preferred stock and
the conversion of all 496,445 shares of Series B convertible redeemable
preferred stock outstanding as of August 28, 2003 into an aggregate of
approximately 1,985,780 shares of common stock.

       By Proposal 2, in addition to amending the certificate of designations
pertaining to the Series B convertible redeemable preferred stock to provide for
its mandatory conversion upon the approval of the holders of a majority of the
outstanding Series B convertible redeemable preferred stock, Frontline is
requesting that the holders of the Series B convertible redeemable preferred
stock elect to effectuate the mandatory conversion of all of the outstanding
Series B convertible redeemable preferred stock to our common stock. Thus, if
Proposal 2 is adopted, all of the Series B convertible redeemable preferred
stock will automatically be converted to common stock.

       Proposal 2 provides a mechanism to effect the mandatory conversion of the
Series B convertible redeemable preferred stock by requiring all of the
outstanding shares to be converted upon the approval by the holders of a
majority of the outstanding shares of Series B convertible redeemable preferred
stock. A copy of the proposed certificate of amendment to the certificate of
designations pertaining to the Series B convertible redeemable preferred stock
is attached to this proxy statement as Annex F. You are encouraged to read the
certificate of amendment carefully.

       The amendments to the certificate of designations would become effective
upon filing the certificate of amendment with the Delaware Secretary of State,
which would occur as soon as possible following the approval of this Proposal 2
by the requisite stockholder votes at the annual meeting. The mandatory
conversion of the Series B convertible redeemable preferred stock to common
stock as described above would occur immediately upon the filing of the
certificate of amendment to the certificate of designations.

Purpose and Background of the Series B Mandatory Conversion Proposal

       The Series B convertible redeemable preferred stock currently is traded
on the American Stock Exchange under the symbol FNT.PR. To maintain the listing
of the Series B convertible redeemable preferred stock on the American Stock
Exchange, we must meet certain listing standards established by the American
Stock Exchange. We are not in compliance with the American Stock Exchange
listing standards with respect to the Series B 





                                       48



 



 




convertible redeemable preferred stock. We are proposing to convert the Series B
convertible redeemable preferred stock into common stock to avoid the Series B
convertible redeemable preferred stock being delisted from the American Stock
Exchange.

       The American Stock Exchange rules require, among other things, that as a
condition of the continued listing of a security, the aggregate market value of
shares of such security publicly held must not fall below $1,000,000. In the
event the aggregate market value of shares of a security publicly held fall
below $1,000,000 for more than 90 consecutive days, the American Stock Exchange
will consider suspending dealings in, or removing from the list, such security.

       On January 16, 2003, the American Stock Exchange advised us that it is
considering filing an application to delist our Series B convertible redeemable
preferred stock because the aggregate market value of the Series B convertible
redeemable preferred stock publicly held was less than $1,000,000 for more than
90 consecutive days. The American Stock Exchange granted us through February 21,
2003 to submit a plan to the American Stock Exchange to achieve compliance with
the American Stock Exchange listing standards.







                                       49



 



 




       In order to address the American Stock Exchange listing issue, our board
of directors convened a meeting during which it evaluated potential plans that
could be undertaken to avoid the delisting of the Series B convertible
redeemable preferred stock from the American Stock Exchange, recognizing that
such an outcome was in the best interests of our stockholders. Our board of
directors determined that the primary factor that has led to the Series B
convertible redeemable preferred stock falling out of compliance with the
American Stock Exchange listing requirements is that the holders of a majority
of the initially outstanding shares of Series B convertible redeemable preferred
stock have voluntarily converted their Series B convertible redeemable preferred
stock into common stock, resulting in a diminution in the aggregate market value
of the publicly held Series B convertible redeemable preferred stock that has
not been offset by an increase in the price of the Series B convertible
redeemable preferred stock. Our board of directors further determined that a
plan aimed towards increasing the stock price of the Series B convertible
redeemable preferred stock would be ineffective. Therefore, on February 21,
2003, after considering a variety of alternatives, we submitted a plan of
compliance to the American Stock Exchange in which we stated that, to avoid
delisting of the Series B convertible redeemable preferred stock from the
American Stock Exchange, we intend to seek the necessary approvals to cause the
holders of the Series B convertible redeemable preferred stock to convert all of
the Series B convertible redeemable preferred stock into common stock. The
American Stock Exchange has indicated that it will not take steps to delist the
Series B convertible redeemable preferred stock, provided that we take timely
action to convert the Series B convertible redeemable preferred stock into
common stock.

Interests of Certain Persons in Approval of the Series B Mandatory Conversion
Proposal


       Interests in Frontline's Securities


       Certain of our directors and executive officers hold shares of our Series
B convertible redeemable preferred stock. The following table identifies the
directors, executive officers and each person or entity who is known to us to
own 5% or more of outstanding shares of our Series B convertible redeemable
preferred stock, who currently hold shares of our Series B convertible
redeemable preferred stock, the number of such shares held by each such person,
and the number of shares of common stock into which such shares of Series B
convertible redeemable preferred stock will be converted upon approval of
Proposal 2 by our stockholders (after giving effect to the proposed
two-for-three reverse stock split) and the percentage of their ownership:







                                                Actual                                 As adjusted (1)
                                --------------------------------------      ----------------------------------------
                                    Series B Preferred convertible
                                         redeemable preferred stock                     Common shares
                                ---------------------------------------     ----------------------------------------
                                  Number of              Percentage                                    Percentage
                                   shares                    Of               Issuable upon                of
                                    owned                Ownership              conversion             ownership
                                --------------        -----------------     -------------------      ---------------
                                                                                          
Stephen Cole-Hatchard (2)              50,450                    10.2%                 201,800                 5.1%
William A.  Barron (3)                    200                     0.2%                     800                 0.3%





------------------------------------
(1) As adjusted to give effect to the conversion of the Series B convertible
redeemable preferred stock, Series C convertible preferred stock and Series D
convertible preferred stock and the proposed two-for-three reverse split.
(2) Includes 201,333 shares issuable upon exercise of options.
(3) Includes 58,000 shares issuable upon exercise of options.





                                       50



 



 






Consequences of the Series B Mandatory Conversion Proposal


       Issuance of Common Stock


       After giving effect to the conversion of the Series C convertible
preferred stock and Series D convertible preferred stock pursuant to Proposal 1,
the conversion of the Series B convertible redeemable preferred stock pursuant
to Proposal 2, and the two-for-three reverse stock split pursuant to Proposal 3,
Frontline's total outstanding shares of common stock would be 34,951,317, of
which approximately 5.7% would be owned by the former holders of the Series B
convertible redeemable preferred stock.

       Elimination of Series B Convertible Redeemable Preferred Stock

       Upon conversion of the Series B convertible redeemable preferred stock
into shares of common stock, Frontline would no longer have any shares of Series
B convertible redeemable preferred stock outstanding. The elimination of the
outstanding Series B convertible redeemable preferred stock would have several
important implications to the holders of Frontline's common stock and Series B
convertible redeemable preferred stock:

       Ranking. The Series B convertible redeemable preferred stock ranks senior
to our common stock, Series C convertible preferred stock and Series D
convertible preferred stock in right of payment of dividends and distributions
upon liquidation, dissolution or winding up of Frontline. The Series B
convertible redeemable preferred stock will also rank senior to any other class
of preferred stock that may be established in the future, unless the holders of
a majority of the outstanding shares of the Series B convertible redeemable
preferred stock vote in favor of the establishment of a senior class of
preferred stock.

       Dividends. Holders of shares of Series B convertible redeemable preferred
stock are entitled to receive annual cumulative dividends of $.60 per share, out
of legally available funds, payable semi-annually on June 30 and December 31 of
each year, commencing June 30, 2000. The dividends are payable, at Frontline's
option, either in cash or in shares of common stock (except that dividends
payable upon a redemption of the Series B convertible redeemable preferred stock
will be payable only in cash). Dividends are cumulative and accrue from the date
of first issuance of the Series B convertible redeemable preferred stock and are
payable to holders of record as they appear on Frontline's stock books on the
record dates to be fixed by our board of directors. The number of shares of
common stock to be issued as a dividend are based on the average closing sales
price of the common stock on the five trading days immediately preceding the
record date for each dividend. No fractional shares of common stock will be
issued. Instead, Frontline must pay the cash equivalent of any fractional share.

       Liquidation Preference. In the event of any liquidation, dissolution or
winding up of Frontline, holders of shares of Series B convertible redeemable
preferred stock are entitled to receive, out of legally available assets, a
liquidation preference of $15.00 per share, plus an amount equal to any accrued
and unpaid dividends up to the payment date, before any payment or distribution
will be made to the holders of common stock or any other capital stock that
ranks junior to the Series B convertible redeemable preferred stock. Holders of
shares of the Series B convertible redeemable preferred stock will not be
entitled to receive any liquidation preference on their shares until the
liquidation preference of any senior capital stock has been paid in full.

       Optional Redemption. If at any time after the date of issuance of the
Series B convertible redeemable preferred stock, the closing sales price of the
common stock has been $8.80 or more for any 15 consecutive trading days,
Frontline may, at its option, by giving notice to the holders of the Series B
convertible redeemable preferred stock at any time during the five business days
after the last trading day in the 15-day trading period, redeem all of the
Series B convertible redeemable preferred stock for $15.00 plus the amount of
accrued and unpaid dividends. Frontline also has the option to redeem all of the
Series B convertible redeemable preferred stock for a payment in cash of $16.50
per share, plus accrued and unpaid dividends.

       Conversion. The Series B convertible redeemable preferred stock is
convertible into shares of common stock at the option of the holder at any time
after it is issued and up to the day before the date fixed for redemption, if
any. Shares of common stock currently are issuable upon conversion of a share of
the Series B convertible redeemable preferred stock at a price of $4.41
(equivalent to a conversion rate of 3.4 shares of common stock for each share of
Series B convertible redeemable preferred stock). The conversion rate is subject
to adjustment for stock splits, reverse stock splits and other similar
capitalization changes. Also, the conversion rate is subject to adjustment for
the issuance of rights or warrants to holders of common stock entitling them to
purchase common stock at a price below the then-current market price, and for
extraordinary dividends to holders of stock junior or equal to the Series 





                                       51



 



 




B convertible redeemable preferred stock. No fractional shares of common stock
will be issued upon conversion. Instead, Frontline will pay the cash equivalent
of any fractional shares.

       Special Voting Rights. Generally, the holders of Series B convertible
redeemable preferred stock are not entitled to voting rights unless required by
law or except as to matters affecting their rights as preferred stockholders,
including the issuance of stock ranking on a parity with or senior to the Series
B convertible redeemable preferred stock upon liquidation or dissolution of
Frontline. If dividends on the Series B convertible redeemable preferred stock
are in arrears and unpaid for six or more dividend periods (whether or not
consecutive), then our board of directors will be increased by two members, who
will be elected by the holders of the then-outstanding shares of Series B
convertible redeemable preferred stock. These voting rights will continue until
all dividends in arrears on the Series B convertible redeemable preferred stock
are paid in full, or the Series B convertible redeemable preferred stock is
redeemed. In any case, the voting rights will terminate if at any time there are
fewer than 25,000 shares of Series B convertible redeemable preferred stock
outstanding. After the voting rights are terminated, the terms of the directors
elected by the holders of Series B convertible redeemable preferred stock will
terminate and the size of our board of directors will be reduced by two members.
In connection with any vote where holders of Series B convertible redeemable
preferred stock have the right to vote, each outstanding share of Series B
convertible redeemable preferred stock will be entitled to one vote.

       The approval of Proposal 2 will eliminate each of the these rights and
privileges (for both Frontline and the holders of Series B convertible
redeemable preferred stock) and convert the Series B convertible redeemable
preferred stock into common stock as set forth in "Conversion" above.

Resale of Common Stock Exchanged for Series B Convertible Redeemable Preferred
Stock

       The conversion of the Series B convertible redeemable preferred stock
into common stock of Frontline will be made pursuant to an exemption from
registration under Section 3(a)(9) of the Securities Act of 1933. For purposes
of the Securities Act, the shares of common stock to be issued in exchange for
the Series B convertible redeemable preferred stock will be subject to the same
restrictions on resale, if any, as are applicable at present to the Series B
convertible redeemable preferred stock of such holder. Affiliates of Frontline
and holders of restricted shares will continue to be subject to the resale
restrictions specified in Rule 144 issued under the Securities Act.


Certain Federal Tax Consequences

       Introduction


       The following discussion summarizes certain United States federal income
tax consequences to Frontline and its stockholders of the conversion of the
Series B convertible redeemable preferred stock to common stock pursuant to
Proposal 2. This summary does not purport to be complete. It does not address
all of the United States federal income tax considerations, including
considerations that may be relevant to Frontline stockholders in light of their
individual circumstances or to Frontline stockholders that are subject to
special rules, such as financial institutions, tax-exempt organizations,
insurance companies, dealers in securities, traders who mark to market, non-U.S.
stockholders, stockholders who hold shares of Frontline stock as part of a
straddle, hedge, or conversion transaction, stockholders who acquired their
shares of Frontline stock pursuant to the exercise of employee stock options or
otherwise as compensation, stockholders who are subject to the federal
alternative minimum tax, and stockholders not holding their shares of Frontline
stock as a capital asset. This discussion also does not address any non-income
tax consequences or any state, local, or non-U.S. tax consequences.

       No rulings from the Internal Revenue Service or opinions of counsel have
been or will be requested with respect to any of the matters discussed herein
and, as a result, there can be no assurance that the Internal Revenue Service
will not disagree with or challenge any of the conclusions described below. The
discussion below is based upon the provisions of the Code, the Treasury
Regulations promulgated thereunder, judicial decisions and administrative
rulings currently in effect, all of which are subject to change, possibly on a
retroactive basis. The summary does not address the tax consequences of any
transaction other than the conversion of the Series B convertible redeemable
preferred stock.

       EACH HOLDER OF OUR SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK SHOULD
CONSULT HIS, HER OR ITS TAX ADVISOR AS TO THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES TO FRONTLINE AND TO SUCH HOLDER OF THE CONVERSION OF THE SERIES B




                                       52



 



 




CONVERTIBLE REDEEMABLE PREFERRED STOCK. EACH HOLDER OF OUR SERIES B CONVERTIBLE
REDEEMABLE PREFERRED STOCK SHOULD ALSO CONSULT HIS, HER OR ITS TAX ADVISOR AS TO
ANY STATE, LOCAL, NON-U.S. AND NON-INCOME TAX CONSIDERATIONS RELEVANT TO SUCH
HOLDER AS A RESULT OF THE CONVERSION OF THE SERIES B CONVERTIBLE REDEEMABLE
PREFERRED STOCK.


       Tax Consequences to Frontline Stockholders


       General. Under Section 354 of the Code, a stockholder who exchanges stock
or securities of a corporation solely for stock or securities of the same
corporation, in a transaction that constitutes a "recapitalization" within the
meaning of Section 368(a)(1)(E) of the Code, generally will not recognize gain
or loss on the exchange. Frontline believes that the conversion of the Series B
convertible redeemable preferred stock pursuant to Proposal 2 will constitute a
"recapitalization" within the meaning of Section 368(a)(1)(E) of the Code. The
remainder of this discussion assumes that the conversion will be treated as a
"recapitalization" within the meaning of Section 368(a)(1)(E) of the Code.

       Treatment of existing holders of Frontline common stock. The existing
holders of shares of Frontline common stock will not recognize gain or loss as a
result of the conversion of the Series B convertible redeemable preferred stock
pursuant to Proposal 2.

       Treatment of Frontline stockholders that exchange shares of Frontline
Series B convertible redeemable preferred stock for shares of Frontline common
stock. As discussed above, a stockholder exchanging stock or securities solely
for other stock or securities in a "recapitalization" within the meaning of
Section 368(a)(1)(E) of the Code generally will not recognize gain or loss on
the exchange. However, under Section 305 of the Code and the Treasury
Regulations thereunder, under certain circumstances, a recapitalization may be
deemed to result in a taxable distribution with respect to the preferred stock.
In particular, a deemed distribution will occur if (i) the recapitalization is
pursuant to a plan to periodically increase a stockholder's proportionate
interest in the assets or earnings and profits of the corporation, or (ii) a
stockholder holding preferred stock with dividends in arrears exchanges his
stock for other stock and, as a result, increases his proportionate interest in
the assets or earnings and profits of the corporation.

       Frontline believes that the conversion of the Series B convertible
redeemable preferred stock is an isolated transaction, and not part of a plan to
periodically increase a stockholder's proportionate interest in Frontline.
Nevertheless, because there are accrued and unpaid dividends with respect to the
Series B convertible redeemable preferred stock, holders of Series B convertible
redeemable preferred stock potentially could be treated as receiving a
distribution from Frontline. The amount of a deemed distribution resulting
because dividends in arrears is limited to the lesser of (i) the amount by which
the fair market value of the Frontline common stock received (determined
immediately following the conversion of Series B convertible redeemable
preferred stock) exceeds the issue price of the Series B convertible redeemable
preferred stock surrendered, or (ii) the amount of the dividends in arrears. The
issue price of the Series B convertible redeemable preferred stock significantly
exceeds the current fair market value of the common stock that holders of Series
B convertible redeemable preferred stock will receive in connection with the
conversion of the Series B convertible redeemable preferred stock pursuant to
Proposal 2.



       The Internal Revenue Service, however, may take the position that the
amendment to the certificate of designation pertaining to the Series B
convertible redeemable preferred stock necessary to permit the conversion of the
Series B convertible redeemable preferred stock pursuant to Proposal 2 should be
analyzed separately from the conversion itself. A change in the conversion rate
of preferred stock generally results in deemed distribution under Section 305 of
the Code. If the Internal Revenue Service were to successfully assert that those
amendments (which alter the terms of the Series B convertible redeemable
preferred stock) themselves caused a deemed distribution, then the amount of the
deemed distribution resulting therefrom would not be subject to the limitations
described above. Nevertheless, Frontline believes, and the remainder of this
discussion assumes, that the conversion of the Series B convertible redeemable
preferred stock pursuant to Proposal 2 will not result in a deemed distribution
to Frontline stockholders.

       In light of the foregoing, Frontline believes that a holder of shares of
Series B convertible redeemable preferred stock who receives shares of common
stock in exchange for shares of the Series B convertible redeemable preferred
stock in connection with the conversion of the Series B convertible redeemable
preferred stock pursuant to Proposal 2 will not recognize gain or loss upon such
exchange.




                                       53



 



 




       Tax basis of Frontline common stock. The aggregate tax basis of the
Frontline common stock received by Frontline stockholders in exchange for their
shares of Series B convertible redeemable preferred stock will be the same as
the aggregate tax basis of the shares of Series B convertible redeemable
preferred stock surrendered in connection with the conversion of the Series B
convertible redeemable preferred stock pursuant to Proposal 2.

       Holding period of Frontline common stock. The holding period of the
Frontline common stock received by Frontline stockholders in exchange for their
shares of Series B convertible redeemable preferred stock in connection with the
conversion of the Series B convertible redeemable preferred stock pursuant to
Proposal will include the holding period of the shares of Series B convertible
redeemable preferred stock surrendered in exchange therefor.

       Information Reporting. Frontline stockholders who receive shares of
Frontline common stock in connection with the conversion of the Series B
convertible redeemable preferred stock pursuant to Proposal 2 will be required
to attach a statement to their tax returns for the year in which the conversion
occurs that contains the information listed in Treasury Regulation Section
1.368-3(b). Such statement must include the holder's tax basis in that holder's
shares of Series B convertible redeemable preferred stock surrendered in
connection with the conversion and a description of the shares of common stock
received in the conversion.


       Tax Consequences to Frontline


       Frontline will not recognize gain or loss by reason of the conversion of
the Series B convertible redeemable preferred stock pursuant to Proposal 2.


Accounting Treatment of the Preferred Conversion


       The conversion of the Series B convertible redeemable preferred stock at
the proposed conversion ratio of 6 for 1 would result in the reclassification of
the Series B convertible redeemable preferred stock account balance ($4,964 as
of June 30, 2003) to Frontline's stockholders' equity accounts, specifically
common stock and additional paid-in capital. Additionally, the excess of the
fair value of the common stock issued to the holders of Series B convertible
redeemable preferred stock over the fair value of the securities issuable
pursuant to the original conversion terms is considered to be a deemed dividend
to the holders of Series B convertible redeemable preferred stock. Accordingly,
such dividend would be reflected as a reduction to retained earnings and an
increase in the net loss applicable to common stockholders for purposes of
computing net loss per share of common stock. Assuming a fair value of $0.42 per
share of common stock, the increase in net loss applicable to common
stockholders would be $95,317.


Dissenters' Rights of Appraisal

       Delaware law does not provide for appraisal rights with respect to the
amendments to the certificate of designations to be effected pursuant to
Proposal 2.

Required Vote

       Under Delaware law, approval of Proposal 2 requires the affirmative vote
of:


       o    the holders of a majority of the outstanding shares of Series B
            convertible redeemable preferred stock, voting separately as a
            single class; and


       o    the holders of a majority of outstanding shares of the common stock,
            voting separately as a single class.

Abstentions and broker non-votes have the effect of a vote against Proposal 2.

Board Recommendation


       Our board of directors unanimously recommends a vote FOR Proposal 2.








                                       54





 





                                   PROPOSAL 3


             AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO EFFECT
           A REVERSE SPLIT OF THE COMMON STOCK AND AN INCREASE IN THE
                   NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

General

         The background information necessary to understand fully this Proposal
3 and the reasons why Frontline is seeking stockholder approval of this proposal
are set forth above in the section captioned "Questions and Answers About
Proposals 1, 2 and 3". We urge you to read that background section carefully.

         Proposal 3 relates to adoption of amendments to our certificate of
incorporation authorizing the following:

         o  a reverse stock split in which all outstanding shares of our common
            stock would be exchanged at a ratio of two-for-three; and

         o  an increase in the number of authorized shares of common stock from
            25,000,000 shares to 100,000,000 shares.

         The test of the proposed amendments to our certificate of incorporation
pertaining to the proposed reverse stock split and increase in authorizes shares
is incorporated as paragraphs 7 and 8 of the certificate of amendment, attached
to this proxy statement as Annex G. The amendments to the certificate of
incorporation would become effective upon filing the amendment with the Delaware
Secretary of State, which would occur as soon as possible following the approval
of this Proposal 3 by the stockholders at the annual meeting.

The Reverse Split

         Purpose and Background of the Reverse Split


         Our primary objective in proposing the reverse split is to attempt to
raise the per share trading price of our common stock. The closing bid price of
our common stock has been below $1.00 per share since October 3, 2000. On
October 1, 2003, the closing price was $0.51.

         Our board of directors believes that the low per share market price of
the common stock impairs its marketability to and acceptance by institutional
investors and other members of the investing public and creates a negative
impression of Frontline generally. Theoretically, decreasing the number of
shares of common stock outstanding should not, by itself, affect the
marketability of the shares, the type of investor who would be interested in
acquiring them, or our reputation in the financial community. In practice,
however, many investors and market makers consider low-priced stocks as unduly
speculative in nature and, as a matter of policy, avoid investment and trading
in such stocks. The presence of these negative perceptions may be adversely
affecting, and may continue to adversely affect, not only the pricing of our
common stock, but also its trading liquidity. In addition, these perceptions may
affect our commercial business and our ability to raise additional capital
through the sale of stock or the cost of debt we may incur.


         We hope that the decrease in the number of shares of our outstanding
common stock resulting from the reverse split, and the anticipated increase in
the price per share, will encourage greater interest in the common stock among
members of the financial community and the investing public and possibly create
a more liquid market for our stockholders with respect to those shares presently
held by them. However, the possibility exists that stockholder liquidity may be
adversely affected by the reduced number of shares which would be outstanding if
the reverse split is effected, particularly if the price per share of the common
stock begins a declining trend after the reverse split is effected.

         There can be no assurance that the reverse split will achieve any of
the desired results. There also can be no assurance that the price per share of
the common stock immediately after the reverse split will increase
proportionately with the reverse split, or that any increase will be sustained
for any period of time.


                                       55






 






         We are not aware of any present efforts by anyone to accumulate the
common stock, and the proposed reverse split is not intended to be an
anti-takeover device.

         Effect on Outstanding Common Stock; No Fractional Shares

         The principal effects of the reverse split will be to decrease the
number of outstanding shares of our common stock. The total number of shares of
common stock each stockholder holds will be reclassified automatically into the
number of shares equal to the number of shares each stockholder held immediately
before the reverse split in accordance with the two-for-three exchange ratio. If
the total number of shares a stockholder holds is not evenly divisible by the
two-for-three exchange ratio, that stockholder will not receive a fractional
share but instead will receive cash in an amount equal to the fraction of a
share that stockholder otherwise would have been entitled to receive multiplied
by the last reported sale price of the common stock before the reverse split
takes effect.

         The reverse split will result in some stockholders owning "odd-lots" of
less than 100 shares of common stock. Brokerage commissions and other costs of
transactions in odd-lots are generally higher than the costs of transactions in
"round-lots" of even multiples of 100 shares.

         The proposed reverse stock split will not otherwise alter or modify the
rights, preferences, privileges or restrictions of the common stock.

         Effect on Outstanding Preferred Stock, Options and Warrants


         Under the terms of our outstanding Series B convertible redeemable
preferred stock, Series C convertible preferred stock, Series D convertible
preferred stock, options and warrants, when the reverse split becomes effective,
the number of shares of common stock covered by each of them will be decreased
and the conversion or exercise price per share will be increased in accordance
with the two-for-three exchange ratio of the reverse split.


         No Effect on Legal Ability to Pay Dividends


         Our board of directors has not in the past declared, nor does it have
any plans to declare in the foreseeable future, any distributions of cash,
dividends or other property to the holders of common stock. We are not in
arrears on any dividends to the holders of common stock. Holders of our Series B
convertible redeemable preferred stock are entitled to receive annual cumulative
dividends of $.60 per share payable semi-annually in June and December of each
year. The dividends may be paid in cash or in shares of common stock, at our
discretion. In June and December 2002 and June 2003, our directors did not
declare a dividend on our Series B convertible redeemable preferred stock. Under
the terms of the Series B convertible redeemable preferred stock, failure to
declare a dividend for six ore more dividend periods constitutes a default which
would confer certain voting rights upon the holders of the Series B convertible
redeemable preferred stock, and empower them to elect two directors to our board
of directors. At June 30, 2003, unpaid dividends represented $446,801. We do not
believe that the reverse split will have any effect with respect to future
distributions, if any, to our stockholders.


         Payment for Fractional Shares; Exchange of Stock Certificates

         We will appoint our transfer agent, American Stock Transfer & Trust
Company, at 59 Maiden Lane, New York, New York 10038, to act as exchange agent
for holders of the common stock in connection with the reverse split. We will
deposit with the exchange agent, as soon as practicable after the effective date
of the reverse split, cash in an amount equal to the value of the estimated
aggregate number of fractional shares that will result from the reverse split.
The funds required to purchase the fractional share interests are available and
will be paid from our current cash reserves. Our stockholder list shows that
some of the outstanding common stock is registered in the names of clearing
agencies and broker nominees. Because we do not know the numbers of shares held
by each beneficial owner for whom the clearing agencies and broker nominees are
record holders, we cannot predict with certainty the number of fractional shares
that will result from the reverse split or the total amount it will be required
to pay for fractional share interests. However, we do not expect that the amount
will be material.


         As of the record date for the annual meeting, there were approximately
234 holders of record of our common stock (although we had significantly more
beneficial holders). We do not expect the reverse split and the payment of cash
in lieu of fractional shares to result in a significant reduction in the number
of record holders. We presently do not intend to seek any change in our status
as a reporting company for federal securities law purposes, either before or
after the reverse split.



                                       56






 





         On or after the effective date of the reverse split, we will mail a
letter of transmittal to each stockholder. Each stockholder will be able to
obtain a certificate evidencing its post-reverse split shares and, if
applicable, cash in lieu of a fractional share only by sending the exchange
agent its old stock certificate(s), together with the properly executed and
completed letter of transmittal and such evidence of ownership of the shares as
we may require. Stockholders will not receive certificates for
post-reverse-split shares unless and until their old certificates are
surrendered. Stockholders should not forward their certificates to the exchange
agent until they receive the letter of transmittal, and they should only send in
their certificates with the letter of transmittal. The exchange agent will send
each stockholder's new stock certificate and payment in lieu of any fractional
share promptly after receipt of that stockholder's properly completed letter of
transmittal and old stock certificate(s).

         Stockholders will not have to pay any service charges in connection
with the exchange of their certificates or the payment of cash in lieu of
fractional shares.

         Certain Federal Tax Consequences

         The following discussion summarizes certain United States federal
income tax consequences to Frontline and its stockholders of the reverse stock
split pursuant to Proposal 3. This summary does not purport to be complete. It
does not address all of the United States federal income tax considerations,
including considerations that may be relevant to Frontline stockholders in light
of their individual circumstances or to Frontline stockholders that are subject
to special rules, such as financial institutions, tax-exempt organizations,
insurance companies, dealers in securities, traders who mark to market, non-U.S.
stockholders, stockholders who hold shares of Frontline stock as part of a
straddle, hedge, or conversion transaction, stockholders who acquired their
shares of Frontline stock pursuant to the exercise of employee stock options or
otherwise as compensation, stockholders who are subject to the federal
alternative minimum tax, and stockholders not holding their shares of Frontline
stock as a capital asset. This discussion also does not address any non-income
tax consequences or any state, local, or non-U.S. tax consequences.

         No rulings from the Internal Revenue Service or opinions of counsel
have been or will be requested with respect to any of the matters discussed
herein and, as a result, there can be no assurance that the Internal Revenue
Service will not disagree with or challenge any of the conclusions described
below. The discussion below is based upon the provisions of the Code, the
Treasury Regulations promulgated thereunder, judicial decisions and
administrative rulings currently in effect, all of which are subject to change,
possibly on a retroactive basis. The summary does not address the tax
consequences of any transaction other than the reverse stock split.

         EACH FRONTLINE STOCKHOLDER SHOULD CONSULT HIS, HER OR ITS TAX ADVISOR
AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO FRONTLINE AND TO SUCH
STOCKHOLDER OF THE REVERSE STOCK SPLIT. EACH FRONTLINE STOCKHOLDER SHOULD ALSO
CONSULT HIS, HER OR ITS TAX ADVISOR AS TO ANY STATE, LOCAL, NON-U.S. AND
NON-INCOME TAX CONSIDERATIONS RELEVANT TO SUCH STOCKHOLDER AS A RESULT OF THE
REVERSE STOCK SPLIT.

         Tax Consequences to Frontline Stockholders

         General. Under Section 354 of the Code, a stockholder who exchanges
stock or securities of a corporation solely for stock or securities of the same
corporation, in a transaction that constitutes a "recapitalization" within the
meaning of Section 368 (a) (1) (E) of the Code, generally will not recognize
gain or loss on the exchange. Frontline believes that the reverse stock split
pursuant to Proposal 3 will constitute a "recapitalization" within the meaning
of Section 368 (a) (1) (E) of the Code. The remainder of this discussion assumes
that the conversion will be treated as a "recapitalization" within the meaning
of Section 368 (a) (1) (E) of the Code.

         Tax basis of Frontline common stock. The aggregate tax basis of the
Frontline common stock received by Frontline stockholders in exchange for their
common stock (including fractional shares of common stock that are converted to
cash) will be the same as the aggregate tax basis of the shares of common stock
surrendered in connection with the reverse stock split pursuant to Proposal 3.

         Holding period of Frontline common stock. The holding period of the
Frontline common stock received by Frontline stockholders in exchange for their
shares of common stock in connection with the reverse stock split pursuant to
Proposal 3 (including fractional shares of common stock that are converted to
cash) will include the holding period of the shares of common stock surrendered
in exchange therefor.


                                       57






 




         Receipt of cash in lieu of fractional shares of Frontline common stock.
A holder of shares of Frontline common stock who receives cash in lieu of a
fractional share of Frontline common stock will be treated as having received
that fractional share in connection with the conversion and then as having
exchanged that fractional share for cash in a redemption by Frontline. The
holder will recognize gain or loss on this deemed redemption in an amount equal
to the difference between the portion of the tax basis of the holder's shares of
common stock surrendered in connection with the reverse stock split that is
allocated to that fractional share and the cash received in lieu thereof. Such
gain or loss generally will be capital gain or loss, and will be long-term
capital gain or loss if the holding period of the shares of common stock
surrendered in connection with the common stock is more than one year as of the
effective date of the reverse stock split.

         Information Reporting. Frontline stockholders who receive shares of
Frontline common stock in connection with the reverse stock split pursuant to
Proposal 3 will be required to attach a statement to their tax returns for the
year in which the conversion occurs that contains the information listed in
Treasury Regulations Section 1.368-3(b). Such statement must include the
holder's tax basis in that holder's shares of common stock surrendered in
connection with the reverse stock split.

         Tax Consequences to Frontline

         Frontline will recognize neither gain nor loss by reason of the reverse
stock split pursuant to Proposal 3.

         Miscellaneous

         The common stock is currently registered under the Securities Exchange
Act of 1934, as amended, and, as a result, we are subject to the periodic
reporting and other requirements of the Securities Exchange Act. The reverse
split will not affect the registration of the common stock under the Securities
Exchange Act. The par value of the common stock will not change as a result of
the reverse split. Accordingly, the common stock account on our consolidated
balance sheet will be reduced with the additional paid-in capital account being
credited with the amount by which the common stock account was reduced.

Increase in Authorized Shares of Common Stock

         Current Capitalization


         Our authorized capital currently consists of 25,000,000 shares of
common stock, par value $.01 per share, and 2,000,000 shares of preferred stock,
par value $.01 per share. Under the terms of our certificate of incorporation
and bylaws, our board of directors has the authority to divide the shares of our
preferred stock into series, to establish and modify the preferences,
limitations and relative rights of each share of our preferred stock, and
otherwise to impact or modify our capitalization. Our board of directors has
invoked such authority to establish three classes of preferred stock, the Series
B convertible redeemable preferred stock, of which 1,250,000 shares are
authorized (and of which 496,445 shares are outstanding as of the record date),
the Series C convertible preferred stock, of which 220,000 shares are authorized
(and of which 220,000 shares are outstanding as of the record date), and the
Series D convertible preferred stock, of which 35,500 shares are authorized (and
of which 35,500 shares are outstanding as of the record date).


         As of the record date for the annual meeting, and without giving effect
to the proposed two-for-three reverse split, our capitalization was as follows:


         o  11,317,480 shares of common stock were outstanding;

         o  1,687,913 shares of common stock were reserved for future issuance
            upon conversion of our Series B convertible redeemable preferred
            stock;

         o  33,000,000 shares of common stock were reserved for future issuance
            upon conversion of our Series C convertible preferred stock;

         o  5,325,000 shares of common stock were reserved for future issuance
            upon conversion of our Series D convertible preferred stock; and

         o  3,800,000 shares of common stock were reserved for future issuance
            under our stock incentive plans and employee stock plans, of which
            approximately 1,257,200 were covered by outstanding options; and



                                       58




 




         o  1,735,000 shares reserved for future issuance under other
            outstanding options and warrants.

         o  440,000 shares reserved for future issuance under a convertible
            promissory note.

         Thus, as of the record date, and without giving effect to the proposed
two-for-three reverse stock split, a total of 57,305,393 shares of common stock
were either issued and outstanding or reserved for issuance upon conversion or
exercise of other outstanding securities. Such amount exceeded our authorized
common stock by 32,305,393 shares.


         Purpose and Background of the Increase in Authorized Shares


         The number of shares of common stock reserved for future issuance
exceeds the number of shares authorized for issuance by 32,305,393 shares. We
are proposing to increase the total number of our authorized shares of common
stock to 100,000,000 so that we will have sufficient authorized but unissued
common stock to permit conversion and exercise of all of our currently
outstanding securities, and in addition enable us to respond quickly to
opportunities to raise capital in public or private offerings and issue shares
in business combinations. The additional authorized shares may be used for any
proper corporate purpose approved by our board of directors (subject only to
such stockholder approval requirements as may apply in the case of business
combination transactions). The availability of additional authorized shares will
enable our board of directors to act with flexibility and dispatch when
favorable opportunities arise to enhance our capital structure. Additional
shares may be issued in connection with public or private offerings for cash,
acquisitions of other businesses, employee benefit plans and stock dividends.


         We believe that the proposed increase in authorized common stock will
make sufficient shares available for use pursuant to the purposes described
herein. Other than as specified above and as permitted or required under our
employee benefit plans and under outstanding options, warrants and other
securities convertible into common stock, we have no present arrangements,
agreements or understandings for the use of the additional shares proposed to be
authorized. No additional action or authorization by the stockholders would be
necessary prior to the issuance of any additional shares, unless required by
applicable law or the rules of any stock exchange or quotation system on which
the common stock is then listed or quoted. We reserve the right to seek a
further increase in authorized shares from time to time in the future as we
consider appropriate.

         Effect on Outstanding Common Stock

         The additional shares of common stock authorized by the proposed
amendment would have the same privileges as the shares of common stock currently
authorized and issued. Stockholders do not have preemptive rights under our
certificate of incorporation and will not have such rights with respect to the
additional authorized shares of common stock. The increase in authorized shares
would not affect the terms or rights of holders of existing shares of common
stock. All outstanding shares of common stock would continue to have one vote
per share on all matters to be voted on by the stockholders, including the
election of directors.


         The issuance of any additional shares of common stock may, depending on
the circumstances under which those shares are issued, reduce stockholders'
equity per share and, unless additional shares are issued to all stockholders on
a pro rata basis, will reduce the percentage ownership of common stock of
existing stockholders. In addition, if our board of directors elects to issue
additional shares of common stock, such issuance could have a dilutive effect on
the earnings per share, voting power and shareholdings of current stockholders.
We expect, however, to receive consideration for any additional shares of common
stock issued, thereby reducing or eliminating any adverse economic effect to
each stockholder of such dilution.


         The proposed increase in the authorized number of shares of common
stock will not otherwise alter or modify the rights, preferences, privileges or
restrictions of the common stock.

         Potential Anti-Takeover Effect

         The proposed amendment to increase the number of authorized shares of
common stock could, under certain circumstances, have an anti-takeover effect.
For example, in the event of a hostile attempt to take over control of
Frontline, it may be possible for us to endeavor to impede the attempt by
issuing shares of common stock, thereby diluting or impairing the voting power
of the other outstanding shares of common stock and increasing the potential
costs to acquire control of Frontline. The amendment therefore may have the
effect of discouraging unsolicited


                                       59






 




takeover attempts, thereby potentially limiting the opportunity for our
stockholders to dispose of their shares at the higher price generally available
in takeover attempts or that may be available under a merger proposal. The
proposed amendment may have the effect of permitting our current management,
including the current board of directors, to retain its position, and place it
in a better position to resist changes that stockholders may wish to make if
they are dissatisfied with the conduct of our business. This proposal to
increase the authorized common stock has been prompted by business and financial
considerations.

Dissenters' Rights of Appraisal

         Delaware law does not provide for appraisal rights with respect to the
amendments to the certificate of incorporation to be effected pursuant to
Proposal 3.

Required Vote

         The affirmative vote of the holders of not less than a majority of the
outstanding shares of common stock is required to approve the proposed
amendments to the certificate of incorporation to effect a two-for-three reverse
split of the common stock and an increase in the number of authorized shares of
common stock from 25,000,000 shares to 100,000,000 shares (Proposal 3).
Abstentions and broker non-votes will have the effect of a vote against Proposal
3.

Board Recommendation


         Our board of directors unanimously recommends a vote FOR Proposal 3.



                                       60






 





                                   PROPOSAL 4


    AN AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO CHANGE OUR NAME FROM
        FRONTLINE COMMUNICATIONS CORPORATION TO PROVO INTERNATIONAL, INC.

General


         Proposal 4 relates to adoption of an amendment to our certificate of
incorporation to change our name from Frontline Communications Corporation to
Provo International, Inc. Our board of directors believes that, as a result of
our acquisition of Provo, the name Provo International, Inc. better reflects our
current and anticipated future business.


         If Proposal 4 is approved, we will amend Section 1 of our certificate
of incorporation to change our name to Provo International, Inc. If Proposal 4
is not so approved, Section 1 of our current certificate of incorporation will
remain in effect and our name will remain Frontline Communications, Inc. If
Proposal 4 is approved, without any further action by our stockholders, after
the name change, our name will be Provo International, Inc. and the outstanding
shares of our common stock shall be deemed to be common stock Provo
International, Inc. The voting and other rights that characterize the common
stock will remain the same and will not be altered by the name change.

         The text of the proposed amendment to our certificate of incorporation
pertaining to the proposed name change is incorporated in paragraph 6 to the
certificate of amendment, attached to this proxy statement as Annex G. The
amendment to the certificate of incorporation would become effective upon filing
the amendment with the Delaware Secretary of State, which would occur as soon as
possible following the approval of Proposal 4 by the stockholders at the annual
meeting.

Required Vote

         The affirmative vote of the holders of not less than a majority of the
outstanding shares of common stock is required to approve the proposed amendment
to the certificate of incorporation to change our name from Frontline
Communications, Inc. to Provo International, Inc. (Proposal 4). Abstentions and
broker non-votes will have the effect of a vote against Proposal 4. Approval of
Proposal 1 is necessary in order for Frontline to undertake Proposal 4.
Accordingly, unless our stockholders approve Proposal 1, we will be unable to
effect Proposal 4.

Board Recommendation


         Our board of directors unanimously recommends a vote FOR Proposal 4.



                                       61






 





                                   PROPOSAL 5


                              ELECTION OF DIRECTORS

General

         The nine individuals nominated for election to our board of directors
are William A. Barron, Stephen Cole-Hatchard, Nicko Feinberg, Miguel Madero,
Jaime Marti, Ventura Martinez del Rio, Sr., Ventura Martinez del Rio, Jr., Jesus
Rodriguez and Ronald C. Signore. Messrs. Barron, Cole-Hatchard, Feinberg,
Madero, Martinez del Rio Sr., Martinez del Rio, Jr. and Signore, are currently
Frontline directors.


         Our board of directors believes that all of the nominees are willing
and able to serve as directors. Directors hold office for a term of one year and
until their successors have been duly elected and qualified. However, if the
directors appoint individuals to fill vacancies on our board of directors, such
appointed directors serve until the next annual meeting of stockholders and
until their successors are duly elected and qualified.


Required Vote

         Assuming that a quorum is present at the annual meeting, the nine
nominees receiving the highest number of affirmative votes of the shares of our
common stock present in person or represented by proxy at the annual meeting and
entitled to vote, shall be elected as directors. The shares represented by the
proxies will be voted in favor of the election as directors of the persons named
below unless authority to do so is withheld. Any shares not voted at the annual
meeting with respect to the election of directors (whether as a result of
abstentions, broker non-votes or otherwise) will have no impact on the vote.

Board Recommendation


         Our board of directors unanimously recommends a vote FOR the election
as directors of the nine nominees identified herein.


Nominees


         Our board of directors has fixed the number of directors to be elected
at the annual meeting at nine. The directors elected will hold office until the
next annual meeting of stockholders currently expected to be held on or about
June 30, 2004, and their respective successors are duly elected and qualified.
The nominees named below were nominated for election to our board of directors
by management. The name, age, business experience and public directorships of
each nominee are as set forth in the table (and accompanying nominee
descriptions) below:







                Name                                 Age                 Position Currently Held with Frontline
                ----                                 ---                 --------------------------------------
                                                                  
Ventura Martinez del Rio, Sr.  (1)                   53                  Chairman of the Board
Stephen J.  Cole-Hatchard                            46                  CEO, Director
Nicko Feinberg                                       32                  President U.S. Division, Director
Ventura Martinez del Rio, Jr.  (1)                   30                  President Mexico Division, Director
William A.  Barron                                   54                  Director
Miguel Madero                                        54                  Director
Jaime Marti (2)                                      58                  None
Jesus Rodriguez                                      81                  None
Ronald C.  Signore                                   42                  Director




--------------
(1) Ventura Martinez del Rio, Sr. is the father of Ventura Martinez del Rio, Jr.
(2) Jaime Marti is the brother-in-law of Ventura Martinez del Rio, Sr.

       Following is additional information with respect to our directors:


                                       62






 






         Ventura Martinez Del Rio, Sr. founded Provo in October 1995, and has
served as chairman of our board of Provo since its inception. He has been our
chairman since our acquisition of Provo in April 2003. From 1983 to 1994, Mr.
Martinez Del Rio, Sr. served in many executive leadership roles for the Mexican
National Lottery. Mr. Martinez Del Rio, Sr. earned an undergraduate degree in
economics from the Universidad Anahuac in Mexico in 1972 and an MBA from the
University of Texas in 1974. He is currently the president of the Texas EX's in
Mexico, an alumni organization of the University of Texas.


         Stephen J. Cole-Hatchard has been our chief executive officer since
August 1997. Mr. Cole-Hatchard was our vice president of Finance from February
1997 to August 1997, our president from August 1997 to July 2001, our chairman
from August 1997 to April 2003 and has been one of our directors since February
1997. Mr. Cole-Hatchard was chief financial officer of Hudson Technologies,
Inc., a refrigerant services company specializing in recovery and
decontamination services, from 1993 to 1996. He has been a licensed attorney in
New York since 1988. During the period from February 1997 until April 2001, Mr.
Cole-Hatchard also worked intermittently as a police officer for the town of
Clarkstown, New York.


         Nicko Feinberg founded Frontline in 1995, has been a director since
February 1997, and was appointed as president, U.S. operations in April 2003. He
was our executive vice president of Technology from November 1996 to July 2001,
chief information officer from August 1997 to July 2001and president and chief
operating officer from July 2001 to April 2003. From 1994 to 1995 Mr. Feinberg
was a sales manager and, from April 1991 to April 1994, a sales account
executive, for Microage Computer Outlet, Inc., a company engaged in computer
sales.

         Ventura Martinez Del Rio, Jr. has been a director and president of
Mexican operations since our acquisition of Provo in April 2003. Mr. Martinez
Del Rio, Jr. joined Provo in 1996 as its chief operating officer, co-led Provo
through its rapid growth from 1996 to 2001 and was named its chief executive
officer in 2001. He holds a BBA degree from the Universidad Anahuac in Mexico
and a graduate degree in business from Ipade Business School of Mexico City.

         William A. Barron has been a director since January 2000. Mr. Barron
served as vice president and chief financial officer of Hudson Technologies,
Inc. from July 1996 to March 1997, when he retired. Previously, Mr. Barron was
president and chief operating officer for Diagnostek, Inc., a pharmacy benefit
management company, from May 1994 to October 1995, and executive vice president
and chief financial officer for Diagnostek, Inc. from March 1993 to April 1994.
From February 2001 through July 2001, as part of our restructuring program, Mr.
Barron served as our interim vice president and chief operating officer.


         Miguel Madero has been a director since April 2003. Mr. Madero earned a
BA in Industrial Engineering from the Universidad Iberoamericana in Mexico City
in 1971, and obtained an MBA from the University of Texas at Austin in 1975. In
September 1985, he co-founded Fomento y Direccion Economica, S.A. de C.V., a
financial advisory and investment banking firm in Mexico City where he currently
serves as a Managing Director. Mr. Madero is a director of Credito Inmobiliario
S.A. de C.V., a real estate financing company in Mexico.

         Jaime Marti earned a BA degree in Engineering from Philadelphia
University in 1969 and obtained an MBA from Ipade Business School of Mexico City
in 1972. In 2000 he co-founded JPJ Comunicacion, S.A. a pre-paid calling card
distributing company in Mexico where he currently serves as its Chairman and
Chief Executive Officer. From 1990 to 2000 he was the general manager of
Imprenta Madero S.A., a printing and editorial company in Mexico. In 1997
Imprenta Madero was merged with Refosa, S.A. and subsequently in 1998, the
company was acquired by G.T.C. Transcontinental of Canada.

         Jesus Rodriguez has been an external advisor to the Minister of Finance
of Mexico since 1998. Mr. Rodriguez has had a distinguished political and
financial career in Mexico. From 1994 to 1997 he was a member of the Mexican
Congress and a Senator from 1988 to 1994. Previously, Mr. Rodriguez held
numerous high level positions within Mexico's financial sector, including
President of the Mexican National Lottery, President of the Mexican Federal
Securities Depository, Mexico's representative and a director of the
Inter-American Development Bank in Washington, D.C. and undersecretary of the
treasury in Mexico. Mr. Rodriguez obtained a law degree from the National
Autonomous University of Mexico in Mexico City.

         Ronald C. Signore has been a director since December 1997. Mr. Signore
has been a partner in the accounting firm of Gray, Signore & Co., LLP for more
than the past five years.

         Following is information with respect to certain of our officers:


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         Name                Age             Position Currently Held with Frontline          Other Directorships
         ----                ---             --------------------------------------          -------------------
                                                                                  
Vasan Thatham                45        Vice President and Chief Financial Officer                   None
Amy Wagner-Mele              35        Executive Vice President, General Counsel and                None
                                       Secretary




         Vasan Thatham, has been our vice president and chief financial officer
since February 1999. From 1994 through 1998, Mr. Thatham was vice president and
chief financial officer of Esquire Communications Ltd., a company engaged in
providing legal support services.

         Amy Wagner-Mele, has been our executive vice president and general
counsel since December 1998, and our secretary since September 1998. She served
as our vice president and corporate counsel from September 1998 to December
1998. From September 1997 to August 1998, Ms. Wagner-Mele was an associate with
the national law firm of Winston & Strawn. From 1993 to 1997, Ms. Wagner-Mele
was an associate with the law firm of Podvey, Sachs, Meanor, Catenacci, Hildner
& Cocoziello, P.C.

Board Committees and Meetings


         During the fiscal year ended December 31, 2002, our board of directors
held ten meetings. In addition, our board took other action by unanimous written
consent in lieu of a meeting. During 2002, each member of our board participated
in at least 75% of all board and applicable committee meetings during the period
for which he was a director.

         Our board of directors has an audit committee comprised of Messrs.
Barron, Madero and Signore, each of whom is an "independent director" under the
rules of the American Stock Exchange. The audit committee has a written charter
that sets forth the duties and responsibilities of its members. The audit
committee supervises our audit and financial procedures. During the fiscal year
ended December 31, 2002, our audit committee held four meetings.

         Our board of directors also has a compensation/stock option committee
which makes recommendations to our board of directors concerning compensation
and stock options to executive officers and directors. The compensation
committee is comprised of Messrs. Barron Madero and Signore. During the fiscal
year ended December 31, 2002, the compensation/stock option committee held no
meetings.

         Our board of directors established a nominating committee in May 2003,
which recommends candidates for election to our board of directors. The
nominating committee is comprised of Messrs. Barron, Madero and Signore. The
nominating committee will consider nominees recommended by stockholders. The
nominating committee has not established any formal procedures to be followed in
submitting recommendations.



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Executive Compensation

         The following table sets forth compensation paid to our chief executive
officer and our two other most highly compensated executive officers (each of
whom was serving at the end of our fiscal year ended December 31, 2002) during
the years ended December 31, 2002, 2001 and 2000. None of our other executive
officers received aggregate compensation which exceeded $100,000 during the year
ended December 31, 2002. We refer to these three executive officers as our
"Named Executives."




                                                                                Long-Term Compensation
                                                                                       Awards
            Name and                                                            Securities Underlying
        Principal Position                   Year      Salary       Bonus          Options/SARs (#)
------------------------------------        ------  ----------- ------------  --------------------------
                                                                  
Stephen J. Cole-Hatchard                     2002    $112,482      $     0                           0
Chief Executive Officer                      2001     114,423       67,725(1)                   52,000
                                             2000     117,692       34,500                      25,000

Nicko Feinberg                               2002    $107,761            0                           0
President                                    2001     109,518       49,175(2)                   52,000
                                             2000     110,000       24,500                      27,000

Vasan Thatham                                2002    $105,265            0                           0
Chief Financial Officer                      2001     109,518       15,051(3)                   27,000
                                             2000     110,000       18,500                      12,000



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

(1)  Includes $43,725, representing the fair market value on the date of the
     award of 291,500 shares of common stock issued under our 2001 Stock
     Incentive Plan.

(2)  Includes $35,175, representing the fair market value on the date of the
     award of 234,500 shares of common stock issued under our 2001 Stock
     Incentive Plan.

(3)  Includes $13,425, representing the fair market value on the date of the
     award of 89,500 shares of common stock issued under our 2001 Stock
     Incentive Plan.

         During the year ended December 31, 2002, we did not grant options to
any of our to our Named Executives. The following table sets forth information
concerning the number of options owned by our Named Executives, the value of any
in-the-money unexercised options as of December 31, 2002 and information
concerning options exercised by our Named Executives during the year ended
December 31, 2002:


           Aggregated Option Exercises and Year-End Option/SAR Values





                                 Shares                       Number of Securities            Value of Unexercised
                                Acquired        Value        Underlying Unexercised              In-The-Money
                               On Exercise   Realized($)   Options/SARs at 12/31/2002   Options/SARs at 12/31/2002 (1)
                               -----------   -----------   --------------------------   ------------------------------
Name                                                       Exercisable  Unexercisable   Exercisable      Unexercisable
--------------------------                                 -----------  -------------   -----------      -------------
                                                                                       
Stephen J.  Cole-Hatchard           0            $0          302,000          0           $2,080          $0
Nicko Feinberg                      0             0          245,000          0            2,080           0
Vasan Thatham                       0             0          100,000          0           $1,080           0




--------------
(1)  The year-end values for unexercised in-the-money options represent the
     positive difference between the exercise price of the options and the
     year-end market value of our common stock. An option is "in-the-money" if
     the year-end fair market value of our common stock exceeds the option
     exercise price. The closing sale price of our common stock on December 31,
     2002 was $.26.



                                       65






 




Employment Agreements


       Our board of directors has approved the adoption of employment agreements
between Frontline and/or its affiliates and Messrs. Martinez del Rio, Sr.,
Cole-Hatchard, Martinez Del Rio, Jr., Feinberg and Thatham that provide for an
annual base compensation of not less than $150,000, $150,000, $120,000, $120,000
and $115,000, respectively. The agreements will provide for certain base salary
increases in the event that we complete an equity financing in excess of
$3,000,000, and for certain bonuses in the event that we achieve certain revenue
objectives. The agreements will also allow for such bonuses as our board of
directors may, in its sole discretion, from time to time determine. The
employment agreements with Messrs. Martinez Del Rio, Sr., Cole-Hatchard,
Martinez Del Rio, Jr., Feinberg and Thatham will expire in April 2005, subject
to automatic successive one-year renewals unless either we or the employee gives
notice of intention not to renew the agreement. With the exception of Mr.
Martinez del Rio Sr., the employment agreements will provide for employment on a
full-time basis, and each of the agreements will contain a provision that the
employee will not compete or engage in a business competitive with our current
or anticipated business during the term of the employment agreement and for a
period of two years thereafter.


       All of the employment agreements will provide that the employees shall be
paid additional compensation equal to 295% of their annual base salary in the
event of a change of ownership or effective control of our company (as defined
in the agreements). The anticipated change in control as a result of the
acquisition of Provo will not trigger the additional compensation clauses of the
employment agreements.


       In the event our stockholders fail to approve the conversion of the
Series C convertible preferred stock as requested hereby, the employment
agreements with Messrs. Martinez del Rio, Sr. and Martinez del Rio, Jr. will
terminate 90 days after the date that the stockholders fail to approve such
conversion.


Director Compensation

       Each of our non-employee directors received an annual retainer of $6,000
in 2002, and was reimbursed for his out-of-pockets costs incurred in attending
board meetings. The annual retainer has been increased to $12,000 per annum for
2003.

1997 Stock Option Plan


       In February 1997, our board of directors and stockholders adopted our
1997 Stock Option Plan, pursuant to which 500,000 shares of common stock were
reserved for issuance upon exercise of options. In June 2000, our board of
directors and our stockholders approved an amendment to increase to 2,000,000
the number of shares of common stock available for issuance upon exercise of
options under the Option Plan. Our Option Plan is designed to serve as an
incentive for retaining qualified and competent employees, directors and
consultants.

       Our board of directors or a committee of our board administers our Option
Plan and is authorized, in its discretion, to grant options under that plan to
all eligible employees, including our officers, directors (whether or not
employees) and consultants. Our Option Plan provides for the granting of both
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended) and non-qualified stock options. Options can be
granted under our Option Plan on such terms and at such prices as determined by
our board of directors or its committee, except that the per share exercise
price of options will not be less than the fair market value of the common stock
on the date of the grant. In the case of an incentive stock option granted to a
stockholder who owns stock possessing more than 10% of the total combined voting
power of all of our classes of stock, the per share exercise price will not be
less than 110% of the fair market value on the date of grant. The aggregate fair
market value (determined on the date of grant) of the shares covered by
incentive stock options granted under our Option Plan that become exercisable by
a grantee for the first time in any calendar year is subject to a $100,000
limit.


       Options granted under our Option Plan will be exercisable during the
period or periods specified in each option agreement. Options granted under our
Option Plan are not exercisable after the expiration of ten years from the date
of grant (five years in the case of incentive stock options granted to a
stockholder owning stock possessing more than 10% of the total combined voting
power of all of our classes of stock) and are not transferable other than by
will or by the laws of descent and distribution.



                                       66



 



 






2001 Stock Incentive Plan


       In June and July 2001, our board of directors and stockholders,
respectively, adopted our 2001 Stock Incentive Plan pursuant to which the grant
of any or all of the following types of awards may be made under the Incentive
Plan (collectively, "Awards"): (i) stock options, (ii) restricted stock, (iii)
deferred stock and (iv) other stock-based awards. Awards may be granted singly,
in combination, or in tandem, as determined by the administrators of the
Incentive Plan. A total of 1,800,000 shares of our common stock, subject to
anti-dilution adjustment as provided in the Incentive Plan, have been reserved
for distribution pursuant to the Incentive Plan. The maximum number of shares of
common stock that may be issued upon the grant of an Award to any individual
participant cannot exceed 500,000 shares during the term of the Incentive Plan.

       The Incentive Plan can be administered by our board of directors or a
committee consisting of two or more non-employee members of our board of
directors appointed by our board. Our board or the committee will determine,
among other things, the persons to whom Awards will be granted, the type of
Awards to be granted, the number of shares subject to each Award and the share
price. Our board or the committee will also determine the term of each Award,
the restrictions or limitations thereon, and the manner in which each such Award
may be exercised or, if applicable, the extent and circumstances under which
common stock and other amounts payable with respect to an Award will be
deferred. Unless sooner terminated, the Incentive Plan will expire at the close
of business on June 20, 2011.


       The Incentive Plan provides for the grant of both incentive stock options
and non-qualified stock options. The exercise price of an incentive stock option
or a non-qualified stock option will not be less than the fair market value of
the shares underlying the option on the date the option is granted, provided,
however, that the exercise price of an incentive stock Option granted to a
stockholder who possesses more than 10% of the combined voting power of all
classes of our stock may not be less than 110% of such fair market value. The
aggregate fair market value (determined at the time the option is granted) of
the shares of common stock covered by an incentive stock option granted under
the Incentive Plan that become exercisable by a grantee for the first time in
any calendar year cannot exceed $100,000.


       The Incentive Plan contains anti-dilution provisions authorizing
appropriate adjustments in certain circumstances. Shares of common stock subject
to Awards which expire without being exercised or which are cancelled as a
result of the cessation of employment are available for further grants. Options
become exercisable in such amounts, at such intervals and upon such terms and
conditions as our board of directors or the committee provides.

       Under the Incentive Plan, our board or the committee may grant shares of
restricted common stock either alone or in tandem with other Awards. restricted
and deferred stock awards give the recipient the right to receive a specified
number of shares of common stock, subject to such terms, conditions and
restrictions as our board or the committee deems appropriate.

       Other stock-based Awards, which may include performance shares and shares
valued by reference to our performance (or the performance of any subsidiary),
may be granted under the Incentive Plan either alone or in tandem with other
Awards.


Voting Security Ownership of Certain Beneficial Owners and Management


       The following table sets forth certain information relating to the
beneficial ownership of shares of our common stock by (i) each person or entity
who is known by us to own beneficially 5% or more of the outstanding common
stock, (ii) each of our directors, (iii) each of the Named Executives, and (iv)
all of our directors and executive officers as a group. Such information is as
of August 28, 2003, the record date for the annual meeting, and as of such date
but giving effect to the conversion of the Series B convertible redeemable
preferred stock, Series C convertible preferred stock and Series D convertible
preferred stock and in each case after giving effect to the proposed
two-for-three reverse stock split:





                                       67



 



 







 
                                                        Number of Shares
                                                     Beneficially Owned (2)               Percentage Ownership
                                                ----------------------------------    -----------------------------
                                                                                      Actual
Name of Beneficial Owner (1)                     Actual (3)       As Adjusted (4)       (3)         As Adjusted (4)
----------------------------------------------  --------------    ----------------    ---------    ----------------
                                                                                                    
Ventura Martinez Del Rio, Sr.                              --          16,500,000(5)        --                47.0%
Stephen J. Cole-Hatchard                            1,066,718(6)        1,798,592(7)       9.0%                5.1%
Nicko Feinberg                                        866,500(8)        1,577,666(9)       7.5%                4.5%
Ventura Martinez Del Rio, Jr.                              --           5,500,000(10)       --                15.7%
William Barron                                        178,972(11)         119,661(12)      1.6%                0.3%
Miguel Madero                                              --                  --           --                  --
Jaime Marti                                                --                  --           --                  --
Jesus Rodriguez
Ronald Signore                                        324,032(13)         216,021          2.9%                0.6%
Vasan Thatham                                         195,500(14)         230,334(15)      1.7%                0.7%
All directors and executive officers as a
   group (11 persons)                               2,937,222(16)      26,245,940(17)     23.5%               73.1%




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

(1)    The address of each of the named persons is c/o Frontline Communications
       Corporation, P.O. Box 1548, Pearl River, New York 10965.

(2)    Unless otherwise indicated, we believe that all persons named in the
       table have sole voting and investment power with respect to all shares of
       common stock beneficially owned by them.


(3)    Actual ownership as of August 28, 2003.

(4)    As adjusted to give effect to the conversion of the Series B convertible
       redeemable preferred stock, Series C convertible preferred stock and
       Series D convertible preferred stock and the proposed two-for-three
       reserve stock split.

(5)    Includes 16,500,000 shares issuable upon conversion of 165,000 shares
       of Series C convertible preferred stock.

(6)    Includes 144,000 shares held by the Cole-Hatchard Family Limited
       Partnership, of which Mr. Cole-Hatchard is a general partner, 302,000
       shares issuable upon exercise of options and 171,530 shares issuable upon
       conversion of 50,450 shares of Series B convertible redeemable preferred
       stock.

(7)    Includes 201,800 shares issuable upon conversion of 50,450 shares or
       Series B convertible redeemable preferred stock and 1,000,000 shares
       issuable upon conversion of 10,000 shares of Series D convertible
       preferred stock.


(8)    Includes 125,000 shares issuable upon exercise of warrants and 245,000
       shares issuable upon exercise of options.


(9)    Includes 1,000,000 shares issuable upon conversion of 10,000 shares of
       Series D convertible preferred stock.

(10)   Includes 5,500,000 shares issuable upon conversion of 55,000 shares of
       Series C convertible preferred stock.

(11)   Includes 87,000 shares issuable upon exercise of options and 680 shares
       issuable upon conversion of 200 shares of Series B convertible redeemable
       preferred stock.

(12)   Includes 800 shares issuable upon conversion of 200 shares of Series B
       convertible redeemable preferred stock.

(13)   Includes 125,000 shares issuable upon exercise of warrants and 75,000
       shares issuable upon exercise of options.


(14)   Includes 100,000 shares issuable upon exercise of options.


(15)   Includes 100,000 shares issuable upon conversion of 1,000 shares of
       Series D convertible preferred stock.

(16)   Includes 1,209,000 shares issuable upon exercise of options and warrants,
       172,210 shares issuable upon conversion of 50,650 shares of Series B
       convertible redeemable preferred stock.




                                       68



 



 




(17)   Includes 24,402,600 shares issuable upon conversion of 50,650 Series B
       convertible redeemable preferred stock, upon conversion of 220,000 shares
       of Series C convertible preferred stock and upon conversion of 22,000
       shares of Series D convertible preferred stock.


Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Securities Exchange Act requires our directors,
executive officers and greater than 10% stockholders to file reports of their
ownership and any changes in ownership of our common stock with the Securities
and Exchange Commission. These directors, executive officers and greater than
10% stockholders are required by regulation to provide us with a copy of any
Section 16(a) reports they file. Based on our review of copies of these reports
received by it and written representations made to us by these persons, we
believe that all Section 16(a) filing requirements applicable to our directors,
executive officers and greater than 10% stockholders were satisfied during the
year ended December 31, 2002.

Certain Relationships and Related Transactions


       Recent Financings and Consulting Engagements


             In July 2003, the Company sold to Fusion Capital Fund II, LLC a
convertible promissory note in the principal amount of $110,000. The convertible
promissory note bears interest at 10% and is payable on December 31, 2005.
Fusion Capital has the option to convert the principal amount of the Note into
shares of the Company's common stock at a conversion price of $.25 per share. In
connection with the sale, the Company issued to Fusion Capital warrants to
acquire 220,000 shares of its common stock at an exercise price of $0.42.

       On August 1, 2003, we entered into a Stock Purchase Agreement with
William T. Ritger, an unrelated third party, in which Mr. Ritger agreed to
purchase $100,000 of our common stock at a price of $.30 per shares. We issued a
total of 333,333 unregistered shares of our common stock to Mr. Ritger under the
agreement. We also issued 150,000 warrants to Mr. Ritger as additional
consideration. The warrants have a five year term and are exercisable at a price
of $.40 per warrant share. We also entered into a Registration Rights Agreement
with Mr. Ritger which obligates us to include the 333,333 purchased by him in
the next registration statement filed by us.

       On September 16, 2003, we entered into a Stock Purchase Agreement with
Platinum Partners Value Arbitrage Fund, LP, an unrelated third party, in which
Platinum Partners agreed to purchase $150,000 of our common stock at a price of
$.30 per shares. We issued a total of 500,000 unregistered shares of our common
stock to Platinum Partners under the agreement. We also issued 150,000 warrants
to Platinum Partners as additional consideration. The warrants have a five year
term and are exercisable at a price of $.40 per warrant share. We also entered
into a Registration Rights Agreement with Platinum Partners which obligates us
to include the 500,000 purchased by them in the next registration statement
filed by us.

       On July 1, 2003, the Company entered into a consulting agreement for
operational services and issued to Fusion Capital Fund II, LLC 120,000 shares of
common stock as consideration for the services to be rendered by them.

       On July 30, 2003 the Company entered into a consulting agreement with The
Research Works, Inc. and issued them 194,175 shares of common stock as
consideration for the services to be rendered by them.


       Credit Facilities and Guaranties - Frontline


       In June 2002, two of our executive officers and directors, Nicko Feinberg
and Ronald Signore, purchased $50,000 in aggregate principal amount of our
promissory notes pursuant to our June 2002 private placement, and received
warrants to purchase 250,000 shares, in the aggregate, of our common stock at an
exercise price of $.08 per share. These purchases were all on terms and
conditions identical to those of the other investors in the private placement.
The promissory notes issued as a result of our June 2002 private placement,
which total $200,000, are due and payable upon a "change of control" of
Frontline. The issuance of shares of common stock upon conversion of the Series
C and Series D convertible preferred stock will constitute a change of control,
and will trigger repayment of these promissory notes.




                                       69



 



 




       As a condition precedent to the closing of our acquisition of Provo and
in order to finance certain of our expenses relating to our acquisition of
Provo, on April 2, 2003 we entered into a bridge financing whereby we borrowed
$550,000 from IIG Equity Opportunities Fund, Ltd., an unaffiliated lender. The
loan is evidenced by a secured promissory note. Two of our executive officers
and directors, Nicko Feinberg and Stephen J. Cole-Hatchard, pledged shares of
our common stock owned by them to IIG Equity as additional collateral securing
its bridge loan to us. In addition, Mr. Cole-Hatchard has personally guaranteed
the repayment of the bridge loan and mortgaged certain personal real estate to
IIG Equity as additional collateral for the bridge loan. For a description of
the terms of the bridge loan see "The Acquisition Transaction - Material Terms
of the Stock Purchase Agreement and Other Transaction Documents - Bridge Loan
Agreement" beginning on page 32.


       Credit Facilities and Guaranties - Provo


       On June 29, 2001, Provo entered into a 6,000,000 peso ($549,954 at the
current exchange rate) revolving line of credit with BBVA Bancomer, S.A. in
Mexico. The loan, which is due and payable in full on June 28, 2004, bears
interest at the Mexican Interbank Equilibrium Rate plus 4%; the current interest
rate is 9.2% per annum. The loan has been personally guaranteed by our chairman,
Ventura Martinez del Rio, Sr. In addition, Gloria Requejo-Martinez del Rio, the
wife of our chairman, mortgaged a house owned by her as collateral for the loan.

       On September 25, 2002, Provo entered into a 6,000,000 peso ($549,954 at
the current exchange rate) revolving line of credit arrangement with BBVA
Bancomer, S.A. in Mexico. The loan, which is due and payable in full on
September 24, 2005, bears interest at the Mexican Interbank Equilibrium Rate
plus 4%; the current interest rate is 9.2% per annum. The loan has been
guaranteed by Inmobiliaria Turin, S.A. de C.V. ("Turin"), a company that is
owned by Gloria Requejo-Martinez del Rio, the wife of our chairman, and by her
brother, Alberto Requejo. As collateral for the loan, Turin mortgaged an
apartment building owned by it. Turin's guaranty obligation is without recourse
to any of its assets other than this mortgaged collateral.

       On September 25, 2002, Provo also entered into a 4,000,000 peso ($366,636
at the current exchange rate) line of credit arrangement with BBVA Bancomer,
S.A. in Mexico. The loan bears interest at the Mexican Interbank Equilibrium
Rate plus 4%; the current interest rate is 9.2% per annum. The governing credit
agreement obligates Provo to make monthly payments of 100,000 pesos during the
first 12 months that the loan remains outstanding, and to make monthly payments
of 200,000 pesos during the subsequent 24 months that the loan remains
outstanding. The balance of the loan is due and payable in full on September 24,
2005. The loan has been guaranteed by Turin. As collateral for the loan, Turin
mortgaged an apartment building owned by it. Turin's guaranty obligation is
without recourse to any of its assets other than this mortgaged collateral.

       On June 30, 2001, Provo entered into a 5,000,000 peso ($458,295 at the
current exchange rate) revolving line of credit with Scotiabank Inverlat, S.A.
in Mexico. The loan, which is due and payable in full on July 29, 2004, bears
interest at the Mexican Interbank Equilibrium Rate plus 3.5%; the current
interest rate is 8.7% per annum. The loan has been personally guaranteed by our
chairman, Ventura Martinez del Rio, Sr. In addition, Gloria Requejo-Martinez del
Rio, the wife of our chairman, mortgaged a ranch owned by her and pledged
certain funds on deposit with Scotiabank Inverlat, S.A. as collateral for
repayment of the loan.

       As security for Turin's guaranties of Provo's credits, Provo granted
Turin a lien on certain of its accounts receivable from selected customers
(Wal-Mart, S.A. de C.V., Operadora VIPS, S.A. de C.V., El Palacio de Hierro,
S.A. de C.V., Cafeterias Toks, S.A. de C.V., CENCA Comercializadora, S.A. de
C.V. and Carrefour de Mexico, S.A. de C.V.). As of June 30, 2003, the aggregate
face value of these accounts receivable was 12,540,819 pesos ($1,149,479 at the
current exchange rate).


       It is our intention, as soon as practicable, to eliminate the personal
guaranties described above and to substitute collateral owned by us for the
existing collateral granted to BBVA Bancomer, S.A. and Scotiabank Inverlat, S.A.
by Mrs. Requejo-Martinez del Rio and Turin.

       Transactions With Affiliated Companies - Provo

       Equity Ownership in Related Company. During 2001, Provo owned a 50%
equity interest in Provoloto, S.A. de C.V. ("Provoloto"), a lottery company. The
remaining 50% equity interest in Provoloto was owned by Comercializadora VGI,
S.A. de C.V. ("VGI"), owned by our chairman, Ventura Martinez del Rio, Sr., and
his three adult children (including our executive officer and director, Ventura
Martinez del Rio, Jr.). Provo accounted for this investment under the equity
method of accounting. During 2001, Provo recorded equity of $129,976 in the
earnings




                                       70



 



 



of Provoloto, representing its 50% interest in Provoloto's total earnings. As of
December 31, 2001, Provo's investment in Provoloto was $187,203, representing
its initial investment plus its share of Provoloto's cumulative earnings. In
January 2002, Provo transferred its investment in Provoloto to Proyectos y
Disenos Especializados, S.A. de C.V. ("PRODIES"), a lottery company that is 90%
owned by our chairman, Ventura Martinez del Rio, Sr., for cash consideration of
$141,053. In connection with this transfer, the excess of the cash consideration
received by Provo over the amount of Provo's investment in Provoloto (in the
amount of $46,150) was treated as a distribution by Provo to Ventura Martinez
del Rio, Sr. Subsequent to the divestiture of its interest in Provoloto, Provo
has had no ongoing involvement with Provoloto.


       Purchase of Real Estate. On March 10, 2003, Provo received in settlement
of accounts receivable an approximately 946-acre timberlands property located in
El Chamal, State of Tamaulipas, Mexico, from Inmobiliaria Nextar, S.A. de C.V.
("Nextar"), a holding company wholly-owned by VGI. This property is currently
securing a line of credit with Telmex for 38,500,000 pesos ($3,528,873 at the
current exchange rate). Provo purchased this property at a discount from the
property's appraised value. The price for this property was approximately
$1,592,000 (16,500,000 Mexican pesos at the then prevailing exchange rate), of
which approximately $1,433,000 was paid by the transfer of aged accounts
receivable and $159,000 is payable pursuant to a promissory note. Such note
issued to Nextar bears interest at the Mexican Interbank Equilibrium Rate plus
3.5% (the current rate is 8.7% per annum), and is payable in 24 monthly payments
commencing on December 31, 2002 and continuing until December 31, 2004. As of
June 30, 2003, Provo had made no payments under such note. Nextar has not taken
any action regarding these loans. In addition, the note must be prepaid in full
in the event that Frontline completes an equity financing in excess of
$3,000,000.

       Settlement with Customer and Transfer of Real Estate to Telmex. During
2002, Provo held discussions with Jose L. Alfaro, an unrelated customer, wherein
Mr. Alfaro proposed to satisfy certain amounts he owed to Provo and certain of
its affiliates by transferring to them certain real property. At the same time,
Provo held discussions with Telmex, whereby Provo proposed to satisfy certain
amounts owed by it to Telmex by transferring to Telmex certain real property,
including the real property proposed to be transferred to Provo by Mr. Alfaro.

       On December 12, 2002, Provo entered into a settlement agreement with Mr.
Alfaro, whereby he transferred to Provo certain real property known as "Rancho
La Providencia" located in Coatepec, State of Mexico, Mexico, and valued by
Telmex at approximately 30 million pesos, in satisfaction of debts totaling
30,402,105 pesos ($2,786,627 at the current exchange rate) owed by Mr. Alfaro to
Provo and certain of Provo's affiliates and related companies, as follows:

 



                                                                                                        Amount
                                     Party to Which Debt Owed                                         (In pesos)
                                     ------------------------                                         ----------
                                                                                                          
Provo                                                                                                  1,793,177
Proyecciones y Ventas Organizadas del D.F., S.A. de C.V.  ("Provo DF")(1)                             11,423,321
Ventura Martinez del Rio, Sr.                                                                         11,200,000
PRODIES                                                                                                4,164,473
Provoloto                                                                                              1,821,134
                                                                                                     ------------
   Total                                                                                              30,402,105


--------------
(1) A wholly-owned subsidiary of Provo.


       On March 10, 2003, as part of a settlement agreement entered into with
Telmex, Provo transferred the "Rancho La Providencia" property to Telmex in
satisfaction of 30,763,182 ($2,907,673 at the then prevailing exchange rate) of
indebtedness owed by Provo to Telmex. For additional information regarding the
Telmex settlement see "The Acquisition Transaction -- Description of Provo's
Business - Telmex Settlement."


       To enable Provo to enter into the settlement agreement with Mr. Alfaro,
on December 12, 2002 Ventura Martinez del Rio, Sr., PRODIES and Provoloto each
assigned to Provo their respective rights to the sums owed to them by Mr. Alfaro
as set forth in the preceding table. As consideration for the assignment of
their rights against Mr. Alfaro, PRODIES and Provoloto each received a
promissory note in the amount of 1,821,134 pesos and 4,164,473 pesos,
respectively. As consideration for the assignment of his rights against Mr.
Alfaro, Provo transferred the following property to Ventura Martinez del Rio,
Sr.:




                                       71


 



 



       o    accounts payable to Provo in the face amount of 7,068,150 pesos,
            payable by Desarrollo Arboledas, S.A. de C.V. (an unaffiliated
            Mexican real estate company that in 1999 had received a loan from
            Provo);

       o    accounts payable to Provo in the face amount of 846,000 pesos,
            payable by Pablo Marti (an unrelated customer of Provo);

       o    12 parcels of real estate located in Los Cabos, State of Baja
            California, Mexico, valued by an independent appraiser at 1,200,060
            pesos and owned by Provo;

       o    the discharge of indebtedness in the amount of 978,487 pesos owed to
            Provo by Ventura Martinez del Rio Sr.; and

       o    a promissory note for 1,107,303 pesos.


The promissory notes issued by Provo to PRODIES, Provoloto and Ventura Martinez
del Rio Sr. as described above each bear interest at the Mexican Interbank
Equilibrium Rate plus 3.5% (currently 8.7% per annum). The notes are payable in
24 monthly payments commencing on December 31, 2002 and continuing until
December 31, 2004. As of June 30, 2003, Provo had made no payments under such
notes to any of the related parties. The related parties have not taken any
action regarding these notes. In addition, the notes must be prepaid in full in
the event that we complete an equity financing in excess of $3,000,000.


       In March 2003, Ventura Martinez del Rio, Sr. forgave $94,669 in debt that
Provo owed him.

       Loans with Related Parties. In addition to the transactions listed above,
as part of its operations, Provo and its subsidiaries have historically received
loans from certain of their current officers and directors as well as from other
Mexican companies affiliated with Ventura Martinez del Rio, Sr. and Ventura
Martinez del Rio, Jr., our current executive officers and directors. As of June
30, 2003, Provo and its subsidiaries were indebted to affiliated entities as
follows:


       o    2,065,514 pesos ($189,323 at the current exchange rate) to
            Provoloto;

       o    5,216,399 pesos ($478,130 at the current exchange rate) to PRODIES;
            and

       o    1,650,000 pesos ($151,237 at the current exchange rate) to Nextar.


The amounts listed above include the principal amounts owed by Provo under the
notes payable to Provoloto, PRODIES and Nextar as described in the preceding
paragraphs.


       Employment Matters. Provo, which has no employees, subcontracts personnel
services from SAPROV, S. C., a partnership created by Ventura Martinez del Rio,
Sr., Rocio Pasquel and Jorge Dehesa, who are officers of Provo. For the years
ended December 31, 2002 and 2001, Provo paid SAPROV $1,599,702 and $1,745,748
for such services. For the six months ended June 30, 2003, Provo incurred
approximately $849,000 for such services.

       Series D Convertible Preferred Stock

       In connection with our acquisition of Provo, we issued an aggregate of
35,500 shares of our Series D convertible preferred stock to 18 individuals,
including 10,000 shares to Stephen J. Cole-Hatchard, our chief executive
officer, 10,000 shares to Nicko Feinberg, our president - U.S. operations and a
director, 5,000 shares of Series D to Joseph Donahue, then a director, 1,000
shares to Vasan Thatham, our vice president and chief financial officer, and
1,000 to Amy Wagner-Mele, our executive vice president and general counsel.

       For additional information concerning such stock issuance, see 
"Proposal 1 -- Interests of Certain Persons in Approval of Conversion of Series
C Convertible Preferred Stock and Series D Convertible Preferred Stock."





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                                   PROPOSAL 6


       APPROVAL OF THE COMMON STOCK PURCHASE AGREEMENT WITH FUSION CAPITAL

Introduction

       To raise additional capital to fund our operations, we entered into a
common stock purchase agreement with Fusion Capital Fund II, LLC on July 1,
2003. The common stock purchase agreement provides for the sale of up to $13.0
million of our common stock. The purchase price will be based upon the future
market price of our common stock without any fixed discount. In addition, the
common stock purchase agreement provides us with an option to enter into a
second common stock purchase agreement with Fusion Capital for the sale to
Fusion Capital of up to an additional $13.0 million of our common stock on
substantially similar terms to the first common stock purchase agreement. We
cannot exercise the option to enter into the second common stock purchase
agreement until we have terminated the first common stock purchase agreement.

American Stock Exchange Requirements


       We are seeking stockholder approval of the Fusion transaction in order to
comply with the rules of the American Stock Exchange, which require stockholder
approval in connection with a transaction involving the issuance or potential
issuance of common stock, or securities convertible into or exercisable for
common stock, equal to 20% or more of the common stock outstanding before the
issuance for less than the greater of book or market value of the stock. Because
the sale of shares to Fusion Capital under the first stock purchase agreement
(and the second stock purchase agreement, should we exercise our option to enter
into such agreement) could result in an issuance of more than 20% of our common
stock outstanding before the issuance and may be deemed to have been issued for
less than the greater of book or market value of the stock, we are seeking
stockholder approval of the transaction with Fusion Capital. By approving the
transaction with Fusion Capital, you are also approving our right to enter into
a second common stock purchase agreement and issue and sell to Fusion Capital up
to an additional $13.0 million of our common stock. Approval of the transaction
with Fusion Capital by our stockholders is not required under applicable law or
our organizational documents.

       Our board of directors believes that the transaction with Fusion Capital
is in the best interests of Frontline and its stockholders because it will
provide additional funding that we need for general corporate purposes.


The Fusion Transaction

       General

       On July 7, 2003, we entered into a common stock purchase agreement with
Fusion Capital Fund II, LLC pursuant to which Fusion Capital agreed to purchase
on each trading day during the term of the agreement, $16,250 of our common
stock or an aggregate of $13.0 million. Copies of the fusion transaction
documents are included herein as Annex H. The $13.0 million of common stock is
to be purchased over a 40-month period, subject to earlier termination at our
discretion. The purchase price of the shares of common stock will be equal to a
price based upon the future market price of the common stock without any fixed
discount to the market price. Fusion Capital does not have the right or the
obligation to purchase shares of our common stock in the event that the price of
our common stock is less than $0.25. The sale of our common stock to Fusion
Capital will commence on or after satisfaction of customary conditions outside
the control of Fusion Capital, including the Securities and Exchange Commission
declaring effective a registration statement registering the shares issuable to
Fusion Capital under the agreement.

       We have authorized the sale and issuance of 10,000,000 shares of our
common stock to Fusion Capital under the common stock purchase agreement. We
estimate that the maximum number of shares that we will sell to Fusion Capital
under the common stock purchase agreement will be 10,000,000 shares (exclusive
of the 1,200,000 shares issued or issuable to Fusion Capital as the commitment
fee), assuming Fusion Capital purchases all $13.0 million of common stock. Under
the common stock purchase agreement, we have the option of selling to Fusion
Capital up to an additional $13.0 million of our common stock on substantially
the same terms and conditions as the sale of the 




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first $13.0 million of stock to Fusion Capital. We cannot exercise the option to
enter into the second common stock purchase agreement until we have terminated
the first common stock purchase agreement.

       Purchase of Shares Under the Common Stock Purchase Agreement

       Under the common stock purchase agreement, on each trading day Fusion
Capital is obligated to purchase a specified dollar amount of our common stock.
Subject to our right to suspend such purchases at any time, and our right to
terminate the agreement with Fusion Capital at any time, each as described
below, Fusion Capital shall purchase on each trading day during the term of the
agreement $16,250 of our common stock. This daily purchase amount may be
decreased by us at any time. We also have the right to increase the daily
purchase amount at any time, provided however, we may not increase the daily
purchase amount above $16,250 unless our stock price is above $1.50 per share
for ten consecutive trading days. The purchase price per share is equal to the
lesser of: 

       o    the lowest sale price of our common stock on the purchase date; or

       o    the average of the three lowest closing sale prices of our common
            stock during the twelve consecutive trading days prior to the date
            of a purchase by Fusion Capital.

       The purchase price will be adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, or other similar transaction
occurring during the trading days in which the closing bid price is used to
compute the purchase price. Fusion Capital may not purchase shares of our common
stock under the common stock purchase agreement if Fusion Capital, together with
its affiliates, would beneficially own more than 9.9% of our common stock
outstanding at the time of the purchase by Fusion Capital. However, even though
Fusion Capital may not receive additional shares of our common stock in the
event that the 9.9% limitation is ever reached, Fusion Capital is still
obligated to pay to us $16,250 on each trading day, unless the common stock
purchase agreement is suspended, an event of default occurs or the agreement is
terminated. Under these circumstances, Fusion Capital would have the right to
acquire additional shares in the future should its ownership subsequently become
less than the 9.9%. Fusion Capital has the right at any time to sell any shares
purchased under the common stock purchase agreement which would allow it to
avoid the 9.9% limitation. Therefore, we do not believe that Fusion Capital will
ever reach the 9.9% limitation.

       Minimum Purchase Price

       We have the right to set a minimum purchase price ("floor price") at any
time. Currently, the floor price is $1.00. We can increase or decrease the floor
price at any time upon one trading day prior notice to Fusion Capital.
Nevertheless, the floor price cannot be less than $0.25. Fusion Capital will not
have the right or the obligation to purchase any shares of our common stock in
the event that the purchase price is less than the then applicable floor price.

       Our Right to Suspend Purchases

       We have the unconditional right to suspend purchases at any time for any
reason effective upon one trading day's notice. Any suspension would remain in
effect until our revocation of the suspension. To the extent we need to use the
cash proceeds of the sales of common stock under the common stock purchase
agreement for working capital or other business purposes, we do not intend to
restrict purchases under the common stock purchase agreement.

       Our Right to Increase and Decrease the Daily Purchase Amount

       Under the common stock purchase agreement, Fusion Capital has agreed to
purchase on each trading day during the 40-month term of the agreement, $16,250
of our common stock or an aggregate of $13.0 million. We have the unconditional
right to decrease the daily amount to be purchased by Fusion Capital at any time
for any reason effective upon one trading day's notice. We also have the right
to increase the daily purchase amount as the market price of our common stock
increases upon five trading day's notice. Specifically, for every $0.50 increase
in threshold price above $1.00, we will have the right to increase the daily
purchase amount by up to an additional $3,250. For example, if the threshold
price is $1.50 we would have the right to increase the daily purchase amount to
up to an aggregate of $19,500. For these purposes, the "threshold price" is the
lowest sale price of our common stock during the five trading days immediately
preceding our notice to Fusion Capital to increase the daily purchase 




                                       74



 



 



amount. If at any time during any trading day the sale price of our common stock
is below the threshold price, the applicable increase in the daily purchase
amount will be void.

       Our Termination Rights

       We have the unconditional right at any time for any reason to give notice
to Fusion Capital terminating the common stock purchase agreement. Such notice
shall be effective one trading day after Fusion Capital receives such notice.

       Effect of Performance of the Common Stock Purchase Agreement on our
       Stockholders

       Once the sale of common stock to Fusion Capital commences, all shares
issued to Fusion Capital will be freely tradable. It is anticipated that shares
issued to Fusion Capital will be sold over a period of up to 40 months. The sale
of a significant amount of shares at any given time could cause the trading
price of our common stock to decline and to be highly volatile. Fusion Capital
may ultimately purchase all of the shares of common stock issuable under the
common stock purchase agreement, and it may sell some, none or all of the shares
of common stock it acquires upon purchase. Therefore, the purchases under the
common stock purchase agreement may result in substantial dilution to the
interests of other holders of our common stock. Nonetheless, we have the right
at any time for any reason to:

       o    reduce the daily purchase amount;

       o    suspend purchases of the common stock by Fusion Capital; and

       o    terminate the common stock purchase agreement.

       No Short-Selling or Hedging by Fusion Capital

       Fusion Capital has agreed that neither it nor any of its affiliates shall
engage in any direct or indirect short-selling or hedging of our common stock
during any time prior to the termination of the common stock purchase agreement.

       Events of Default

       Generally, Fusion Capital may terminate the common stock purchase
agreement without any liability or payment to us upon the occurrence of any of
the following events of default: 

       o    the effectiveness of the registration statement that we are required
            to file lapses for any reason (including, without limitation, the
            issuance of a stop order) or is unavailable to Fusion Capital for
            sale of our common stock and such lapse or unavailability continues
            for a period of ten consecutive trading days or for more than an
            aggregate of 30 trading days in any 365-day period;

       o    suspension by our principal market of our common stock from trading
            for a period of three consecutive trading days;


       o    the de-listing of our common stock from the American Stock Exchange,
            provided our common stock is not immediately thereafter trading on
            the Nasdaq National Market, the Nasdaq National SmallCap Market, or
            the New York Stock Exchange;


       o    the transfer agent's failure for five trading days to issue to
            Fusion Capital shares of our common stock which Fusion Capital is
            entitled to under the common stock purchase agreement;

       o    any material breach of the representations or warranties or
            covenants contained in the common stock purchase agreement or any
            related agreements which has or which could have a material adverse
            affect on us subject to a cure period of ten trading days;

       o    a default by us of any payment obligation in excess of $1.0 million;
            or

       o    any participation or threatened participation in insolvency or
            bankruptcy proceedings by or against us.




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       Commitment Shares Issued to Fusion Capital

       Under the terms of the common stock purchase agreement, Fusion Capital
has received 500,000 shares of our common stock as a commitment fee. At such
time as Fusion Capital has purchased $4,329,000 of our common stock, we will
issue to Fusion Capital an additional 400,000 shares of our common stock. At
such time as Fusion Capital has purchased $8,671,000 of our common stock, we
will issue to Fusion an additional 300,000 shares of our common stock. Unless an
event of default occurs, these shares must be held by Fusion Capital until 40
months from the date of the common stock purchase agreement or the date the
common stock purchase agreement is terminated.

       No Variable Priced Financings

       Until the termination of the common stock purchase agreement, we have
agreed not to issue, or enter into any agreement with respect to the issuance
of, any variable priced equity or variable priced equity-like securities unless
we have obtained Fusion Capital's prior written consent.

       Use of Proceeds

       We intend to use the proceeds, if any, from the sale of common stock to
Fusion Capital to support general corporate purposes, including working capital
and capital expenditures.

Required Vote


       Under the American Stock Exchange rules, approval of the issuance of the
common stock to Fusion Capital as described herein requires the affirmative vote
of the majority of the votes cast on the proposal, provided that the total votes
cast on the proposal represent a majority of the outstanding common stock, which
is the only outstanding class of securities entitled to vote on the proposal.
Abstentions and broker non-votes will have the same effect as a vote against
Proposal 6.


Board Recommendation


       Our board of directors unanimously recommends a vote FOR Proposal 6.





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                                   PROPOSAL 7


              RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS

General


       Our board of directors, upon the recommendation of its audit committee,
has appointed BDO Hernandez Marron y Cia, S.C., to serve as our independent
public accountants for the 2003 fiscal year, subject to ratification by the
holders of the common stock. BDO Hernandez Marron y Cia, S.C. is headquartered
in Mexico City and is a member of BDO International, a worldwide accounting
network. In taking this action, the members of our board of directors considered
carefully BDO Hernandez Marron y Cia, S.C.'s independence with respect to the
services to be performed, their general reputation for adherence to professional
auditing standards and their ability to audit our subsidiaries in Mexico. In the
event that the common stockholders fail to ratify the selection of BDO Hernandez
Marron y Cia, S.C., our board of directors would reconsider such selection. A
representative of BDO Hernandez Marron y Cia, S.C. will be present at the annual
meeting to respond to appropriate questions and to make a statement if such
representative desires to do so.


Former Accountants

       On May 16, 2003, we dismissed Goldstein Golub Kessler LLP as our
principal accountants and engaged BDO Hernandez Marron y Cia, S.C. in such
capacity. None of our former accountants' reports on our financial statements
contained an adverse opinion, disclaimer of opinion, or a modified or qualified
opinion. The report of Godstein Golub Kessler LLP on our financial statements
for the fiscal year ended December 31, 2002, contained an emphasis of a matter
relating to our ability to continue as a going concern. Furthermore, we had no
disagreements with our former accountants on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure; we
had no disagreements with our former accountants with respect to internal
controls necessary for us to develop reliable financial statements; our former
accountants have not advised us of any material matters with respect to our
reports or financial statements or of information that had come to our former
accountants' attention that had led them no longer to be able to rely on
management's representations, that made them unwilling to be associated with
financial statements prepared by management, that led them to advise us of the
need to expand the scope of its audit or that led them to question the fairness
or reliability of reports or financial statements. BDO Hernandez Marron y Cia,
S.C. was not consulted on any matter during 2001 or 2002 on either the
application of accounting principles to a specified transaction or an audit
opinion, or any matter on which there was a disagreement with our former
accountants.

       Goldstein Golub Kessler LLP has a continuing relationship with American
Express Tax and Business Services, Inc. ("TBS") from which it leases its
auditing staff who are full-time, permanent employees of TBS and through which
its partners provide non-audit services. As a result of this arrangement,
Goldstein Golub Kessler LLP has no full-time employees and therefore, none of
the audit services performed until May 16, 2003, were provided by permanent
full-time employees of Goldstein Golub Kessler LLP. Goldstein Golub Kessler LLP
manages and supervises the audit staff, and is exclusively responsible for the
opinions rendered in connection with its examination.

Audit Committee Report


       On March 14, 2003, the audit committee met with management to review and
discuss the audited financial statements for the fiscal year 2002. The audit
committee also conducted discussions with the Former Auditors, regarding the
matters required by the Statement on Auditing Standards No. 61. As required by
Independence Standards Board Standard No. 1, "Independence Discussion with Audit
Committees," the audit committee has discussed with and received the required
written disclosures and confirming letter from the Former Auditors regarding
their independence, and has discussed with the Former Auditors their
independence. Based upon the review and discussions referred to above, the audit
committee recommended to our board of directors that the audited financial
statements be included in our Annual Report on Form 10-KSB for the year ended
December 31, 2002.


       As part of its duties, the audit committee also considered whether the
provision of services other than audit services during fiscal year 2002 by the
Former Accountants, our independent public accountants, is compatible with
maintaining the accountants.



                                       77


 




 



       Fees for all services provided by the Former Accountants for fiscal year
2002 are as follows:

       Audit Fees. Amounts billed by the Former Accountants related to the 2002
annual financial statement audit and reviews of quarterly financial statements
filed in the report on Form 10-QSB were approximately $54,786.

       All Other Fees. Amounts billed by the Former Accountants in fiscal 2002
were approximately $8,900 for tax related services provided to Frontline by TBS.

Required Vote


       Neither Delaware law, our certificate of incorporation or bylaws or the
American Stock Exchange rules require that our stockholders ratify the selection
of BDO Hernandez Marron y Cia, S.C. as our independent auditors. We are
requesting stockholder ratification as a matter of good corporate practice. Our
board of directors has determined that the affirmative vote of the holders of a
majority of the shares of our common stock represented at the annual meeting, in
person or by proxy, will constitute ratification of the selection of BDO
Hernandez Marron y Cia, S.C. as our independent auditors. If the stockholders do
not ratify the selection, our board and the audit committee will reconsider
whether or not to retain BDO Hernandez Marron y Cia, S.C., but may retain BDO
Hernandez Marron y Cia, S.C. Even if the selection is ratified, our board and
the audit committee in their discretion may change the appointment at any time
during the year if they determine that such change would be in our best
interests.


       Abstentions will have the effect of a vote against Proposal 7. Broker
non-votes will have no effect on the outcome of the vote on Proposal 7.

Board Recommendation


       Our board of directors unanimously recommends a vote FOR Proposal 7.



                  STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING

       Stockholders who wish to present proposals appropriate for consideration
at our annual meeting of stockholders to be held in 2004 must submit the
proposal in proper form and in accordance with applicable SEC regulations to us
at our address set forth on the first page of this proxy statement not later
than January 22, 2004 in order for the proposition to be considered for
inclusion in our proxy statement and form of proxy relating to such annual
meeting. Any such proposals, as well as any questions related thereto, should be
directed to Amy Wagner-Mele, our secretary.

       After the January 22, 2004 deadline, a stockholder may present a proposal
at our 2004 annual meeting it is submitted to our secretary at the address set
forth above no later than April 9, 2004. If timely submitted, in proper form,
the stockholder may present the proposal at the 2004 annual meeting, but we are
not obligated to include the matter in our proxy statement.



                                       78



 



 




                  INCORPORATION OF OTHER DOCUMENTS BY REFERENCE


       The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. You may read and copy any materials we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The information
incorporated by reference is an important part of this proxy statement. We
incorporate by reference the documents listed below under Item 13(b), Item
14(b)(4), Item 14(b)(8)-(11) and Item 14(c) of Schedule 14A of Regulation 14A
under the Securities Exchange Act:

       o    Annual report on Form 10-KSB for the year ended December 31, 2002,
            filed on April 15, 2003, as amended by Form 10-KSB/A filed on
            October 6, 2003;

       o    Quarterly report on Form 10-QSB for the quarter ended June 30, 2003,
            filed on August 19, 2003, as amended by Form 10-QSB/A filed on
            October 3, 2003;

       o    Form 8-Ks filed on March 31, 2003, April 18, 2003 and May 20, 2003;
            and

       o    Form 8-K/As filed on May 6, 2003, June 17, 2003, June 18, 2003 and
            October 6, 2003.


       You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:


                   Frontline Communications Corporation
                   One Blue Hill Plaza
                   P.O. Box 1548 Pearl River, New York 10965 
                   Attention: Corporate Secretary 
                   (845) 623-8553

       A copy of our Form 10-KSB for the year ended December 31, 2003, as
amended, and of our Form 10-QSB for the quarter ended June 30, 2003, is included
herewith. If so requested, we will provide a copy of the incorporated filings by
first class mail or equally prompt means within one business day of our receipt
of your request.


       All documents that we file pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act subsequent to the date of this proxy statement
and prior to our Annual Meeting shall be deemed to be incorporated by reference
into this proxy statement and to be a part hereof from the date of filing of
such documents.

       Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this proxy statement to the extent that a statement contained in
this proxy statement, or in any other subsequently filed document which is also
incorporated herein by reference, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part of this proxy statement except as so modified or superseded.

                                  OTHER MATTERS


       Our board of directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.




                                             By Order of the Board of Directors

                                             Amy Wagner-Mele
                                             Secretary


                                             October __, 2003




                                       79





 







                         INDEX OF FINANCIAL STATEMENTS

                      FRONTLINE COMMUNICATIONS CORPORATION

                        Consolidated Financial Statements






                                                                                                     Page
                                                                                                     -----
                                                                                                 
 
Report of Independent Certified Public Accountants..................................................  F-2
Consolidated Financial Statements;
   Balance Sheet at December 31, 2002...............................................................  F-3
   Statements of Operations for the Years Ended December 31, 2001 and 2002..........................  F-4
   Statements of Stockholders' Equity (deficit) for the Years Ended December 31, 2001 and 2002......  F-5
   Statements of Cash Flows for the Years Ended December 31, 2001 and 2002..........................  F-6
   Notes to Consolidated Financial Statements.......................................................  F-8

                                   FRONTLINE COMMUNICATIONS CORPORATION

                          Unaudited Condensed Consolidated Financial Statements

Balance Sheet at June 30, 2003...................................................................... F-20
Statements of Operations (unaudited) for the Six Months Ended June 30, 2002 and 2003................ F-22
Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2002 and 2003................ F-23
Notes to Condensed Consolidated Financial Statements (unaudited).................................... F-25

                             PROYECCIONES Y VENTAS ORGANIZADAS, S.A. DE C.V.

                                           Financial Statements

Report of Independent Certified Public Accountants.................................................. F-33
   Balance Sheet at December 31, 2002............................................................... F-34
   Statements of Operations for the Years Ended December 31, 2001 and 2002.......................... F-36
   Statements of Stockholders' Equity for the Years Ended December 31, 2001 and 2002................ F-37
   Statements of Cash Flows for the Years Ended December 31, 2001 and 2002.......................... F-39
   Notes to Financial Statements.................................................................... F-41
Unaudited Financial Statements;
   Balance Sheet at March 31, 2003.................................................................. F-34
   Statements of Operations (unaudited) for the Three Months Ended March 31, 2002 and 2003.......... F-36
   Statement of Stockholders' Equity (unaudited) for the Three Months Ended March 31, 2003.......... F-37
   Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2002 and 2003.......... F-39
   Notes to Financial Statements (unaudited)........................................................ F-41

                                   FRONTLINE COMMUNICATIONS CORPORATION

                            Unaudited Pro Forma Combined Financial Information

Introduction to Pro Forma........................................................................... F-58
Unaudited Pro Forma Combined Balance Sheet at June 30, 2003......................................... F-60
Unaudited Pro Forma Combined Statement of Operations for the Year Ended December 31, 2002........... F-62
Unaudited Pro Forma Combined Statement of Operations for the Six Months Ended June 30, 2003......... F-63
Notes to Unaudited Pro Forma Combined Financial Information......................................... F-64





                                     F-1




 







INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Frontline Communications Corporation

We have audited the accompanying consolidated balance sheet of Frontline
Communications Corporation and Subsidiaries (the "Company") as of December 31,
2002 and the related consolidated statements of operations, stockholders' equity
(deficiency), and cash flows for each of the two years in the period then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Frontline
Communications Corporation and Subsidiaries as of December 31, 2002, and the
results of their operations and their cash flows for each of the two years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.


In April 2003, as discussed in note 10 of the notes to consolidated financial
statements, the Company entered into an agreement with the stockholders of
Proyecciones y Ventas Organizadas, S.A. de C.V. ("Provo"), a corporation
organized under the laws of the Republic of Mexico to acquire Provo. Upon
completion of the transaction described in note 10 and the approval of the
proposed stock conversion by the Company's stockholders, it is expected that the
stockholders of Provo will control the Company.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 1 of the
notes to consolidated financial statements, the Company has suffered recurring
losses from operations, has a working capital deficiency and a stockholders'
deficiency, which raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding those matters are also described in
note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.



GOLDSTEIN GOLUB KESSLER LLP
New York, New York


February 20, 2003, except for note 10,

as to which the date is April 3, 2003


                                   F-2




 






                          FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                                      CONSOLIDATED BALANCE SHEET



-------------------------------------------------------------------------------------------------------------------
December 31, 2002
-------------------------------------------------------------------------------------------------------------------
                                                                                                   
ASSETS
Current:
   Cash and cash equivalents                                                                             $   208,502
   Accounts receivable, less allowances for doubtful accounts of $25,000                                     212,397
   Prepaid expenses and other                                                                                 57,778
---------------------------------------------------------------------------------------------------------------------
     Total current assets                                                                                    478,677
Property and Equipment, net                                                                                  671,013
Other                                                                                                        108,877
---------------------------------------------------------------------------------------------------------------------
     Total Assets                                                                                        $ 1,258,567
=====================================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
   Accounts payable                                                                                      $   765,749
   Accrued expenses                                                                                          903,710
   Current portion of long-term debt                                                                         940,202
   Deferred revenue                                                                                          524,738
---------------------------------------------------------------------------------------------------------------------
     Total current liabilities                                                                             3,134,399
Long-term Debt, less current portion                                                                          11,453
Promissory Notes Payable (face value $200,000, including $50,000 payable to officers and
   directors), net of unamortized discount of $58,333                                                        141,667
---------------------------------------------------------------------------------------------------------------------
     Total liabilities                                                                                     3,287,519
---------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Stockholders' Deficiency:
   Preferred stock - $.01 par value; authorized 2,000,000 shares, issued and outstanding 496,445
     shares (liquidation preference of $7,446,675)                                                             4,964
   Common stock - $.01 par value; authorized 25,000,000 shares, issued 9,940,424 shares                       99,404
   Additional paid-in capital                                                                             36,204,292
   Accumulated deficit                                                                                   (37,466,196)
---------------------------------------------------------------------------------------------------------------------
                                                                                                          (1,157,536)
   Treasury stock, at cost, 645,452 shares                                                                  (871,416)
---------------------------------------------------------------------------------------------------------------------
     Stockholders' deficiency                                                                             (2,028,952)
---------------------------------------------------------------------------------------------------------------------
     Total Liabilities and Stockholders' Deficiency                                                      $ 1,258,567
=====================================================================================================================




                                     F-3


                 See notes to Consolidated Financial Statements







 







                          FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENT OF OPERATIONS




--------------------------------------------------------------------------------------------------------------------
Year ended December 31,                                                                    2002            2001
--------------------------------------------------------------------------------------------------------------------
                                                                                                
Revenue                                                                               $   5,047,098    $  6,503,120
--------------------------------------------------------------------------------------------------------------------
Costs and expenses:
   Cost of revenue                                                                        2,493,337       3,482,954
   Selling, general and administrative                                                    2,446,816       3,860,999
   Depreciation and amortization, includes $175,238 and $185,311 related to costs of
     revenue                                                                                745,135       2,943,678
   Impairment of intangibles                                                                     --       2,827,993
   Noncash compensation charge                                                               58,500         206,505
--------------------------------------------------------------------------------------------------------------------
                                                                                          5,743,788      13,322,129
--------------------------------------------------------------------------------------------------------------------
   Loss from operations                                                                    (696,690)     (6,819,009)
Other income (expense):
   Interest income                                                                            7,796          53,887
   Interest expense                                                                         (95,417)       (131,778)
   Loss on disposal of property and equipment                                                (3,214)       (132,387)
--------------------------------------------------------------------------------------------------------------------
Net loss                                                                                   (787,525)     (7,029,287)
Preferred dividends                                                                         297,867         320,910
--------------------------------------------------------------------------------------------------------------------
Net loss available to common stockholders                                              $ (1,085,392)   $ (7,350,197)
====================================================================================================================
Loss per share - basic and diluted                                                     $      (0.12)   $      (1.00)
====================================================================================================================
Weighted-average number of shares outstanding - basic and diluted                         9,119,533       7,333,221
====================================================================================================================






                 See notes to Consolidated Financial Statements


                                    F-4





 







                          FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)




----------------------------------------------------------------------------------------------------------------------------
Years ended December 31, 2002 and 2001
----------------------------------------------------------------------------------------------------------------------------
                                       Preferred Stock     Common Stock 
                                      -----------------   --------------
                                                                                                                   Total
                                                                            Additional     Treasury             Stockholders'
                                                                             Paid-in     Accumulated    Stock,     Equity
                                        Shares  Amount   Shares    Amount    Capital       Deficit     at Cost  (Deficiency)
----------------------------------------------------------------------------------------------------------------------------
                                                                                        

Balance at December 31, 2000           597,800  $5,978  7,164,793  $71,648  $35,570,119 $(29,030,607) $(860,539)  $5,756,599
Purchase of treasury stock, at cost
   (6,800 shares)                           --      --         --       --           --           --     (4,113)      (4,113)
Conversion of Series B preferred 
   stock                               (70,700)   (707)   240,380    2,404       (1,697)          --         --           --
Common stock issued for services            --      --  1,376,700   13,767      192,738           --         --      206,505
Dividends on preferred stock                --      --    779,324    7,793      313,117     (320,910)        --           --
Net loss                                    --      --         --       --           --   (7,029,287)        --   (7,029,287)
----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001           527,100   5,271  9,561,197   95,612   36,074,277  (36,380,804)  (864,652)  (1,070,296)
Purchase of treasury stock, at cost
   (28,806 shares)                          --      --         --       --           --           --     (6,764)      (6,764)
Common stock issued for services            --      --    275,000    2,750       55,750           --         --       58,500
Conversion of Series B preferred
   stock                               (30,655)   (307)   104,227    1,042         (735)          --         --           --
Dividends on preferred stock                --      --         --       --           --     (297,867)        --     (297,867)
Warrants issued with promissory
   notes payable                            --      --         --       --       75,000           --         --       75,000
Net loss                                    --      --         --       --           --     (787,525)        --     (787,525)
----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002           496,445  $4,964  9,940,424  $99,404  $36,204,292 $(37,466,196) $(871,416) $(2,028,952)
============================================================================================================================





                  See notes to Consolidated Financial Statements

                                       F-5




 







                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                            CONSOLIDATED STATEMENT OF CASH FLOWS



-----------------------------------------------------------------------------------------------------------------
 Year ended December 31,                                                                 2002           2001
-----------------------------------------------------------------------------------------------------------------
                                                                                                 
Cash flows from operating activities:
    Net loss                                                                           $ (787,525)  $ (7,029,287)
    Adjustments to reconcile net loss to net cash provided by (used in) operating
      activities:
      Depreciation and amortization                                                       745,135      2,943,678
      Debt discount amortization                                                           16,667             --
      Noncash compensation charge                                                          58,500        206,505
      Impairment of intangibles                                                                --      2,827,993
      Loss on disposal of property and equipment                                            3,214        132,387
      Changes in operating assets and liabilities:
        Decrease in marketable securities                                                      --      1,808,210
        Decrease in accounts receivable                                                    51,860        312,567
        (Increase) decrease in prepaid expenses and other                                 (24,755)        93,675
        (Increase) decrease in other assets                                                (4,488)        10,597
        Decrease in accounts payable and accrued expenses                                (390,355)      (563,729)
        Decrease in deferred revenue                                                      (90,612)      (474,854)
 ----------------------------------------------------------------------------------------------------------------
          Net cash provided by (used in) operating activities                            (422,359)       267,742
 ----------------------------------------------------------------------------------------------------------------
 Cash flows from investing activities:
    Acquisition of property and equipment                                                 (14,895)       (51,148)
    Proceeds from disposal of property and equipment                                        5,000         51,886
 ----------------------------------------------------------------------------------------------------------------
          Net cash provided by (used in) investing activities                              (9,895)           738
 ----------------------------------------------------------------------------------------------------------------
 Cash flows from financing activities:
    Principal payments on long-term debt                                                 (155,014)      (442,915)
    Proceeds from issuance of promissory notes payable                                    200,000             --
    Payments to acquire treasury stock                                                     (6,764)        (4,113)
 ----------------------------------------------------------------------------------------------------------------
            Net cash provided by (used in) financing activities                            38,222       (447,028)
 ----------------------------------------------------------------------------------------------------------------
 Net decrease in cash and cash equivalents                                               (394,032)      (178,548)
 Cash and cash equivalents at beginning of year                                           602,534        781,082
 ----------------------------------------------------------------------------------------------------------------
 Cash and cash equivalents at end of year                                              $  208,502   $    602,534
 ================================================================================================================
 Supplemental disclosure of cash flow information:
    Cash paid during the year for interest                                             $   83,000   $    132,000
 ================================================================================================================




                                                                     (continued)


                  See notes to Consolidated Financial Statements


                                     F-6





 






                          FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENT OF CASH FLOWS



 ----------------------------------------------------------------------------------------------------------------
 Year ended December 31,                                                                     2002        2001
 ----------------------------------------------------------------------------------------------------------------
                                                                                                   
 Supplemental schedule of noncash investing and financing activities:
    Warrants issued with promissory notes payable                                          $ 75,000            --
 ================================================================================================================
    Capital lease obligations incurred                                                           --      $ 48,098
 ================================================================================================================
    Dividends on Series B preferred stock paid in common stock or accrued                  $297,867      $320,910
 ================================================================================================================
    Common stock issued for services                                                       $ 58,500            --
 ================================================================================================================





               See notes to Consolidated Financial Statements


                                 F-7





 





                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                        NOTE TO CONSOLIDATED FINANCIAL STATEMENT
--------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT     Frontline Communications Corporation ("Frontline"
ACCOUNTING POLICIES:          or the "Company") is an Internet company that
                              offers Internet access; Web site development and
                              Internet presence services.


                              The accompanying consolidated financial statements
                              have been prepared assuming that the Company will
                              continue as a going concern. The Company has
                              suffered recurring losses from operations, has a
                              net working capital deficiency of $2,655,722 and a
                              stockholders' deficiency of $2,028,952 at December
                              31, 2002. These factors raise substantial doubt
                              about its ability to continue as a going concern.
                              Management has entered into an agreement with the
                              stockholders of Proyecciones y Ventas Organizadas,
                              S.A. de C.V. ("Provo"), a corporation organized
                              under the laws of the Republic of Mexico to
                              acquire Provo. This agreement, which is discussed
                              in note 10, is expected to transfer control of the
                              Company to the stockholders of Provo upon approval
                              by the Frontline stockholders. The Company's
                              operations will then include the historical
                              operations of the Company and the operations of
                              Provo, which is engaged in the distribution of
                              calling card and cellular phone airtime in Mexico.
                              Management of the Company feels that the addition
                              of Provo to the operations of the Company will
                              enable it to continue to meet its obligations as
                              they come due and to continue as a going concern.
                              The consolidated financial statements do not
                              include any adjustments that might result from the
                              outcome of this uncertainty.


                              The consolidated financial statements include the
                              accounts of the Company and its wholly owned
                              subsidiaries. Intercompany balances and
                              transactions have been eliminated.

                              In preparing the consolidated financial statements
                              in conformity with accounting principles generally
                              accepted in the United States of America,
                              management is required to make estimates and
                              assumptions that affect the reported amounts of
                              assets and liabilities and the disclosure of
                              contingent assets and liabilities at the date of
                              the consolidated financial statements, and the
                              reported amount of revenue and expenses during the
                              reporting period. Actual results could differ from
                              those estimates. Many of the Company's estimates
                              and assumptions used in the financial statements
                              are related to the Company's industry, which is
                              subject to rapid technological change. It is
                              reasonably possible that changes may occur in the
                              near term that would affect management's estimates
                              with respect to the carrying values of property
                              and equipment and intangibles.

                              Monthly subscription service revenue for Internet
                              access is recognized over the period in which
                              services are provided. Fee revenue for Web site
                              development and Internet Web site presence
                              services are recognized as services are performed.
                              Deferred revenue represents prepaid access fees by
                              subscribers.



                                      F-8



 



 




                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                        NOTE TO CONSOLIDATED FINANCIAL STATEMENT
--------------------------------------------------------------------------------

                              Accounts receivable are reported at their
                              outstanding unpaid principal balances reduced by
                              an allowance for doubtful accounts. The Company
                              estimates doubtful accounts based on historical
                              bad debts, factors related to specific customers'
                              ability to pay, and current economic trends. The
                              Company writes off accounts receivable against the
                              allowance when a balance is determined to be
                              uncollectible.

                              Property and equipment is stated at cost, less
                              accumulated depreciation and amortization.
                              Depreciation and amortization is computed over the
                              estimated useful lives of the assets using the
                              straight-line method.

                              Intangible assets consisted of purchased customer
                              bases. Amortization was computed using the
                              straight-line basis over three years. The
                              intangible was fully amortized at December 31,
                              2002. Amortization expense for the years ended
                              December 31, 2002 and 2001 amounted to $140,738
                              and $2,255,310, respectively.

                              Long-lived assets, such as property and equipment,
                              intangibles and customer bases, are evaluated for
                              impairment when events or changes in circumstances
                              indicate that the carrying amount of the assets
                              may not be recoverable through the estimated
                              undiscounted future cash flows from the use of
                              these assets. When any such impairment exists, the
                              related assets will be written down to fair value.
                              During the year ended December 31, 2001, goodwill
                              and purchased customer bases were written down by
                              $2,827,993, due to impairment of such assets.

                              Intangible assets consisted primarily of purchased
                              customer base. The Company reviewed each
                              acquisition separately to determine the number of
                              customers remaining from the original purchase
                              date. For acquisitions where less than 50% of the
                              original customers remained, the intangible asset
                              was deemed impaired. Discounted cash flows of the
                              remaining customers were then used to determine
                              fair value. In all instances, the expected cash
                              flow from such customers was less than the
                              expected cost of sales. Therefore, the intangible
                              assets of $2,705,868 representing purchased
                              customer base was deemed fully impaired and
                              written down to zero. Additionally, there was
                              unamortized goodwill remaining on the our purchase
                              of PNET of $422,125. PNET has had a lack of
                              operating profit from the date of acquisition and
                              was not expected to generate positive cash flows.
                              Accordingly, the remaining goodwill has been
                              written down to zero, after reducing goodwill by a
                              $300,000 gain on the settlement of a note payable
                              to the former owners of PNET.

                              Deferred income taxes are provided on differences
                              between the financial reporting and income tax
                              bases of assets and liabilities based upon
                              statutory tax rates enacted for future periods.
                              Valuation allowances are established when
                              necessary to reduce deferred tax assets to the
                              amount expected to be realized.



                                      F-9




 



 



                              Financial instruments which potentially subject
                              the Company to concentrations of credit risk
                              consist principally of temporary cash investments
                              and trade accounts receivable. The Company's cash
                              investments are placed with high credit quality
                              financial institutions and may, at times, exceed
                              the amount of federal deposit insurance.
                              Concentrations of credit risk with respect to
                              trade receivables are limited due to the large
                              number of customers comprising the Company's
                              customer base.





                                      F-10



 



 





                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                        NOTE TO CONSOLIDATED FINANCIAL STATEMENT
--------------------------------------------------------------------------------

                              The Company considers all highly liquid money
                              market instruments purchased with an original
                              maturity of three months or less to be cash
                              equivalents.

                              The Company applies Accounting Principles Board
                              Opinion No. 25, Accounting for Stock Issued to
                              Employees, and related interpretations by
                              recording compensation expense for the excess of
                              fair market value over the exercisable price per
                              share, as of the date of the grant, in accounting
                              for its stock options.

                              SFAS No. 123 requires the Company to provide pro
                              forma information regarding net loss and net loss
                              per share as if compensation cost for the
                              Company's stock options had been determined in
                              accordance with the fair-value-based method
                              prescribed in SFAS No. 123. The Company estimates
                              the fair value of each stock option at the date of
                              the grant using the Black Scholes option-pricing
                              model with the following weighted-average
                              assumptions used for options in 2001:




 
                              Year ended December 31, 2001
                              -----------------------------------------------------------------------
                                                                                            
                              Risk-free interest rate                                        4.65%
                              Expected life                                               5 years
                              Expected volatility                                             169%
                              Dividend yield                                                 None
                              -----------------------------------------------------------------------


 

                              No stock options were issued to employees during
                              2002. Accordingly, no Black Scholes assumptions
                              were used in 2002.

                              Under the accounting provisions of SFAS No. 123,
                              the Company's net loss and loss per share would
                              have been increased to the pro forma amounts
                              indicated below:
 




                              Year  ended December 31,                     2002           2001
                              ------------------------------------------------------------------------
                                                                                          
                              Net loss available to common
                                 stockholders:
                                 As reported                            $(1,085,392)  $ (7,350,197)
                                 Stock-based compensation using the
                                   fair value method                        (55,991)      (100,110)
                               ------------------------------------------------------------------------
                                 Pro forma                               (1,141,383)    (7,450,307)
                               Net loss per share (basic and diluted):
                                 As reported                                  (0.12)         (1.00)
                                 Pro forma                                    (0.13)         (1.02)
                               ------------------------------------------------------------------------



  
                              All costs associated with advertising services are
                              expensed in the period incurred. Advertising
                              expense was approximately $43,000 and $130,000 for
                              the years ended December 31, 2002 and 2001,
                              respectively.

                              The Company follows SFAS No. 128, Earnings per
                              Share, which provides for the calculation of
                              "basic" and "diluted" earnings per share ("EPS").
                              Basic EPS includes no dilution and is computed by
                              dividing income or loss available to common
                              stockholders by the weighted-average number of
                              common shares outstanding for the period. Diluted
                              earnings per share reflect the potential dilution
                              that could occur through the effect of common
                              shares issuable upon exercise of stock options and
                              warrants and convertible securities. 





                                      F-11



 



 




                              Potential common shares have not been included in
                              the computation of diluted EPS since the effect
                              would be antidilutive. At December 31, 2002, there
                              were 4,862,100 options and warrants outstanding
                              and preferred stock convertible into 1,687,963
                              shares of common stock that could potentially
                              dilute basic EPS in the future.








                                      F-12



 



 





                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                        NOTE TO CONSOLIDATED FINANCIAL STATEMENT
--------------------------------------------------------------------------------
  
                              In November 2002, the EITF issued EITF Issue No.
                              00-21, Revenue Arrangements with Multiple
                              Deliverables, which addresses certain aspects of
                              the accounting by a vendor for arrangements under
                              which it will perform multiple revenue-generating
                              activities. Specifically, EITF Issue No. 00-21
                              addresses how to determine whether an arrangement
                              involving multiple deliverables contains more than
                              one unit of accounting. EITF Issue No. 00-21 is
                              effective for the Company for revenue arrangements
                              entered into beginning July 1, 2003. The Company
                              does not expect the adoption of EITF Issue No.
                              00-21 to have a material impact on its 2003
                              consolidated financial statements.

                              The Company does not believe that any other
                              recently issued, but not yet effective, accounting
                              standards, if currently adopted, will have a
                              material effect on the Company's consolidated
                              financial position or results of operations.

2. PROPERTY AND               Property and equipment, at cost, consists of the
   EQUIPMENT:                 following at December 31, 2002:





                                                                                      Estimated
                                                                                        Useful
                                                                                         Life
                              --------------------------------------------------------------------
                                                                                     
                              Computer and office equipment             $2,611,297   3 to 5 years
                              Furniture and fixtures                        74,825        5 years
                              Leasehold improvements                       149,365     Lease term
                              --------------------------------------------------------------------
                                                                         2,835,487
                              Less accumulated depreciation and           
                                 amortization                            (2,164,47)
                              --------------------------------------------------------------------
                                                                        $  671,013
                              ====================================================================



                              Depreciation and amortization for the years ended
                              December 31, 2002 and 2001 amounted to
                              approximately $604,000 and $689,000, respectively.

3. ACCRUED EXPENSES:          Accrued expenses consist of the following at
                              December 31, 2002:
 


                                                                       
                              Accrued Internet connection and             
                              telephone                                   $355,363
                              Lease cancellations and related costs         98,750
                              Dividends payable                            297,867
                              Accrued professional fees                     46,268
                              Accrued wages and salaries                    82,896
                              Other                                         22,566
                              -----------------------------------------------------
                                                                          $903,710
                              =====================================================



4. LONG-TERM DEBT:            Long-term debt consists of the following at
                              December 31, 2002:



                                                                         
                              Present value of net minimum lease           $223,055
                              payments (a)
                              Promissory note payable (b)                   728,600
                              ------------------------------------------------------
                                                                            951,655
                              Less current portion                          940,202
                              ------------------------------------------------------
                                                                           $ 11,453
                              ======================================================




                                      F-13



 



 





                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                        NOTE TO CONSOLIDATED FINANCIAL STATEMENT
--------------------------------------------------------------------------------

                              (a)  The Company leases computer and other
                                   equipment under capital leases. The assets
                                   acquired under capital leases have a cost of
                                   approximately $1,155,000 and accumulated
                                   depreciation of approximately $887,000 as of
                                   December 31, 2002.

                              The following is a schedule of future minimum
                              lease payments under capitalized leases, together
                              with the present value of the net minimum lease
                              payments at December 31, 2002:





                              Year ending December 31,
                              ------------------------
                                                                       
                                         2003                               $222,073
                                         2004                                 10,958
                                         2005                                  1,279
                              -------------------------------------------------------
                              Total minimum lease payments                   234,310
                              Less amount representing interest               11,255
                              -------------------------------------------------------
                              Present value of net minimum lease
                                 payments                                    223,055
                              Less current portion                           211,602
                              -------------------------------------------------------
                                 Long-term lease obligations                $ 11,453
                              =======================================================




                              (b)  A promissory note, issued as part of a
                                   business acquisition, in the principal amount
                                   of $728,600. The promissory note bears
                                   interest at 4% and is payable in June 2003.
                                   The Company has the option to convert the
                                   principal amount due under the promissory
                                   note to shares of its common stock at a
                                   conversion price of $8 per share
                                   (significantly greater than the market value
                                   of the common stock at the acquisition date),
                                   under certain circumstances, as defined in
                                   the acquisition agreement, such as the market
                                   price of the Company's common stock exceeding
                                   $10 per share. See note 10.


                                   The carrying amount of the Company's
                                   long-term debt approximates fair value using
                                   the Company's estimated incremental borrowing
                                   rate.



                                      F-14



 



 




                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                        NOTE TO CONSOLIDATED FINANCIAL STATEMENT
--------------------------------------------------------------------------------

5. PROMISSORY NOTES:          In June 2002, the Company completed a private
                              placement of 8% promissory notes and received
                              proceeds of $200,000 (including $50,000 from
                              officers and directors). The promissory notes bear
                              interest at 8% and mature in three years from the
                              date of issuance. The Company has the option to
                              convert the principal amount due under the
                              promissory notes into shares of its common stock
                              at a conversion price of $4.80 per share, under
                              certain circumstances, as defined in the agreement
                              with the promissory note holders, such as the
                              market price of the Company's common stock
                              exceeding $6 per share. The Company also issued to
                              the note holders warrants to purchase an aggregate
                              of 1,000,000 shares of its common stock at an
                              exercise price of $.08 per share. Out of the
                              proceeds, $75,000 was allocated as the value of
                              the warrants and is recorded as a discount on the
                              notes payable in the accompanying consolidated

                              balance sheet. The discount is being amortized as
                              additional interest over the terms of the
                              promissory notes. At December 31, 2002, the
                              promissory notes payable included on the
                              accompanying consolidated balance sheet amounting
                              to $141,667 are net of unamortized discounts of
                              $58,333. The fair value of the notes approximates
                              the carrying amount based on rates available to
                              the Company.

6. COMMITMENTS AND            The Company rents office space and equipment under
   CONTINGENCIES:             operating lease agreements expiring at various
                              dates through 2005. Future minimum rental payments
                              required under operating leases are approximately
                              as follows:





                              Year ending December 31,
                              ------------------------
                                                                       
                                         2003                             $379,000
                                         2004                              226,000
                                         2005                                5,000
                              -----------------------------------------------------
                                                                          $610,000
                              =====================================================



                              Rental expense was approximately $341,000 and
                              $438,000 for the years ended December 31, 2002 and
                              2001, respectively.

                              In connection with the Company's lease for its
                              main office space, the Company has opened an
                              irrecoverable letter of credit with a bank for
                              approximately $65,000 in lieu of a security
                              deposit.

7. STOCK OPTIONS:             The Company has a stock option plan (the "Plan")
                              which authorizes the issuance of incentive options
                              and nonqualified options to purchase up to
                              2,000,000 shares of common stock. The Plan has a
                              10-year term. The board retained the authority to
                              determine the individuals to whom, and the times
                              at which, stock options would be granted, along
                              with the number of shares, vesting schedule and
                              other provisions related to the stock options.

                              A summary of the status of the Company's stock
                              option plan as of December 31, 2002 and 2001, and
                              changes during the years ended on those dates, is
                              presented below:



                                      F-15



 



 




                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                        NOTE TO CONSOLIDATED FINANCIAL STATEMENT
--------------------------------------------------------------------------------





                              December 31,                      2002                 2001
                              --------------------------------------------------------------------
                                                                   Weighted-            Weighted-
                                                                    average              average
                                                                   Exercise             Exercise
                                                          Shares     Price    Shares      Price
                                                         -------- -------------------- ----------
                                                                                
                              Outstanding at beginning   
                                 of year                 1,458,900   $2.67   1,347,768    $4.19
                              Granted                                          445,000     0.22
                              Forfeited                   (169,900)   1.68    (333,868)    4.97
                              --------------------------------------------------------------------
                              Outstanding at end of year 1,289,000   $2.81   1,458,900    $2.67
                              ====================================================================
                              Options exercisable at     
                                 year-end                1,289,000   $2.81   1,442,900    $2.64
                              ====================================================================
                              Weighted-average fair             
                                value of options
                                granted during the
                                year                            --      --          --    $0.21
                              ====================================================================



                              The following table summarizes information about
                              stock options outstanding and exercisable at
                              December 31, 2002:





                                                           Options Outstanding and Exercisable
                                                         ----------------------------------------
                                                            Number        Remaining   Weighted-
                                                        Outstanding at    Remaining    average
                                   Range of              December 31,    Contractual   Exercise
                              Exercise Prices                2002           Life        Price
                              -------------------------------------------------------------------
                                                                             
                              $0.22 to $1.00                   501,000     3.1 years     $0.31
                              $1.00 to $2.50                   184,800            .9      2.37
                              $2.50 to $4.00                    97,000            .8      3.58
                              $4.00 to $6.00                   433,200          1.95      5.16
                              $6.00 to $6.75                    73,000           1.1      6.10
                              -----------------------------------------------------------------
                                                             1,289,000                   $2.81
                              =================================================================





8. STOCKHOLDERS' EQUITY       In April 2000, the Company's board of directors
   (DEFICIENCY):              authorized the Company to purchase up to
                              $1,000,000 worth of its common stock from time to
                              time, as the Company deems appropriate, through
                              open market purchases or in privately negotiated
                              transactions. As of December 31, 2002, the Company
                              had acquired 413,932 shares of common stock for an
                              aggregate consideration of approximately $607,000.

                              In September 2001, the Company granted 1,376,700
                              restricted shares of its common stock to its
                              employees under the Company's 2001 Stock Incentive
                              Plan. Accordingly, $206,505, representing the fair
                              value of the shares granted, was charged to
                              operations as a noncash compensation charge.

                              During 2001, the Company issued: (i) 240,380
                              shares of common stock upon conversion of 70,700
                              shares of Series B Convertible Redeemable
                              preferred stock, and (ii) 779,324 shares of common
                              stock as dividends to the holders of Series B
                              Convertible Redeemable preferred stock.





                                      F-16



 



 



                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                        NOTE TO CONSOLIDATED FINANCIAL STATEMENT
--------------------------------------------------------------------------------

                              In May 2002, the Company entered into a consulting
                              agreement for marketing services and issued to the
                              consultant 250,000 shares of common stock as
                              consideration for the services rendered by the
                              consultant. Accordingly, $50,000, representing the
                              fair value of the shares issued, was charged to
                              operations.

                              In June 2002, the Company issued, in a private
                              sale of 8% promissory notes, warrants to purchase
                              an aggregate of 1,000,000 shares of its common
                              stock at an exercise price of $.08 per share.

                              In August 2002, the Company entered into a
                              consulting agreement for marketing services and
                              issued to the consultant 25,000 shares of common
                              stock as consideration for the services rendered
                              by the consultant. Accordingly, $8,500,
                              representing the fair value of the shares issued,
                              was charged to operations.

                              During 2002, the Company issued 104,227 shares of
                              common stock upon conversion of 30,655 shares of
                              Series B Convertible Redeemable preferred stock.

                              In addition, at December 31, 2002, other warrants
                              to purchase 2,516,300 shares of common stock were
                              outstanding and exercisable at prices ranging
                              between $4.80 and $8.50 per share, expiring at
                              various times through 2004.

9. INCOME TAXES:              At December 31, 2002, the tax effects of loss
                              carryforwards and the valuation allowance that
                              give rise to deferred tax assets are as follows:



                                                                                  
                              Net operating losses                                   $ 7,650,000
                              Less valuation allowance                                (7,650,000)
                              -------------------------------------------------------------------
                                 Deferred tax assets                                 $     - 0 -
                              ===================================================================



                              The provision (benefit) for income taxes differs
                              from the amount computed using the federal
                              statutory rate of 34% as a result of the
                              following:




                              December 31,                                        2002     2001
                              -------------------------------------------------------------------
                                                                                    
                              Federal statutory rate                                (34)%    (34)%
                              Increase in valuation allowance                        34       34
                              -------------------------------------------------------------------
                                                                                   - 0 -%   - 0 -%
                              ===================================================================



                              The Company had net operating loss carryforwards
                              of approximately $22,500,000 at December 31, 2002,
                              which expire through 2022. The tax benefit of
                              these losses has been completely offset by a
                              valuation allowance due to the uncertainty of its
                              realization.



                                      F-17



 



 




                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                        NOTE TO CONSOLIDATED FINANCIAL STATEMENT
--------------------------------------------------------------------------------

                              Internal Revenue Code Section 382 provides for
                              limitations on the use of net operating loss
                              carryforwards in years subsequent to a more than
                              50% change in ownership (as defined by Section
                              382), which limitations can significantly impact
                              the Company's ability to utilize its net operating
                              loss carryforwards. As a result of the sale of the
                              preferred shares in the public offering in
                              February and March 2000, changes in ownership may
                              have occurred which might result in limitations of
                              the utilization of the net operating loss
                              carryforwards. The extent of any limitations as a
                              result of changes in ownership has not been
                              determined by the Company.

10. SUBSEQUENT EVENT:         In April 2003, the Company entered into an amended
                              and restated stock purchase agreement with the two
                              stockholders of Provo, a corporation organized
                              under the laws of the Republic of Mexico, to
                              acquire from them all the issued and outstanding
                              shares of Provo. As consideration, the Company
                              issued 220,000 shares of Series C Convertible
                              Preferred Stock ("Series C Preferred") of the
                              Company to the two stockholders of Provo. Provo
                              and its subsidiaries are engaged in the
                              distribution of prepaid calling cards and cellular
                              phone airtime in Mexico.

                              Each share of Series C Preferred will
                              automatically convert into 150 shares of the
                              Company's common stock after the transaction is
                              approved by the Company's stockholders. In
                              connection with the transaction, the Company will
                              require stockholder approval for (i) the issuance
                              of shares of common stock upon conversion of
                              Series C Preferred, (ii) the change in control
                              contemplated by the Provo transaction, (iii) an
                              increase in authorized common stock to 75,000,000
                              shares, and (iv) a reverse split of all of the
                              issued and outstanding shares of common stock.
                              Upon such approval, Series C Preferred will
                              convert into common stock representing
                              approximately 66% of the combined Company. The
                              Company issued 35,500 Series D Preferred shares
                              ("Series D Preferred") to certain brokers, finders
                              and certain of the Company's officers and
                              directors in accordance with the terms of certain
                              consulting agreements. Each share of Series D
                              Preferred can be converted into 150 shares of the
                              Company's common stock after the stockholder
                              approval is obtained for (i) the issuance of the
                              shares of common stock upon conversion of the
                              Series D Preferred, (ii) an increase in the
                              Company's authorized common stock to 75,000,000
                              and (iii) a reverse split of the common stock.

                              In the event the Company's stockholders do not
                              approve the conversion of Series C Preferred into
                              the Company's common stock, the Company will be
                              obligated to pay $20,000,000 to the Series C
                              Preferred stockholders.




                                      F-18



 



 





                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                        NOTE TO CONSOLIDATED FINANCIAL STATEMENT
--------------------------------------------------------------------------------

                              In April 2003, the Company borrowed $550,000 from
                              an unaffiliated entity (the "Lender") and issued a
                              secured promissory note (the "note") to the
                              Lender. The note bears interest of 14% and is
                              secured by substantially all of the Company's
                              assets. Two officers have pledged shares of the
                              Company's common stock owned by them as additional
                              collateral to the Lender. In connection with the
                              financing, the Company issued 500,000 shares of
                              common stock to the Lender as additional
                              consideration. The note is payable at the earlier
                              of 90 days or upon financing of Provo's accounts
                              receivable. Out of the proceeds, the Company used
                              $200,000 to settle a promissory note, issued as a
                              part of a business acquisition, in the principal
                              amount of $728,600. The balance of the promissory
                              note was settled through issuance of 375,000
                              shares of common stock to the promissory note
                              holders.





                                      F-19










 




Frontline Communications Corporation
Condensed Consolidated Balance Sheets




                                                                               June 30,
                                                                                 2003
                                                                             -------------
                                                                              (Unaudited)
                                                                         
    ASSETS
    Current:
       Cash and cash equivalents                                                 $323,978
       Accounts receivable:
         Trade, net of allowance for doubtful accounts                          7,427,100
         Related parties                                                          476,003
         Other                                                                    181,367
                                                                             ------------
    Total accounts receivable                                                   8,084,470

      Value-added tax recoverable                                                 579,473
      Inventory                                                                 1,541,345
      Prepaid expenses                                                            637,321
                                                                             ------------
    Total current assets                                                       11,166,587

    Property and equipment, net                                                   607,448
    Investment nonproductive properties                                         1,955,012
    Deferred income taxes                                                         132,280
    Costs in excess on net assets acquired, goodwill                            5,343,741
    Other assets                                                                  429,141
                                                                             ------------
                                                                             $ 19,634,209
                                                                             ============

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current maturities of long-term debt                                     $  1,352,868
    Payable under supplier credit facility                                      4,312,518
    Related parties                                                               822,066
    Accounts payable and accrued expenses                                       2,595,067
    Income taxes payable                                                          401,123
    Deferred taxes                                                                422,215
    Deferred revenue                                                              513,267
                                                                             ------------
    Total current liabilities                                                  10,419,124


    Long-term debt, less current maturities                                     1,423,154
    Payable under supplier credit facility, less current maturities            3,137,622
                                                                             ------------
    Total long-term debt                                                        4,560,776
                                                                             ------------
    Total liabilities                                                          14,979,900
                                                                             ------------

    Minority Interest                                                              27,983

    Stockholder's Equity (deficiency)
        Series B Preferred stock, $.01 par value, 2,000,000 shares
        authorized, issued and outstanding 496,445 shares. Liquidation
        preference $7,446,675.                                                      4,964
        Series C Preferred stock, $.01 par value, issued and outstanding
        220,000 shares                                                              2,200






                                 F-20





 







                                                                           
        and none, respectively. Liquidation preference $2,200.       
        Series D Preferred stock, $.01 par value, issued and outstanding
        35,500 shares and none, respectively. Liquidation preference $355             355
        Common Stock, $.01 par value, 25,000,000 shares authorized,
        10,815,424 and 9,940,424 issued, respectively, 10,169,972 and
        9,294,972 outstanding, respectively.                                      108,154
        Additional paid-in capital                                             43,327,100
        Accumulated deficit                                                   (38,003,879)
        Accumulated other comprehensive gain                                       58,848
        Treasury stock, at cost, 645,452 shares.                                 (871,416)
                                                                             ------------
                    Total stockholders' equity (deficiency)                     4,626,326
                                                                             ------------
                                                                             $ 19,634,209
                                                                             ============





            See notes to condensed consolidated financial statements.



                                      F-21






 





FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)





                                                      For the six months ended
                                                      June 30,         June 30,
                                                       2003              2002
                                                    -----------       ----------
                                                               
Revenues                                            $21,638,113       $2,639,230

Costs and expenses:
      Cost of revenues                               19,621,304        1,329,860
      Selling, general and administrative             2,172,232        1,299,579
      Depreciation and amortization                     296,131          387,719
                                                    -----------       ----------
                                                     22,089,667        3,017,158
                                                    -----------       ----------
Loss from operations                                   (451,554)        (377,928)

Other income (expense):
   Interest income                                       13,666            6,062
   Interest expense                                    (215,819)         (43,720)
   Amortization of deferred financing costs            (189,413)
   Other income ( expense)                               95,097          (3,214)
                                                    ----------------------------
Net loss before income tax, minority interest
  and gain on debt settlement                          (748,023)        (418,800)
                                                    ----------------------------

Gain on debt settlement                                 449,850
                                                    -----------       ----------
Income (loss)  before tax and minority interest        (298,173)        (418,800)

Income taxes                                             89,996

Minority interest                                           580
                                                    -----------       ----------
Net income (loss)                                      (388,749)        (418,800)
                                                    -----------       ----------

Preferred dividends                                     148,934          154,500
                                                    -----------       ----------
Net loss available to common stockholders             ($537,683)       ($573,300)
                                                    ===========       ==========

Loss per common share-basic and diluted                  ($0.06)          ($0.06)
                                                    ===========       ==========

Weighted average number of common shares
   outstanding- basic and diluted                     9,720,386        9,003,304
                                                    ===========       ==========




           See notes to condensed consolidated financial statements.


                                      F-22






 






FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)





                                                                      For the six months ended
                                                                      June 30,         June 30,
                                                                        2003            2002
                                                                     --------------------------
                                                                              
Cash flow from operating activities:
   Net loss                                                          ($388,749)       ($418,800)
   Adjustments to reconcile net loss to net cash provided by
    (used in) operating activities:
     Minority interest                                                     580
      Depreciation and amortization                                    296,131          387,719
      Debt discount amortization                                        12,498            2,083
      Amortization of deferred financing cost                          189,413
      Gain on debt settlement                                         (449,850)
      Noncash compensation charge                                                        50,000
      Deferred income taxes                                           (129,447)
      Loss on disposal of property and equipment                                          3,214
      Changes in operating assets and liabilities
         Accounts receivable                                           494,882           44,233
         Value-added tax recoverable                                   (29,009)
         Inventory                                                     178,948
         Prepaid expenses and other                                    (91,980)         (10,383)
         Other assets                                                   (4,406)          (1,906)
         Accounts payable and accrued expenses                        (366,605)        (299,428)
         Deferred revenue                                              (11,471)           5,091
         Income taxes payable                                          217,973
                                                                     ---------        ---------
Net cash provided by operating activities                              (81,092)        (238,177)
                                                                     ---------        ---------


Cash flows from investing activities:
   Acquisition of property and equipment                               (14,830)         (14,895)
    Proceeds from disposal of property and equipment                                      5,000
    Acquisition of Provo, net of cash acquired $345,137               (154,863)
                                                                     ---------        ---------
Net cash used in investing activities                                 (169,693)          (9,895)
                                                                     ---------        ---------


Cash flows from financing activities:
   Principal payments on long-term debt                                (42,268)        (134,018)
   Proceeds from private sale of notes payable                                          200,000
   Payments to acquire treasury stock                                                   (6,764)
   Supplier credit facility                                             84,094
   Net proceeds from bridge loan                                       465,587
   Seller note settlement                                             (200,000)
                                                                     ---------        ---------
Net cash provided by financing activities                              307,413           59,218
                                                                     ---------        ---------

Effects of changes in foreign currency exchange
    exchange rate changes on cash                                       58,848

                                                                     ---------        ---------
Net decrease in cash and cash equivalents                              115,476         (188,854)
                                                                     ---------        ---------

Cash and cash equivalents, beginning of period                         208,502          602,534





                                 F-23


   


 






                                                                                 
Cash and cash equivalents, end of period                             $ 323,978         $413,680
                                                                     =========        =========

Supplemental information:
Approximate interest paid during the period                          $ 185,000          $42,000
                                                                     =========        =========
Dividends on Series B Preferred stock accrued                        $ 149,000         $155,000
                                                                     =========
Approximate debt issue discount arising from the value
 of warrants                                                                           $ 75,000
                                                                                      =========




            See notes to condensed consolidated financial statements.

                                      F-24





 




FRONTLINE COMMUNICATIONS CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003



NOTE A- BASIS OF PRESENTATION


       On April 3, 2003, Frontline Communications Corporation (the" Company')
completed the acquisition (see Note B) 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"). Provo and its
subsidiaries are engaged in selling and distribution of prepaid calling cards
and cellular phone airtime in Mexico. As consideration, the Company issued
220,000 shares of its Series C Convertible Preferred Stock ("Series C
Preferred") to the two stockholders of Provo.

       The accompanying unaudited consolidated financial statements have been
prepared treating the Company as the acquirer and the results of operations of
Provo are included from the date of acquisition. The purchase price for the
acquisition is established using the Company's common stock value at the time
the acquisition was signed and announced and by applying the conversion ratio of
the Series C Preferred shares issued to the former stockholders of Provo.

       Each share of Series C Preferred will automatically convert into 150
shares of the Company's common stock upon approval of the conversion by the
Company's stockholders. In the event that, the Company's stockholders do not
approve conversion of Series C Preferred, the Company will be obligated to pay
$20 million to the former stockholders of Provo. The Company has assessed the
likelihood of it paying this amount as very improbable and has not given any
effect of this amount in the accompanying financial statements or factored it in
valuing the acquisition.

       The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 (b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. The results for the interim periods are not necessarily
indicative of the results that may be attained for an entire year or any future
periods. For further information, refer to the Financial Statements and
footnotes thereto in the Company's annual report on Form 10-KSB for the fiscal
year ended December 31, 2002 and to the audited financial statements of Provo
filed with the Company's Form 8K/A. There have been no significant changes in
accounting policies since December 31, 2002.


       The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.


NOTE B- PROVO ACQUISITION

         In April 2003, the Company entered into an amended and restated stock
purchase agreement with the two stockholders of Proyecciones y Ventas
Organizadas, S.A. de C.V., a corporation organized under the laws of the
Republic of Mexico ("Provo"), to acquire from them all the issued and
outstanding shares of Provo. As consideration, the Company issued 220,000 shares
of its Series C Convertible Preferred Stock ("Series C Preferred") to the two
stockholders of Provo ("Sellers").




                                      F-25



 



 



FRONTLINE COMMUNICATIONS CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003



         Each share of Series C Preferred will automatically convert into 150
shares of the Company's common stock after the transaction is approved by the
Company's stockholders. In connection with the transaction, the Company will
require stockholder approval for (i) issuance of common stock upon conversion of
Series C Preferred, (ii) an increase in authorized common stock to 75,000,000
shares, and (iii) a reverse split of all of the issued and outstanding shares of
common stock. Upon such approval, Series C Preferred will convert into common
stock representing approximately 64% of the combined company.

         In the event the Company's stockholders do not approve the conversion
of Series C Preferred into the Company's common stock on or prior to August 20,
2003 or such later date as agreed to by the holders of a majority of Series C
Preferred ("Conversion Date"), (which date shall be extended for a period of up
to 30 days due to actions or inactions of Securities and Exchange Commission or
American Stock Exchange), the compensation payable to the Sellers will be
increased by $20 million, payable in the form of a Note (the "Acquisition
Note"). The Acquisition Note is a $20 million principal amount promissory note
issued to the Sellers in connection with the acquisition, which only becomes due
and payable only if the Series C Preferred is not converted into Frontline's
common stock on the Conversion Date. The Acquisition Note is secured by
substantially all of Frontline's assets including the shares of capital stock of
Provo and its subsidiaries sold to Frontline.

         In connection with the acquisition, the Company issued 35,500 Series D
Convertible Preferred Stock Preferred shares ("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 can be converted into 150 shares of the
Company's common stock after stockholder approval is obtained for (i) the
issuance of the shares of common stock upon conversion of the Series D
Preferred, (ii) an increase in the Company's authorized common stock to
75,000,000 and (iii) a reverse split of the common stock.

         The purchase price for accounting purposes is established using the
fair market value of 33,000,000 of the Company's common stock (to be issued upon
conversion of 220,000 shares of Series C Preferred issued to the Sellers) valued
at $0.204, which represents the average quoted market price of the Company's
stock, as reported by the American Stock Exchange, during the time between when
the acquisition was signed and when it was announced.





                                                                                
Fair value of common stock to be issued upon conversion of
  Series C Preferred                                                        $6,732,000
Acquisition related costs
Fair value of 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                                                        218,363
Other estimated transaction costs                                              500,000
                                                                            ----------
       Total purchase price                                                 $7,450,363
                                                                            ==========





         The fair values of Provo's assets and liabilities have been estimated,
principally based on book values, for the purpose of allocating the purchase
price of the acquisition. A summary of assets acquired, liabilities assumed and
resulting goodwill is as follows:






                                      F-26



 



 



FRONTLINE COMMUNICATIONS CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003



                                                                           
       Book values of Provo's assets                                  $ 13,315,129
       Book values of Provo's liabilities and minority interest        (11,208,507)
       Goodwill, costs in excess of net assets acquired                  5,343,741
                                                                      ------------
             Total purchase price                                     $  7,450,363
                                                                      ============





The foregoing 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 management's ongoing evaluation.
Accordingly, the final allocation of the purchase price may differ significantly
from the preliminary allocation.

       The Company has adopted 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.

       The accompanying pro forma operating statements are presented as if the
Provo acquisition occurred on January 1, 2002 (see Note G for noncash
compensation charge). The pro forma information is unaudited and is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the acquisition had been completed as of January 1,
2002 and neither is it necessarily indicative of the results of operations for
future periods.







       Six months ended June 30                        2003               2002
       ------------------------                        ----               ----
                                                                         
       Revenues                                    $ 41,187,403       $ 53,486,890
       Net loss                                        (490,390)        (1,007,427)
       Net loss per share-basic and diluted.             ($0.01)            ($0.02)





The weighted average number used to calculate the net loss per share includes
33,000,000 shares of common stock to be issued upon conversion of 220,000 shares
of Series C Preferred issued in connection with the Provo acquisition and
5,325,000 shares of common stock to be issued upon conversion of 35,500 shares
of Series D Preferred issued to officers, employees, brokers and finders in
connection with the Provo acquisition.








                                      F-27



 



 



FRONTLINE COMMUNICATIONS CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003



NOTE C- LOSS PER SHARE

         The Company follows SFAS No. 128, "Earning per Share", which provides
for the calculation of "basic" and "diluted" earning per share ("EPS"). Basic
EPS includes no dilution and is computed by dividing income or loss available to
common stockholders by the weighted - average number of common shares
outstanding for the period. Diluted earnings per share reflect the potential
dilution that could occur through the effect of common shares issuable upon
exercise of stock options and warrants and convertible securities. Potential
common shares have not been included in the computation of diluted loss since
the effect would be antidilutive.

         If the shares of common stock to be issued upon conversion of Series C
Preferred and Series D Preferred are included in the calculation of the weighted
average number of shares, the net loss per common share for the six months ended
June 30, 2003 would have been $0.02.

NOTE D- ADOPTION OF NEW ACCOUNTING LITERATURE

         The Company does not believe that any other recently issued, but not
yet effective, accounting standards, if currently adopted, will have a material
effect on the Company's consolidated financial position or results of
operations.

NOTE E- STOCK OPTIONS

       Statement of Financial Accounting Standard No. 123 requires the Company
to provide pro forma information regarding net loss and net loss per share as if
compensation cost for the stock options had been determined in accordance with
the fair-value based method prescribed in SFAS No. 123. For the three- and six-
periods ended June 30, 2003 and 2002, the pro forma net loss and loss per share
calculated under the provisions of SFAS No. 123 would have been the same as the
reported numbers.

NOTE F- DEBT

       In April 2003, the Company borrowed $550,000 from an unaffiliated entity
(the "Lender") and issued a secured promissory note (the "Note") to the Lender.
The Note bears interest at the rate of 14% per annum and is secured by
substantially all of the Company's assets. Two officers have pledged shares of
the Company's common stock owned by them to the Lender as additional collateral
for this loan. The Note was payable on July 2, 2003 and by mutual agreement, the
repayment date was extended to August 1, 2003. The Company is currently
negotiating with the Lender to extend the repayment date. In connection with the
financing, the Company issued 500,000 shares of common stock (fair market value
of approximately $ 105,000) to the Lender as additional consideration. In
addition, the Company incurred approximately $84,413 in related expenses. The
aggregate amount of $189,413 was deferred as financing cost and was amortized
over the initial term of the Note.

         In April 2003, the Company paid $200,000 to settle a promissory note,
issued as a part of a business acquisition, in the principal amount of $728,600.
The balance of the promissory note was settled through issuance of 375,000
shares of the Company's common stock (fair market value of approximately
$78,750) to the promissory note holders. Upon settlement, the Company 





                                      F-28



 



 



FRONTLINE COMMUNICATIONS CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003



recognized a gain on debt settlement of approximately $449,850 during the three
months ended June 30, 2003.


NOTE G- STOCKHOLDERS EQUITY.

         In April 2003, the Company issued 500,000 shares of its common stock in
connection with a borrowing and issued 375,000 shares of common stock for a
settlement of a debt (see Note F).

         In connection with Provo acquisition, the Company issued 220,000 shares
of Series C Preferred to the Sellers and issued 35,500 Series D Preferred,
including 27,500 shares to officers and employees and 8,000 shares to brokers
and finders. Each share of both the classes of preferred shares automatically
convert into 150 shares of the Company's common stock after the Company's
stockholders approve the conversion. The par value and the liquidation
preference of each share of Series C Preferred and Series D Preferred are $.01.

         In the accompanying consolidated financial statements the value of the
outstanding Series C Preferred and Series D Preferred issued to brokers and
finders is determined based on the Company's common share price on the relevant
dates and by applying the ratio in which Series C Preferred and Series D
Preferred can be converted into shares of common stock. Accordingly, 220,000
outstanding shares of Series C are valued at $6,732,000 and the 8,000 shares of
Series D Preferred are valued at $218,363.

         The fair value of the common shares to be issued upon the conversion of
27,500 shares Series D issued to officers and employees will be determined upon
the Company's stockholders approval of the conversion. Accordingly, noncash
compensation expense for the fair value of the shares issued will be recorded
after the Company's stockholders approval. For pro forma purposes (see Note B),
Series D shares are valued in the same manner as Series C and the pro forma
adjusted for noncash compensation of $750,622.


NOTE H- OTHER COMMENTS

1. We report our operations in two segments: Internet business in the U.S.A. and
sale and distribution of prepaid phone cards in Mexico.

The Company's Internet business provides Internet access, web hosting, website
design and related services to residential and business customers.

The Company's Mexican subsidiary, Provo, sells and distributes prepaid phone
cards in Mexico for Telmex and Telcel. Telmex is the dominant telecommunications
provider in Mexico and Telcel is the dominant provider of cellular airtime in
Mexico. Prepaid phone cards are distributed through a vast network of retail
outlets, including convenience stores, drug stores, restaurants, lottery stands,
newspaper and magazine stands and other general stores.




                                      F-29



 



 



FRONTLINE COMMUNICATIONS CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003



Segment information for the six months ended June 30 is as follows:







                                                              Six months ended
                                                                   June 30,
                                                            2003            2002
                                                      ---------------------------------
                                                                            
Revenues:
  Internet business                                     $ 2,053,345      $2,639,230
  Sale and distribution of phone cards                   19,584,768
                                                     ---------------------------------
                                       Consolidated     $21,638,113      $2,639,230
                                                     ---------------------------------

Operating (loss) profit:
  Internet business in U.S.A.                             ($458,753)      ($377,928)
  Sale and distribution of phone cards                        7,199
                                                     ---------------------------------
                                       Consolidated       ($451,554)      ($377,928)
                                                     ---------------------------------





For the six months ended June 30, 2003 the Internet business includes
approximately $210,000 of common corporate expenses.

2. The Company has determined that for its subsidiary's operations in Mexico,
the Mexican peso is the functional currency. Assets and liabilities denominated
in the Mexican peso are translated into U.S. dollars at the rates in effect at
the balance sheet date. Revenues and expenses are translated at average rates
for the reported period. The net exchange difference resulting from these
translations are recorded as a separate component of the stockholders' equity as
accumulated other comprehensive income, which is excluded from net income. For
the three and six months ended June 30, 2003, the Company recorded a translation
gain of $58,848 to its stockholders equity as accumulated other comprehensive
income.

3. The Company's Mexican subsidiary subcontracts personnel services from an
entity affiliated with one of the directors of the Company. During the three
months ended June 30, 2003, the subsidiary paid approximately $637,000 for such
services. The Company believes that the terms it obtained from the affiliated
entity was no less favorable than what it would have obtained form an
unaffiliated party. In addition, during the three months ended June 30, 2003,
the Mexican subsidiary sold prepaid cards to entities affiliated with one the
directors of the Company in the aggregate amount of approximately $263,000 under
normal trade terms.

NOTE J-SUBSEQUENT EVENTS

       In July 2003, the Company entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC, whereby, subject to the Company's receipt of
necessary approvals and satisfaction of other applicable conditions, Fusion
Capital has agreed to purchase up to $13 million of the Company's common stock
over a 40-month period. In connection with the agreement the Company issued
500,000 shares of its common stock to Fusion Capital as a commitment fee.






                                      F-30


 



 



FRONTLINE COMMUNICATIONS CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003


       In July 2003, the Company entered into a consulting agreement for
operational services and issued to the consultant 120,000 shares of common stock
as a consideration for the services to be rendered by the consultant. The fair
value of the shares issued will be charged to operations over the term of the
consulting agreement.

         In July 2003, the Company sold to Fusion Capital Fund II, LLC a
convertible promissory note ("Note") in the principal amount of $110,000. The
Note bears interest at 10% and is payable on December 31, 2005. Fusion Capital
has the option to convert the principal amount of the Note into shares of the
Company's common stock at a conversion price of $.25 per share. In connection
with the sale, the Company issued to Fusion Capital warrants to acquire 220,000
shares of its common stock at an exercise price of $0.42.

       In August 2003, the Company sold to an unaffiliated individual 333,333
share of its common stock for $100,000. In addition, the Company issued the
individual warrants to acquire 150,000 shares of its common stock at an exercise
price of $0.40







                                      F-31







 





Report of Independent Auditors


To the Board of Directors and Stockholders 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, stockholders'
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
acquirer for financial reporting purposes.


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.





                                      F-32



 




 





                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                        Combined and Consolidated Balance Sheets

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






                                                                            December 31,             March 31,
                                                                     ----------------------------  --------------
                                                                                                       2003
                                                                                                   (consolidated,
                                                                         2002           2001          unaudited)
-------------------------------------------------------------------------------------------------  --------------
                                                                                                    
ASSETS
Current assets:
Cash                                                                  $   293,594    $   648,334     $   345,137
Accounts receivable:
   Trade, net of allowance for doubtful accounts of $252,470,
     $280,417 and $84,009 (unaudited), respectively                     8,170,269     11,093,610       6,821,623
   Related parties (note 7)                                             1,124,340      1,796,557         507,587
   Other                                                                  184,242         76,208         176,464
-----------------------------------------------------------------------------------------------------------------
Total accounts receivable                                               9,478,851     12,966,375       7,505,674
Value-added tax recoverable                                               635,276        429,575         550,464
Inventory                                                               2,273,682      2,642,799       1,720,293
Prepaid expenses                                                          636,398        452,914         487,563
Real estate held for sale (note 2)                                      3,724,145             --              --
-----------------------------------------------------------------------------------------------------------------
Total current assets                                                   17,041,946     17,139,997      10,609,131
Investment in unconsolidated subsidiary (note 3)                               --        187,203              --
Property and equipment, net (note 4)                                      632,472        632,108         222,962
Investment nonproductive properties (notes 2 and 5)                       422,566        422,566       1,955,012
Deferred income taxes (note 9)                                            260,883        254,507         136,955
Other assets                                                              170,319         28,983         391,069
-----------------------------------------------------------------------------------------------------------------
                                                                      $18,528,186    $18,665,364     $13,315,129
=================================================================================================================










                                      F-33



 




 





                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                        Combined and Consolidated Balance Sheets

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







                                                                            December 31,             March 31,
                                                                     ----------------------------  ---------------
                                                                                                       2003
                                                                                                    (consolidated,
                                                                        2002            2001          unaudited)
-------------------------------------------------------------------------------------------------  ---------------
                                                                                          
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current maturities of long-term debt (note 6)                      $   562,424    $ 1,093,817     $   631,554
   Payable under supplier credit facility (note 5)                      9,678,012     10,805,631       4,311,759
   Related parties (note 7)                                             1,114,197        598,083         781,319
   Accounts payable and accrued expenses                                  220,219        481,570         322,742
   Income taxes payable                                                   165,379        114,330         183,150
   Deferred income taxes (note 9)                                         706,261        781,085         556,337
-----------------------------------------------------------------------------------------------------------------
Total current liabilities                                              12,446,492     13,874,516       6,786,861
Long-term debt:
   notes payable, less current maturities (note 6)                      1,376,970      1,203,198       1,263,107
   Payable under supplier credit facility,
     less current portion (note 5)                                      2,171,715      1,487,153       3,050,695
-----------------------------------------------------------------------------------------------------------------
Total liabilities                                                      15,995,177     16,564,867      11,100,663
Minority interest                                                          92,556        (56,493)        107,844
-----------------------------------------------------------------------------------------------------------------
Commitments and contingencies (note 10 and 11)
Stockholders' equity (note 8)
   Capital stock                                                          770,368        770,368         770,368
   Additional paid-in capital                                             246,316        246,316         509,446
   Retained earnings                                                    1,568,653      1,155,899       1,006,369
   Accumulated other comprehensive loss, net of taxes                    (144,884)       (15,593)       (179,561)
-----------------------------------------------------------------------------------------------------------------
Total stockholders' equity                                              2,440,453      2,156,990       2,106,622
-----------------------------------------------------------------------------------------------------------------
                                                                      $18,528,186    $18,665,364     $13,315,129
=================================================================================================================






   The accompanying notes are an integral part of these financial statements.




                                      F-34



 



 





                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                              Combined and Consolidated Statements of Operations
--------------------------------------------------------------------------------






                                                                                       Quarter ended March 31
                                                      Years ended December 31,              (unaudited)
                                                   -------------------------------  -----------------------------
                                                                                        2003           2002
                                                        2002            2001        consolidated     combined
-----------------------------------------------------------------------------------------------------------------
                                                                                                 
Revenue                                              $101,550,659    $119,766,884    $19,549,290     $21,826,788
Cost of revenue                                        96,866,869     115,100,882     18,891,342      20,540,329
-----------------------------------------------------------------------------------------------------------------
Gross profit                                            4,683,790       4,666,002        657,948       1,286,459
Operating costs and expenses:
   Selling                                                657,993         884,032         95,777         256,225
   General and administrative                           2,930,585       3,268,131        617,623         671,997
   Depreciation and amortization                           86,425          70,410         30,051          16,099
-----------------------------------------------------------------------------------------------------------------
Total operating costs and expenses                      3,675,003       4,222,573        743,451         944,321
-----------------------------------------------------------------------------------------------------------------
Operating income (loss)                                 1,008,787         443,429        (85,503)        342,138
Interest income                                           (97,256)       (244,549)           (59)        (12,223)
Interest expense                                          419,345         448,584         86,865         108,453
Other (income) expenses, net                              (69,881)       (485,605)       (24,451)        (14,466)
Gain on assets transferred in settlement of
   supplier payables (note 5)                                  --              --       (245,159)             --
-----------------------------------------------------------------------------------------------------------------
Income before income tax, equity in the net               756,579         724,999         97,301         260,374
   earnings of unconsolidated subsidiary and
   minority interest
Income taxes expense (note 9)                             148,395         291,065         34,730          82,700
-----------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest                    608,184         433,934         62,571         177,674
Equity in the net earnings of unconsolidated
   subsidiary                                                  --         129,976             --              --
Minority interest                                         149,280         (20,771)        15,278          32,571
-----------------------------------------------------------------------------------------------------------------
Net income (loss)                                   $     458,904    $    584,681    $    47,293     $   145,103
=================================================================================================================






   The accompanying notes are an integral part of these financial statements.





                                      F-35



 



 




                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                    Combined and Consolidated Statements of Shareholders' Equity
--------------------------------------------------------------------------------
 




                                                   Additional                      Cumulative         
                                      Common         Paid-in        Retained      Translation
                                      Stock          Capital        Earnings       Adjustment         Total
-----------------------------------------------------------------------------------------------------------------
                                       (restated/note 8)
                                                                                            
Balance, December 31, 2000           $770,368       $ 29,995       $  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, net of tax               --             --               --         46,280            46,280
---------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001            770,368        287,941        1,114,274        (15,593)        2,156,990
Non-cash distribution to the
   majority stockholder (note 3)           --             --          (46,150)            --           (46,150)
Net income                                 --             --          458,904             --           458,904
Translation loss, net of tax               --             --               --       (129,291)         (129,291)
---------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002            770,368        287,941        1,527,028       (144,884)        2,440,453
Non-cash distribution to the
   majority stockholder for the
   purchase of affiliated
   companies (note 8)                      --             --         (609,577)            --          (609,577)
Additional paid-in capital
   (note 7)                                --        168,461               --             --           168,461










                                      F-36



 



 




                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                    Combined and Consolidated Statements of Shareholders' Equity
--------------------------------------------------------------------------------
 





                                                               Additional              Cumulative
                                                    Common      Paid-in     Retained   Translation
                                                     Stock       Capital    Earnings   Adjustment       Total
 ----------------------------------------------------------------------------------------------------------------
                                                                                              
 Non-cash contribution by majority stockholder            
    in forgiveness of payables (note 7)                   --       94,669         --            --        94,669
 Net income                                               --           --     47,293            --        47,293
 Translation loss, net of tax                             --           --         --       (34,677)      (34,677)
 ----------------------------------------------------------------------------------------------------------------
 Balance, March 31, 2003 (consolidated,             
    unaudited)                                      $770,368     $551,071    964,744     $(179,561)   $2,106,622
 ================================================================================================================





                    Combined and Consolidated Statements of Comprehensive Income
 




                                                                                        Quarters ended March 31
                                                            Years ended December 31,          (unaudited)
                                                            --------------------------  -------------------------
                                                                                           2003         2002
                                                                2002          2001       consolidated  combined
                                                            -------------  -----------  ------------ ------------
                                                                                                 
Net income                                                     $ 458,904     $584,681      $ 47,293     $145,103
Comprehensive income (loss):
    Translation gain (loss), net of taxes                       (129,291)      46,280       (34,677)     (40,291)
-----------------------------------------------------------------------------------------------------------------
Total comprehensive income                                     $ 329,613     $630,961      $ 12,616     $104,812
=================================================================================================================



   The accompanying notes are an integral part of these financial statements.




                                      F-37



 



 



                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                               Combined and Consolidated Statements of Cash flow
--------------------------------------------------------------------------------

                           Increase (Decrease) in Cash
 





                                                                                    Quarter ended March 31,
                                                 Years Ended December 31,                 (unaudited)
-----------------------------------------------------------------------------------------------------------------
                                                                                     2003              2002
                                                   2002            2001          consolidated        combined
-----------------------------------------------------------------------------------------------------------------
                                                                                                 
Cash flows from operating activities:
   Net income                                    $   458,904     $   584,681           $  47,293     $   145,103
     Adjustments to reconcile net income to
       cash provided by (used in) operating
       activities:
       Minority interest                             149,280         (20,771)             15,288          32,571
       Equity in the net earnings of
         unconsolidated subsidiary                        --        (129,976)                 --              --
       Depreciation and amortization                  86,425          70,410              30,051          16,098
       Bad debt expense                               16,388          72,618                  --          16,357
       Deferred income taxes                         (81,200)         50,196             (25,996)         82,700
Changes in operating assets and liabilities:

   Accounts receivable                             2,083,717      (2,033,552)            460,684       1,047,598
   Value-added tax recoverable                      (205,701)       (144,308)             84,812        (140,688)
   Inventory                                         369,117         492,852             553,389      (1,072,580)
   Prepaid expenses                                 (183,487)        (27,945)            148,835         341,980
   Accounts payable and accrued expenses          (1,894,746)        577,555            (596,755)     (1,513,757)
   Income taxes payable                               51,049          47,660              17,771          (6,947)
-----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating             849,746        (460,580)            735,372      (1,051,565)
   activities
-----------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
   Acquisition of property and equipment             (86,674)        (29,698)                 --         (11,576)
    Other assets                                    (141,334)            103            (226,805)        (80,817)
-----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities               (228,008)        (29,595)           (226,805)        (92,393)
-----------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
   Proceeds from note payable, net                        --         682,374                  --              --
   Capital contribution                                   --         123,821                  --              --
   Net cash distribution to the majority
     stockholder                                     (46,382)             --                  --              --
   Payments of long-term debt                       (357,748)             --             (44,733)         30,035
   Supplier credit facility                         (443,057)       (114,229)           (377,614)        999,910
-----------------------------------------------------------------------------------------------------------------







                                      F-38



 



 




                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                              Combined and Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------


                           Increase (Decrease) in Cash
 




                                                                                       Quarter ended March 31,
                                                        Years Ended December 31,             (unaudited)
                                                       --------------------------   ------------------------------
                                                                                       2003               2002
                                                           2002           2001      consolidated        combined
------------------------------------------------------------------------------------------------------------------
                                                                                                  
Net cash (used in) provided by financing activities        (847,187)     691,966       (422,347)        1,029,945
Effects of changes in foreign currency exchange rate
   changes on cash                                         (129,291)      46,510        (34,677)          (40,291)
------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash                            (354,740)     248,301         51,543          (154,304)
Cash, beginning of year                                     648,334      400,033        293,594           648,334
------------------------------------------------------------------------------------------------------------------
Cash, end of year                                        $  293,594     $648,334     $  345,137        $  494,030
------------------------------------------------------------------------------------------------------------------
Supplemental cash flow data:
   Interest paid                                         $  301,194     $361,087     $   86,806        $       --
   Income tax paid                                           29,692      246,101             --                --
------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of non-cash investing
   activities -
Assignment of receivable collection rights to
   related party                                         $1,915,300     $     --     $       --        $       --
Acquisition of properties in settlement of trade
   accounts receivable                                    3,724,145           --      1,532,446                --
note issued in partial consideration of acquisition
   of real state                                                 --           --        159,000                --
Assets transferred in settlement of supplier payables            --           --      4,332,688                --
Acquisition of subsidiaries for payable to
   stockholder                                                   --           --        584,048                --
Non-cash contribution by majority stockholder in
   forgiveness of payables (note 7)                              --       94,669             --                --
==================================================================================================================






   The accompanying notes are an integral part of these financial statements.




                                      F-39







 









                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------
                           
1. Summary of Significant        Nature of Operations & Basis of Presentation
   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., ("proved")
                                 Proyecciones y Ventas Organizadas de Occidente,
                                   S.A. de C.V., ("provoke")
                                 FS Provo, S.A. de C.V., ("FSProvo")
                                 PTL Administradora, S.A. de C.V., ("PTLA")
                                 TILGO, S.A. de C.V., ("TILGO")
                                 Comercializadora 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 in a 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
                                 stockholders sold their shares in ProvoDF,
                                 ProvoC, FSProvo, PTLA, TILGO and TARNOR to
                                 Provo, formally integrating all operations into
                                 a single entity (See note 8). Accordingly, the
                                 accompanying financial statements as of March
                                 31, 2003, have been consolidated to include the
                                 accounts of Provo and its subsidiaries.
                                 Intercompany balances and transactions have
                                 been eliminated in the consolidation.

                                 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




                                      F-40






 







                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------
                           
                                 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.

                                 Provo occasionally settles receivables for
                                 consideration other than cash. When receivables
                                 are not settled in cash, the Company records 
                                 the assets received at their fair value on the
                                 settlement date and relieves the carrying value
                                 of the related receivable. A gain or loss is
                                 recognized for the difference between fair value
                                 of the consideration received and the carrying
                                 amount of the receivable.

                                 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 and Investment
                                 Nonproductive Properties

                                 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).

                                 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 stockholders' equity
                                 accumulated other comprehensive income, which
                                 is excluded from net income.

                                 Fair Market Value of Financial Instruments




                                      F-41






 









                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------
                           
                                 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.

                                 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.



                                      F-42






 








                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to 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 extinguishment 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 adopted the provisions of SFAS 145
                                 effective January 1, 2003 and this
                                 pronouncement did not 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 of the
                                 accompanying financial statements.




                                      F-43






 






                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to 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.

                                 Interim Financial Statements -

                                 The accompanying unaudited consolidated
                                 condensed financial statements as of March 31,
                                 2003 and for the three months ended March 31,
                                 2002 and 2003, were prepared in accordance with
                                 accounting principles generally accepted in the
                                 United States of America and all applicable
                                 financial statement rules and regulations of
                                 the Securities and Exchange Commission
                                 pertaining to interim financial information.
                                 The interim financial statements do not include
                                 all information or footnote disclosures
                                 required by accounting principles generally
                                 accepted in the United States of America for
                                 complete financial statements. All adjustments
                                 which are, in the opinion of management, of a
                                 normal recurring nature and are necessary for a
                                 fair presentation of the interim financial
                                 statements have been included. The results of
                                 operations for the three months ended March 31,
                                 2003 are not necessarily indicative of the
                                 results to be expected for the full year.

2. Real Estate Held for          The Company has purchased or obtained real     
   Sale and Investment           estate properties as part of settlements       
   Nonproductive Properties      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 and March 31, 2003, 
                                 these investments are as follows:







                                                                   December 31,       March 31,
                                 ---------------------------------------------------------------
                                                                  2002       2001        2003
                                 ---------------------------------------------------------------
                                                                           
                                 Real Estate Held for Sale                           (unaudited)
                                   Los Cabos Properties        $  728,521  $     --   $       --
                                   La Providencia Ranch         2,995,624        --           --
                                 ---------------------------------------------------------------
                                 Total                          3,724,145        --           --
                                 ---------------------------------------------------------------
                                 Investment Nonproductive
                                  Properties
                                    San Gabriel Ranch             422,566   422,566      422,566
                                    Undeveloped property in
                                      Ocampo County in
                                       Tamaulipas                      --        --    1,532,446
                                 ---------------------------------------------------------------
                                 Total                         $  422,566  $422,566   $1,955,012
                                 ---------------------------------------------------------------




                                      F-44






 







                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------
                           
                                 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).

                                 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 the amount 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 $176,689 (1,793,177 Mexican
                                    Pesos) to Provo and $1,125,583 (11,423,321
                                    Mexican Pesos) to Provo DF.

                                    This agreement also involved the settlement
                                    with the customer of other indebtedness to
                                    Mr. Ventura Martinez del Rio, Provo's
                                    majority stockholder for $1,103,578
                                    (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 $589,774 (5,985,607
                                    Mexican pesos. (See note 7).

                                    The total amount of the transaction with the
                                    customer was $2,995,624 (30,402,000 Mexican
                                    Pesos).

                                 o  As mentioned in note 7, on March 10, 2003,
                                    the Company acquired an undeveloped property
                                    located in Ocampo County in Tamaulipas State
                                    in Mexico, from Inmobiliaria Nextar, S.A. de
                                    C.V. (related party). This property is
                                    currently securing a line of credit with
                                    Telmex for $3,680,000 (38,500,000 Mexican
                                    Pesos).

                                 o  Other assets include real estate properties with
                                    a carrying value of $422,586. These properties 
                                    are pledged as collateral under the Company's 
                                    supplier line of credit. The properties are not
                                    used in the Company's normal operations.




                                      F-45






 








                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------
                           
3. Equity in Earnings of         During the year ended December 31, 2001, until 
   Unconsolidated                divestiture in January 2002, the Company owned 
   Subsidiary                    a 50% interest in Provoloto, S.A. de C.V., a   
                                 lottery company controlled by Provo's majority 
                                 stockholder. The investment was accounted for  
                                 on the equity method of accounting as Provo's  
                                 majority stockholder, 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.

                                 In January 2002, the Company's investment in
                                 Provoloto was transferred to its majority
                                 stockholder 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 stockholder 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, 2002 and 2001 and March 31, 2003,
                                 together with their estimated useful lives,
                                 consisted of the following:







                                                                   December 31,       March 31,
                                 --------------------------------------------------------------   Useful
                                                                                         2003      Life
                                                                  2002       2001    (unaudited)  (Years)
                                 ------------------------------------------------------------------------
                                                                                     
                                 Land (note 5)                  $ 151,320  $ 151,320  $      --        --
                                 Building (note 5)                306,102    296,881         --        20
                                 Office furniture and
                                   equipment                      168,538    166,617    168,928        10
                                 Transportation equipment         135,016     66,385    134,322         4
                                 Computer equipment               103,158     96,258    106,064         3
                                 --------------------------------------------------------------
                                                                  864,134    777,461    409,314
                                 Less accumulated
                                   depreciation                  (231,662)  (145,353)  (186,352)
                                 --------------------------------------------------------------
                                 Net property and equipment     $ 632,472  $ 632,108  $ 222,962
                                 ==============================================================



                                 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 liquidation of amounts owed to Telmex.


                                      F-46






 








                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to 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). Various non-operating properties owned 
                                 by Provo, properties owned by the majority     
                                 stockholder'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 and at March 31, 2003, the       
                                 outstanding balance with Telmex is as follows:







                                                                     December 31,            March 31,
                                 ---------------------------------------------------------------------
                                                                                               2003
                                                                  2002           2001      (unaudited)
                                 ---------------------------------------------------------------------
                                                                                  
                                 Accounts payable              $ 4,061,857    $10,062,054   $       --
                                 Short-term financing            3,878,788             --    3,937,268
                                 Long-term financing             3,909,082      2,230,730    3,425,186
                                 ---------------------------------------------------------------------
                                                                11,849,727     12,292,784    7,362,454
                                 Less long-term maturities      (2,171,715)    (1,487,153)  (3,050,695)
                                 ---------------------------------------------------------------------
                                 Total short-term              $ 9,678,012    $10,805,631   $4,311,759
                                 =====================================================================




                                 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.

                                 3. The above mentioned 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.


                                      F-47






 







                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------
                           
                                 On March 10, 2003, Provo entered into a new
                                 settlement agreement with Telmex, to liquidate
                                 its payable to 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 $642,290 (6,915,600
                                     Mexican Pesos) consideration applied
                                     against the amounts due Telmex.

                                 (2) Provo relinquished its rights to Telmex of
                                     certain of its non-revenue generating real
                                     estate properties, "La Providencia Ranch",
                                     described in note 2, in exchange for a
                                     portion of the balance due to Telmex at
                                     December 31, 2002 in the amount of
                                     $2,857,146 (30,763,182 Mexican Pesos) and
                                     "Los Cabos" properties in the amount of
                                     $833,253 (8,971,722 Mexican Pesos).

                                     The above mentioned transactions generated
                                     a gain of $245,159 such assets transferred
                                     in settlement of supplier payables, which
                                     was recorded in the companies results from
                                     operations for the quarter ended March 31,
                                     2003.

                                 (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 November
                                         10, 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.

                                 At December 31, 2002, the applicable TIIE
                                 interest rate, payable by Provo, was 11.09% per
                                 annum.



                                      F-48






 







                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------
                           
6. notes Payable                 notes payable consisted of the following at
                                 December 31 2002 and 2001 and at March 31,
                                 2003:







                                                                     December 31,            March 31,
                                 ---------------------------------------------------------------------
                                                                                               2003
                                                                  2002           2001      (unaudited)
                                 ---------------------------------------------------------------------
                                                                                  
                                 Provo
                                   BBVA Bancomer, S.A.  (1)     $  387,879    $   437,527   $  557,253
                                   BBVA Bancomer, S.A.  (2)        581,818        656,290      501,528
                                   BBVA Bancomer, S.A.  (3)        581,818        656,290      371,502
                                 ProvoDF
                                   SCOTIABANK Inverlat,
                                     S.A. (4)                      387,879        546,908      464,378
                                 ---------------------------------------------------------------------
                                 Total notes payable             1,939,394      2,297,015    1,894,661
                                 Less short-term                  (562,424)    (1,093,817)    (631,554)
                                 =====================================================================
                                 Long-term bank loans           $1,376,970    $ 1,203,198   $1,263,107
                                 =====================================================================






                           

                                 (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 stockholder'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 stockholder'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
                                     stockholder'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.

                                 (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 stockholder'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




                                      F-49






 




                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------




                                                                                     December 31,    March 31,
                                 ------------------------------------------------------------------------------
                                                                                                       2003
                                                                            2002          2001      (unaudited)
                                 ------------------------------------------------------------------------------
                                                                                           
                                 Accounts receivable:
                                   Desarrollo Arboledas                 $        --    $  891,022     $      --
                                   Comercializadora VGI, S.A. de
                                    C.V.                                    584,048       693,578            --
                                   SAPROV, S.C.                             235,252       106,952       211,749
                                   Mr. Ventura Martinez del Rio Sr.
                                     - Majority stockholder                      --        98,443            --
                                   Other minority stockholders               92,444         6,562        98,093
                                   Tarpa, S.A.  de C.V.                     212,596            --       197,745
                                 ------------------------------------------------------------------------------
                                 Total related party receivables        $ 1,124,340    $1,796,557     $ 507,587
                                 ==============================================================================
                                 Accounts payable:
                                   Mr. Ventura Martinez del Rio Sr.
                                     - Majority stockholder             $  (124,858)   $       --     $      --
                                   Provoloto                               (403,879)      (88,490)     (246,687)
                                   PRODIES                                 (585,460)     (481,660)     (534,632)
                                   Tarpa, S.A.  de C.V.                          --       (27,933)           --
                                 ------------------------------------------------------------------------------
                                 Total related party payables           $(1,114,197)   $ (598,083)    $(781,319)
                                 ==============================================================================



                                 The Company has entered into certain
                                 transactions with related parties as follows:





                                                                                     December 31,    March 31,
                                 ------------------------------------------------------------------------------
                                                                                                       2003
                                                                            2002          2001      (unaudited)
                                 ------------------------------------------------------------------------------
                                                                                           
                                 Purchases of properties and            $(2,774,199)   $       --   $(1,532,446)
                                   receivables
                                 Acquisition of subsidiaries from
                                   majority stockholder                          --            --      (609,577)
                                 Non-cash contribution by
                                   majority stockholder in
                                   forgiveness of payables                       --            --        94,669
                                 Sales of properties and
                                   receivables                              194,416            --            --
                                 Personnel services                      (1,599,702)   (1,745,748)     (211,749)
                                 Loans received                            (984,748)     (306,462)     (888,885)
                                 Sales of telephone cards                   697,854       604,710       182,050
                                 Interest earned                             49,805        53,745           --
                                 Other                                      (72,984)       74,041        88,862
                                 ==============================================================================




                                      F-50






 









                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to 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 and
                                 quarter ended March 31, 2003, total personnel
                                 services expenses of $1,599,702, $1,745,748 and
                                 $211,749 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.

                                 In December 2002, the Company received real
                                 estate properties, value data 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
                                 stockholder and companies owned by that
                                 stockholder, 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
                                 stockholder 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
                                 2002 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 5).




                                      F-51






 







                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------
                           
                                 On March 10, 2003, the Company acquired an
                                 undeveloped property from Inmobiliaria Nextar,
                                 S.A. de C.V. (a related party "Nextar"). The
                                 price for this transaction was approximately
                                 $1,592,000 (16,500,000 Mexican Pesos) of which
                                 approximately $1,433,000 was paid with the
                                 companies aged accounts receivable from third
                                 party trade customers and $159,000 is payable
                                 in 24 equal monthly installments. Such
                                 receivables had an allowance for doubtful
                                 accounts of $168,461. When the receivables were
                                 sold, such reserve was recognized as additional
                                 paid-in capital due to the related party nature
                                 of the transaction.

                                 Effective March 31, 2003, the majority
                                 stockholder forgave $94,669 in amounts due from
                                 the Company. This amount was recognized as a
                                 capital contribution to the Company.

8. Stockholders' Equity          Capital Stock:

                                 In March 2003, the common controlling
                                 stockholders sold their shares in ProvoDF,
                                 ProvoC, FSProvo, PTLA, TILGO and TARNOR to
                                 Provo for $609,577, formally integrating all
                                 operations into a single entity. Accordingly,
                                 the financial statements at March, 31 2003 are
                                 presented on a consolidated, rather than a
                                 combined, basis and the historical equity
                                 balances have been restated as if the
                                 integration had occurred as of the earliest
                                 date presented. The net effect of the
                                 transaction is to reduce the value of capital
                                 stock by $287,941 to reflect only the issued
                                 and outstanding shares of Provo and to increase
                                 paid-in capital by a like amount.

                                 In connection with the integration, the Company
                                 recorded a distribution charged against
                                 retained earnings for an amount equal to the
                                 purchase price of the acquired shares, payable
                                 to its common controlling stockholders.

                                 The Companies' common stock is represented by
                                 registered shares at December 31, 2002 and 2001
                                 and at March 31, 2003, as follows:



                                      F-52






 




                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------




                                                                        (Shares as of December 31,)
                                                            ----------------------------------------------------
                                                                                                       Total
                                                                                                      March 31,
                                                              Capital stock(1)                          2003
                                                            --------------------   Total    Total   (consolidated,
                                 December 31,               Fixed    Variable      2002     2001      unaudited)
                                 -------------------
                                                                                      
                                 Capital stock shares:
                                   Provo                    20,000    116,200     136,200  136,200      136,200
                                 ---------------------------------------------------------------------------------
                                 Par-value                                           5.66     5.66         5.66
                                 ---------------------------------------------------------------------------------
                                 Total capital stock                             $770,368 $770,368     $770,368
                                 =================================================================================

                                 Shares of subsidiaries:
                                   ProvoDF (30%
                                     minority interest -
                                     see note 10)            2,100      5,600       7,700    7,700
                                   FSProvo                   1,000         --       1,000    1,000           --
                                   ProvoC                    1,000         --       1,000    1,000
                                   PTLA                      2,000         --       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
                                 ---------------------------------------------------------------------------------



--------------
(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 stockholders' approval. The variable capital stock requires
     only stockholder approval for changes in the number of shares authorized.




                           

                                 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).

                                 In the event of a reduction in capital, the
                                 excess of stockholders' 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.




                                      F-53






 











                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------
                           

                                 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.




--------------
(2)  In September 2001, the stockholders of the Company resolved that Mr.
     Ventura Martinez del Rio, Sr., the Company's majority stockholder, 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
     stockholders did not participate in the capital increase.



                                 carryforwards were as follows:



                                                                            Expiration
                                 Fiscal year                    Amount         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 and for the three
                                 months ended March, 31, 2003, 2002 is as
                                 follows:




                                                                                March 31,
                                                                December 31,  (unaudited)
                                 ----------------------------------------------------------
                                                                2002    2001   2003   2002
                                 ----------------------------------------------------------
                                                                          
                                 Statutory tax rate              35%    35%     34%    35%
                                 Recognition of the effects of
                                   inflation                      5%    37%    116%    (3%)
                                 Non deductible expenses          2%     2%      2%    --
                                 Utilization of tax loss
                                   carryforwards                (22%)  (34%)  (116%)   --
                                 ----------------------------------------------------------
                                 Effective income tax rate       20%    40%     36%    32%
                                 ==========================================================



                                 The provision for income tax for the years
                                 ended December 31, 2002 and 2001 and for the
                                 three months ended March, 31, 2003, 2002 is as
                                 follows:


                                      F-54






 




                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------




                                                                                  March 31,
                                                            December 31,         (unaudited)
                                 --------------------------------------------------------------
                                                          2002       2001       2003      2002
                                 --------------------------------------------------------------
                                                                      
                                 Current                $229,595   $240,869   $ 60,726       --
                                 Deferred                (81,200)    50,196    (25,996)  82,700
                                 --------------------------------------------------------------
                                 Total                  $148,395   $291,065   $ 34,730   82,700
                                 ==============================================================



                                 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 and
                                 March 31, 2003, 2002 are as follows:




                                                                     December 31,         March 31,
                                 -------------------------------------------------------------------
                                                                                             2003
                                                                    2002        2001     (unaudited)
                                 -------------------------------------------------------------------
                                                                                  
                                 Deferred income taxes current:
                                                                            
                                   Inventories                    $(825,696)  $(874,772)  $(584,900)
                                   Allowance for bad debts          119,435      93,687       28,563
                                 -------------------------------------------------------------------
                                     Net deferred income tax
                                       liability current           (706,261)   (781,085)    (556,337)
                                 -------------------------------------------------------------------
                                 Long-term deferred income tax
                                  liability
                                   Property and equipment           147,240     135,073      136,955
                                   Tax loss carryforwards           113,643     119,434           --
                                 -------------------------------------------------------------------
                                     Total long-term deferred      
                                       tax asset                    260,883     254,507      136,955
 
                                -------------------------------------------------------------------
                                                                  $(445,378)  $(526,578)  $ (419,382)
                                 ===================================================================




                                 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.

10. Commitments and              The Company maintains Mexican Peso denominated 
    Contingencies                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:

                                     F-55






 





                               Proyecciones y Ventas Organizadas, S. A. de C. V.
                                                        and Affiliated Companies

                                                   Notes to Financial Statements
--------------------------------------------------------------------------------




                                                              December 31
                                 ----------------------------------------
                                                                   2002
                                 ----------------------------------------
                                                           
                                 2003                            $148,090
                                 2004                             154,014
                                 2005                             158,634
                                 2006                             163,393
                                 2007                             168,295
                                 2008 and thereafter                   --
                                 ----------------------------------------
                                                                 $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, 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
                              stockholders. Upon conversion, 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 acquirer for financial
                              reporting purposes.

                              In the event Frontline does not obtain the
                              required stockholder approvals for conversion
                              of the Preferred C shares prior to July 18,
                              2003, the consideration paid to 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 Proyecciones y
                              Ventas Organizadas del DF, S.A. de C.V. capital
                              stock from the respective minority stockholder.
                              With this purchase, Provo obtained control of
                              100% of the shares of TARNOR and of ProvoDF.




                                      F-56










 






                      Frontline Communications Corporation
                                       and
                 Proyecciones y Ventas Organizadas, S.A. de C.V




               Unaudited Pro Forma Combined Financial Information


       On April 3, 2003 Frontline completed 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 between Frontline,
Provo and the former stockholders of Provo.

       As a consideration for the stock in Provo, Frontline issued to the former
stockholders of Provo a total of 220,000 shares of Frontline's Series C
convertible preferred stock. Each share of Series C convertible preferred stock
automatically converts to 150 shares of common stock of Frontline upon receipt
of the approval of Frontline's stockholders 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. Upon its stockholders approval,
Frontline will issue 33 million shares of common stock (before giving effect to
the proposed reverse split) to the former stockholders of Provo and a change of
control of Frontline will occur. Upon conversion of the Series C convertible
preferred stock, the former stockholders of Provo will own approximately 62.9%
of the common stock of Frontline. In the event Frontline stockholders do not
approve the conversion of Series C convertible preferred into Frontline's common
stock, Frontline will be obligated to pay a promissory note in the principal
amount of $20,000,000 to the Series C convertible preferred Stockholders.

       In connection with the acquisition, Frontline issued to 18 individuals an
aggregate of 35,500 shares of Series D convertible preferred stock , including
27,500 shares to officers and employees and 8,000 shares to brokers and finders.
Each share of Series D convertible preferred is convertible into 150 shares of
common stock upon receipt of Frontline's stockholder approvals.

       Frontline is requesting the holders of its Series B convertible
redeemable preferred stock to convert their shares into shares of Frontline
common stock; currently the preferred stock can be converted into common stock
at the rate of 3.4 shares of common stock for each share of preferred stock. In
connection with the conversion, Frontline has offered to pay the holders of the
preferred stock accrued and unpaid dividends on the preferred stock in shares of
its common stock. Including accrued dividends and deemed dividends (see note 3),
the proposed conversion ratio is 6 shares of common for each share of preferred
stock.

       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
treating Frontline as the acquirer for accounting purposes. The purchase price
for the acquisition was established using Frontline's common stock value at the
time the acquisition was signed and announced and by applying the conversion
ratio of the Series C convertible preferred stock issued to the former
stockholders of Provo. The acquisition was accounted for using the purchase
method of accounting, and accordingly, the purchase price was allocated to
tangible and intangible assets of Provo acquired, and the liabilities of Provo
assumed, on the basis of their fair market values as of the acquisition date.

       A consolidated balance sheet subsequent to the closing date was included
in Frontline's unaudited interim financial statements as of June 30, 2003, as
filed on Form 10-QSB on August 19, 2003. The accompanying pro forma balance
sheet gives effect to Frontline's stockholders approval of conversion of
preferred stock into common stock and the 1 for 1.5 share reverse split of
Frontline's common stock as if such approval occurred on June 30, 2003.



                                      F-57




 





       For purposes of pro forma information, the Frontline and the Provo
statements of operations for the year ended December 31, 2002 and the six months
ended June 30, 2003 have been combined as if the acquisition and the Frontline's
stockholders approval of the conversion of preferred stock into common stock and
the 1 for 1.5 share reverse split of Frontline's common stock 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
indicated, 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 management's ongoing evaluation. Accordingly, the
final allocation of the purchase price may differ significantly from the
preliminary allocation.


                                 F-58



 






UNAUDITED PRO FORMA BALANCE SHEET
  Frontline Communications Corporation
  June 30, 2003







                                                                             Pro forma
                                                              Historical     Adjustments    Note       Pro forma
                                                            --------------  ------------   -------    -----------
                                                                                          
    ASSETS
    Current:
       Cash and cash equivalents                               $323,978                                  $323,978
       Accounts receivable:
         Trade, net of allowance for doubtful accounts        7,427,100                                 7,427,100
         Related parties                                        476,003                                   476,003
         Other                                                  181,367                                   181,367
                                                            -----------                               -----------
                                Total accounts receivable     8,084,470                                 8,084,470

       Value-added tax recoverable                              579,473                                   579,473
       Inventory                                              1,541,345                                 1,541,345
       Prepaid expenses                                         637,321                                   637,321
                                                            -----------                               -----------
                                     Total current assets    11,166,587                                11,166,587

    Real estate held for sale                                 1,955,012                                 1,955,012
    Property and equipment, net                                 607,448                                   607,448
    Deferred income taxes                                       132,280                                   132,280
    Costs in excess on net assets acquired, goodwill          5,343,741                                 5,343,741
    Other assets                                                429,141                                   429,141
                                                            -----------         --------              -----------
                                                            $19,634,209               $0              $19,634,209
                                                            ===========         ========              ===========

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current maturities of long-term debt                     $1,352,868                                $1,352,868
    Payable under supplier credit facility                    4,312,518                                 4,312,518
    Related parties                                             822,066                                   822,066
    Accounts payable and accrued expenses                     2,595,067         (446,801)       1       2,148,266


    Income taxes payable                                        401,123                                   401,123
    Deferred taxes                                              422,215                                   422,215
    Deferred revenue                                            513,267                                   513,267
                                                            -----------         --------              -----------
                                Total current liabilities    10,419,124         (446,801)               9,972,323


    Long-term debt, less current maturities                   1,423,154                                 1,423,154
    Payable under supplier  credit facility, less             3,137,622                                 3,137,622
    current maturities
                                                            -----------         --------              -----------
                                     Total long-term debt     4,560,776                0                4,560,776
                                                            -----------         --------              -----------
                                        Total liabilities    14,979,900         (446,801)              14,533,099

    Minority Interest                                            27,983                                    27,983

    Stockholder's Equity (deficiency)
    Series B Preferred stock                                      4,964           (4,964)       2               0
    Series C Preferred stock                                      2,200           (2,200)       2               0





                                        F-59




 









                                                                             Pro forma
                                                              Historical     Adjustments    Note       Pro forma
                                                            --------------  ------------   -------   ------------
                                                                                         
    Series D Preferred stock                                        355            (355)       2                0
    Common stock                                                108,154         239,307        2          347,461

    Additional paid in capital                              43,327,1002         446,801        1       44,388,052
                                                                                 95,317        3
                                                                               (231,788)       2
                                                                                750,622        4
    Retained earning (accumulated deficit)                  (38,003,879)        (95,317)       3      (38,849,818)
                                                                               (750,622)       4
    Accumulated other comprehensive loss                         58,848                                    58,848
    Treasury stock, at cost                                    (871,416)                                 (871,416)
                                                            -----------         --------             ------------
    Total stockholders' equity                                4,626,326          446,801                5,073,127
                                                            -----------         --------             ------------
                                                            $19,634,209               $0              $19,634,209
                                                            ===========         ========             ============




                                       F-60





 






PRO FORMA COMBINED STATEMENT OF OPERATIONS

For the year ended December 31, 2002
(Unaudited)





                                                     (Historical)
                                           --------------------------------
                                                                                Pro Forma             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
                                             ------------        ----------      --------             -----------
Income (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                 0
Deemed dividends                                                                   95,317     3            95,317
                                             ------------        ----------      --------             -----------
Net loss applicable to common
   stockholders                              $    458,904       ($1,085,392)    ($548,072)            ($1,174,560)
                                             ============        ==========      ========             ===========
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        33,615,469
                                                                 ==========                           ===========




                                       F-61




 







PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the six months ended June 30, 2003
(Unaudited)





                                                                      
                                                                 Historical         Pro Forma            Pro Forma
                                                   Frontline        Provo          Adjustments  Note      Combined
                                                 --------------  ------------     ------------  -----  ------------
                                                                                         
Revenues                                            $21,638,113   $19,549,290                           $41,187,403

Costs and expenses:
      Cost of revenues                               19,621,304    18,891,342                            38,512,646
      Selling, general and administrative             2,172,232       713,400                             2,885,632
      Depreciation and amortization                     296,131        30,051                               326,182
                                                    -----------   -----------        ---------          -----------
                                                     22,089,667    19,634,793                            41,724,460
                                                    -----------   -----------        ---------          -----------
Loss from operations                                   (451,554)      (85,503)                             (537,057)

Other income (expense):
   Interest expense                                    (215,819)      (86,865)                             (302,684)
   Interest income                                       13,666            59                                13,725
   Amortization of deferred financing costs            (189,413)                                           (189,413)
   Other income (expense)                                95,097       269,610                               364,707
                                                    -----------   -----------                           -----------
Net income (loss) before gain on debt settlement,
   income tax and minority interest                    (748,023)       97,301                              (650,722)
                                                    -----------   -----------                           -----------
Gain on debt settlement                                 449,850                                             449,850
                                                    -----------   -----------                           -----------
Income( loss) before income tax and minority
  interest                                             (298,173)       97,301                              (200,872)

Income tax expense                                       89,996        34,730                               124,726
                                                    -----------   -----------                           -----------
Income (loss) before minority interest                (388,169)       62,571                              (325,598)

Minority interest                                           580        15,278                                15,858

                                                    -----------   -----------                           -----------
Net income (loss)                                      (388,749)       47,293                              (341,456)
                                                    -----------   -----------        ---------          -----------
Preferred dividends                                     148,934                       (148,934)    5

                                                    -----------   -----------        ---------          -----------
Net loss applicable to common stockholders            ($537,683)      $47,293        ($148,934)           ($341,456)
                                                    ===========   ===========        =========          ===========

Loss per common share-basic and diluted                  ($0.06)                                             ($0.01)
                                                    ===========                                         ===========

Weighted average number of  common shares
   outstanding- basic and diluted                     9,720,386                                  6       34,016,037
                                                    ===========                                         ===========





   (1) Historical amounts for Frontline include Provo's results of operation
   from the acquisition date. 

   (2) Historical amounts for Provo are up to the acquisition date.


                                       F-62




 




NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION


1.     To adjust accrued expenses of $446,801 for dividends on Series B
       convertible redeemable stock proposed to be paid in shares of common
       stock.

2.     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 convertible preferred stock 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 convertible
       preferred stock issued to brokers and finders; 4,125,000 shares of
       common stock to be issued upon conversion of 27,500 shares of Series D
       convertible preferred stock issued to certain officers and employees and
       2,978,670 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 of10,815,424 (10,169,972 outstanding) at
       June 30, 2003 results in issued shares of 52,119,094 (51,473,642
       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 34,746,063 (34,315,761 outstanding) on a post-split basis. In
       addition, this pro forma adjustment records the effect of the proposed
       payment of accrued dividends on Series B convertible redeemable preferred
       stock and the noncash compensation (see Note 4).

3.     The fair value of the dividends proposed to be paid on Series B
       convertible redeemable preferred stock through issuance of common stock
       exceeds accrued dividends. Accordingly, the excess of $95,317 is treated
       as deemed dividends and charged to retained earnings.

4.     The fair value of the common shares issued upon conversion of 27,500
       shares of Series D convertible preferred stock issued to certain officers
       and employees will be determined upon Frontline's stockholders approval
       of the conversion. Accordingly, noncash compensation expense for the fair
       value of the shares issued will be recorded after Frontline's
       stockholders approval. For pro forma purposes, Series D shares are valued
       in the same manner as Series C and the pro forma is adjusted for noncash
       compensation expense of $750,622.

5.     To eliminate the dividends of $297,867 for 2002 and $148,934 for 2003 on
       series B convertible redeemable preferred stock pursuant to the assumed
       conversion of them into shares of common stock on January 1, 2002.

6.     The weighted average number of shares has been adjusted for; 33,000,000
       shares of common stock to be issued upon conversion of 220,000 shares of
       Series C convertible preferred stock issued to the former stockholders
       of Provo in the acquisition; 1,200,000 shares common stock to be issued
       upon conversion of 8,000 shares of Series D convertible preferred stock
       issued to brokers and finders; 2,978,670 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 convertible
       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.



                                       F-63






 




                                                                         ANNEX A


                           CERTIFICATE OF DESIGNATION


                                       of


                      SERIES C CONVERTIBLE PREFERRED STOCK


                                       of


                      FRONTLINE COMMUNICATIONS CORPORATION


                           Pursuant to Section 151 of
                           the General Corporation Law
                            of the State of Delaware

     Frontline Communications Corporation, a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority conferred upon the
Board of Directors of the Corporation (the "Board") by the Amended Certificate
of Incorporation of the Corporation (the "Certificate of Incorporation") and
Section 151 of the General Corporation Law of the State of Delaware (the
"DGCL"), the Board, at a special meeting held on March 13, 2003, duly adopted
the following resolution creating a series of Preferred Stock, par value $.01
per share, designated as Series C Convertible Preferred Stock:

     RESOLVED, that Series C Convertible Preferred Stock, par value $.01 per
share, of the Corporation be, and hereby is, created and that the designation
and amount of, and the rights, powers, preferences, privileges, qualifications,
limitations and restrictions of the shares of this series are as follows:

     Section 1. Designation, Number of Shares and Rank.

          (a)  There will be one series of Preferred Stock designated as "Series
               C Convertible Preferred Stock" (the "Series C Preferred Stock")
               and the number of shares constituting such series will be 220,000
               shares.

          (b)  With respect to dividend rights and rights on liquidation,
               winding-up and dissolution, the Series C Preferred Stock will
               rank: (i) senior to: (A) the common stock, par value $1.00 per
               share (the "Common Stock") of the Corporation; (B) all other
               classes of common stock, (C) the Series D Convertible Preferred
               Stock, par value $.01 per share (the "Series D Preferred Stock")
               of the Corporation, and (D) each other class or series of
               preferred stock of the Corporation now or hereafter established
               by the Board of Directors (the "Board of Directors" or the
               "Board") of the Corporation, the terms of which do not expressly
               provide that it ranks senior to, or on a parity with, the Series
               C Preferred Stock as to dividend and redemption rights and rights
               on liquidation, winding-up and dissolution of the Corporation;
               (ii) on a parity with each other class or series of preferred
               stock of the Corporation established hereafter by the Board of
               Directors, the terms of which expressly provide that such class
               or series will rank on a parity with the Series C Preferred Stock
               as to dividend and redemption rights and rights on liquidation,
               winding-up and dissolution; and (iii) junior to (x) the Series B
               Convertible Preferred Stock, par value $.01 per share of the
               Corporation and (y) each class or series of preferred stock of
               the Corporation established hereafter by the Board, the terms of
               which class or series expressly provide that such class or series
               will rank senior to the Series C Preferred Stock as to dividend
               and redemption rights or rights on liquidation, winding-up and
               dissolution of the Corporation.







 




     Section 2. Conversion


          (a)  Upon (i) receipt of the approval of the Corporation's
               stockholders (the "Requisite Approvals") for the Corporation to
               (x) issue shares of Common Stock upon the conversion of the
               Series C Preferred Stock (y) effect a 1- for -1.5 share reverse
               split of the Common Stock (the "Reverse Split") and (z) increase
               the number of authorized shares of Common Stock to at least
               75,000,000 shares (the matters referred to in clauses (x), (y)
               and (z) of this subsection 2(a)(1) are collectively referred to
               as the "Actions") and (ii) the filing of an amendment to the
               Certificate of Incorporation of the Corporation to effect the
               Actions (the "Amendment") with the Secretary of State of the
               State of Delaware, each share of Series C Preferred Stock will
               automatically convert into that number of fully paid and
               nonassessable shares of Common Stock (calculated as to each
               conversion to the nearest 1/100th of a share) as shall be equal
               to the Conversion Rate (as hereinafter defined), in effect at the
               time of conversion. The "Conversion Rate" shall initially be 150
               shares of Common Stock per each share of Series C Preferred
               Stock. For the avoidance of doubt, it is intended that after
               giving effect to the Actions, upon conversion of the Series C
               Preferred Stock, the holders of the Series C Preferred Stock
               shall be entitled to receive 22,000,000 shares of Common Stock
               after giving effect to the Reverse Split (and after appropriate
               adjustments in the event of further stock splits, stock dividends
               or similar capital adjustments). Notwithstanding the foregoing,
               this Series C Preferred Stock shall not convert into Common Stock
               if the Requisite Approvals are not obtained by November 15, 2003
               or as defined in the Amended and Restated Stock Purchase
               Agreement dated April 3, 2003 between the Corporation and
               Proyecciones y Ventas Organizadas, S.A. de C.V., Ventura Martinez
               del Rio Requejo and Ventura Martinez del Rio Arrangoiz.


          (b)  The Corporation shall not be required to pay any tax which may be
               payable in respect of any transfer involved in the issue and
               delivery upon conversion of shares of Common Stock or other
               securities or property in a name other than that of the holder of
               the shares of the Series C Preferred Stock being converted, and
               the Corporation shall not be required to issue or deliver any
               such shares or other securities or property unless and until the
               person or persons requesting the issuance thereof shall have paid
               to the Corporation the amount of any such tax or shall have
               established to the satisfaction of the Corporation that such tax
               has been paid.

          (c)  The Corporation (and any successor corporation) shall take all
               action necessary so that a number of shares of the authorized but
               unissued Common Stock (or common stock in the case of any
               successor corporation) sufficient to provide for the conversion
               of the Series C Preferred Stock outstanding upon the basis
               hereinbefore provided are at all times reserved by the
               Corporation (or any successor corporation), free from preemptive
               rights, for such conversion, subject to the provisions of Section
               2(d). If the Corporation shall issue any securities or make any
               change in its capital structure which would change the number of
               shares of Common Stock into which each share of the Series C
               Preferred Stock shall be convertible as herein provided, the
               Corporation shall at the same time also make proper provision so
               that thereafter there shall be a sufficient number of shares of
               Common Stock authorized and reserved, free from preemptive
               rights, for conversion of the outstanding Series C Preferred
               Stock on the new basis.


                                      -2-







 





          (d)  In case of any consolidation or merger of the Corporation with
               any other corporation or in case of any sale or transfer of more
               than 50% of the assets of the Corporation, or in the case of any
               share exchange, in each case pursuant to which more than 50% of
               the outstanding shares of Common Stock are converted into other
               securities, cash or other property, the Corporation shall make
               appropriate provision or cause appropriate provision to be made
               so that each holder of shares of Series C Preferred Stock then
               outstanding shall have the right thereafter (in lieu of the right
               to convert into Common Stock, which right shall cease) to convert
               such shares of Series C Preferred Stock into the kind and amount
               of securities, cash or other property receivable upon such
               consolidation, merger, sale, transfer or share exchange by a
               holder of the number of shares of Common Stock into which such
               shares of Series C Preferred Stock could have been converted
               immediately prior to the effective date of such consolidation,
               merger, sale, transfer or share exchange. If, in connection with
               any such consolidation, merger, sale, transfer or share exchange,
               each holder of shares of Common Stock is entitled to elect to
               receive either securities, cash or other property upon completion
               of such transaction, the Corporation shall provide or cause to be
               provided each holder of Series C Preferred Stock the right to
               elect the securities, cash (other than by the exercise of
               appraisal rights) or other property into which the Series C
               Preferred Stock held by such holder shall be convertible after
               completion of any such transaction on the same terms and subject
               to the same conditions applicable to holders of the Common Stock
               (including, without limitation, notice of the right to elect,
               limitations on the period in which such election shall be made
               and the effect of failing to exercise the election). The above
               provisions shall similarly apply to successive consolidations,
               mergers, sales, transfers or share exchanges.

          (e)  No fractional shares of Common Stock shall be issued upon
               conversion of Series C Preferred Stock but, in lieu of any
               fraction of a share of Common Stock which would otherwise be
               issuable in respect of the aggregate number of such shares
               surrendered for conversion at one time by the same holder, the
               aggregate number of shares of Common Stock shall be rounded to
               the nearest whole number of shares.

          (f)  The Conversion Rate shall be adjusted from time to time under
               certain circumstances in case the Corporation shall (i) pay a
               dividend or make a distribution on its Common Stock in shares of
               its capital stock, (ii) subdivide its outstanding Common Stock
               into a greater number of shares, (iii) combine the shares of its
               outstanding Common Stock into a smaller number of shares
               (including as a result of the Reverse Split), or (iv) issue by
               reclassification of its Common Stock any shares of its capital
               stock, then in each such case the Conversion Rate in effect
               immediately prior thereto shall be proportionately adjusted so
               that the holder of any Series C Preferred Stock thereafter
               surrendered for conversion shall be entitled to receive, to the
               extent permitted by applicable law, the number and kind of shares
               of capital stock of the Corporation which it would have owned or
               have been entitled to receive after the happening of such event
               had such Series C Preferred Stock been converted immediately
               prior to the record date for such event (or if no record date has
               been established in connection with such event, the effective
               date for such action). An adjustment pursuant to this Section
               2(f) shall become effective immediately after the record date in
               the case of a stock dividend or distribution and shall become
               effective immediately after the effective date in the case of a
               subdivision, combination, or reclassification.

          (g)  Except as otherwise provided above in this Section 2, no
               adjustment in the Conversion Rate shall be made in respect of any
               conversion for share distributions or dividends theretofore
               declared and paid or payable on the Common Stock.

     Section 3. Voting Rights. The holders of the Series C Preferred Stock will
not have any voting rights except as set forth in this Section 3 or as otherwise
from time to time required by law.


                                      -3-







 





          (a)  The affirmative vote or consent of the holders of at least a
               majority of the outstanding shares of the Series C Preferred
               Stock, voting separately as a class, will be required for (i) any
               amendment, alteration or repeal of this Certificate of
               Designation, if such amendment, alteration or repeal affects the
               rights, preferences or privileges of the Series C Preferred Stock
               or (ii) the creation, authorization or issuance, by
               reclassification or otherwise, of any class or series of any
               stock of the Corporation having preference equivalent to or
               senior to the Series C Preferred Stock as to dividends,
               liquidation, redemption, conversion, voting or assets (the
               "Senior Stock") or the increase in the amount of authorized
               shares of any such Senior Stock. Such right of the holders of
               Series C Preferred Stock to vote as hereinabove provided may be
               exercised at any annual meeting or at any special meeting called
               for such purpose as hereinafter provided or at any adjournment
               thereof.

          (b)  In any case in which the holders of Series C Preferred Stock
               shall be entitled to vote pursuant to this Section 3 or pursuant
               to law, each holder of Series C Preferred Stock entitled to vote
               with respect to such matters shall be entitled to one vote for
               each share of Series C Preferred Stock held.


     Section 4. Covenants. Prior to November 15, 2003, the Corporation shall
not, unless specifically contemplated by this Certificate of Designation,
directly or indirectly, do or propose or commit to do, any of the following:


          (a)  authorize any merger of the Corporation with another person or
               entity which would result in any transaction of series of related
               transactions constituting the sale, transfer, lease conveyance,
               exchange or other disposition of more than 50% of the
               consolidated assets , business or earning power of the
               Corporation or its subsidiaries;

          (b)  take any action which would result in the voluntary or
               involuntary liquidation, dissolution or winding-up of the
               Corporation or its business;

          (c)  amend, repeal or add any provision to the Corporation's
               Certificate of Incorporation or By-laws if the effect thereof
               would be materially adverse to the holders of the Series C
               Preferred Stock, provided, however, that it is specifically
               agreed that the transactions provided for in Section 2(a) hereof
               shall not be prohibited by this Section 4;

          (d)  issue any options, warrants or other securities convertible into
               or exchangeable for shares of Senior Stock;

          (e)  incur, refinance or amend the terms of any indebtedness or any
               other obligation for the payment of money in an aggregate amount
               of $1,000,000; or

          (f)  enter into any agreement for the public or private sale of any of
               the Corporation's securities or engaging in any capital financing
               transaction in which the Company issues any shares of capital
               stock (including any options, warrants or other obligations or
               securities convertible or exchangeable for shares of the
               Corporation's capital stock) at a price per share lower than
               $1.50.

     Section 5. Preemptive Rights. The holders of the Series C Preferred Stock
are not entitled to any preemptive rights.

     Section 6. Dividends and Distributions. The holders of shares of Series C
Preferred Stock shall not be entitled to receive dividends.


                                      -4-







 





     Section 7. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series C Preferred Stock shall be entitled to receive out of the
assets of the Corporation, whether such assets constitute stated capital or
surplus of any nature, a sum in cash equal to $.01 per share (as appropriately
adjusted in the event of stock splits, stock dividends or similar capital
adjustments or recapitalization) (the "Liquidation Preference"), and no more;
provided, however, that such rights shall accrue to the holders of Series C
Preferred Stock only if the Corporation's payments with respect to the
liquidation preference of the holders of Senior Stock are fully met. After the
liquidation preferences of the Senior Stock are fully met, the entire assets of
the Corporation available, for distribution shall be distributed ratably among
the holders of the Series C Preferred Stock and any Parity Stock in proportion
to the respective preferential amounts to which each is entitled (but only to
the extent of such preferential amounts). After payment in full of the accrued
and unpaid dividends and the Liquidation Preference of the shares of Series C
Preferred Stock as provided in this Section 6, the holders of such shares shall
not be entitled to any further participation in any distribution of assets by
the Corporation. Neither a consolidation or merger of the Corporation with
another corporation nor a sale or transfer of all or part of the Corporation's
assets for cash, securities or other property will be considered a liquidation,
dissolution or winding up of the Corporation.

     Section 8. No Sinking Fund. The shares of Series C Preferred Stock shall
not be subject to the operation of a purchase, retirement or sinking fund.

     Section 9. Residual Rights. All rights accruing to the outstanding shares
of the Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.

     Section 10. No Reissuance of Series C Preferred Stock. No share or shares
of Series C Preferred Stock acquired by the Corporation by reason of purchase,
conversion, redemption or otherwise will be sold or reissued, and, upon such
event, all such shares will resume the status of authorized but unissued shares
of Series C Preferred Stock.


                            [SIGNATURE PAGE FOLLOWS]




                                      -5-







 





     IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under penalty of perjury this
3rd day of April 2003.
 
                                           FRONTLINE COMMUNICATIONS CORPORATION

                                           By:  /s/  Stephen J. Cole-Hatchard
                                                --------------------------------
                                                Name: Stephen J. Cole-Hatchard
                                                Title: Chief Executive Officer
 
ATTEST:

By:  /s/ Amy Wagner-Mele
    --------------------------------
    Name: Amy Wagner-Mele
    Title: Secretary








 




                                                                         ANNEX B


                           CERTIFICATE OF DESIGNATION


                                       of


                      SERIES D CONVERTIBLE PREFERRED STOCK


                                       of


                      FRONTLINE COMMUNICATIONS CORPORATION


                           Pursuant to Section 151 of
                           the General Corporation Law
                            of the State of Delaware

     Frontline Communications Corporation, a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority conferred upon the
Board of Directors of the Corporation (the "Board") by the Amended Certificate
of Incorporation of the Corporation (the "Certificate of Incorporation") and
Section 151 of the General Corporation Law of the State of Delaware (the
"DGCL"), the Board, at a special meeting held on March 13, 2003, duly adopted
the following resolution creating a series of Preferred Stock, par value $.01
per share, designated as Series D Convertible Preferred Stock:

     RESOLVED, that Series D Convertible Preferred Stock, par value $.01 per
share, of the Corporation be, and hereby is, created and that the designation
and amount of, and the rights, powers, preferences, privileges, qualifications,
limitations and restrictions of the shares of this series are as follows:

     Section 1. Designation, Number of Shares and Rank.

          (a)  There will be one series of Preferred Stock designated as "Series
               D Convertible Preferred Stock" (the "Series D Preferred Stock")
               and the number of shares constituting such series will be 35,500
               shares.

          (b)  With respect to dividend rights and rights on liquidation,
               winding-up and dissolution, the Series D Preferred Stock will
               rank: (i) senior to: (A) the common stock, par value $1.00 per
               share (the "Common Stock") of the Corporation; (B) all other
               classes of common stock; and (ii) junior to (A) the Series B
               Convertible Preferred Stock, par value $.01 per share of the
               Corporation; (B) the Series C Convertible Preferred Stock, par
               value $.01 per share of the Corporation and (C) each other class
               or series of preferred stock of the Corporation now or hereafter
               established by the Board of Directors (the "Board of Directors"
               or the "Board") of the Corporation, the terms of which do not
               expressly provide that it ranks senior to, or on a parity with,
               the Series D Preferred Stock as to dividend and redemption rights
               and rights on liquidation, winding-up and dissolution of the
               Corporation; and (D) each class or series of preferred stock of
               the Corporation established hereafter by the Board, the terms of
               which class or series expressly provide that such class or series
               will rank senior to the Series D Preferred Stock as to dividend
               and redemption rights or rights on liquidation, winding-up and
               dissolution of the Corporation (iii) on a parity with each other
               class or series of preferred stock of the Corporation established
               hereafter by the Board of Directors, the terms of which expressly
               provide that such class or series will rank on a parity with the
               Series C Preferred Stock as to dividend and redemption rights and
               rights on liquidation, winding-up and dissolution.








 




     Section 2. Conversion

          (a)  Upon (i) receipt of the approval of the Corporation's
               stockholders (the "Requisite Approvals") for the Corporation to
               (x) issue shares of Common Stock upon the conversion of the
               Series D Preferred Stock (y) effect a 1- for -1.5 share reverse
               split of the Common Stock (the "Reverse Split") and (z) increase
               the number of authorized shares of Common Stock to at least
               75,000,000 shares (the matters referred to in clauses (i), (ii)
               and (iii) of this Section 2(a) are collectively referred to as
               the "Actions") and (ii) the filing of an amendment to the
               Certificate of Incorporation of the Corporation to effect the
               Actions (the "Amendment") with the Secretary of State of the
               State of Delaware, each share of Series D Preferred Stock will
               automatically convert into that number of fully paid and
               nonassessable shares of Common Stock (calculated as to each
               conversion to the nearest 1/100th of a share) as shall be equal
               to the Conversion Rate (as hereinafter defined), in effect at the
               time of conversion. The "Conversion Rate" shall initially be 150
               shares of Common Stock per each share of Series D Preferred
               Stock.

          (b)  The Corporation shall not be required to pay any tax which may be
               payable in respect of any transfer involved in the issue and
               delivery upon conversion of shares of Common Stock or other
               securities or property in a name other than that of the holder of
               the shares of the Series D Preferred Stock being converted, and
               the Corporation shall not be required to issue or deliver any
               such shares or other securities or property unless and until the
               person or persons requesting the issuance thereof shall have paid
               to the Corporation the amount of any such tax or shall have
               established to the satisfaction of the Corporation that such tax
               has been paid.

          (c)  The Corporation (and any successor corporation) shall take all
               action necessary so that a number of shares of the authorized but
               unissued Common Stock (or common stock in the case of any
               successor corporation) sufficient to provide for the conversion
               of the Series D Preferred Stock outstanding upon the basis
               hereinbefore provided are at all times reserved by the
               Corporation (or any successor corporation), free from preemptive
               rights, for such conversion, subject to the provisions of Section
               2(d). If the Corporation shall issue any securities or make any
               change in its capital structure which would change the number of
               shares of Common Stock into which each share of the Series D
               Preferred Stock shall be convertible as herein provided, the
               Corporation shall at the same time also make proper provision so
               that thereafter there shall be a sufficient number of shares of
               Common Stock authorized and reserved, free from preemptive
               rights, for conversion of the outstanding Series D Preferred
               Stock on the new basis.

          (d)  In case of any consolidation or merger of the Corporation with
               any other corporation or in case of any sale or transfer of all
               or substantially all of the assets of the Corporation, or in the
               case of any share exchange, in each case pursuant to which all of
               the outstanding shares of Common Stock are converted into other
               securities, cash or other property, the Corporation shall make
               appropriate provision or cause appropriate provision to be made
               so that each holder of shares of Series D Preferred Stock then
               outstanding shall have the right thereafter (in lieu of the right
               to convert into Common Stock, which right shall cease) to convert
               such shares of Series D Preferred Stock into the kind and amount
               of securities, cash or other property receivable upon such
               consolidation, merger, sale, transfer or share exchange by a
               holder of the number of shares of Common Stock into which such
               shares of Series D Preferred Stock could have been converted
               immediately prior to the effective date of such consolidation,
               merger, sale, transfer or share exchange. If, in connection with
               any such consolidation, merger, sale, transfer or share exchange,
               each holder of shares of Common Stock is entitled to elect to
               receive either securities, cash or other property upon completion
               of such transaction, the Corporation shall provide or cause to be
               provided each holder of Series D Preferred Stock the right to
               elect the securities, cash (other than by the exercise of
               appraisal rights) or other property into which the Series D
               Preferred Stock held by such holder shall be convertible after
               completion of any such transaction on the same terms and subject
               to the same conditions applicable to holders of the Common Stock
               (including, without limitation, notice of the right to elect,
               limitations on the period in which such election shall be made
               and the effect of failing to exercise the election). The above
               provisions shall similarly apply to successive consolidations,
               mergers, sales, transfers or share exchanges.


                                       2







 




          (e)  No fractional shares of Common Stock shall be issued upon
               conversion of Series D Preferred Stock but, in lieu of any
               fraction of a share of Common Stock which would otherwise be
               issuable in respect of the aggregate number of such shares
               surrendered for conversion at one time by the same holder, the
               aggregate number of shares of Common Stock shall be rounded to
               the nearest whole number of shares.

          (f)  The Conversion Rate shall be adjusted from time to time under
               certain circumstances in case the Corporation shall (i) pay a
               dividend or make a distribution on its Common Stock in shares of
               its capital stock, (ii) subdivide its outstanding Common Stock
               into a greater number of shares, (iii) combine the shares of its
               outstanding Common Stock into a smaller number of shares
               (including as a result of the Reverse Split), or (iv) issue by
               reclassification of its Common Stock any shares of its capital
               stock, then in each such case the Conversion Rate in effect
               immediately prior thereto shall be proportionately adjusted so
               that the holder of any Series D Preferred Stock thereafter
               surrendered for conversion shall be entitled to receive, to the
               extent permitted by applicable law, the number and kind of shares
               of capital stock of the Corporation which it would have owned or
               have been entitled to receive after the happening of such event
               had such Series D Preferred Stock been converted immediately
               prior to the record date for such event (or if no record date has
               been established in connection with such event, the effective
               date for such action). An adjustment pursuant to this Section 2
               (f) shall become effective immediately after the record date in
               the case of a stock dividend or distribution and shall become
               effective immediately after the effective date in the case of a
               subdivision, combination, or reclassification.

          (g)  Except as otherwise provided above in this Section 2, no
               adjustment in the Conversion Rate shall be made in respect of any
               conversion for share distributions or dividends theretofore
               declared and paid or payable on the Common Stock.

     Section 3. Voting Rights.

          (a)  The holders of the Series D Preferred Stock will not have any
               voting rights except as set forth in this Section 3 or as
               otherwise from time to time required by law.

          (b)  The affirmative vote or consent of the holders of at least a
               majority of the outstanding shares of the Series D Preferred
               Stock, voting separately as a class, will be required for any
               amendment, alteration or repeal of this Certificate of
               Designation, if such amendment, alteration or repeal materially
               and adversely affects the rights, preferences or privileges of
               the Series D Preferred Stock. The creation, authorization or
               issuance of any class or series or shares of any class or series
               of senior, parity or junior stock, or the increase or decrease in
               the amount of authorized capital stock of any such class shall
               not require the consent of holders of the Series D Preferred
               Stock and shall not be deemed to affect adversely the rights,
               preference or privileges of shares of Series D Preferred Stock.
               Such right of the holders of Series D Preferred Stock to vote as
               hereinabove provided may be exercised at any annual meeting or at
               any special meeting called for such purpose as hereinafter
               provided or at any adjournment thereof.

          (c)  In any case in which the holders of Series D Preferred Stock
               shall be entitled to vote pursuant to this Section 3 or pursuant
               to law, each holder of Series D Preferred Stock entitled to vote
               with respect to such matters shall be entitled to one vote for
               each share of Series D Preferred Stock held.

     Section 4. Preemptive Rights. The holders of the Series D Preferred Stock
are not entitled to any preemptive rights.

     Section 5. Dividends and Distributions. The holders of shares of Series D
Preferred Stock shall not be entitled to receive dividends.


                                       3







 




     Section 6. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series D Preferred Stock shall be entitled to receive out of the
assets of the Corporation, whether such assets constitute stated capital or
surplus of any nature, a sum in cash equal to $.01 per share (the "Liquidation
Preference"), and no more; provided, however, that such rights shall accrue to
the holders of Series D Preferred Stock only if the Corporation's payments with
respect to the liquidation preference of the holders of Senior Stock are fully
met. After the liquidation preferences of the Senior Stock are fully met, the
entire assets of the Corporation available, for distribution shall be
distributed ratably among the holders of the Series D Preferred Stock and any
Parity Stock in proportion to the respective preferential amounts to which each
is entitled (but only to the extent of such preferential amounts). After payment
in full of the accrued and unpaid dividends and the Liquidation Preference of
the shares of Series D Preferred Stock as provided in this Section 6, the
holders of such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation. Neither a consolidation or merger of
the Corporation with another corporation nor a sale or transfer of all or part
of the Corporation's assets for cash, securities or other property will be
considered a liquidation, dissolution or winding up of the Corporation.

     Section 7. No Sinking Fund. The shares of Series D Preferred Stock shall
not be subject to the operation of a purchase, retirement or sinking fund.

     Section 8. Residual Rights. All rights accruing to the outstanding shares
of the Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.

     Section 9. No Reissuance of Series D Preferred Stock. No share or shares of
Series D Preferred Stock acquired by the Corporation by reason of purchase,
conversion, redemption or otherwise will be sold or reissued, and, upon such
event, all such shares will resume the status of authorized but unissued shares
of Series D Preferred Stock.


                            [SIGNATURE PAGE FOLLOWS]





                                       4







 




     IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under penalty of perjury this
3rd day of April 2003.
 
                                           FRONTLINE COMMUNICATIONS CORPORATION

                                           By:   /s/  Stephen J. Cole-Hatchard
                                                 -------------------------------
                                                 Name: Stephen J. Cole-Hatchard
                                                 Title: Chief Executive Officer
 
ATTEST:
By:        /s/ Amy Wagner-Mele
           ----------------------------
           Name: Amy Wagner-Mele
           Title: Secretary









 





                                                                         ANNEX C


                                      NOTE
                              ISSUED TO HOLDERS OF
                      SERIES C CONVERTIBLE PREFERRED STOCK
                                       of
                      FRONTLINE COMMUNICATIONS CORPORATION

 The obligations under this Secured Promissory note shall arise on the
    Conversion Date (as defined in the Amended and Restated Stock Purchase
    Agreement dated April 3, 2003 between the Corporation and Proyecciones y
    Ventas Organizadas, S.A. de C.V., Ventura Martinez del Rio Requejo and
    Ventura Martinez del Rio Arrangoiz (the "Agreement") and only if the
    Series C Preferred Stock (as defined in the Certificate of Designation of
    Series C convertible preferred stock of the Company (the "Designation")
    is not converted into Common Stock of the Company in accordance with
    the Designation.



                             SECURED PROMISSORY NOTE
 
$20,000,000                                                        New York, NY
                                                                   April 3, 2003
 

     FOR VALUE RECEIVED, Frontline Communications, Corp., a Delaware corporation
(the "Borrower") promises to pay to Ventura Martinez del Rio Arrangoiz
("Arrangoiz" or the "Lender"), as agent for the Sellers under that certain
Amended and Restated Stock Purchase Agreement, dated as of April 3, 2003 (the
"Stock Purchase Agreement"), among Borrower, Proyecciones y Ventas Organizadas,
S.A. de C.V. ("Provo"), Arrangoiz and Ventura Martinez del Rio Requejo
("Requejo" and together with Arrangoiz, the "Sellers"), or ORDER, the principal
sum of Twenty Million and 00/100 Dollars ($20,000,000), in lawful money of the
United States of America, with interest thereon, to be computed on each advance
from the date of its disbursement, at the rate of 8% per annum.

     IT IS HEREBY EXPRESSLY AGREED that the entire principal sum from time to
time outstanding hereunder and all accrued and unpaid interest thereon shall
become due and payable, within fifteen (15) days of the Conversion Date and only
if the Series C Preferred Stock is not converted into Common Stock of the
Company in accordance with the Designation. (the "Due Date").

     If any amount payable by the Borrower hereunder is not paid on the date
when due (whether at maturity, by acceleration or otherwise) interest shall
accrue on such amount ("Late Payment"), to the extent permitted by applicable
law, during the period from and including the Due Date thereof to but excluding
the date such amount is paid at the rate of 12 % per annum. Interest accruing on
Late Payments shall be payable from time to time on demand by the holder of this
note. Principal and interest shall be payable at the office of Arrangoiz in
Mexico City, Mexico, or at such other place as the holder may from time to time
designate in writing.


     This note is being issued pursuant to the Stock Purchase Agreement and the
Certificate of Designation and is secured by the Security Agreement referred to
therein.

     This note may be prepaid at any time, and from time to time, in whole or in
part, without any premium or penalty therefor; provided, however, that all such
prepayments shall be applied first toward interest accrued on this note and then
toward the outstanding principal balance.

     The Borrower (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for the holder to first
institute suit in order to enforce payment of this note (iii) consents to any
one or more extensions or postponements of time of payment, forbearance,
forgiveness or other indulgence, without notice or consent and (iv) consents
that the Lender may release or surrender, exchange or substitute any collateral
security now held or which may hereafter be held as security for the payment of
this note. The pleading of any statute of limitations as a defense to any demand
against the undersigned is expressly hereby waived by the undersigned. The
holder shall have the right, but not the obligation, to set off against this
note any and all amounts owing at any time by the undersigned to the holder.








 





     The holder shall not be required to resort to any means of collection for
payment of any amounts evidenced by this note, but may proceed directly against
the Borrower in such manner as the holder may choose. None of the rights of the
holder shall be waived or diminished by any failure or delay in the exercise
thereof.

     This note shall have the effect of an instrument executed under seal and
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to the choice or conflict of laws provisions
thereof that would give rise to the application of the domestic substantive law
of any other jurisdiction.


     The Borrower irrevocably consents and submits to the non-exclusive
jurisdiction of the courts of the State of New York, and waives any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this note or in any way connected with or related or
incidental to the dealings of the Borrower, Provo and Sellers in respect of this
note or the transactions related hereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and
agrees that any dispute arising out of the relationship among the Borrower,
Provo and Sellers or the conduct of such persons in connection with this note
shall be heard only in the courts described above (except that the holder shall
have the right to bring any action or proceeding against the Borrower or its
property in the courts of any jurisdiction which the holder deems necessary to
appropriate in order to enforce its rights against the Borrower or its
property).

     The Borrower hereby waives personal service of any and all process on it
and consents that all such service of process may be made by registered or
certified mail (return receipt requested and postage prepaid) directed to it,
and service so made shall be deemed to be completed five (5) calendar days after
the same shall have been deposited in the U.S. mails, or, at the holder's
option, by service upon the undersigned in any other manner provided under
applicable law.

     All notices, request, demands and other communications that are required or
may be given hereunder (collectively, "Notices") shall be in writing and shall
be sent by registered or certified mail (return receipt requested and postage
prepaid) to the Borrower and Arrangoiz at the following respective addresses or
at such other address as shall be specified by like Notice: (i) if to the
Borrower, to Frontline Communications Corp., One Blue Hill Plaza, 7th Floor,
Pearl River, New York 10965, Attention: Stephen Cole-Hatchard; and (ii) if to
the Lender, to Quintana Roo No. 28, Col. Roma Sur, 06760 Mexico, D.F., Mexico,
Attention: Ventura Martinez del Rio Arrangoiz. Notices shall be deemed given on
the third business day following the day sent, whether or not such Notice was
actually received on such day.

     All agreements between the Borrower and the Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness or otherwise, shall the amount paid
or agreed to be paid for the use or forbearance of the indebtedness evidenced
hereby exceed the maximum amount which is permitted to receive under applicable
law. If, from any circumstances whatsoever, fulfillment of any provision hereof
or of the Stock Purchase Agreement, at the time performance of such provision
shall be due, shall involve exceeding such amount, then the obligation to be
fulfilled shall automatically be reduced to the limit of such validity and if,
from any circumstances the Lender should ever receive as interest an amount
which would exceed such maximum amount, such amount which is excessive interest
shall be applied to the reduction of the principal balance evidenced hereby and
not to the payment of interest. As used herein, the term "applicable law" shall
mean the law which results in a higher permissible rate of interest, then this
note shall be governed by such new law as of its effective date. This provision
shall control every other provision of all agreements between the Borrower and
the Lender.


     If this note shall not be paid when due and shall be placed by the holder
hereof in the hands of an attorney for collection, through legal proceedings or
otherwise, the Borrower will pay reasonable attorneys' fees to the holder
hereof; together with reasonable costs and expenses of collection, including,
without limitation, any such attorneys' fees, costs and expenses relating to any
proceedings with respect to the bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation of the Borrower or any party to
any instrument or agreement securing this note, all is provided in the Stock
Purchase Agreement.


                                       2







 





     THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED ON THIS NOTE OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR OUT OF ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY
PERSON. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE LENDER TO ACCEPT
THIS NOTE AND TO MAKE LOANS AS CONTEMPLATED HEREBY.


     This note shall be binding on the successors and assigns of the Borrower
and inure to the benefit of the Lender and any other holder of this note.
Whenever used herein, the term the Borrower shall be deemed to include its
successors and assigns and the term "Arrangoiz" shall be deemed to include the
Sellers and their respective successors and assigns. If any term or provision of
this note shall be held invalid, illegal or unenforceable, the validity of all
other terms and provisions hereof shall be in no way affected thereby.


                                           Frontline Communications Corp.


                                           By: /s/ Stephen J. Cole-Hatchard
                                               ---------------------------------
                                               Stephen J. Cole-Hatchard
                                               Chief Executive Officer






                                     3




 




                                                                         ANNEX D


                           CERTIFICATE OF DESIGNATION
                                       of
                 SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
                                       of
                      FRONTLINE COMMUNICATIONS CORPORATION


        (Pursuant to Section 151 of the Delaware General Corporation Law)

             The undersigned, the authorized officer of Frontline Communications
Corporation, a Delaware corporation (the "Corporation"), in accordance with the
provisions of Section 103 of the Delaware General Corporation Law (the "DGCL")
does hereby certify that, in accordance with Section 141 of the DGCL, the
following resolution was duly adopted by the Board of Directors of the
Corporation on February 7, 2000:

             RESOLVED, that a series of Preferred Stock of the Corporation is
hereby created and the designation, number of shares, powers, preferences,
rights, qualifications, limitations and restrictions thereof (in addition to any
provisions set forth in the Certificate of Incorporation of the Corporation
which are applicable to the preferred stock of all classes and series) are as
follows:


                         SERIES B CUMULATIVE CONVERTIBLE
                           REDEEMABLE PREFERRED STOCK

             Section 1. Designation and Amount; Stated Capital. The shares of
such series shall be designated as "Series B Cumulative Convertible Redeemable
Preferred Stock" (the "Series B Convertible Preferred Stock"), the par value
thereof shall be $.01 per share and the number of shares constituting the Series
B Convertible Preferred Stock shall be 1,250,000. The amount to be represented
in stated capital at all times for each share of Series B Convertible Preferred
Stock shall be $.01.

             Section 2. Rank. With respect to dividend rights and rights on
liquidation, winding-up and dissolution, the Series B Convertible Preferred
Stock will rank: (i) senior to: (A) the common stock, par value $.01 per share
(the "Common Stock"); (B) all other classes of common stock and (C) each other
class or series of preferred stock of the Corporation now or hereafter
established by the Board of Directors (the "Board of Directors" or the "Board")
of the Corporation, the terms of which do not expressly provide that it ranks
senior to, or on a parity with, the Series B Convertible Preferred Stock as to
dividend and redemption rights and rights on liquidation, winding-up and
dissolution of the Corporation (collectively referred to as "Junior Stock");
(ii) on a parity with each other class or series of preferred stock of the
Corporation established hereafter by the Board of Directors, the terms of which
expressly provide that such class or series will rank on a parity with the
Series B Convertible Preferred Stock as to dividend and redemption rights and
rights on liquidation, winding-up and dissolution (collectively referred to as
"Parity Stock"); and (iii) junior to each class or series of preferred stock of
the Corporation established hereafter by the Board, the terms of which class or
series expressly provide that such class or series will rank senior to the
Series B Convertible Preferred Stock as to dividend and redemption rights or
rights on liquidation, winding-up and dissolution of the Corporation
(collectively referred to as "Senior Stock").

             Section 3.  Dividends and Distributions.

             (a) The holders of shares of Series B Convertible Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for such purpose, cumulative dividends at the
rate of $.60 per share of the Series B Convertible Preferred Stock per annum,
and no more. The dividend on each share of Series B Convertible Preferred Stock
shall accrue from the date of its original issuance. The dividend shall be
payable on the last business day of June and December of each year, commencing
on June 30, 2000, to the holders of record as they appear on the stock books of
the Corporation on such record dates, not more than 60 nor less than 10 days
preceding the payment dates for such dividends, as shall be fixed by the Board.
The amount of dividends payable per share of Series B Convertible Preferred
Stock for each semi-annual dividend period shall be computed by dividing the
annual dividend amount by two. The amount of dividends payable for the initial
dividend period and any period shorter than a full semi-annual dividend period
shall be computed on the basis of a 365-day year and the actual days elapsed.




 



 




             (b) Any dividends on the Series B Convertible Preferred Stock
payable pursuant to this Section 3 may be paid, at the Corporation's option,
either in cash or by the issuance of shares of Common Stock having an average
daily Closing Price (as hereinafter defined), on the five consecutive trading
days immediately preceding the day prior to the record date for the
determination of stockholders entitled to receive such dividend, equal to the
amount of such dividends; provided, however, that cash will be paid in lieu of
the issuance of fractional shares of Common Stock; and provided, further, that
accrued and unpaid dividends payable pursuant to Section 4 or 5 will be paid in
cash.
             (c) As used herein, the "Closing Price" for each day for any
security shall be the last reported sales price regular way or, in case no sale
takes place on such day, the average of the closing bid and asked prices regular
way on such day, in either case as reported on the principal national securities
exchange on which such security is listed or quoted (including, for this
purpose, the Nasdaq Stock Market), or, if not so listed or quoted, the average
of the high bid and low asked prices on such day as recorded by the Nasdaq Stock
Market, or, if the Nasdaq Stock Market shall not have reported any bid and asked
prices for such security on such day, the average of the bid and asked prices
for such day as furnished by any New York Stock Exchange member firm selected
from time to time by the Corporation for such purpose, or, if no such bid and
asked prices can be obtained from any such firm, the fair market value of such
security on such day as determined in good faith by the Board of Directors. Such
determination by the Board of Directors shall be conclusive.

             (d) No dividends or other distributions, other than dividends
payable solely in shares of Junior Stock, shall be paid or set apart for payment
on, and no purchase, redemption or other acquisition shall be made by the
Corporation of, any shares of Junior Stock unless and until all accrued and
unpaid dividends due on the Series B Convertible Preferred Stock (whether or not
declared) shall have been paid or declared and set apart for payment; provided,
however, that the conversion, exercise or exchange of a security for Junior
Stock shall not be deemed a purchase, redemption or acquisition of the security
so converted or exercised for purposes of this Section 3(d).

             (e) If at any time any dividend on any Senior Stock shall be in
default, in whole or in part, no dividend shall be paid or declared and set
apart for payment on the Series B Convertible Preferred Stock unless and until
all accrued and unpaid dividends with respect to the Senior Stock shall have
been paid or declared and set apart for payment, without interest.

             (f) No full dividends shall be paid or declared and set apart for
payment on any Parity Stock for any period unless all accrued but unpaid
dividends (whether or not declared) have been, or contemporaneously are, paid or
declared and set apart for such payment on the Series B Convertible Preferred
Stock. No full dividends shall be paid or declared and set apart for payment on
the Series B Convertible Preferred Stock for any period unless all accrued but
unpaid dividends (whether or not declared) have been, or contemporaneously are,
paid or declared and set apart for payment on the Parity Stock for all dividend
periods terminating on or prior to the date of payment of such full dividends.
When dividends are not paid in full upon the Series B Convertible Preferred
Stock and the Parity Stock, all dividends paid or declared and set apart for
payment upon shares of Series B Convertible Preferred Stock and the Parity Stock
shall be paid or declared and set apart for payment pro rata, so that the amount
of dividends paid or declared and set apart for payment per share on the Series
B Convertible Preferred Stock and the Parity Stock shall in all cases bear to
each other the same ratio that accrued and unpaid dividends per share on the
shares of Series B Convertible Preferred Stock and the Parity Stock bear to each
other. Any reference to "distribution" contained in this Section 3 shall not be
deemed to include any distribution made in connection with any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.

             Section 4. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series B Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, a sum in cash equal to $15.00 per share (the
"Liquidation Preference"), together with an amount equal to the dividends
accrued and unpaid thereon (whether or not declared) to the date of final
distribution to such holders, without interest, and no more, before any payment
shall be made or any assets distributed to the holders of any Junior Stock;
provided, however, that such rights shall accrue to the holders of Series B
Convertible Preferred Stock only if the Corporation's payments with respect to
the liquidation preference of the holders of Senior Stock are fully met. After
the liquidation preferences of the Senior Stock are fully met, the entire assets
of the Corporation available for distribution shall be distributed ratably among
the holders of the Series B Convertible Preferred Stock and any Parity Stock in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
accrued and unpaid dividends and the Liquidation Preference of the shares of the
Series B Convertible Preferred Stock as provided in this Section 4, the holders
of such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation. Neither a consolidation or merger of
the Corporation with another corporation nor a sale or transfer of all or part
of the Corporation's assets for cash, securities or other property will be
considered a liquidation, dissolution or winding up of the Corporation.

                                       2


 




 



             Section 5.  Optional Redemption.

             (a) If at any time after February 11, 2000 (the "Issue Date"), the
Closing Price of the Common Stock shall be $8.80 or more per share for any 15
consecutive trading days, the Corporation, at its option, may at any time (until
the date that is five days after the last trading day used in determining the
Closing Price for such 15 consecutive trading day period) give notice in
accordance with Section 5(c) that it will redeem all, but not less than all, of
the Series B Convertible Preferred Stock (an "Optional Price-Based Redemption")
at a sum in cash equal to the Liquidation Preference per share, together with an
amount equal to the dividends accrued and unpaid thereon (whether or not
declared), pro rata to the date fixed for redemption.

             (b) At any time after the date that is 180 days after the Issue
Date, the Corporation, at its option, may redeem (an "Optional Time-Based
Redemption") all, but not less than all, of the Series B Convertible Preferred
Stock on any date set by the Board of Directors, at the price per share set
forth below (the "Principal Price"), plus, in each case, an amount in cash per
share equal to the dividends accrued and unpaid thereon (whether or not
declared), pro rata to the date fixed for redemption. The Principal Price for an
Optional Time-Based Redemption shall be as follows:
 



If the date of the Optional Time-Based                                          
Redemption is:                                                                 The Principal Price Shall Be:
                                                                                
                                                                                
more than 180 days after the Issue Date and less than 12 months after the
Issue Date.................................................................    150% of the Liquidation Preference
                                                                                
12 months or more after the Issue Date and less than 24 months after the
Issue Date.................................................................    125% of the Liquidation Preference
                                                                                
24 months or more after the Issue Date and less than 36 months after the
Issue Date.................................................................    115% of the Liquidation Preference
                                                                                
36 months or more after the Issue Date and at any time thereafter..........    110% of the Liquidation Preference




             (c) Not more than 60 nor less than 15 days prior to any redemption
date, notice by first class mail, postage prepaid, shall be given to the holders
of record of the Series B Convertible Preferred Stock, addressed to such
stockholders at their last addresses as shown on the books of the Corporation.
Each such notice of redemption shall specify the date fixed for redemption, the
redemption price, the place or places of payment, the then effective Conversion
Rate (as hereinafter defined), that the right of holders of shares of Series B
Convertible Preferred Stock being redeemed to exercise their conversion right
shall terminate as to such shares at the close of business on the day that
immediately precedes the date that is fixed for redemption (provided that no
default by the Corporation in the payment of the applicable redemption price
shall have occurred and be continuing), that payment will be made upon
presentation and surrender of the shares of Series B Convertible Preferred
Stock, that accrued but unpaid dividends to the date fixed for redemption
(whether or not declared) will be paid on the date fixed for redemption, and
that on and after the redemption date, dividends will cease to accrue on such
shares.

             (d) Any notice which is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of the
Series B Convertible Preferred Stock receives such notice; and failure to give
such notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Series B Convertible Preferred Stock. On
or after the date fixed for redemption as stated in such notice, each holder of
the shares shall surrender the certificate (or certificates) evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the applicable redemption price. If,
on the date fixed for redemption, funds necessary for the redemption shall be
available therefor and shall have been irrevocably deposited or set aside, then,
notwithstanding that the certificates evidencing any shares so called for
redemption shall not have been surrendered, the dividends with respect to the
shares so called shall cease to accrue after the date fixed for redemption, the
shares shall no longer be deemed outstanding, the holders thereof shall cease to
be stockholders, and all rights whatsoever with respect to the shares so called
for redemption (except the right of the holders to receive the applicable
redemption price, without interest, upon surrender of their certificates
therefor) shall terminate. Any monies deposited by the Corporation pursuant to
the foregoing provision and unclaimed at the end of one year from the date fixed
for redemption shall, to the extent permitted by law, be returned to the
Corporation, after which the holders of shares of Series B Convertible Preferred
Stock so called for redemption shall look only to the Corporation for the
payment thereof.



                                       3



 



 



             Section 6.  No Sinking Fund.

             The shares of Series B Convertible Preferred Stock shall not be
subject to the operation of a purchase, retirement or sinking fund.

             Section 7.  Conversion.

             (a) At any time after the Issue Date but not later than the close
of business on the day preceding the date fixed for the redemption of the Series
B Convertible Preferred Stock in any notice of redemption given pursuant to the
provisions of Section 5 hereof if there is no default in payment of the
applicable redemption price, the holders of the Series B Convertible Preferred
Stock may, upon surrender of the certificates therefor, convert any or all of
their shares of Series B Convertible Preferred Stock into fully paid and
nonassessable shares of Common Stock and such other securities and property as
hereinafter provided. Each share of Series B Convertible Preferred Stock shall
be convertible at the office of any transfer agent for the Series B Convertible
Preferred Stock, and at such other office or offices, if any, as the Board of
Directors may designate, into that number of fully paid and nonassessable shares
of Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) as shall be equal to the Conversion Rate, determined as hereinafter
provided, in effect at the time of conversion. Shares of Series B Convertible
Preferred Stock may initially be converted into full shares of Common Stock at
the rate of 3.4 shares of Common Stock for each share of Series B Convertible
Preferred Stock subject to adjustment as hereinafter provided (the "Conversion
Rate"). Notwithstanding anything in this Section 7 to the contrary, no change in
the Conversion Rate shall actually be made until the cumulative effect of the
adjustments called for by this Section 7 since the date of the last change in
the Conversion Rate would change the Conversion Rate by more than 1%. However,
once the cumulative effect would result in such a change, the Conversion Rate
shall actually be changed to reflect all adjustments called for by this Section
7 and not previously made.

             (b) The right of the holders of Series B Convertible Preferred
Stock to convert their shares shall be exercised by surrendering for such
purpose to the Corporation or its agent, as provided above, certificates
representing shares to be converted, duly endorsed in blank or accompanied by
proper instruments of transfer and a notice of conversion. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery upon conversion of shares of Common
Stock or other securities or property in a name other than that of the holder of
the shares of the Series B Convertible Preferred Stock being converted, and the
Corporation shall not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons requesting the
issuance thereof shall have paid to the Corporation the amount of any such tax
or shall have established to the satisfaction of the Corporation that such tax
has been paid.

             (c) The Corporation (and any successor corporation) shall take all
action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series B Convertible Preferred
Stock outstanding upon the basis hereinbefore provided are at all times reserved
by the Corporation (or any successor corporation), free from preemptive rights,
for such conversion, subject to the provisions of Section 7(d). If the
Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series B Convertible Preferred Stock shall be convertible as
herein provided, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series B Convertible Preferred Stock on the new
basis.



                                       4



 



 




             (d) In case of any consolidation or merger of the Corporation with
any other corporation or in case of any sale or transfer of all or substantially
all of the assets of the Corporation, or in the case of any share exchange, in
each case pursuant to which all of the outstanding shares of Common Stock are
converted into other securities, cash or other property, the Corporation shall
make appropriate provision or cause appropriate provision to be made so that
each holder of shares of Series B Convertible Preferred Stock then outstanding
shall have the right thereafter (in lieu of the right to convert into Common
Stock, which right shall cease) to convert such shares of Series B Convertible
Preferred Stock into the kind and amount of securities, cash or other property
receivable upon such consolidation, merger, sale, transfer or share exchange by
a holder of the number of shares of Common Stock into which such shares of
Series B Convertible Preferred Stock could have been converted immediately prior
to the effective date of such consolidation, merger, sale, transfer or share
exchange. If, in connection with any such consolidation, merger, sale, transfer
or share exchange, each holder of shares of Common Stock is entitled to elect to
receive either securities, cash or other property upon completion of such
transaction, the Corporation shall provide or cause to be provided to each
holder of Series B Convertible Preferred Stock the right to elect the
securities, cash (other than by the exercise of appraisal rights) or other
property into which the Series B Convertible Preferred Stock held by such holder
shall be convertible after completion of any such transaction on the same terms
and subject to the same conditions applicable to holders of the Common Stock
(including, without limitation, notice of the right to elect, limitations on the
period in which such election shall be made and the effect of failing to
exercise the election). The Corporation shall not effect any such transaction
unless the provisions of this Section 7(d) have been complied with. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers or share exchanges.

             (e) Upon the surrender of certificates representing shares of
Series B Convertible Preferred Stock, the person converting shall be deemed to
be the holder of record of the Common Stock issuable upon such conversion, and
all rights with respect to the shares surrendered shall forthwith terminate
except the right to receive the Common Stock or other securities, cash or other
property as herein provided.

             (f) No fractional shares of Common Stock shall be issued upon
conversion of Series B Convertible Preferred Stock but, in lieu of any fraction
of a share of Common Stock which would otherwise be issuable in respect of the
aggregate number of such shares surrendered for conversion at one time by the
same holder, the Corporation shall pay in cash an amount equal to the product of
(i) the Closing Price of a share of Common Stock on the last trading day before
the conversion date and (ii) such fraction of a share.

             (g) The Conversion Rate shall be adjusted from time to time under
certain circumstances, subject to the provisions of the last two sentences of
Section 7(a), as follows:

                   (i) In case the Corporation shall (A) pay a dividend or make
       a distribution on its Common Stock in shares of its capital stock, (B)
       subdivide its outstanding Common Stock into a greater number of shares,
       (C) combine the shares of its outstanding Common Stock into a smaller
       number of shares, or (D) issue by reclassification of its Common Stock
       any shares of its capital stock, then in each such case the Conversion
       Rate in effect immediately prior thereto shall be proportionately
       adjusted so that the holder of any Series B Convertible Preferred Stock
       thereafter surrendered for conversion shall be entitled to receive, to
       the extent permitted by applicable law, the number and kind of shares of
       capital stock of the Corporation which it would have owned or have been
       entitled to receive after the happening of such event had such Series B
       Convertible Preferred Stock been converted immediately prior to the
       record date for such event (or if no record date has been established in
       connection with such event, the effective date for such action). An
       adjustment pursuant to this Section 7(g)(i) shall become effective
       immediately after the record date in the case of a stock dividend or
       distribution and shall become effective immediately after the effective
       date in the case of a subdivision, combination, or reclassification.

                   (ii) In case the Corporation shall issue rights or warrants
       to all holders of the Common Stock entitling such holders to subscribe
       for or purchase Common Stock on the record date referred to below at a
       price per share less than the average daily Closing Prices of the Common
       Stock on the 30 consecutive trading days commencing 45 business days
       before such record date (the "Current Market Price"), then in each such
       case the Conversion Rate in effect on such record date shall be adjusted
       in accordance with the formula




                                       5



 



 






                                          
          
                          c1 = C x              O + N
                                                O + N x P
                                                    -----
                                                      M




Where

             c1 =   the adjusted Conversion Rate.
             C  =   the current Conversion Rate (immediately preceding the
                    issuance of such rights or warrants).
             O  =   the number of shares of Common Stock outstanding on the
                    record date.
             N  =   the number of additional shares of Common Stock issuable
                    pursuant to the N exercise of such rights or warrants.
             P  =   the exercise price per share of such rights or warrants.
             M  =   the Current Market Price per share of Common Stock on such
                    record date.


Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants. If
any or all of such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Rate then in effect shall be readjusted
appropriately.

                   (iii) In case the Corporation shall, by dividend or
       otherwise, distribute to all holders of its Junior Stock or Parity Stock
       evidences of its indebtedness or assets (including cash or securities,
       but excluding any warrants or subscription rights referred to in Section
       7(g)(ii) above, any ordinary dividend paid in cash out of the retained
       earnings of the Corporation and any dividend or distribution referred to
       in Section 7(g)(i) above), then in each such case the Conversion Rate
       then in affect shall be adjusted in accordance with the formula
 


                                             
                          c1 = C x              M
                                                M-F





where
 
             c1 =   the adjusted Conversion Rate.
             C  =   the current Conversion Rate (immediately preceding such
                    distribution).
             M  =   the Current Market Price per share of Common Stock with
                    respect to the record date mentioned below.
             F  =   the aggregate amount of such cash dividend and/or the fair
                    market value on such record date of the assets or securities
                    to be distributed, divided by the number of shares of Common
                    Stock outstanding on the record date. In the case of
                    securities, the fair market value shall be the average of
                    the daily Closing Price for the 30 trading days preceding
                    such record date (or such fewer number of days for which
                    there shall be a recognized trading market); provided,
                    however, that if there shall not be any recognized trading
                    market for such securities until after such record date, the
                    fair market value shall be the average of the daily Closing
                    Price for the 10 trading days following such record date. In
                    all other cases, the Board of Directors shall determine such
                    fair market F value, which determination shall be
                    conclusive.

Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution.

                   (iv) All calculations hereunder shall be made to the nearest
       cent or to the nearest 1/100 of a share, as the case may be.




                                       6



 



 





Page 7 of 52

                   (v) If at any time as a result of an adjustment made pursuant
       to Section 7(g)(i), the holder of any Series B Convertible Preferred
       Stock thereafter surrendered for conversion shall become entitled to
       receive securities, cash, or assets other than Common Stock, the number
       or amount of such securities or property so receivable upon conversion
       shall be subject to adjustment from time to time in a manner and on terms
       as nearly equivalent as practicable to the provisions with respect to the
       Common Stock contained in Section 7(g)(i) to (iv), inclusive, above.

             (h) Except as otherwise provided above in this Section 7, no
adjustment in the Conversion Rate shall be made in respect of any conversion for
share distributions or dividends theretofore declared and paid or payable on the
Common Stock.

             (i) Whenever the Conversion Rate is adjusted as herein provided,
the Corporation shall send to each transfer agent for the Series B Convertible
Preferred Stock and the Common Stock, and to the principal securities exchange,
if any, on which the Series B Convertible Preferred Stock and the Common Stock
is traded, or the Nasdaq Stock Market if the Series B Convertible Preferred
Stock or Common Stock is admitted for quotation thereon, a statement signed by
the Chairman of the Board, the President, or any Vice President of the
Corporation and by its Treasurer or its Secretary or Assistant Secretary stating
the adjusted Conversion Rate determined as provided in this Section 7, and any
adjustment so evidenced, given in good faith, shall be binding upon all
stockholders and upon the Corporation. Whenever the Conversion Rate is adjusted,
the Corporation will give notice by mail to the holders of record of Series B
Convertible Preferred Stock, which notice shall be made within 45 days after the
effective date of such adjustment and shall state the adjustment and the
Conversion Rate. Notwithstanding the foregoing notice provisions, failure by the
Corporation to give such notice or a defect in such notice shall not affect the
binding nature of such corporate action of the Corporation.

             (j) Whenever the Corporation shall propose to take any of the
actions specified in Section 7(d) or in Section 7(g)(i), (ii) or (iii) which
would result in any adjustment in the Conversion Rate under this Section 7, the
Corporation shall use its best efforts to cause a notice to be mailed at least
20 days prior to the date on which the books of the Corporation will close or on
which a record will be taken for such action, to the holders of record of the
outstanding Series B Convertible Preferred Stock on the date of such notice.
Such notice shall specify the action proposed to be taken by the Corporation and
the date as of which holders of record of the Common Stock shall participate in
any such actions or be entitled to exchange their Common Stock for securities or
other property, as the case may be. Failure by the Corporation to mail the
notice or any defect in such notice shall not affect the validity of the
transaction.

             (k) Notwithstanding any other provision of this Section 7, no
adjustment in the Conversion Rate need be made (i) for a transaction referred to
in Section 7(g)(i), (ii) or (iii) if holders of Series B Convertible Preferred
Stock are to participate in the transaction or distribution on a basis and with
notice that the Board of Directors reasonably determines such transaction to be
fair to the holders of the Series B Convertible Preferred Stock and appropriate
in light of the basis on which holders of Common Stock or, in the case of a
transaction referred to in Section 7(g)(iii), holders of Junior Stock
participate in the transaction; (ii) for sales of Common Stock pursuant to a
plan for reinvestment of dividends and interest, provided that the purchase
price in any such sale is at least equal to 90% of the fair market value of the
Common Stock at the time of such purchase, or pursuant to any plan adopted by
the Corporation for the benefit of its employees, directors or consultants;
(iii) for a change in par value of the Common Stock not involving a subdivision
or combination described in Section 7(g)(i)(B) or 7(g)(i)(C); or (iv) after the
Series B Convertible Preferred Stock becomes convertible solely into cash by
reason of an adjustment pursuant to Section 7(d) hereof.

                   Section 8.  Voting Rights.

                   (a) The holders of Series B Convertible Preferred Stock will
not have any voting rights except as set forth in this Section 8 or as otherwise
from time to time required by law.




                                       7



 



 




                   (b) The affirmative vote or consent of the holders of at
least a majority of the outstanding shares of the Series B Convertible Preferred
Stock, voting separately as a class, will be required for (i) the issuance of
any Senior Stock or Parity Stock or (ii) any amendment, alteration or repeal of
this Certificate of Designation if such amendment, alteration or repeal
materially and adversely affects the powers, preferences or special rights of
the Series B Convertible Preferred Stock. The creation, authorization or
issuance of any shares of any Junior Stock or the increase or decrease in the
amount of authorized capital stock of any class, including preferred stock,
shall not require the consent of holders of the Series B Convertible Preferred
Stock and shall not be deemed to affect adversely the rights, preferences,
privileges or voting rights of shares of Series B Convertible Preferred Stock.
Such right of the holders of Series B Convertible Preferred Stock to vote as
hereinabove provided may be exercised at any annual meeting or at any special
meeting called for such purpose as hereinafter provided or at any adjournment
thereof.

                   (c) If dividends on the Series B Convertible Preferred Stock
are in arrears and unpaid for six or more dividend periods (whether or not
consecutive) (a "Dividend Default"), then the number of directors constituting
the Board of Directors of the Corporation will be increased by two and the
holders of the then outstanding shares of Series B Convertible Preferred Stock
(together with the holders of Parity Stock upon which like rights have been
conferred and are exercisable), voting separately and as a class, shall have the
right and power to elect such two additional directors. The occurrence of a
Dividend Default is a "Voting Rights Triggering Event." A Voting Rights
Triggering Event shall not be deemed to have occurred if at the time of such
event there are less than 25,000 shares of Series B Convertible Preferred Stock
then outstanding.

                   (d) The voting rights set forth in Section 8(c) will continue
until such time as (x) in the case of a default in the payment of dividends, all
dividends in arrears on the Series B Convertible Preferred Stock are paid in
full or (y) there are fewer than 25,000 shares of Series B Convertible Preferred
Stock outstanding, at which time the term of any directors elected pursuant to
the provisions of Section 8(c) shall terminate and the number of directors
constituting the Board of Directors shall be decreased by two (until the
occurrence of any subsequent Voting Rights Triggering Event). At any time after
voting power to elect directors shall have become vested and be continuing in
the holders of Series B Convertible Preferred Stock pursuant to Section 8(c), or
if vacancies shall exist in the offices of directors elected by such holders, a
proper officer of the Corporation may, and upon the written request of the
holders of record of at least 25% of the shares of Series B Convertible
Preferred Stock then outstanding addressed to the Secretary of the Corporation
shall, call a special meeting of the holders of Series B Convertible Preferred
Stock; provided, however, that no such special meeting shall be called if the
next annual meeting of stockholders of the Corporation is to be held within 60
days after the voting power to elect directors shall have become vested, in
which case such meeting shall be deemed to have been called for such next annual
meeting. If such meeting shall not be called by a proper officer of the
Corporation within 20 days after personal service to the Secretary of the
Corporation at its principal executive offices, then the holders of record of at
least 25% of the outstanding shares of Series B Convertible Preferred Stock may
designate in writing one of their members to call such meeting at the expense of
the Corporation, and such meeting may be called by the person so designated upon
the notice required for the annual meetings of stockholders of the Corporation
and shall be held at the place for holding the annual meetings of stockholders.
Any holder of Series B Convertible Preferred Stock so designated shall have, and
the Corporation shall provide, access to the lists of holders of Series B
Convertible Preferred Stock to be called pursuant to the provisions hereof. If
no special meeting of the holders of Series B Convertible Preferred Stock is
called as provided in this Section 8(d), then such meeting shall be deemed to
have been called for the next annual meeting of stockholders of the Corporation
or special meeting of the holders of any other capital stock of the Corporation.

                   (e) At any meeting held for the purposes of electing
directors at which the holders of Series B Convertible Preferred Stock (together
with the holders of Parity Stock upon which like rights have been conferred and
are exercisable) shall have the right, voting together as a separate class, to
elect directors as aforesaid, the presence in person or by proxy of the holders
of at least a majority in voting power of the outstanding shares of Series B
Convertible Preferred Stock (and such Parity stock) shall be required to
constitute a quorum thereof.

                   (f) Any vacancy occurring in the office of a director elected
by the holders of Series B Convertible Preferred Stock (and such Parity Stock)
may be filled by the remaining director elected by the holders of Series B
Convertible Preferred Stock (and such Parity Stock) unless and until such
vacancy shall be filled by the holders of Series B Convertible Preferred Stock
(and such Parity Stock).




                                       8


 




 




                   (g) In any case in which the holders of Series B Convertible
Preferred Stock shall be entitled to vote pursuant to this Section 8 or pursuant
to Delaware law, each holder of Series B Convertible Preferred Stock entitled to
vote with respect to such matters shall be entitled to one vote for each share
of Series B Convertible Preferred Stock held.

                   Section 9. Outstanding Shares. All shares of Series B
Convertible Preferred Stock shall be deemed outstanding except: (i) from the
date fixed for redemption pursuant to Section 5 hereof, all shares of Series B
Convertible Preferred Stock which have been so called for redemption under
Section 5, if funds necessary for such redemption of such shares are available;
(ii) from the date of surrender of certificates representing shares of Series B
Convertible Preferred Stock for conversion into Common Stock, all shares of
Series B Convertible Preferred Stock converted into Common Stock; and (iii) from
the date of registration of transfer, all shares of Series B Convertible
Preferred Stock held of record by the Corporation or any subsidiary of the
Corporation.

             IN WITNESS WHEREOF, Frontline Communications Corporation has caused
this certificate to be signed by Stephen J. Cole-Hatchard, its Chief Executive
Officer this 10th day of February, 2000.
 
                                            FRONTLINE COMMUNICATIONS CORPORATION


                                            By /s/ Stephen J.  Cole-Hatchard
                                               ---------------------------------
                                               Stephen J. Cole-Hatchard
                                               Chief Executive Officer





                                       9



 



 



                                                                         ANNEX E


                       OPINION OF GUNALLEN FINANCIAL, INC.

March 13, 2003

The Special Committee of the Board of Directors
Frontline Communications Corporation
One Blue Hill Plaza
Pearl River, New York 10965

Members of the Board:

       You have asked GunnAllen Financial, Incorporated ("GunnAllen") to render
a written opinion ("Opinion") to the Special Committee of the Board of Directors
as to the fairness, from a financial point of view, to Frontline Communications
Corporation frontline") of the Transaction (defined below) provided for in the
stock Purchase Agreement, dated as of January 24, 2003 (the "Stock Purchase
Agreement"), among Frontline Communications Corporation, a Delaware Corporation
and Proyecciones y Ventas Organizadas, S.A. de C.V., a corporation organized
under the laws of the Republic of Mexico, Ventura Martinez del Rio Requejo, and
Ventura Martinez del Rio Arrangoiz, ("collectively referred to as "Provo"). The
Stock Purchase Agreement provides for, among things, the acquisition by
Frontline of all outstanding shares of the common stack, par value peso $50 per
share, of Provo and its subsidiaries ( as outlined in the Stock Purchase
Agreement) in exchange for an aggregate of 22,000,000 shares of the common
stock, per value $0.01 per share, of Frontline ("the Transaction"), subject to
certain adjustments as more fully described In the Stock Purchase Agreement and
as a result of the acceptance and conversion of Provo's Series C Preferred
Stock, Our opinion does not address the fairness of the Transaction if Frontline
issues Provo a note in the amount of $20 million as provided for in the Stock
Purchase Agreement.

       You also have asked GunnAllen to render an Opinion to the Special
Committee of the Board of Directors as to the fairness, from a financial point
of view, to the holders of Frontline, other than Provo than the consideration to
be received by stockholders of Provo pursuant to the Stock Purchase Agreement.

       In arriving at our Opinion, we:

       (a) reviewed the Stock Purchase Agreement and certain related documents,
including forms of exhibits attached as exhibits to the Stock Purchase Agreement
(including the Certificate of Designation and "Registration Rights Agreement");

       (b) reviewed audited financial statements of Frontline and for the fiscal
years ended December 31, December 31, 2000 and December 31, 2001 and the
unaudited financial statements of Provo for the fiscal years ending December 31,
2004-December 31, 2001 and December 31, 2002 and assumed that there would be no
material differences in the unaudited financial statements after they were
audited.

       (c) reviewed unaudited financial statements of Frontline for the nine
months ended September 30, 2002;

       (d) reviewed financial forecasts and other information relating to
Frontline and Provo provided to or discussed with us by the managements of
Frontline and Provo.

       (e) reviewed historical market prig and trading volumes for Frontline
Common Stock

       (f) held discussions with the senior managements and other
representatives of Frontline with reaped to the businesses and prospects for
future growth of Frontline and Provo;

       (g) reviewed and analyzed certain publicly available financial date for
certain companies we deemed comparable to Frontline and Provo;

       (h) performed discounted cash flow analyses of Frontline and Provo using
assumptions of future performance prepared or discussed with us by the
managements of Frontline and Provo;

       (i) reviewed public information concerning Frontline, and

       (j) performed such other analyses and reviewed and considered such other
information and factors as we deemed appropriate.



                                      E-1



 



 



       In rendering our Opinion, we relied upon and assumed, without independent
verification or investigation, the accuracy and completeness of all of the
financial and other information provided to or discussed with us by Frontline
and Provo and their respective employees, representatives and affiliates. With
respect to the financial forecasts and other information relating to Frontline
and provided to or discussed with us by the managements of Frontline and Provo,
we assumed, at the direction of the managements of Frontline and Prow, without
independent verification or investigation, that such forecasts and information
were reasonably prepared on bases reflecting the best available information,
estimates and judgements of the managements of Frontline and Provo as to the
existing and future financial condition end operating results of Frontline and
Provo . We have relied, at the direction of the managements of Frontline and
Provo, without independent verification or investigation, upon the assessments
of the managements of Frontline and Provo as to the existing and future
technology and products of and the risks associated with such technology and
products. We have assumed, with the consent of Frontline, that in the course of
obtaining the necessary regulatory or third party approvals and consents for the
Transaction, no delay, limitation, restriction or conditions will be imposed
that would have a material adverse effect on Frontline or the contemplated
benefits to Frontline of the Transaction. We also have assumed, with to consent
of Frontline, that the Transaction and the other transactions contemplated by
tire Agreements will be consummated, in all material respects in accordance with
their terms, without waiver, modification or amendment of any material
conditions or agreements. We have neither made nor obtained any independent
evaluations or appraisals of the assets or liabilities (contingent or otherwise)
of Frontline, Provo, or affiliated entities. We are not expressing any opinion
as to the underlying valuation, future performance or long-term viability of
Frontline, Provo or the prices at which the Frontline Common Stock will trade
upon or subsequent to announcement or consummation of the Transaction. We
express no view as to, end our Opinion does not address, the underlying business
decision of Frontline to effect the Transaction nor were we requested to
consider the relative merits of the Transaction as compared to any alternative
business strategies that might exist for Frontline or the effect of any other
transaction in which Frontline might engage. In connection with our engagement,
we were not requested to, and we did not, participate in the negotiation or
structuring of the Transaction. Our Opinion is necessarily based on the
Information available to us and general economic, financial and stock market
conditions and circumstances as they exist and can be evaluated by us on the
date hereof. It should be understood that, although subsequent developments may
affect this Opinion, we do not have any obligation to update, revise or reaffirm
the Opinion.

       As part of our investment banking business, we are regularly engaged in
valuations of businesses end securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.

       We have been engaged solely to render an Opinion to the Special Committee
of the Board of Directors in connection with the Transaction, for which we tire
received and will receive compensation, the balance of which was paid upon
delivery of this Opinion. GunnAllen Financial and its affiliates has not in the
past but may in the future provide services to Frontline unrelated to the
proposed Transaction, for which services GunnAllen Financial and its affiliates
may receive compensation. In he ordinary course of business, GunnAllen Financial
and its affiliates may actively trade securities of Frontline for their own
account and for the accounts of customers and, accordingly, may at arty time
hold a long or short position in such securities.

       Based upon and subject to the foregoing, and such other factors as we
deemed relevant, It is our opinion that, as of the date hereof, the Transaction
is fair, from a financial point of view, to Frontline and the holders of
Frontline Common Stock, other than Provo and its affiliates. This Opinion is for
the use of the Special Committee of the Board of Directors of Frontline in Its
evaluation of the Transaction and does riot constitute a recommendation to any
stockholder of Frontline or how such stockholder should vote with respect to any
matters relating to the Transaction.
 
                                       Very truly yours,

                                       /s/ GunAllen Financial
                                       -----------------------------------------
                                           GunAllen Financial




                                      E-2



 



 



                                                                         ANNEX F


                            CERTIFICATE OF AMENDMENT
                                       to
                           CERTIFICATE OF DESIGNATION
                                       of
                         SERIES B CUMULATIVE CONVERTIBLE
                           REDEEMABLE PREFERRED STOCK
                                       of
                      FRONTLINE COMMUNICATIONS CORPORATION

       Frontline Communications Corporation, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify:

       FIRST: The Certificate of Designation of Series B Cumulative Convertible
Redeemable Preferred Stock of the Corporation (the "Certificate of Designation")
is hereby amended by adding a new Section 10 to such Certificate of Designation,
which new Section 10 shall read in its entirety as follows:

             "Section 10. Mandatory Conversion. Notwithstanding anything to the
       contrary contained in this Section 7:

                   (a) Each share of Series B Convertible Preferred Stock that
       is issued and outstanding on the date and time at which this Certificate
       of Amendment of the Certificate of Designation (this "Certificate of
       Amendment") becomes effective shall be and is, by means of this
       Certificate of Amendment, automatically and without any further action on
       the part of the stockholders of the Corporation, converted into six
       shares of the Common Stock of the Corporation. The time and the date on
       which such conversion occurs and becomes effective shall be hereinafter
       referred to as the "Mandatory Conversion Date".

                   (b) Holders of shares of Series B Convertible Preferred Stock
       immediately prior to conversion pursuant to Section 10(a) shall, from and
       after the Mandatory Conversion Date, cease to own, be holders of or have
       any rights to or arising out of any shares of Series B Convertible
       Preferred Stock and, in lieu thereof, shall automatically and without any
       further action become owners or holders of and have rights to and arising
       out of the number of shares of Common Stock into which such shares of
       Series B Convertible Preferred Stock converted pursuant to Section 10.
       Until such time as each holder of shares of Series B Convertible
       Preferred Stock receives the stock certificate or stock certificates
       representing shares of Common Stock pursuant to Section 10(d) below, all
       stock certificates that, immediately prior to the Mandatory Conversion
       Date, represented shares of Series B Convertible Preferred Stock held by
       such holder of Series B Convertible Preferred Stock, shall, from and
       after the Mandatory Conversion Date, cease to represent shares of Series
       B Convertible Preferred Stock and shall be deemed to represent the number
       of shares of Common Stock into which the shares of Series B Convertible
       Preferred Stock previously represented by such stock certificate or
       certificates were converted on the Mandatory Conversion Date pursuant to
       Section 10(a) above.

                   (c) Within ten (10) days after the Mandatory Conversion Date,
       the Corporation shall give written notice to all holders of record of
       shares of Series B Convertible Preferred Stock that a conversion pursuant
       to this Section 10(a) has occurred and become effective. Such written
       notice shall be sent by first class mail, postage prepaid to the last
       address of each record stockholder as shown on the books of the
       Corporation, and such notice shall set forth the number of shares of
       Common Stock issued to such record holder on account of the conversion of
       such record holder's shares of Series B Convertible Preferred Stock in
       accordance with the provisions of Section 10(a).





                                      F-1



 



 




                   (d) The Corporation shall cause its transfer agent to deliver
       as promptly as practicable but in no event later than three (3) trading
       days after delivery of written notice from the Corporation pursuant to
       Section 10(c) above a stock certificate or stock certificates
       representing the number of shares of Common Stock into which all of such
       holder's shares of Series B Convertible Preferred Stock converted
       pursuant to Section 10(a), and thereafter each holder of a stock
       certificate or stock certificates that, prior to the Mandatory Conversion
       Date, represented shares of Series B Convertible Preferred Stock shall
       surrender such stock certificate or certificates to the Corporation's
       transfer agent at the place designated in such written notice. If so
       required by the Corporation or such transfer agent, stock certificates
       surrendered pursuant to this Section 10(d) shall be endorsed or
       accompanied by written instrument or instruments of transfer, in form
       satisfactory to the Corporation or such transfer agent, duly executed by
       the registered holder or by his or its attorney duly authorized in
       writing. The Corporation shall pay all expenses related to such issuances
       (including any stamp taxes or issue taxes); provided that the Corporation
       shall not be required to pay any tax which may be payable in respect of
       any transfer involved in the issuance and delivery of shares of Common
       Stock or other securities or property on conversion of shares of Series B
       Convertible Preferred Stock in a name other than that of such holder, and
       the Corporation shall not be required to issue or deliver any such shares
       or other securities or property unless and until the person or persons
       requesting the issuance thereof shall have paid to the Corporation the
       amount of any such tax or shall have established to the satisfaction of
       the Corporation that such tax has been paid. The converting holder shall
       be responsible for the amount of any withholding tax payable in
       connection with any conversion of shares of Series B Convertible
       Preferred Stock."

       SECOND: The amendments to the Certificate of Designation herein certified
has been duly adopted by the Board of Directors of the Corporation in accordance
with the provisions of Section 141of the General Corporation Law of the State of
Delaware.


       THIRD: The amendments to the Certificate of Designation herein certified
have been duly adopted by (i) a majority of the holders of the Series B
Convertible Preferred Stock of the Corporation and (ii) a majority of the
holders of the Common Stock of the Corporation, at a meeting convened on
November 10, 2003, in accordance with the provisions of Sections 211 et. seq. of
the General Corporation Law of the State of Delaware.


       FOURTH: The capital of said Corporation shall not be reduced under or by
reason of said amendment.


       IN WITNESS WHEREOF, Frontline Communications Corporation has caused this
Certificate to be signed by its Chief Executive Officer this ___ day of
November, 2003.

                                      Frontline Communications Corporation
                                       
                                      By: 
                                          --------------------------------------
                                          Stephen Cole-Hatchard
                                          Chief Executive Officer




                                      F-2



 



 




                                                                         ANNEX G


                         FOURTH CERTIFICATE OF AMENDMENT

                                       to
                          CERTIFICATE OF INCORPORATION
                                       of
                      FRONTLINE COMMUNICATIONS CORPORATION

       The undersigned, the Chief Executive Office of Frontline Communications
Corporation, a Delaware corporation (the "Corporation"), does hereby certify as
follows:

       1. That the name of the Corporation is Frontline Communications
Corporation.

       2. That the Certificate of Incorporation of the Corporation was filed
with the Delaware Secretary of State on February 18, 1997.

       3. That a first Certificate of Amendment to the Certificate of
Incorporation of the Corporation was filed with the Delaware Secretary of State
on July 24, 1997.

       4. That a second Certificate of Amendment to the Certificate of
Incorporation of the Corporation was filed with the Delaware Secretary of State
on June 28, 1998.

       5. That a third Certificate of Amendment to the Certificate of
Incorporation of the Corporation was filed with the Delaware Secretary of State
on January 6, 2000.

       6. That Article First of said Certificate of Incorporation, as amended,
is hereby further amended by striking it out in its entirety and inserting in
lieu and instead thereof a new Article First as follows:

                  "FIRST: The name of the Corporation is Provo International, 
             Inc."

       7. That the first paragraph of Article Fourth of said Certificate of
Incorporation, as amended, is hereby further amended by striking out the first
paragraph of Article Fourth thereof as it now exists and inserting in lieu and
instead thereof a new first paragraph of Article Fourth as follows:

                   "FOURTH: The total number of shares of capital stock which
             the Corporation shall have authority to issue is One Hundred Two
             Million (102,000,000) shares, of which One Hundred Million
             (100,000,000) shares shall be Common Stock, par value $0.01per
             share, and Two Million (2,000,000) shares shall be Preferred Stock,
             par value per $0.01 per share.

       8. That Article Fourth of said Certificate of Incorporation, as amended,
is hereby further amended by adding to the end of the thirteenth paragraph
thereof, the following:

              "Each three shares of Common Stock of the Corporation, par value
       $0.01, that are issued and outstanding on the date and at the time at
       which this Fourth Certificate of Amendment of the Certificate of
       Incorporation (the "Fourth Certificate of Amendment") becomes effective
       shall be and are, by means of this Fourth Certificate of Amendment,
       automatically and without any further action on the part of the
       stockholders of the Corporation converted into and reconstituted as two
       fully-paid and non-assessable shares of Common Stock of the Corporation,
       par value $0.01, subject to the treatment of fractional interests as
       described below, with a resultant simultaneous change in the amount of
       stated capital and additional paid-in capital of the Corporation. Each
       holder of a certificate or certificates which, immediately prior to the
       effective date of this Fourth Certificate of Amendment pursuant to and in
       accordance with the General Corporation Law of the State of Delaware (the
       "Effective Date"), representing outstanding shares of Common Stock prior
       to the Effective Date shall be entitled to receive a certificate
       representing the number of new shares of Common Stock to which such
       holder shall be entitled as a result of this Fourth Certificate of
       Amendment upon presentation of the certificate representing the
       outstanding shares prior to the Effective Date to the Corporation's
       transfer agent for cancellation and exchange.






 



 





             No scrip or fractional certificates will be issued upon such
       conversion and reconstitution. The number of shares of Common Stock shown
       on any certificate issuable upon the effectiveness of this Fourth
       Certificate of Amendment shall be rounded down to the nearest whole share
       if a fractional share interest in a share of Common Stock would, except
       for the provisions of the preceding sentence, be deliverable upon such
       conversion and reconstitution. The Corporation shall pay an amount in
       cash equal to the fair market value of such fractional interest to each
       holder of shares of Common Stock to whom such fractional interest would
       have been deliverable. Such fair market value will be determined by
       multiplying the fractional interest by the closing sale price per share
       of the Common Stock on the American Stock Exchange (or such other
       quotation or listing system on which the Common Stock may then be listed
       or quoted) on the business day immediately preceding the Effective Date.
       Such cash payment would be made upon the surrender to the Corporation's
       transfer agent of stock certificates representing a fractional share
       interest. The ownership of a fractional share interest in a share of
       Common Stock will not give the holder thereof any voting, dividend or
       other rights except the right to receive payment therefor as described
       herein.

             Except as required by law, all shares of Common Stock shall be
       identical in all respects and shall entitle the holders thereof to the
       same rights and privileges, subject to the same qualifications,
       limitations and restrictions. Except as required by law, the holders of
       shares of Common Stock shall be entitled to one vote per share of Common
       Stock on all matters on which stockholders of the Corporation have the
       right to vote."

       9. The foregoing amendment was duly approved and adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware and the Corporation's By-Laws at a meeting of the Board of Directors
of the Corporation.


       10. At the Annual Meeting of the Stockholders of the Corporation held on
November 10, 2003, duly called and held in accordance with the provisions of
Section 222 of the General Corporation Law of the State of Delaware, a majority
of the shares of the outstanding Common Stock entitled to vote thereon were
voted in favor of the amendment in accordance with Section 242 of the General
Corporation Law of the State of Delaware.


       11. This amendment shall be effective on the date this Fourth Certificate
of Amendment is filed and accepted by the Secretary of State of the State of
Delaware.


       The undersigned, being the Chief Executive Office of the Corporation, for
purposes of amending its Certificate of Incorporation pursuant to the General
Corporation Law of the State of Delaware, acknowledges that it is his act and
deed and that the facts stated herein are true, and has signed this instrument
on November __, 2003


                                        FRONTLINE COMMUNICATIONS CORPORATION
                                       
                                        By:
                                            ------------------------------------
                                            Stephen Cole-Hatchard
                                            Chief Executive Officer








 




                                                                  EXECUTION COPY


                         COMMON STOCK PURCHASE AGREEMENT

             COMMON STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of July
7, 2003 by and between FRONTLINE COMMUNICATIONS CORPORATION, a Delaware
corporation (the "Company"), and FUSION CAPITAL FUND II, LLC, an Illinois
limited liability company (the "Buyer"). Capitalized terms used herein and not
otherwise defined herein are defined in Section 10 hereof.

                                    WHEREAS:

             Subject to the terms and conditions set forth in this Agreement,
the Company wishes to sell to the Buyer, and the Buyer wishes to buy from the
Company, up to Thirteen Million Dollars ($13,000,000) of the Company's common
stock, par value $0.01 per share (the "Common Stock"). The shares of Common
Stock to be purchased hereunder are referred to herein as the "Purchase Shares."
In addition, as set forth in Section 1 (h) hereof, the Company may, in its sole
discretion, at any time after the date hereof and until 30 days after such date
as the Available Amount is equal to $0, deliver an irrevocable written notice to
the Buyer stating that the Company elects to enter into a second Common Stock
Purchase Agreement with the Buyer for the purchase of an additional Thirteen
Million Dollars ($13,000,000) of Common Stock.

             NOW THEREFORE, the Company and the Buyer hereby agree as follows:

             1. PURCHASE OF COMMON STOCK.

             Subject to the terms and conditions set forth in Sections 6, 7 and
9 below, the Company hereby agrees to sell to the Buyer, and the Buyer hereby
agrees to purchase from the Company, shares of Common Stock as follows:

             (a) Commencement of Purchases of Common Stock. The purchase and
sale of Common Stock hereunder shall commence (the "Commencement") within five
(5) Trading Days following the date of satisfaction (or waiver) of the
conditions to the Commencement set forth in Sections 6 and 7 below (or such
later date as is mutually agreed to by the Company and Buyer) (the date of such
Commencement, the "Commencement Date").

             (b) Buyer's Purchase Rights and Obligations. Subject to the
Company's right to suspend purchases under Section 1(d)(ii) hereof, the Buyer
shall purchase shares of Common Stock on each Trading Day during each Monthly
Period equal to the Daily Purchase Amount (as defined in Section 1(c)(i)) at the
Purchase Price. Within one (1) Trading Day of receipt of Purchase Shares, the
Buyer shall pay to the Company an amount equal to the Purchase Amount with
respect to such Purchase Shares as full payment for the purchase of the Purchase
Shares so received. The Company shall not issue any fraction of a share of
Common Stock upon any purchase. All shares of Common Stock (including fractions
thereof) issuable upon a purchase under this Agreement shall be aggregated for
purposes of determining whether the purchase would result in the issuance of a
fraction of a share of Common Stock. If, after the aforementioned aggregation,
the issuance would result in the issuance of a fraction of a share of Common
Stock, the Company shall round such fraction of a share of Common Stock up or
down to the nearest whole share. All payments made under this Agreement shall be
made in lawful money of the United States of America by check or wire transfer
of immediately available funds to such account as the Company or Buyer may from
time to time designate by written notice in accordance with the provisions of
this Agreement. Whenever any amount expressed to be due by the terms of this
Agreement is due on any day that is not a Trading Day, the same shall instead be
due on the next succeeding day which is a Trading Day.

             (c) The Daily Purchase Amount; Company's Right to Decrease or
Increase the Daily Purchase Amount.

                          (i) The Daily Purchase Amount. As used herein the term
             "Original Daily Purchase Amount" shall mean Sixteen Thousand Two
             Hundred Fifty Dollars ($16,250) per Trading Day. As used herein,
             the term "Daily Purchase Amount" shall mean initially Sixteen
             Thousand Two Hundred Fifty Dollars ($16,250) per Trading Day, which
             amount may be increased or decreased from time to time pursuant to
             this Section 1(c).


 



 




                          (ii) Company's Right to Decrease the Daily Purchase
             Amount. The Company shall always have the right at any time to
             decrease the amount of the Daily Purchase Amount by delivering
             written notice (a "Daily Purchase Amount Decrease Notice") to the
             Buyer which notice shall specify the new Daily Purchase Amount. The
             decrease in the Daily Purchase Amount shall become effective one
             Trading Day after receipt by the Buyer of the Daily Purchase Amount
             Decrease Notice. Any purchases by the Buyer which have a Purchase
             Date on or prior to the first (1st) Trading Day after receipt by
             the Buyer of a Daily Purchase Amount Decrease Notice must be
             honored by the Company as otherwise provided herein. The decrease
             in the Daily Purchase Amount shall remain in effect until the
             Company delivers to the Buyer a Daily Purchase Amount Increase
             Notice (as defined below).

                          (iii) Company's Right to Increase the Daily Purchase
             Amount. The Company shall have the right (but not the obligation)
             to increase the amount of the Daily Purchase Amount in accordance
             with the terms and conditions set forth in this Section 1(c)(iii)
             by delivering written notice to the Buyer stating the new amount of
             the Daily Purchase Amount (a "Daily Purchase Amount Increase
             Notice"). A Daily Purchase Amount Increase Notice shall be
             effective five (5) Trading Days after receipt by the Buyer. The
             Company shall always have the right at any time to increase the
             amount of the Daily Purchase Amount up to the Original Daily
             Purchase Amount. With respect to increases in the Daily Purchase
             Amount above the Original Daily Purchase Amount, as the market
             price for the Common Stock increases the Company shall have the
             right from time to time to increase the Daily Purchase Amount as
             follows. For every $0.50 increase in Threshold Price above $1.00
             (subject to equitable adjustment for any reorganization,
             recapitalization, non-cash dividend, stock split or other similar
             transaction), the Company shall have the right to increase the
             Daily Purchase Amount by up to an additional $3,250 in excess of
             the Original Daily Purchase Amount. "Threshold Price" for purposes
             hereof means the lowest Sale Price of the Common Stock during the
             five (5) consecutive Trading Days immediately prior to the
             submission to the Buyer of a Daily Purchase Amount Increase Notice
             (subject to equitable adjustment for any reorganization,
             recapitalization, non-cash dividend, stock split or other similar
             transaction). For example, if the Threshold Price is $1.50, the
             Company shall have the right to increase the Daily Purchase Amount
             to up to $19,500 in the aggregate. If the Threshold Price is $2.50,
             the Company shall have the right to increase the Daily Purchase
             Amount to up to $26,000 in the aggregate. Any increase in the
             amount of the Daily Purchase Amount shall continue in effect until
             the delivery to the Buyer of a Daily Purchase Amount Decrease
             Notice. However, if at any time during any Trading Day the Sale
             Price of the Common Stock is below the applicable Threshold Price,
             such increase in the Daily Purchase Amount shall be void and the
             Buyer's obligations to buy Purchase Shares hereunder in excess of
             the applicable maximum Daily Purchase Amount shall be terminated.
             Thereafter, the Company shall again have the right to increase the
             amount of the Daily Purchase Amount as set forth herein by delivery
             of a new Daily Purchase Amount Increase Notice only if the Sale
             Price of the Common Stock is above the applicable Threshold Price
             on each of five (5) consecutive Trading Days immediately prior to
             such new Daily Purchase Amount Increase Notice.

             (d) Limitations on Purchases.

                          (i) Limitation on Beneficial Ownership. The Company
             shall not effect any sale under this Agreement and the Buyer shall
             not have the right to purchase shares of Common Stock under this
             Agreement to the extent that after giving effect to such purchase
             the Buyer together with its affiliates would beneficially own in
             excess of 4.9% of the outstanding shares of the Common Stock
             following such purchase. For purposes hereof, the number of shares
             of Common Stock beneficially owned by the Buyer and its affiliates
             or acquired by the Buyer and its affiliates, as the case may be,
             shall include the number of shares of Common Stock issuable in
             connection with a purchase under this Agreement with respect to
             which the determination is being made, but shall exclude the number
             of shares of Common Stock which would be issuable upon (1) a
             purchase of the remaining Available Amount which has not been
             submitted for purchase, and (2) exercise or conversion of the
             unexercised or unconverted portion of any other securities of the
             Company (including, without limitation, any warrants) subject to a
             limitation on conversion or exercise analogous to the limitation
             contained herein beneficially owned by the Buyer and its
             affiliates. If the 4.9% limitation is ever reached the Company
             shall have the option to increase such limitation to 9.9% by
             delivery of written notice to the Buyer. Thereafter, if the 9.9%
             limitation is ever reached this shall not affect or limit the
             Buyer's obligation to purchase the Daily Purchase Amount as
             otherwise provided in this Agreement. Specifically, even 






 



 



             though the Buyer may not receive additional shares of Common Stock
             in the event that the 9.9% limitation is ever reached, the Buyer is
             still obligated to pay to the Company the Daily Purchase Amount on
             each Trading Day as otherwise obligated under this Agreement, e.g.
             no Event of Default (as defined in Section 9 hereof) has occurred,
             nor any event which, after notice and/or lapse of time, would
             become an Event of Default. Under such circumstances, the Buyer
             would have the right to acquire additional shares of Common Stock
             in the future only at such time as its ownership subsequently
             become less than the 9.9% limitation. For purposes of this Section,
             in determining the number of outstanding shares of Common Stock the
             Buyer may rely on the number of outstanding shares of Common Stock
             as reflected in (1) the Company's most recent Form 10-Q or Form
             10-K, as the case may be, (2) a more recent public announcement by
             the Company or (3) any other written communication by the Company
             or its Transfer Agent setting forth the number of shares of Common
             Stock outstanding. Upon the reasonable written or oral request of
             the Buyer, the Company shall promptly confirm orally and in writing
             to the Buyer the number of shares of Common Stock then outstanding.
             In any case, the number of outstanding shares of Common Stock shall
             be determined after giving effect to any purchases under this
             Agreement by the Buyer since the date as of which such number of
             outstanding shares of Common Stock was reported. Except as
             otherwise set forth herein, for purposes of this Section 1(d)(i),
             beneficial ownership shall be determined in accordance with Section
             13(d) of the Securities Exchange Act of 1934, as amended.

                          (ii) Company's Right to Suspend Purchases. The Company
             may, at any time, give written notice (a "Purchase Suspension
             Notice") to the Buyer suspending purchases of Purchase Shares by
             the Buyer under this Agreement. The Purchase Suspension Notice
             shall be effective only for purchases that have a Purchase Date
             later than one (1) Trading Day after receipt of the Purchase
             Suspension Notice by the Buyer. Any purchase by the Buyer that has
             a Purchase Date on or prior to the first (1st) Trading Day after
             receipt by the Buyer of a Purchase Suspension Notice from the
             Company must be honored by the Company as otherwise provided
             herein. Such purchase suspension shall continue in effect until a
             revocation in writing by the Company, at its sole discretion. So
             long as a Purchase Suspension Notice is in effect, the Buyer shall
             not be obligated to purchase any Purchase Shares from the Company
             under Section 1 of this Agreement.

                          (iii) Purchase Price Floor. The Company shall not
             affect any sales under this Agreement and the Buyer shall not have
             the right nor the obligation to purchase any Purchase Shares under
             this Agreement on any Trading Day where the Purchase Price for any
             purchases of Purchase Shares would be less than the Floor Price.

             (e) Records of Purchases. The Buyer and the Company shall each
maintain records showing the remaining Available Amount at any given time and
the dates and Purchase Amounts for each purchase or shall use such other method,
reasonably satisfactory to the Buyer and the Company.

             (f) Taxes. The Company shall pay any and all transfer, stamp or
similar taxes that may be payable with respect to the issuance and delivery of
any shares of Common Stock to the Buyer made under this Agreement.

             (g) Compliance with Principal Market Rules. The Company shall not
effect any sale under this Agreement and the Buyer shall not have the right to
purchase shares of Common Stock under this Agreement to the extent that after
giving effect to such purchase the "Exchange Cap" shall be deemed to be reached.
The "Exchange Cap" shall be deemed to have been reached if, at any time prior to
the shareholders of the Company approving the transaction contemplated by this
Agreement, upon a purchase under this Agreement, the Purchase Shares issuable
pursuant to such purchase would, together with all Purchase Shares previously
issued under this Agreement, exceed 2,032,977 shares of Common Stock (19.99% of
the 10,169,972 outstanding shares of Common Stock as of the date of this
Agreement). The Company may, but shall be under no obligation to, request its
shareholders to approve the transaction contemplated by this Agreement. The
Company shall not be required or permitted to issue any shares of Common Stock
under this Agreement if such issuance would breach the Company's obligations
under the rules or regulations of the Principal Market.

             (h) Option for Second Tranche; Second Common Stock Purchase
Agreement. The Company may, in its sole discretion, at any time after the date
hereof and until 30 days after such date as the Available Amount is equal to $0
(the "Second Tranche Expiration Date"), deliver an irrevocable written notice
(the "Second Tranche Notice") to the Buyer stating that the Company elects to
enter into an additional Common Stock Purchase






 




 



Agreement (the "Second Common Stock Purchase Agreement") with the Buyer for the
purchase of Thirteen Million Dollars ($13,000,000) of additional Common Stock.
It is agreed and acknowledged by the parties hereto that entering into the
Second Common Stock Purchase Agreement shall be at the option of the Company in
its sole discretion until such time as the Company shall have delivered the
Second Tranche Notice to the Buyer. The Buyer shall not be obligated to enter
into the Second Common Stock Purchase Agreement unless the Company has delivered
the Second Tranche Notice prior to the Second Tranche Expiration Date. The
Second Common Stock Purchase Agreement may not be entered into until the
aggregate Available Amount under this Agreement is fully used to buy Purchase
Shares hereunder. Upon delivery of the Second Tranche Notice to the Buyer prior
to the Second Tranche Expiration Date, the Buyer and the Company shall be
obligated to enter into the Second Common Stock Purchase Agreement no later than
the date that is 10 Trading Days after the Second Tranche Expiration Date. If
the Buyer and the Company have not entered into the Second Common Stock Purchase
Agreement by the date that is 10 Trading Days after the Second Tranche
Expiration Date, the Buyer shall not be obligated to enter into such additional
Common Stock Purchase Agreement. The terms and conditions of the Second Common
Stock Purchase Agreement shall be in form and substance identical in all
respects to this Agreement, provided, however, that for purposes of the Second
Common Stock Purchase Agreement, this Section 1(h) shall be omitted.

             2. BUYER'S REPRESENTATIONS AND WARRANTIES.

             The Buyer represents and warrants to the Company that as of the
date hereof and as of the Commencement Date:

             (a) Investment Purpose. The Buyer is entering into this Agreement
and acquiring the Commitment Shares, (as defined in Section 4(f) hereof) (this
Agreement and the Commitment Shares are collectively referred to herein as the
"Securities"), for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof; provided however, by making the representations herein, the Buyer does
not agree to hold any of the Securities for any minimum or other specific term.

             (b) Accredited Investor Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.

             (c) Reliance on Exemptions. The Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.





 





 



             (d) Information. The Buyer has been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities that have been reasonably
requested by the Buyer, including, without limitation, the SEC Documents (as
defined in Section 3(f) hereof). The Buyer understands that its investment in
the Securities involves a high degree of risk. The Buyer (i) is able to bear the
economic risk of an investment in the Securities including a total loss, (ii)
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and others matters related to an investment in the
Securities. Neither such inquiries nor any other due diligence investigations
conducted by the Buyer or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. The Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.

             (e) No Governmental Review. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

             (f) Transfer or Resale. The Buyer understands that except as
provided in the Registration Rights Agreement (as defined in Section 4(a)
hereof): (i) the Securities have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder or (B) an
exemption exists permitting such Securities to be sold, assigned or transferred
without such registration; (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.

             (g) Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.

             (h) Residency. The Buyer is a resident of the State of Illinois.

             (i) No Prior Short Selling. The Buyer represents and warrants to
the Company that at no time prior to the date of this Agreement has any of the
Buyer, its agents, representatives or affiliates engaged in or effected, in any
manner whatsoever, directly or indirectly, any (i) "short sale" (as such term is
defined in Rule 3b-3 of the 1934 Act) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.

             3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

             The Company represents and warrants to the Buyer that as of the
date hereof and as of the Commencement Date:


 




 




             (a) Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns 50% or more of the voting stock or
capital stock or other similar equity interests) are corporations duly organized
and validly existing in good standing under the laws of the jurisdiction in
which they are incorporated, and have the requisite corporate power and
authority to own their properties and to carry on their business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing could not reasonably be expected to have a
Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on any of: (i) the business, properties,
assets, operations, results of operations or financial condition of the Company
and its Subsidiaries, if any, taken as a whole, or (ii) the authority or ability
of the Company to perform its obligations under the Transaction Documents (as
defined in Section 3(b) hereof). The Company has no Subsidiaries except as set
forth on Schedule 3(a).

             (b) Authorization; Enforcement; Validity. Except as disclosed in
Schedule 3(b): (i) the Company has the requisite corporate power and authority
to enter into and perform its obligations under this Agreement, the Registration
Rights Agreement and each of the other agreements entered into by the parties on
the Commencement Date and attached hereto as exhibits to this Agreement
(collectively, the "Transaction Documents"), and to issue the Securities in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation, the
issuance of the Commitment Shares and the reservation for issuance and the
issuance of the Purchase Shares issuable under this Agreement, have been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
shareholders, (iii) this Agreement has been, and each other Transaction Document
shall be on the Commencement Date, duly executed and delivered by the Company
and (iv) this Agreement constitutes, and each other Transaction Document upon
its execution on behalf of the Company, shall constitute, the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies. The Board of Directors of the Company has
approved the resolutions (the "Signing Resolutions") substantially in the form
as set forth as Exhibit C-1 attached hereto to authorize this Agreement and the
transactions contemplated hereby. The Signing Resolutions are valid, in full
forth and effect and have not been modified or supplemented in any respect other
than by the resolutions set forth in Exhibit C-2 attached hereto regarding the
registration statement referred to in Section 4 hereof. The Company has
delivered to the Buyer a true and correct copy of a unanimous written consent
adopting the Signing Resolutions executed by all of the members of the Board of
Directors of the Company. Except as disclosed in Schedule 3(b), no other
approvals or consents of the Company's Board of Directors and/or shareholders is
necessary under applicable laws and the Company's Certificate of Incorporation
and/or Bylaws to authorize the execution and delivery of this Agreement or any
of the transactions contemplated hereby, including, but not limited to, the
issuance of the Commitment Shares and the issuance of the Purchase Shares.



 




 




             (c) Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of the following: (i) 25,000,000 shares of Common
Stock, of which as of the date hereof, 10,169,162 shares are issued and
outstanding, 3,800,000 shares are reserved for issuance pursuant to the
Company's stock option plans of which only approximately 1,283,200 shares remain
available for future grants and 1,687,913 shares are issuable and reserved for
issuance pursuant to securities (other than stock options issued pursuant to the
Company's stock option plans) exercisable or exchangeable for, or convertible
into, shares of Common Stock, and 35,000,000 shares are issuable and reserved
for issuance pursuant to other securities or convertible into shares of Common
Stock, subject to the prior approval of the stockholders of the Company; and
(ii) 2,000,000 shares of Preferred Stock, $0.01 par value, of which 1,250,000
shares are designated as Series B Cumulative Convertible Redeemable Preferred
Stock with a $15.00 per share liquidation preference, of which as of the date
hereof 496,445 shares are issued and outstanding, 220,000 shares are designated
as Series C Convertible Preferred Stock with a $0.01 per share liquidation
preference, of which as of the date hereof 220,000 shares are issued and
outstanding, and 33,500 shares are designated as Series D Convertible Preferred
Stock with a $0.01 per share liquidation preference, of which as of the date
hereof 33,500 shares are issued and outstanding. All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding debt securities, (iii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement), (v) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries, (vi) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this
Agreement and (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement. The
Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "Certificate of Incorporation"), and the Company's By-laws, as amended and
as in effect on the date hereof (the "By-laws"), and summaries of the terms of
all securities convertible into or exercisable for Common Stock, if any, and
copies of any documents containing the material rights of the holders thereof in
respect thereto.

             (d) Issuance of Securities. The Commitment Shares have been duly
authorized and, upon issuance in accordance with the terms hereof, the
Commitment Shares shall be (i) validly issued, fully paid and non-assessable and
(ii) free from all taxes, liens and charges with respect to the issue thereof.
10,000,000 shares of Common Stock have been duly authorized and reserved for
issuance upon purchase under this Agreement, subject to the prior approval of
the stockholders of the Company. 700,000 shares of Common Stock (subject to
equitable adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) have been duly authorized
and reserved for issuance as Additional Commitment Shares in accordance with
Section 4(f) this Agreement. Upon issuance and payment therefor in accordance
with the terms and conditions of this Agreement, the Purchase Shares shall be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock.



 



 




             (e) No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Purchase Shares) will not (i) result in a violation of the
Certificate of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market applicable to
the Company or any of its Subsidiaries) or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected, except in the case of
conflicts, defaults and violations under clause (ii), which could not reasonably
be expected to result in a Material Adverse Effect. Except as disclosed in
Schedule 3(e), neither the Company nor its Subsidiaries is in violation of any
term of or in default under its Certificate of Incorporation, any Certificate of
Designation, Preferences and Rights of any outstanding series of preferred stock
of the Company or By-laws or their organizational charter or by-laws,
respectively. Except as disclosed in Schedule 3(e), neither the Company nor any
of its Subsidiaries is in violation of any term of or is in default under any
material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except for possible conflicts, defaults,
terminations or amendments which could not reasonably be expected to have a
Material Adverse Effect. The business of the Company and its Subsidiaries is not
being conducted, and shall not be conducted, in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations, the
sanctions for which either individually or in the aggregate could not reasonably
be expected to have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act or applicable
state securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
the Transaction Documents in accordance with the terms hereof or thereof. Except
as disclosed in Schedule 3(e), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence shall be obtained or effected on or prior to the Commencement Date.
Except as listed in Schedule 3(e), since March 31, 2002 the Company has not
received nor delivered any notices or correspondence from or to the Principal
Market. The Principal Market has not commenced any delisting proceedings against
the Company.

             (f) SEC Documents; Financial Statements. Except as disclosed in
Schedule 3(f), since January 1, 2002, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC Documents"). As of their respective dates (except as
they have been correctly amended), the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC (except as they may have
been properly amended), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates (except as they
have been properly amended), the financial statements of the Company included in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as listed in
Schedule 3(f), the Company has received no notices or correspondence from the
SEC since January 1, 2002. The SEC has not commenced any enforcement proceedings
against the Company or any of its subsidiaries.


 




 





             (g) Absence of Certain Changes. Except as disclosed in Schedule
3(g), since March 31, 2003, there has been no material adverse change in the
business, properties, operations, financial condition or results of operations
of the Company or its Subsidiaries. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any
Bankruptcy Law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy or insolvency proceedings. The Company is financially solvent and is
generally able to pay its debts as they become due.

             (h) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
which could reasonably be expected to have a Material Adverse Effect. A
description of each action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body which, as of the date of this Agreement, is pending or threatened in
writing against or affecting the Company, the Common Stock or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, is set forth in Schedule
3(h).

             (i) Acknowledgment Regarding Buyer's Status. The Company
acknowledges and agrees that the Buyer is acting solely in the capacity of arm's
length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that the Buyer
is not acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. The Company further represents to the Buyer that the
Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives and
advisors.

             (j) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.

             (k) Dilutive Effect. The Company understands and acknowledges that
the number of Purchase Shares purchasable under this Agreement is not fixed and
will vary depending on the Purchase Price at which such shares are purchased.
The Company further acknowledges that its obligation to issue Purchase Shares
under this Agreement in accordance with the terms and conditions hereof is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other shareholders of the Company.

             (l) Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(l), none of the
Company's material trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from the date of
this Agreement. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of any material trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
Schedule 3(l), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement, which could reasonably be
expected to have a Material Adverse Effect.



 



 



             (m) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

             (n) Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(n) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.

             (o) Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.

             (p) Regulatory Permits. The Company and its Subsidiaries possess
all material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

             (q) Tax Status. The Company and each of its Subsidiaries has made
or filed all federal and state income and all other material tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.

             (r) Transactions With Affiliates. Except as set forth on Schedule
3(r) and other than the grant or exercise of stock options disclosed on Schedule
3(c), none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has an interest or is an
officer, director, trustee or partner, which transaction would be required to be
disclosed in a proxy statement on Schedule 14A pertaining to the solicitation by
the board of directors of proxies for the election of directors of the Company
at an annual meeting of stockholders called for such purpose.

             (s) Application of Takeover Protections. The Company and its board
of directors have taken or will take prior to the Commencement Date all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation which
is or could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and the Buyer's ownership of the Securities.






 



 



             (t) Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.

             4. COVENANTS.

             (a) Filing of Registration Statement. Within ten (10) Trading Days
from the date on which its stockholders approve the matters described in the
proxy statement referred to in the Disclosure Schedule file a new registration
statement covering the sale of the Commitment Shares and at least 10,000,000
Purchase Shares in accordance with the terms of the Registration Rights
Agreement between the Company and the Buyer, dated as of the date hereof (the
"Registration Rights Agreement").

             (b) Blue Sky. The Company shall take such action, if any, as is
reasonably necessary in order to obtain an exemption for or to qualify (i) the
initial sale of the Commitment Shares and any Purchase Shares to the Buyer under
this Agreement and (ii) any subsequent resale of the Commitment Shares and any
Purchase Shares by the Buyer, in each case, under applicable securities or "Blue
Sky" laws of the states of the United States in such states as is reasonably
requested by the Buyer from time to time, and shall provide evidence of any such
action so taken to the Buyer.

             (c) No Variable Priced Financing. Other than pursuant to this
Agreement, the Company agrees that beginning on the date of this Agreement and
ending on the date of termination of this Agreement (as provided in Section
11(k) hereof), neither the Company nor any of its Subsidiaries shall, without
the prior written consent of the Buyer, contract for any equity financing
(including any debt financing with an equity component) or issue any equity
securities of the Company or any Subsidiary or securities convertible or
exchangeable into or for equity securities of the Company or any Subsidiary
(including debt securities with an equity component) which, in any case (i) are
convertible into or exchangeable for an indeterminate number of shares of common
stock, (ii) are convertible into or exchangeable for Common Stock at a price
which varies with the market price of the Common Stock, (iii) directly or
indirectly provide for any "re-set" or adjustment of the purchase price,
conversion rate or exercise price after the issuance of the security, or (iv)
contain any "make-whole" provision based upon, directly or indirectly, the
market price of the Common Stock after the issuance of the security, in each
case, other than reasonable and customary anti-dilution adjustments for issuance
of shares of Common Stock at a price which is below the market price of the
Common Stock.

             (d) Listing. The Company shall promptly secure the listing of all
of the Purchase Shares and Commitment Shares upon each national securities
exchange and automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all such securities from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Principal Market. Neither the Company nor any
of its Subsidiaries shall take any action that would be reasonably expected to
result in the delisting or suspension of the Common Stock on the Principal
Market. The Company shall promptly, and in no event later than the following
Trading Day, provide to the Buyer copies of any notices it receives from the
Principal Market regarding the continued eligibility of the Common Stock for
listing on such automated quotation system or securities exchange. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section.

             (e) Limitation on Short Sales and Hedging Transactions. The Buyer
agrees that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 11(k), the Buyer and its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) "short sale" (as such term is
defined in Rule 3b-3 of the 1934 Act) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.



 



 




             (f) Issuance of Commitment Shares; Limitation on Sales of
Commitment Shares. Immediately upon the execution of this Agreement, the Company
shall issue to the Buyer 500,000 shares of Common Stock (the "Initial Commitment
Shares"). Immediately at such time as the Available Amount is $8,671,000, the
Company shall issue the Buyer 400,000 shares of Common Stock (the "First
Additional Commitment Shares") and immediately at such time as the Available
Amount is $4,329,000, the Company shall issue the Buyer 300,000 shares of Common
Stock (the "Second Additional Commitment Shares" and together with the First
Additional Commitment Shares, the "Additional Commitment Shares."). The Initial
Commitment Shares and Additional Commitment Shares are collectively referred to
herein as the "Commitment Shares." The Additional Commitment Shares shall be
equitably adjusted for any reorganization, recapitalization, non-cash dividend,
stock split or other similar transaction. The Initial Commitment Shares shall be
issued in certificated form and (subject to Section 5 hereof) shall bear the
following restrictive legend:

             THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
             REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
             APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
             FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
             OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
             FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
             APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF BUYER'S COUNSEL,
             IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
             ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
             RULE 144 UNDER SAID ACT.

The Buyer agrees that the Buyer shall not transfer or sell the Commitment Shares
until the earlier of 800 Trading Days (40 Monthly Periods) from the date hereof
or the date on which this Agreement has been terminated, provided, however, that
such restrictions shall not apply: (i) in connection with any transfers to or
among affiliates (as defined in the 1934 Act), (ii) in connection with any
pledge in connection with a bona fide loan or margin account, (iii) in the event
that the Commencement does not occur on or before October 31, 2003, due to the
failure of the Company to satisfy the conditions set forth in Section 7 or (iv)
if an Event of Default has occurred, or any event which, after notice and/or
lapse of time, would become an Event of Default, including any failure by the
Company to timely issue Purchase Shares under this Agreement. Notwithstanding
the forgoing, the Buyer may transfer Commitment Shares to a third party in order
to settle a sale made by the Buyer where the Buyer reasonably expects the
Company to deliver Purchase Shares to the Buyer under this Agreement so long as
the Buyer maintains ownership of the same overall number of shares of Common
Stock by "replacing" the Commitment Shares so transferred with Purchase Shares
when the Purchase Shares are actually issued by the Company to the Buyer.

             (g) Due Diligence. The Buyer shall have the right, from time to
time as the Buyer may reasonably deem appropriate, to perform reasonable due
diligence on the Company during normal business hours and upon not less than 24
hours' prior notice. The Company and its officers and employees shall provide
information and reasonably cooperate with the Buyer in connection with any
reasonable request by the Buyer related to the Buyer's due diligence of the
Company, including, but not limited to, any such request made by the Buyer in
connection with (i) the filing of the registration statement described in
Section 4(a) hereof and (ii) the Commencement. Each party hereto agrees not to
disclose any Confidential Information of the other party to any third party and
shall not use the Confidential Information for any purpose other than in
connection with, or in furtherance of, the transactions contemplated hereby.
Each party hereto acknowledges that the Confidential Information shall remain
the property of the disclosing party and agrees that it shall take all
reasonable measures to protect the secrecy of any Confidential Information
disclosed by the other party.

             (h) Expense Reimbursement. As reimbursement of Buyer's expenses in
connection with entering into the transactions contemplated hereby, the Company
agrees to pay to the Buyer $15,000 on or before the earlier to occur of (1) the
Commencement Date, or (2) within 5 Trading Days of the date that this Agreement
is terminated if the Commencement does not occur.


 




 




             5. TRANSFER AGENT INSTRUCTIONS.

             Immediately upon the execution of this Agreement, the Company shall
deliver to the Transfer Agent a letter in the form as set forth as Exhibit E
attached hereto with respect to the issuance of the Initial Commitment Shares.
Immediately at such time as the Available Amount is $8,671,000, the Company
shall deliver to the Transfer Agent a letter in the form as set forth as Exhibit
F attached hereto with respect to the issuance of the First Additional
Commitment Shares. Immediately at such time as the Available Amount is
$4,329,000, the Company shall deliver to the Transfer Agent a letter in the form
as set forth as Exhibit G attached hereto with respect to the issuance of the
Second Additional Commitment Shares. On the Commencement Date, the Company shall
cause any restrictive legend on the Initial Commitment Shares to be removed and
all of the Purchase Shares and Additional Commitment Shares to be issued under
this Agreement shall be issued without any restrictive legend. The Company shall
issue irrevocable instructions to the Transfer Agent, and any subsequent
transfer agent, to issue Purchase Shares in the name of the Buyer for the
Purchase Shares (the "Irrevocable Transfer Agent Instructions"). The Company
warrants to the Buyer that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5, will be given by the Company
to the Transfer Agent with respect to the Purchase Shares and that the
Commitment Shares and the Purchase Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement subject to the provisions of
Section 4 (f) in the case of the Commitment Shares.

             6. CONDITIONS TO THE COMPANY'S OBLIGATION TO COMMENCE SALES OF
                SHARES OF COMMON STOCK.

             The obligation of the Company hereunder to commence sales of the
Purchase Shares is subject to the satisfaction of each of the following
conditions on or before the Commencement Date (the date that sales begin) and
once such conditions have been initially satisfied, there shall not be any
ongoing obligation to satisfy such conditions after the Commencement has
occurred; provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion by providing the
Buyer with prior written notice thereof:

             (a) The Buyer shall have executed each of the Transaction Documents
and delivered the same to the Company.

             (b) Subject to the Company's compliance with Section 4(a), a
registration statement covering the sale of all of the Commitment Shares and at
least 10,000,000 Purchase Shares shall have been declared effective under the
1933 Act by the SEC and no stop order with respect to the Registration Statement
shall be pending or threatened by the SEC.

             (c) The representations and warranties of the Buyer shall be true
and correct in all material respects as of the date when made and as of the
Commencement Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the Commencement Date.

             7. CONDITIONS TO THE BUYER'S OBLIGATION TO COMMENCE PURCHASES OF
                SHARES OF COMMON STOCK.

             The obligation of the Buyer to commence purchases of Purchase
Shares under this Agreement is subject to the satisfaction of each of the
following conditions on or before the Commencement Date (the date that sales
begin) and once such conditions have been initially satisfied, there shall not
be any ongoing obligation to satisfy such conditions after the Commencement has
occurred; provided that these conditions are for the Buyer's sole benefit and
may be waived by the Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:

             (a) The Company shall have executed each of the Transaction
Documents and delivered the same to the Buyer.

             (b) The Company shall have issued to the Buyer the Initial
Commitment Shares and shall have removed the restrictive transfer legend from
the certificate representing the Initial Commitment Shares.

             (c) The Common Stock shall be authorized for quotation on the
Principal Market, trading in the Common Stock shall not have been within the
last 365 days suspended by the SEC or the Principal Market and the Purchase
Shares and the Commitment Shares shall be approved for listing upon the
Principal Market.




 



 



             (d) The Buyer shall have received the opinions of the Company's
legal counsel dated as of the Commencement Date substantially in the form of
Exhibit A attached hereto.

             (e) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Commencement Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Commencement Date, including, but not
limited to such covenants set forth in Section 4(h) hereof. The Buyer shall have
received a certificate, executed by the CEO, President or CFO of the Company,
dated as of the Commencement Date, to the foregoing effect in the form attached
hereto as Exhibit B.

             (f) The Board of Directors of the Company shall have adopted
resolutions in the form attached hereto as Exhibit C which shall be in full
force and effect without any amendment or supplement thereto as of the
Commencement Date.

             (g) As of the Commencement Date, the Company shall have reserved
out of its authorized and unissued Common Stock, (A) solely for the purpose of
effecting purchases of Purchase Shares hereunder, at least 10,000,000 shares of
Common Stock and (B) as Additional Commitment Shares in accordance with Section
4(f) hereof, 700,000 shares of Common Stock.

             (h) The Irrevocable Transfer Agent Instructions, in form acceptable
to the Buyer shall have been delivered to and acknowledged in writing by the
Company and the Company's Transfer Agent.

             (i) The Company shall have delivered to the Buyer a certificate
evidencing the incorporation and good standing of the Company in the State of
Delaware issued by the Secretary of State of the State of Delaware as of a date
within ten (10) Trading Days of the Commencement Date.

             (j) The Company shall have delivered to the Buyer a certified copy
of the Certificate of Incorporation as certified by the Secretary of State of
the State of Delaware within ten (10) Trading Days of the Commencement Date.

             (k) The Company shall have delivered to the Buyer a secretary's
certificate executed by the Secretary of the Company, dated as of the
Commencement Date, in the form attached hereto as Exhibit D.

             (l) A registration statement covering the sale of all of the
Commitment Shares and at least 10,000,000 Purchase Shares shall have been
declared effective under the 1933 Act by the SEC and no stop order with respect
to the registration statement shall be pending or threatened by the SEC. The
Company shall have prepared and delivered to the Buyer a final form of
prospectus to be used by the Buyer in connection with any sales of any
Commitment Shares or any Purchase Shares. The Company shall have made all
filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Commitment Shares and the Purchase Shares
pursuant to this Agreement in compliance with such laws.

             (m) No Event of Default has occurred, or any event which, after
notice and/or lapse of time, would become an Event of Default has occurred.

             (n) On or prior to the Commencement Date, the Company shall take
all necessary action, if any, and such actions as reasonably requested by the
Buyer, in order to render inapplicable any control share acquisition, business
combination, shareholder rights plan or poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation which
is or could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and the Buyer's ownership of the Securities.

             (o) The Company shall have provided the Buyer with the information
requested by the Buyer in connection with its due diligence requests made prior
to, or in connection with, the Commencement, in accordance with the terms of
Section 4(g) hereof.






 



 




             8. INDEMNIFICATION.

             In consideration of the Buyer's execution and delivery of the
Transaction Documents and acquiring the Securities hereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless the Buyer and all of
its affiliates, shareholders, officers, directors, employees and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, other than with respect to Indemnified
Liabilities which directly and primarily result from the gross negligence or
willful misconduct of the Indemnitee. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.

             9. EVENTS OF DEFAULT.

             An "Event of Default" shall be deemed to have occurred at any time
as any of the following events occurs:

             (a) while any registration statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of such registration statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the Buyer
for sale of all of the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of ten (10)
consecutive Trading Days or for more than an aggregate of thirty (30) Trading
Days in any 365-day period;

             (b) the suspension from trading or failure of the Common Stock to
be listed on the Principal Market for a period of three (3) consecutive Trading
Days;

             (c) the delisting of the Company's Common Stock from the Principal
Market, provided, however, that the Common Stock is not immediately thereafter
trading on the New York Stock Exchange, the Nasdaq National Market, the Nasdaq
SmallCap Market or the Nasdaq Over-the-Counter Bulletin Board;

             (d) the failure for any reason by the Transfer Agent to issue
Purchase Shares to the Buyer within five (5) Trading Days after the applicable
Purchase Date which the Buyer is entitled to receive;

             (e) if at any time after the Commencement Date, the "Exchange Cap"
is reached (the "Exchange Cap" shall be deemed to be reached at such time if,
upon submission of a Purchase Notice under this Agreement, the issuance of such
shares of Common Stock would exceed that number of shares of Common Stock which
the Company may issue under this Agreement without breaching the Company's
obligations under the rules or regulations of the Principal Market);

             (f) the Company breaches any representation, warranty, covenant or
other term or condition under any Transaction Document if such breach could have
a Material Adverse Effect and except, in the case of a breach of a covenant
which is reasonably curable, only if such breach continues for a period of at
least ten (10) Trading Days;

             (g) any payment default under any contract whatsoever or any
acceleration prior to maturity of any mortgage, indenture, contract or
instrument under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by the Company or for money
borrowed the repayment of which is guaranteed by the Company, whether such
indebtedness or guarantee now exists or shall be created hereafter, which, with
respect to any such payment default or acceleration prior to maturity, is in
excess of $1,000,000;

             (h) if any Person commences a proceeding against the Company
pursuant to or within the meaning of any Bankruptcy Law;






 



 



             (i) if the Company pursuant to or within the meaning of any
Bankruptcy Law; (A) commences a voluntary case, (B) consents to the entry of an
order for relief against it in an involuntary case, (C) consents to the
appointment of a Custodian of it or for all or substantially all of its
property, (D) makes a general assignment for the benefit of its creditors, (E)
becomes insolvent, or (F) is generally unable to pay its debts as the same
become due; or

             (j) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against the Company in an
involuntary case, (B) appoints a Custodian of the Company or for all or
substantially all of its property, or (C) orders the liquidation of the Company
or any Subsidiary.

In addition to any other rights and remedies under applicable law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof, so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default, has
occurred and is continuing, or so long as the Purchase Price is below the
Purchase Price Floor, the Buyer shall not be obligated to purchase any shares of
Common Stock under this Agreement. If pursuant to or within the meaning of any
Bankruptcy Law, the Company commences a voluntary case, or any Person commences
a proceeding against the Company, a Custodian is appointed for the Company or
for all or substantially all of its property, or the Company makes a general
assignment for the benefit of its creditors (any of which would be an Event of
Default as described in Sections 9(h), 9(i) and 9(j) hereof) this Agreement
shall automatically terminate without any liability or payment to the Company
without further action or notice by any Person. No such termination of this
Agreement under Section 11(k)(i) shall affect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with respect
to any pending purchases under this Agreement.

             10. CERTAIN DEFINED TERMS.

             For purposes of this Agreement, the following terms shall have the
following meanings:

             (a) "1933 Act" means the Securities Act of 1933, as amended.

             (b) "Available Amount" means initially Thirteen Million Dollars
($13,000,000) in the aggregate which amount shall be reduced by the Purchase
Amount each time the Buyer purchases shares of Common Stock pursuant to Section
1 hereof.

             (c) "Bankruptcy Law" means Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.

             (d) "Closing Sale Price" means, for any security as of any date,
the last closing trade price for such security on the Principal Market as
reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing trade
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by Bloomberg.

             (e) "Confidential Information" means any information disclosed by
either party to the other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including, without limitation,
documents, prototypes, samples, plant and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation. Information
communicated orally shall be considered Confidential Information if such
information is confirmed in writing as being Confidential Information within ten
(10) business days after the initial disclosure. Confidential Information may
also include information disclosed to a disclosing party by third parties.
Confidential Information shall not, however, include any information which (i)
was publicly known and made generally available in the public domain prior to
the time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
the disclosing party as shown by the receiving party's files and records
immediately prior to the time of disclosure; (iv) is obtained by the receiving
party from a third party without a breach of such third party's obligations of
confidentiality; (v) is independently developed by the receiving party without
use of or reference to the disclosing party's Confidential Information, as shown
by documents and other competent evidence in the receiving party's possession;
or (vi) is required by law to be disclosed by the receiving party, provided that
the receiving party gives the disclosing party prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the information from public disclosure.

             (f) "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.






 



 



             (g) "Floor Price" means initially $1.00, which amount may be
increased or decreased from time to time as provided below, except that in no
case shall the Floor Price be less than $0.25. The Company may at any time give
written notice (a "Floor Price Change Notice") to the Buyer increasing or
decreasing the Floor Price. The Floor Price Change Notice shall be effective
only for purchases that have a Purchase Date later than one (1) Trading Day
after receipt of the Floor Price Change Notice by the Buyer. Any purchase by the
Buyer that has a Purchase Date on or prior to the first Trading Day after
receipt of a Floor Price Change Notice from the Company must be honored by the
Company as otherwise provided herein. The Floor Price shall be appropriately
adjusted for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction.

             (h) "Maturity Date" means the date that is 800 Trading Days (40
Monthly Periods) from the Commencement Date.

             (i) "Monthly Period" means each successive 20 Trading Day period
commencing with the Commencement Date.

             (j) "Person" means an individual or entity including any limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.


             (k) "Principal Market" means the American Stock Exchange; provided
however, that in the event the Company's Common Stock is ever listed or traded
on the Nasdaq National Market, the Nasdaq SmallCap Market, the Nasdaq OTC
Bulletin Board, or the New York Stock Exchange, than the "Principal Market"
shall mean such other market or exchange on which the Company's Common Stock is
then listed or traded.


             (l) "Purchase Amount" means the portion of the Available Amount to
be purchased by the Buyer pursuant to Section 1 hereof.

             (m) "Purchase Date" means the actual date that the Buyer is to buy
Purchase Shares pursuant to Section 1 hereof.

             (n) "Purchase Price" means, as of any date of determination the
lower of the (A) the lowest Sale Price of the Common Stock on such date of
determination and (B) the arithmetic average of the three (3) lowest Closing
Sale Prices for the Common Stock during the twelve (12) consecutive Trading Days
ending on the Trading Day immediately preceding such date of determination (to
be appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction).

             (o) "Sale Price" means, for any security as of any date, any trade
price for such security on the Principal Market as reported by Bloomberg, or, if
the Principal Market is not the principal securities exchange or trading market
for such security, the trade price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg.

             (p) "SEC" means the United States Securities and Exchange
Commission.

             (q) "Transfer Agent" means the transfer agent of the Company as set
forth in Section 11(f) hereof or such other person who is then serving as the
transfer agent for the Company in respect of the Common Stock.

             (r) "Trading Day" means any day on which the Principal Market is
open for customary trading.


 




 




             11. MISCELLANEOUS.

             (a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of
the State of Delaware shall govern all issues concerning the relative rights of
the Company and its shareholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
other Transaction Documents shall be governed by the internal laws of the State
of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

             (b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

             (c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

             (d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

             (e) Entire Agreement; Amendments. With the exception of the Mutual
Nondisclosure Agreement between the parties dated as of April 18, 2003, this
Agreement supersedes all other prior oral or written agreements between the
Buyer, the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement, the other
Transaction Documents and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
Buyer, and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought.

             (f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Trading Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:


             If to the Company:
                   Frontline Communications Corporation
                   One Blue Hill Plaza, 7th Floor
                   Pearl River, New York 10965
                   Telephone:  845-623-8553
                   Facsimile:  845-623-8669
                   Attention:  President







 



 



             If to the Buyer:
                   Fusion Capital Fund II, LLC
                   222 Merchandise Mart Plaza, Suite 9-112
                   Chicago, IL 60654
                   Telephone: 312-644-6644
                   Facsimile: 312-644-6244
                   Attention: Steven G. Martin


             If to the Transfer Agent:
                   American Stock Transfer and Trust Co.
                   40 Wall Street
                   New York, New York 10005
                   Telephone: 718-921-8261
                   Facsimile: 718-921-8337
                   Attention: Donna Ansbro


or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Trading Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, and recipient facsimile number or (C) provided by a nationally recognized
overnight delivery service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.

             (g) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyer, including
by merger or consolidation. The Buyer may not assign its rights or obligations
under this Agreement.

             (h) No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

             (i) Publicity. The Buyer shall have the right to approve before
issuance any press releases or any other public disclosure (including any
filings with the SEC) with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or other public disclosure
(including any filings with the SEC) with respect to such transactions as is
required by applicable law and regulations (although the Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).

             (j) Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

             (k) Termination. This Agreement may be terminated only as follows:

                          (i) By the Buyer any time an Event of Default exists
             without any liability or payment to the Company. However, if
             pursuant to or within the meaning of any Bankruptcy Law, the
             Company commences a voluntary case, or any Person commences a
             proceeding against the Company, a Custodian is appointed for the
             Company or for all or substantially all of its property, or the
             Company makes a general assignment for the benefit of its
             creditors, (any of which would be an Event of Default as described
             in Sections 9(h), 9(i) and 9(j) hereof) this Agreement shall
             automatically terminate without any liability or payment to the
             Company without further action or notice by any Person. No such
             termination of this Agreement under this Section 11(k)(i) shall
             affect the Company's or the Buyer's obligations under this
             Agreement with respect to pending purchases and the Company and the
             Buyer shall complete their respective obligations with respect to
             any pending purchases under this Agreement.




 





 



                          (ii) In the event that the Commencement shall not have
             occurred, the Company shall have the option to terminate this
             Agreement for any reason or for no reason without liability of any
             party to any other party.

                          (iii) In the event that the Commencement shall not
             have occurred on or before November 30, 2003, due to the failure to
             satisfy the conditions set forth in Sections 6 and 7 above with
             respect to the Commencement (and the nonbreaching party's failure
             to waive such unsatisfied condition(s)), the nonbreaching party
             shall have the option to terminate this Agreement at the close of
             business on such date or thereafter without liability of any party
             to any other party.

                          (iv) If by the Maturity Date (including any extension
             thereof by the Company pursuant to Section 10(g) hereof), for any
             reason or for no reason the full Available Amount under this
             Agreement has not been purchased as provided for in Section 1 of
             this Agreement, by the Buyer without any liability or payment to
             the Company.

                          (v) At any time after the Commencement Date, the
             Company shall have the option to terminate this Agreement for any
             reason or for no reason by delivering notice (a "Company
             Termination Notice") to the Buyer electing to terminate this
             Agreement without any liability or payment to the Buyer. The
             Company Termination Notice shall not be effective until one (1)
             Trading Day after it has been received by the Buyer.

                          (vi) This Agreement shall automatically terminate on
             the date that the Company sells and the Buyer purchases the full
             Available Amount as provided herein, without any action or notice
             on the part of any party.

Except as set forth in Sections 11(k)(i) (in respect of an Event of Default
under Sections 9(h), 9(i) and 9(j)) and 11(k)(vi), any termination of this
Agreement pursuant to this Section 11(k) shall be effected by written notice
from the Company to the Buyer, or the Buyer to the Company, as the case may be,
setting forth the basis for the termination hereof. The representations and
warranties of the Company and the Buyer contained in Sections 2 and 3 hereof,
the expense reimbursement provisions set forth in Section 4(h) hereof, the
indemnification provisions set forth in Section 8 hereof and the agreements and
covenants set forth in Section 11, shall survive the Commencement and any
termination of this Agreement. No termination of this Agreement shall affect the
Company's or the Buyer's obligations under this Agreement with respect to
pending purchases and the Company and the Buyer shall complete their respective
obligations with respect to any pending purchases under this Agreement.

              (l) No Financial Advisor, Placement Agent, Broker or Finder. The
Company represents and warrants to the Buyer that it has not engaged any
financial advisor, placement agent, broker or finder in connection with the
transactions contemplated hereby. The Buyer represents and warrants to the
Company that it has not engaged any financial advisor, placement agent, broker
or finder in connection with the transactions contemplated hereby. The Company
shall be responsible for the payment of any fees or commissions, if any, of any
financial advisor, placement agent, broker or finder relating to or arising out
of the transactions contemplated hereby. The Company shall pay, and hold the
Buyer harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out of pocket expenses) arising in connection
with any such claim.

             (m) No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

              (n) Remedies, Other Obligations, Breaches and Injunctive Relief.
The Buyer's remedies provided in this Agreement shall be cumulative and in
addition to all other remedies available to the Buyer under this Agreement, at
law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy of the Buyer contained herein shall be deemed a
waiver of compliance with the provisions giving rise to such remedy and nothing
herein shall limit the Buyer's right to pursue actual damages for any failure by
the Company to comply with the terms of this Agreement. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Buyer and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Buyer shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.






 




 



              (o) Changes to the Terms of this Agreement. This Agreement and any
provision hereof may only be amended by an instrument in writing signed by the
Company and the Buyer. The term "Agreement" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented.

              (p) Enforcement Costs. If: (i) this Agreement is placed by the
Buyer in the hands of an attorney for enforcement or is enforced by the Buyer
through any legal proceeding; or (ii) an attorney is retained to represent the
Buyer in any bankruptcy, reorganization, receivership or other proceedings
affecting creditors' rights and involving a claim under this Agreement; or (iii)
an attorney is retained to represent the Buyer in any other proceedings
whatsoever in connection with this Agreement, then the Company shall pay to the
Buyer, as incurred by the Buyer, all reasonable costs and expenses including
attorneys' fees incurred in connection therewith, in addition to all other
amounts due hereunder.

              (q) Failure or Indulgence Not Waiver. No failure or delay in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.


                                    * * * * *


             IN WITNESS WHEREOF, the Buyer and the Company have caused this
Common Stock Purchase Agreement to be duly executed as of the date first written
above.
 
                                  THE COMPANY:



                                  FRONTLINE COMMUNICATIONS CORPORATION



                                  By:    /s/ Stephen J. Cole-Hatchard
                                  Name:  Stephen J. Cole-Hatchard
                                  Title: Chief Executive Officer
 
                                  BUYER:

                                  FUSION CAPITAL FUND II, LLC
                                  BY: FUSION CAPITAL PARTNERS, LLC
                                  BY: SGM HOLDINGS CORP.
                                  

                                  By:    /s/ Steven G. Martin
                                  Name:  Steven G. Martin
                                  Title: President






 




                                                                  EXECUTION COPY


                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July 7,
2003, by and between FRONTLINE COMMUNICATIONS CORPORATION, a Delaware
corporation, (the "Company"), and FUSION CAPITAL FUND II, LLC (together with it
permitted assigns, the "Buyer"). Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Common Stock
Purchase Agreement by and between the parties hereto, dated as of the date
hereof (as amended, restated, supplemented or otherwise modified from time to
time, the "Purchase Agreement").


                                    WHEREAS:

         A. The Company has agreed, upon the terms and subject to the conditions
of the Purchase Agreement, to issue to the Buyer (i) up to Thirteen Million
Dollars ($13,000,000) of the Company's common stock, par value $0.01 per share
(the "Common Stock") (the "Purchase Shares"), and (ii) such number of shares of
Common Stock as is required pursuant to Section 4(f) of the Purchase Agreement
(the "Commitment Shares"); and

         B. To induce the Buyer to enter into the Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "1933 Act"), and applicable state
securities laws.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyer hereby agree as follows:

         1. DEFINITIONS.

             As used in this Agreement, the following terms shall have the
following meanings:

             a. "Investor" means the Buyer, any transferee or assignee thereof
to whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.

             b. "Person" means any person or entity including any corporation, a
limited liability company, an association, a partnership, an organization, a
business, an individual, a governmental or political subdivision thereof or a
governmental agency.

             c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more registration
statements of the Company in compliance with the 1933 Act and pursuant to Rule
415 under the 1933 Act or any successor rule providing for offering securities
on a continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such registration statement(s) by the United States Securities
and Exchange Commission (the "SEC").

             d. "Registrable Securities" means the Purchase Shares which have
been, or which may from time to time be, issued or issuable upon purchases of
the Available Amount under the Purchase Agreement (without regard to any
limitation or restriction on purchases) and the Commitment Shares issued or
issuable to the Investor and any shares of capital stock issued or issuable with
respect to the Purchase Shares, the Commitment Shares or the Purchase Agreement
as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, without regard to any limitation on purchases under
the Purchase Agreement.

             e. "Registration Statement" means the registration statement of the
Company covering the sale of the Registrable Securities.








 




         2. REGISTRATION.

             a. Mandatory Registration. The Company shall file with the SEC the
Registration Statement within the period specified in Section 4(a) of the
Purchase Agreement. The Investor and its counsel shall have a reasonable
opportunity to review and comment upon such registration statement or amendment
to such registration statement and any related prospectus prior to its filing
with the SEC. Investor shall furnish all information reasonably requested by the
Company for inclusion therein. The Company shall use its best efforts to have
the Registration Statement or amendment declared effective by the SEC at the
earliest possible date. The Company shall use reasonable best efforts to keep
the Registration Statement effective pursuant to Rule 415 promulgated under the
1933 Act and available for sales of all of the Registrable Securities at all
times until the earlier of (i) the date as of which the Investor may sell all of
the Registrable Securities without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) or (ii) the date on which
the Investor shall have sold all the Registrable Securities and no Available
Amount remains under the Purchase Agreement (the "Registration Period"). The
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.

             b. Rule 424 Prospectus. The Company shall, as required by
applicable securities regulations, from time to time file with the SEC, pursuant
to Rule 424 promulgated under the 1933 Act, the prospectus and prospectus
supplements, if any, to be used in connection with sales of the Registrable
Securities under the Registration Statement. The Investor and its counsel shall
have a reasonable opportunity to review and comment upon such prospectus prior
to its filing with the SEC. The Investor shall use its reasonable best efforts
to comment upon such prospectus within one (1) Trading Day from the date the
Investor receives the final version of such prospectus.

             c. Sufficient Number of Shares Registered. In the event the number
of shares available under the Registration Statement is insufficient to cover
all of the Registrable Securities, the Company shall amend the Registration
Statement or file a new registration statement (a "New Registration Statement"),
so as to cover all of such Registrable Securities as soon as practicable, but in
any event not later than ten (10) Trading Days after the necessity therefor
arises. The Company shall use it reasonable best efforts to cause such amendment
and/or New Registration Statement to become effective as soon as practicable
following the filing thereof.

         3. RELATED OBLIGATIONS.

         With respect to the Registration Statement and whenever any Registrable
Securities are to be registered pursuant to Section 2(b) including on any New
Registration Statement, the Company shall use its reasonable best efforts to
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:

             a. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to any registration
statement and the prospectus used in connection with such registration
statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep the Registration Statement or
any New Registration Statement effective at all times during the Registration
Period, and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company covered
by the Registration Statement or any New Registration Statement until such time
as all of such Registrable Securities shall have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof as set
forth in such registration statement.

             b. The Company shall permit the Investor to review and comment upon
the Registration Statement or any New Registration Statement and all amendments
and supplements thereto at least two (2) Trading Days prior to their filing with
the SEC, and not file any document in a form to which Investor reasonably
objects. The Investor shall use its reasonable best efforts to comment upon the
Registration Statement or any New Registration Statement and any amendments or
supplements thereto within two (2) Trading Days from the date the Investor
receives the final version thereof. The Company shall furnish to the Investor,
without charge, any correspondence from the SEC or the staff of the SEC to the
Company or its representatives relating to the Registration Statement or any New
Registration Statement


                                       2







 




             c. Upon request of the Investor, the Company shall furnish to the
Investor, (i) promptly after the same is prepared and filed with the SEC, at
least one copy of such registration statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits, (ii) upon the effectiveness of any registration
statement, ten (10) copies of the prospectus included in such registration
statement and all amendments and supplements thereto (or such other number of
copies as the Investor may reasonably request) and (iii) such other documents,
including copies of any preliminary or final prospectus, as the Investor may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by the Investor.

             d. The Company shall use reasonable best efforts to (i) register
and qualify the Registrable Securities covered by a registration statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investor reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
the Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.

             e. As promptly as practicable after becoming aware of such event or
facts, the Company shall notify the Investor in writing of the happening of any
event or existence of such facts as a result of which the prospectus included in
any registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and promptly prepare a supplement or
amendment to such registration statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to the
Investor (or such other number of copies as the Investor may reasonably
request). The Company shall also promptly notify the Investor in writing (i)
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and when a registration statement or any post-effective amendment
has become effective (notification of such effectiveness shall be delivered to
the Investor by facsimile on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to any
registration statement or related prospectus or related information, and (iii)
of the Company's reasonable determination that a post-effective amendment to a
registration statement would be appropriate.

             f. The Company shall use its reasonable best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of any
registration statement, or the suspension of the qualification of any
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Investor of the issuance of such
order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.

             g. The Company shall (i) cause all the Registrable Securities to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities on the
Principal Market. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section.

             h. The Company shall cooperate with the Investor to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to any
registration statement and enable such certificates to be in such denominations
or amounts as the Investor may reasonably request and registered in such names
as the Investor may request.

             i. The Company shall at all times provide a transfer agent and
registrar with respect to its Common Stock.


                                       3







 




             j. If reasonably requested by the Investor, the Company shall (i)
immediately incorporate in a prospectus supplement or post-effective amendment
such information as the Investor believes should be included therein relating to
the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any registration
statement.

             k. The Company shall use its reasonable best efforts to cause the
Registrable Securities covered by the any registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.

             l. Within one (1) Trading Day after any registration statement
which includes the Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investor) confirmation that such registration statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.

             m. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of Registrable Securities
pursuant to any registration statement.

         4. OBLIGATIONS OF THE INVESTOR.

             a. The Company shall notify the Investor in writing of the
information the Company reasonably requires from the Investor in connection with
any registration statement hereunder. The Investor shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request.

             b. The Investor agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
registration statement hereunder.

             c. The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event or existence of facts of the kind
described in Section 3(f) or the first sentence of 3(e), the Investor will
immediately discontinue disposition of Registrable Securities pursuant to any
registration statement(s) covering such Registrable Securities until the
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or the first sentence of 3(e). Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to promptly
deliver shares of Common Stock without any restrictive legend in accordance with
the terms of the Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract for
sale prior to the Investor's receipt of a notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e) and for which the Investor has not yet settled.

         5. EXPENSES OF REGISTRATION.

         All reasonable expenses, other than sales or brokerage commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company, shall be paid by the Company.



                                       4







 




         6. INDEMNIFICATION.

             a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend the Investor, each Person, if
any, who controls the Investor, the members, the directors, officers, partners,
employees, agents, representatives of the Investor and each Person, if any, who
controls the Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act") (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, attorneys' fees, amounts paid in settlement or
expenses, joint or several, (collectively, "Claims") incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is or may be
a party thereto ("Indemnified Damages"), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in the Registration
Statement, any New Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("Blue Sky Filing"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to the Registration Statement or
any New Registration Statement or (iv) any material violation by the Company of
this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations"). The Company shall reimburse each Indemnified Person
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, any New Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) or Section 3(e); (ii) with respect to any superceded
prospectus, shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of any person controlling such person) if
the untrue statement or omission of material fact contained in the superceded
prospectus was corrected in the revised prospectus, as then amended or
supplemented, if such revised prospectus was timely made available by the
Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was
promptly advised in writing not to use the incorrect prospectus prior to the use
giving rise to a violation and such Indemnified Person, notwithstanding such
advice, used it; (iii) shall not be available to the extent such Claim is based
on a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3(c) or Section 3(e); and (iv)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investor pursuant to Section 9.


                                       5







 




             b. In connection with the Registration Statement or any New
Registration Statement, the Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement or any New Registration Statement,
each Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
about the Investor set forth on Exhibit B attached hereto and furnished to the
Company by the Investor expressly for use in connection with such registration
statement; and, subject to Section 6(d), the Investor will reimburse any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
the Investor as a result of the sale of Registrable Securities pursuant to such
registration statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investor
pursuant to Section 9.

             c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.

             d. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

             e. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.


                                       6







 




         7. CONTRIBUTION.

         To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.

         8. REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.

             With a view to making available to the Investor the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Investor to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees, at
the Company's sole expense, to:

             a. make and keep public information available, as those terms are
understood and defined in Rule 144;

             b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and

             c. furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting and or disclosure provisions of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investor to sell such securities pursuant to Rule 144 without
registration.


             d. take such additional action as is requested by the Investor to
enable the Investor to sell the Registrable Securities pursuant to Rule 144,
including, without limitation, delivering all such legal opinions, consents,
certificates, resolutions and instructions to the Company's Transfer Agent as
may be requested from time to time by the Investor and otherwise fully cooperate
with Investor and Investor's broker to effect such sale of securities pursuant
to Rule 144.


             The Company agrees that damages may be an inadequate remedy for any
breach of the terms and provisions of this Section 8 and that Investor shall,
whether or not it is pursuing any remedies at law, be entitled to equitable
relief in the form of a preliminary or permanent injunctions, without having to
post any bond or other security, upon any breach or threatened breach of any
such terms or provisions.

         9. ASSIGNMENT OF REGISTRATION RIGHTS.

             The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investor, except
in connection with any merger or consolidation in which the Company is not the
surviving party. The Investor may not assign its rights under this Agreement
without the written consent of the Company, other than to an affiliate of the
Investor controlled by Steven G. Martin or Joshua B. Scheinfeld.

         10. AMENDMENT OF REGISTRATION RIGHTS.

             Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investor.

         11. MISCELLANEOUS.

             a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.


                                       7





 



             b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) Trading Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:


       If to the Company:
                   Frontline Communications Corporation
                   One Blue Hill Plaza, 7th Floor
                   Pearl River, New York 10965
                   Telephone:         845-623-8553
                   Facsimile:         845-623-8669
                   Attention:         Chief Financial Officer


       If to the Investor:
                   Fusion Capital Fund II, LLC
                   222 Merchandise Mart Plaza, Suite 9-112
                   Chicago, IL 60654
                   Telephone:         312-644-6644
                   Facsimile:         312-644-6244
                   Attention:         Steven G. Martin

or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Trading Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

             c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

             d. The corporate laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting the City of Chicago, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.


                                       8







 




             e. This Agreement, and the Purchase Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement and the
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.

             f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

             g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

             h. This Agreement may be executed in identical counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

             i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

             j. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.

             k. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                                     * * * * * *

             IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be duly executed as of day and year first above written.
 
                                           THE COMPANY:

                                           FRONTLINE COMMUNICATIONS CORPORATION

                                           By:     /s/ Stephen J. Cole-Hatchard
                                                   -----------------------------
                                           Name:   Stephen J. Cole-Hatchard
                                           Title:  Chief Executive Officer
 
                                           BUYER:

                                           FUSION CAPITAL FUND II, LLC BY:
                                           BY:     FUSION CAPITAL PARTNERS, LLC
                                           BY:     SGM HOLDINGS CORP.

                                           By:     /s/ Steven G. Martin
                                                   -----------------------------
                                           Name:   Steven G. Martin
                                           Title:  President


                                       9







 




                               PROXY-COMMON STOCK
                      FRONTLINE COMMUNICATIONS CORPORATION
                  SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS


         The undersigned hereby appoints Stephen J. Cole-Hatchard and Amy
Wagner-Mele (with full power to act without the other and with power to appoint
his or her substitute) as the undersigned's proxies to vote all of the
undersigned's shares of common stock of Frontline Communications Corporation, a
Delaware corporation (the "Company"), which the undersigned would be entitled to
vote at the Annual Meeting of Stockholders of the Company (the "Annual Meeting")
to be held at 11:00 a.m. local time on November 10, 2003, at the Board Room of
the American Stock Exchange, 86 Trinity Place, New York, New York, and at any
and all adjournments thereof, as follows.



         THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL.


1. CONVERSION OF SERIES C AND SERIES D CONVERTIBLE PREFERRED STOCK. Proposal to
approve of the issuance of shares of the Company's common stock upon the
conversion of the Company's outstanding Series C Convertible Preferred Stock and
Series D Convertible Preferred Stock.


       [ ] FOR [ ] AGAINST [ ] ABSTAIN


2. CONVERSION OF SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK. Proposal to
amend the certificate of designations pertaining to the Company's Series B
Cumulative Convertible Redeemable Preferred Stock ("Series B convertible
redeemable preferred stock") to provide for the mandatory conversion of all
Series B convertible redeemable preferred stock upon the election of the holders
of a majority of the Series B convertible redeemable preferred stock and the
election to effectuate such conversion at a conversion ration of six shares of
common stock for each share of Series B convertible redeemable preferred stock.


       [ ] FOR [ ] AGAINST [ ] ABSTAIN

3. CHARTER AMENDMENT: Proposal to amend the Company's certificate of
incorporation to effect a two-for-three reverse split of the Company's common
stock and to increase the number of shares of authorized common stock from
25,000,000 shares to 100,000,000 shares.

       [ ] FOR [ ] AGAINST [ ] ABSTAIN

4. CHARTER AMENDMENT: Proposal to amend the Company's certificate of
incorporation to change its name to Provo International, Inc.

       [ ] FOR [ ] AGAINST [ ] ABSTAIN

5. ELECTION OF DIRECTORS: [ ] FOR all nominees listed below (except as marked to
the contrary below).

                          [ ] WITHOUT AUTHORITY to vote for all nominees
                              listed below.

NOMINEES: William A. Barron,, Stephen J. Cole-Hatchard, Nicko Feinberg, Miguel
          Madero, Jaime Marti, Ventura Martinez del Rio, Sr., Ventura Martinez
          del Rio, Jr., Jesus Rodriguez, and Ronald C. Signore

(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line set forth below.)
--------------------------------------------------------------------------------

6. ISSUANCE OF COMMON STOCK: Proposal to enter into a common stock purchase
agreement with Fusion Capital Fund II, LLC.

       [ ] FOR [ ] AGAINST [ ] ABSTAIN

7. AUDITORS: Proposal to ratify the Company's selection of BDO Hernandez Marron
y Cia, S.C. as independent auditors for the Company for the year ending December
31, 2003.

       [ ] FOR [ ] AGAINST [ ] ABSTAIN







 




8. In their discretion, upon such other business as may properly come before the
Annual Meeting and any and all adjournments thereof.

         THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE FOREGOING INSTRUCTIONS. IN THE ABSENCE OF ANY INSTRUCTIONS,
SUCH SHARES WILL BE VOTED FOR THE ELECTION OF ALL THE NOMINEES LISTED IN ITEM 4
AND FOR THE PROPOSALS IN ITEMS 1, 2, 3, 5, 6 AND 7.


         The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders to be held on November 10, 2003 and the Proxy Statement
of the Company, each dated October __, 2003, each of which has been enclosed
herewith.


         The undersigned hereby revokes any proxy to vote shares of common stock
of the Company heretofore given by the undersigned.
 
Dated: ________________________________, 2003

__________________________________________

Signature

__________________________________________
Signature, if held jointly

__________________________________________
Tile (if applicable)
 

         Please date, sign exactly as your name appears on this Proxy and
promptly return in the enclosed envelope. In the case of joint ownership, each
joint owner must sign. When signing as guardian, executor, administrator,
attorney, trustee, custodian, or in any other similar capacity, please give full
title. If a corporation, sign in full corporate name by president or other
authorized officer, giving title, and affix corporate seal. If a partnership,
sign in partnership name by authorized person.







 





              PROXY-SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK
                      FRONTLINE COMMUNICATIONS CORPORATION
                  SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         The undersigned hereby appoints Stephen J. Cole-Hatchard and Amy
Wagner-Mele (with full power to act without the other and with power to appoint
his or her substitute) as the undersigned's proxies to vote all of the
undersigned's shares of Series B Cumulative Convertible Redeemable Preferred
Stock ("Series B convertible redeemable preferred stock") of Frontline
Communications Corporation, a Delaware corporation (the "Company"), which the
undersigned would be entitled to vote at the Annual Meeting of Stockholders of
the Company (the "Annual Meeting") to be held at 11:00 a.m. local time on
November 10, 2003, at the Board Room of the American Stock Exchange, 86 Trinity
Place, New York, New York, and at any and all adjournments thereof, as follows.



         THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.


1. CONVERSION OF SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK. Proposal to
amend the certificate of designations pertaining to the Company's Series B
convertible redeemable preferred stock to provide for the mandatory conversion
of all Series B convertible redeemable preferred stock upon the election of the
holders of a majority of the Series B convertible redeemable preferred stock and
to effectuate such conversion at a conversion ratio of six shares of common
stock for each share of Series B convertible redeemable preferred stock.


       [ ] FOR [ ] AGAINST [ ] ABSTAIN

2. In their discretion, upon such other business as may properly come before the
Annual Meeting and any and all adjournments thereof.

         THE SHARES OF SERIES A STOCK REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE FOREGOING INSTRUCTIONS. IN THE ABSENCE OF ANY INSTRUCTIONS,
SUCH SHARES WILL BE VOTED FOR THE PROPOSAL IN ITEM 1.


         The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders to be held on November 10, 2003 and the Proxy Statement
of the Company, each dated October __, 2003, each of which has been enclosed
herewith.


         The undersigned hereby revokes any proxy to vote shares of common stock
of the Company heretofore given by the undersigned.
 
Dated: ________________________________, 2003

__________________________________________
Signature

__________________________________________
Signature, if held jointly

__________________________________________
Tile (if applicable)
 

Please date, sign exactly as your name appears on this Proxy and promptly return
in the enclosed envelope. In the case of joint ownership, each joint owner must
sign. When signing as guardian, executor, administrator, attorney, trustee,
custodian, or in any other similar capacity, please give full title. If a
corporation, sign in full corporate name by president or other authorized
officer, giving title, and affix corporate seal. If a partnership, sign in
partnership name by authorized person.