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Quarterly report filed by small businesses

10QSB


                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934.

     For the quarterly period ended September 30, 2004

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934.
                For the transition period from _______ to ______

                        Commission file number 001-15673

                            PROVO INTERNATIONAL, INC.
        (Exact name of small business issuer as specified in its charter)

             Delaware                                                 13-3950283
   (State or other jurisdiction                                  (I.R.S employer
of incorporation or organization)                         identification number)


One Blue Hill Plaza, P.O. Box 1548, Pearl River, New York                  10965
         (Address of principal executive offices)                    (Zip code)

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

                      Frontline Communications Corporation
                ------------------------------------------------
                   (Former name, if changed since last report)

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

Yes [X]    No[_]


As of December 5, 2004 there were outstanding 41,678,556 shares of the Issuer's
common stock, $ .01 par value.







                                      INDEX

                                                                                    Page
                                                                                  

Part I   Financial Information


Item 1   Financial Statements (Unaudited)

         Condensed Consolidated Balance Sheets                                       1

         Condensed Consolidated Statements of Operations                             2

         Condensed Consolidated Statements of Cash Flows                             3

         Notes to Condensed Consolidated Financial Statements                        4


Item 2   Management's Discussion and Analysis of Financial Condition And
         Results Of Operations                                                       10


Item 3   Controls and Procedures                                                     17


Part II  Other information                                                           18

         Signatures                                                                  20







PROVO INTERNATIONAL, INC.  AND SUBSIDIARIES
Condensed Consolidated Balance Sheets




                                                                          September 30,        December 31,
                                                                             2004                 2003
                                                                         --------------       -------------
                                                                          (Unaudited)           (Audited)
                                                                                        
ASSETS
Current:
   Cash and cash equivalents                                             $     68,394         $    106,025
                                                                         ------------         ------------
   Accounts receivable:
     Trade, net of allowance for doubtful accounts                          2,877,269            5,775,010
     Related parties                                                          490,184              564,397
     Other                                                                    432,996              521,766

                                                                         ------------         ------------
Total accounts receivable                                                   3,800,449            6,861,173

  Value-added tax recoverable                                                 564,496              531,711
  Inventory                                                                   256,893              811,934
  Prepaid expenses                                                            325,387              348,172
  Deferred income taxes                                                                            125,941
                                                                         ------------         ------------
Total current assets                                                        5,015,619            8,784,956

Property and equipment, net                                                   186,503              406,387
Investment in nonproductive properties                                                           1,955,012
Deferred income taxes                                                         291,773               28,299
Goodwill                                                                      487,265            5,343,741
Other assets                                                                  256,696              388,473

                                                                         ------------         ------------
                                                                         $  6,237,856         $ 16,906,868
                                                                         ============         ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current maturities of long-term debt                                     $  1,413,676         $  1,548,837
Payable under supplier credit facility                                                           6,940,363
Related parties                                                               938,926              901,267
Accounts payable                                                              951,768            1,833,794
Accrued expenses                                                            1,635,558              961,734
Income taxes payable                                                          301,880              193,835
Deferred income taxes                                                          83,515
Deferred revenue                                                              353,637              463,370
                                                                         ------------         ------------
Total current liabilities                                                   5,678,960           12,843,200


Long-term debt, less current maturities                                       867,127              685,772

                                                                         ------------         ------------
Total liabilities                                                           6,546,087           13,528,972
                                                                         ------------         ------------

Minority Interest                                                                  49                   49

Stockholder's Equity  (deficiency)
    Series E Preferred stock, $.01 par value, 2,000,000 shares
      authorized, issued and outstanding 30,555 and 86,555,
      respectively. Liquidation preference                                        306                  866
    $306 and 866, respectively
    Common Stock, $.01 par value, 100,000,000 shares authorized,
      42,108,857 and 28,960,449  issued, respectively, 41,678,556
      and 28,530,148  outstanding, respectively                               421,088              289,604
   Additional paid-in capital                                              49,026,132           46,904,232
   Accumulated deficit                                                    (48,622,580)         (42,715,222)
   Unamortized deferred consulting costs                                                          (145,191)
   Accumulated other comprehensive loss                                      (261,810)             (85,026)
   Treasury stock, at cost, 430,301 shares                                   (871,416)            (871,416)

                                                                         ------------         ------------
                        Total stockholders' equity (deficiency)              (308,280)           3,377,847

                                                                         ------------         ------------
                                                                         $  6,237,856         $ 16,906,868
                                                                         ============         ============




See notes to condensed consolidated financial statements.


                                      -1-






PROVO INTERNATIONAL, INC.  AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)


                                                              For the three months ended           For the nine  months ended
                                                              September 30,    September 30,    September 30,   September 30,
                                                                  2004             2003             2004            2003
                                                              ------------     ------------     ------------     ------------
                                                                                                     
Revenues                                                      $  4,515,548     $ 17,170,676     $ 37,416,577     $ 38,808,789
                                                              ------------     ------------     ------------     ------------

Costs and expenses:
    Cost of revenues (excludes costs $14,415, $42,064,           4,081,515       16,024,334       35,350,355       35,645,638
    $52,374 and $ 127,697 included in depreciation
      and amortization)
    Selling, general and administrative                          1,016,224        1,322,511        6,031,163        3,494,743
       (excludes equity related noncash compensation of
         $16,644, $51,445, $447,692  and $51,445)
    Depreciation and amortization                                   64,678          147,477          235,437          443,608
    Noncash compensation                                            16,644           51,445          447,692           51,445
    Impairment of goodwill                                       4,856,476                         4,856,476
                                                              ------------     ------------     ------------     ------------
                                                                10,035,537       17,545,767       46,921,123       39,635,434
                                                              ------------     ------------     ------------     ------------
Loss from operations                                            (5,519,989)        (375,091)      (9,504,546)        (826,645)

Other income (expense):
   Interest income                                                   2,329               58           18,928           13,724
   Interest expense                                                (63,124)        (175,550)        (319,333)        (391,369)
   Amortization of deferred debt discount and
    conversion benefit                                             (73,779)         (42,768)        (980,651)        (247,613)
   Gain on assets transferred in settlement
    of supplier payables                                                            721,010        4,808,298          721,010
   Gain on debt settlement                                                                                            449,850
   Other income (expense)                                           15,939                            15,939          110,529
                                                              ------------     ------------     ------------     ------------
Net income (loss)  before income tax and
    minority interest                                           (5,638,624)         127,659       (5,961,365)        (170,514)
                                                              ------------     ------------     ------------     ------------

Income tax expense (benefit)                                      (121,778)         288,189          (54,007)         378,185

Minority interest                                                                   (18,512)                          (17,932)

                                                              ------------     ------------     ------------     ------------
Net  loss                                                       (5,516,846)        (142,018)      (5,907,358)        (530,767)
                                                              ------------     ------------     ------------     ------------

Preferred dividends                                                     --           74,467               --          223,401

                                                              ------------     ------------     ------------     ------------
Net loss available to common shareholders                     ($ 5,516,846)    ($   216,485)    ($ 5,907,358)    ($   754,168)
                                                              ============     ============     ============     ============

Loss  per common share-basic and diluted                      ($      0.13)    ($      0.03)    ($      0.16)    ($      0.11)
                                                              ============     ============     ============     ============

Weighted average number of  common shares
  outstanding- basic and diluted                                41,459,598        7,379,401       37,735,436        6,878,599
                                                              ============     ============     ============     ============




See notes to condensed consolidated financial statements.

                                      -2-




PROVO INTERNATIONAL, INC.  AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)




                                                                       For the nine months ended
                                                                    September 30,      September 30,
                                                                        2004               2003
                                                                   -------------      -------------
                                                                                
Cash flow from operating activities:
   Net loss                                                        ($5,907,358)       ($  530,767)
   Adjustments to reconcile net loss to net cash provided by
    (used in) operating activities:
      Minority interest                                                                   (17,932)
      Depreciation and amortization                                    235,437            443,608
      Allowance for bad debts                                        2,700,000
      Debt discount amortization and conversion benefit                980,651            266,363
      Gain on debt and supplier credit settlement                   (4,808,298)        (1,170,860)
      Noncash compensation charge                                      447,692             51,445
      Impairment of goodwill                                         4,856,476
      Deferred income taxes                                            (54,018)          (174,257)
      Changes in operating assets and liabilities
         Accounts receivable                                           197,741          1,357,742
         Value-added tax recoverable                                   510,215             81,300
         Inventory                                                     555,041            372,568
         Prepaid expenses and other                                   (520,215)          (210,425)
         Other assets                                                  230,027             15,929
         Accounts payable and accrued expenses                         (15,864)          (472,448)
         Deferred revenue                                             (109,733)           (64,692)
         Income taxes payable                                          108,045            434,507

                                                                   -------------      -------------
Net cash  provided  by (used in) operating activities                 (594,161)           382,081
                                                                   -------------      -------------


Cash flows from investing activities:
     Acquisition of property and equipment                            (179,451)           (60,703)
     Acquisition of Provo Mexico, net of cash
      acquired $345,137                                                                  (154,863)
                                                                   -------------      -------------
Net cash used in  investing activities                                (179,451)          (215,566)
                                                                   -------------      -------------


Cash flows from financing activities:
   Principal payments on long-term debt                               (685,643)          (183,667)
   Proceeds from  sale of notes payable                                300,000            100,000
   Proceeds from sale of convertible notes, net of cost                924,987
   Proceeds from issuance of common stock                              568,000            250,000
   Supplier credit facility                                              6,971           (532,284)
   Proceeds (repayment) of bridge loan                                (203,461)           465,587
   Seller note settlement and repayment of bridge loan                                   (325,000)
                                                                   -------------      -------------
Net cash provided by (used in)  financing activities                   910,854           (225,364)
                                                                   -------------      -------------

Effects of changes in foreign currency
    exchange rate changes on cash                                     (174,873)            11,881

                                                                   -------------      -------------
Net decrease in cash and cash equivalents                              (37,631)           (46,968)
                                                                   -------------      -------------

Cash and cash equivalents, beginning of period                         106,025            208,502

Cash and cash equivalents, end of period                           $    68,394        $   161,534
                                                                   =============      =============

Supplemental information:
  Interest paid during the period                                  $   298,000        $   361,000
                                                                   =============      =============

 Dividends on Series B Preferred stock accrued                                        $   223,000
                                                                                      =============
  Supplier credit payable settled by transfer of properties        $ 6,900,000
  Net book amounts of properties transferred to supplier
   credit settlement                                               $ 2,142,215
                                                                   =============
  Approximate gain on assets transferred in settlement
   of supplier payable                                                                $   721,000
                                                                                      =============



See notes to condensed consolidated financial statements.


                                      -3-



PROVO INTERNATIONAL, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2004

NOTE A- BASIS OF PRESENTATION

      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, 2003. There have been no significant changes in
accounting policies since December 31, 2003.

      The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

      In December 2003, the Company's stockholders approved a two-for-three
reverse split of the Company's common stock. All data relating to the number of
shares and per share amounts presented in these financial statements have been
retroactively adjusted in order to reflect the reverse split.

NOTE B- TELMEX SETTLEMENT AGREEMENT

      On April 7, 2004, Provo Mexico entered into a settlement agreement with
Telmex, whereby Provo Mexico transferred eight non-revenue generating real
estate properties and certain vehicles carried at a net book value of
approximately $2.1 million to Telmex in full satisfaction and release of the
$6.9 million credit balance to Telmex. The gain resulting from the reduction of
indebtedness approximated $4.8 million, and has been recorded during the three
months ended June 30, 2004.

      The Telmex agreement required Provo Mexico to stop distribution of Telmex
prepaid cards from May of 2004. In addition, the settlement agreement requires
that for a period of 15 years from the date of the agreement, certain affiliates
of Provo Mexico can not participate in any companies or transactions involving
the wholesale distribution of Telmex issued prepaid calling cards.

      Nothing in the settlement agreement restricts the Company or Provo Mexico
from continuing to distribute cellular cards issued by Telcel or prepaid
telecommunications cards issued by other telecommunications carriers in Mexico,
other than Telmex. For the year ended December 31, 2003, Telcel airtime sales
represented about 48.3% of Provo Mexico's total annual sales. All purchases of
Telcel cards are made in cash and Provo Mexico has no lines of credit with
Telcel. As a result of the settlement agreement, Provo Mexico is currently
distributing only Telcel cards in Mexico.


                                      -4-



NOTE C- 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 Mexico"), to acquire from them all the issued and
outstanding shares of Provo Mexico. The results of operations of Provo Mexico
are included from the date of acquisition.

      The accompanying pro forma operating statements are presented as if the
Provo Mexico acquisition occurred on January 1, 2003. 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, 2003 and neither is it necessarily indicative of the
results of operations for future periods.

         Nine months ended September 30, 2003
         Revenues                                             $ 58,358,079
         Net loss available to common shareholders              (2,563,125)
         Net loss per share- basic and diluted.                     ($0.08)

      The weighted average number used to calculate the net loss per share
includes 22,000,000 shares of common stock to be issued upon conversion of
220,000 shares of Series E Preferred issued for the Provo Mexico acquisition and
3,550,000 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 Mexico acquisition.

NOTE D- LOSS PER SHARE

      The Company follows SFAS No. 128, "Earning 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 shareholders 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.

      At September 30, 2004, there were outstanding 3,115,666 options and
warrants, preferred stock convertible into an aggregate of 3,055,500 shares of
common stock and promissory notes convertible into an aggregate of 6,300,000
shares of common stock that could potentially dilute basic EPS in the future.

NOTE E- ADOPTION OF NEW ACCOUNTING LITERATURE

      In January 2003, 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 interest in variable interest entities created after
January 31, 2003 and to variable interest 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.


                                      -5-



      In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS
150 establishes standards on classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all instruments that exist as of the beginning of the
first interim financial reporting period beginning after June 15, 2003. The
adoption of SFAS 150 did not have a material impact on the Company's financial
statements.

NOTE F- 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 nine
months ended September 30, 2004 and 2003, 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 G- DEBT AND COMMITMENTS

      In January 2004, the Company borrowed an aggregate principal amount of
$1,050,000 pursuant to the terms of five convertible promissory notes. The notes
are due in January of 2006 and bear an interest rate of 8% per annum. The note
holders have the option to convert the balance due under the notes into shares
of the Company's common stock at a conversion price of $0.38 per share. In
connection with the borrowing, the Company issued the note holders and the
placement agent warrants to acquire an aggregate of 1,600,000 shares at an
exercise price of $0.57 per share. The Company incurred expenses of
approximately $145,000 (including $20,000 paid in shares of common stock to the
placement agent prior to December 31, 2003). The expenses are treated as
deferred financing cost and amortized over the term of the notes. Based on the
fair value of the Company's common stock and warrants at the date of issuance,
approximately $1,017,000 was allocated as the value of the conversion feature
($605,000) and debt discount( $412,000). The amount attributable to the
conversion feature was charged to operations during the three months ended March
31, 2004 and the debt discount is being charged to operations over the term of
the note. For the three and nine months ended September 30, 2004, approximately
$49,000 and $131,000 of discount related to the warrants was charged to
operations.

      In January 2004, the Company repaid $203,461 due under a bridge loan
payable. The balance of $125,000 due on the bridge loan was satisfied by
issuance of 500,000 shares of the Company's common stock. The fair market value
of the shares issued exceeded the balance due under the bridge loan by $160,000.
The excess is treated as expense and charged to operations during the three
months ended March 31, 2004.

      In August 2004, the Company borrowed an aggregate principal amount of
$300,000 pursuant to the terms of eight promissory notes. The notes are due in
February of 2005 and bear an interest rate of 7% per annum.

      In September 2004, the Company amended its lease with the landlord for its
principal office space for a term of three more years. The amendment provides
for a reduced area of office space with an annual rental commitment of
approximately $92,000.


                                      -6-



NOTE H- STOCKHOLDERS EQUITY

      In January and February of 2004, the Company issued 4,400,000 shares of
common stock upon exercise of warrants and received gross proceeds of $620,000
(net proceeds of $568,000).

      During the nine months ended September 30, 2004, the Company issued
5,600,000 shares of common stock upon conversion of 56,000 shares of Series E
Preferred and 96,052 shares of common stock upon exercise of warrants.

      In May and June 2004, the Company issued 2,016,667 shares of its common
stock to its directors, employees and officers. Accordingly, $302,500,
representing the fair value of the shares issued, was charged to operations as a
noncash compensation charge.

      In July and August 2004, the Company issued 534,689 shares of its common
stock upon conversion of convertible promissory notes in the aggregate principal
amount of approximately $81,000.

NOTE I - SEGMENT INFORMATION

      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 Mexico, sells and distributes
prepaid phone cards in Mexico for Telcel. Until May of 2004, Provo Mexico
distributed prepaid phone cards in Mexico for Telmex. 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.


                                      -7-



Segment information for the three and nine months ended September 30 is as
follows:




                                                    Three months ended              Nine months ended
                                                       September 30,                  September 30,
                                                  2004             2003          2004             2003
                                              ------------    ------------    ------------    ------------
                                                                                  
Revenues:
  Internet business                           $    720,361    $    998,722    $  2,352,957    $  3,052,067
  Sale and distribution of phone cards           3,795,187      16,171,954      35,063,620      35,756,722
                                              ------------    ------------    ------------    ------------
                               Consolidated   $  4,515,548    $ 17,170,676    $ 37,416,577    $ 38,808,789
                                              ------------    ------------    ------------    ------------

Operating profit (loss) excluding
impairment of goodwill:
  Internet business                               (422,415)       (266,305)     (1,401,157)       (725,058)
  Sale and distribution of phone cards            (241,098)       (108,786)     (3,246,913)       (101,587)
                                              ------------    ------------    ------------    ------------
                               Consolidated   ($   663,513)   ($   375,091)   ($ 4,648,070)   ($   826,645)
                                              ------------    ------------    ------------    ------------



      For the three months and nine months ended September 30, 2004 the Internet
business includes approximately $387,000 and $761,000, respectively, of common
corporate expenses. For the three months and nine months ended September 30,
2003 the Internet business includes approximately $243,000 and $453,000,
respectively, of common corporate expenses

NOTE J- FOREIGN CURRENCY TRANSLATION

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 nine months ended September 30, 2004, the Company recorded a translation
loss of approximately $177,000 to its stockholders equity as accumulated other
comprehensive income.

NOTE K- PLANNED DISPOSAL OF PROVO MEXICO

      In July 2004, the Company entered into an agreement with the former
shareholders of Provo Mexico to sell back Provo Mexico to them in exchange for
them returning back to the Company substantially all of the Company's shares of
common stock and preferred stock issued to them (the "Unwind"). For the Unwind
to take effect, the Company has to comply with several requirements including
acquiring another line of business and obtaining stockholder and lender
approval. Upon the Company complying with the requirements and when the
likelihood of the unwind is more likely, the measurement date for disposal of
Provo Mexico will be established for financial reporting purposes. Once the
measurement date is established, the Company will recognize the loss on disposal
of Provo Mexico and the Company's financial statements for periods that include
results of Provo Mexico operations prior to the measurement date will be
reclassified as results of discontinued operations. However, there can be no
assurance that the Company will complete the Unwind.


                                      -8-



NOTE L- IMPAIRMENT OF GOODWILL

      The Company's management evaluated Provo Mexico's operations and the near
term business conditions in which Provo Mexico operates. Based on this
evaluation, management determined that the goodwill related to Provo Mexico is
impaired. Based on the estimated fair value of Provo Mexico, management
estimated an impairment loss of $4,856,476 at September 30, 2004 and the
impairment loss was charged to operations for the three months ended September
30, 2004. The measurement of impairment loss is an estimate and any further
adjustment shall be recognized in the three months ended December 31, 2004 in
connection with the execution of the unwind.

NOTE M- LEGAL PROCEEDINGS

      On or about September 20, 2004, the Company was served a complaint in an
action entitled Vertex Corporation vs. Provo US, Inc, and Provo International,
Inc. (Delaware Court of Chancery No. 702-N). In that action, Vertex seeks an
order compelling defendants to submit to arbitration of a claim involving
finder's fee based upon services allegedly rendered to Provo US, Inc., a
subsidiary of Provo Mexico. The Company believes that the claim lacks merit, and
plans to move for a dismissal on the ground that it was not a party to the
agreement. In addition, the alleged services took place prior to the Company
acquiring Provo Mexico and the former owners of Provo Mexico have agreed to
indemnify the Company for pre acquisition claims. Therefore, the Company
believes that the legal action will not have a material impact on its operations
and financial condition, accordingly no amounts have been accrued for this claim
as of September 30, 2004.

NOTE N- SUBSEQUENT EVENTS

      In October 2004, the Company sold its customer base of Digital Subscriber
Line (DSL) to an unaffiliated entity for estimated proceeds of $65,000. For the
nine months ended September 30, 2004 and 2003, the revenues from DSL customers
were an insignificant part of the consolidated revenues.

      In August 2004, the Company entered into a letter of intent to acquire a
company in employee leasing and recruitment services. In October 2004, the
letter of intent was terminated by mutual consent of the parties.

      In November 2004, the Company entered into a letter of intent to acquire
certain assets from a biopharmaceutical company. The transaction is subject to,
among other things, satisfactory completion of due diligence by both parties, an
execution of a definitive agreement with customary closing conditions, including
regulatory and shareholder approval. However, there cannot be any assurance that
we will be able to successfully close the transaction.

      In December 2004, we sold in a private offering a promissory note in the
face value of $325,000 and 50,000 shares of Series F Preferred Stock for
$50,000.The promissory note is due in April of 2005 and bears interest at 12%.
In connection with the financing the Company issued warrants to acquire 500,000
shares of the Company's common stock at an exercise price $0.13 per share.


                                      -9-



      In connection with the transaction described in the preceding paragraph,
in December 2004, the Company repaid $300,000 and entered into an agreement with
the holders of secured convertible notes (aggregate face amount of $920,000 at
September 30, 2004) whereby the noteholders have agreed to release their
security interest in Provo Mexico. In connection therewith, the Company has
agreed to sell certain of its customer bases to fund the partial repayment of
the convertible notes by a specified date. The agreement with the noteholders
also provides for payment of the balance due on the notes in shares of the
Company's common stock at a conversion price specified in the agreement. The
Company is in negotiation with potential buyers to sell certain of its customer
bases, however, there is no definitive agreement and there can be no assurance
that the Company will be successful in selling its customer bases by the
specified date or on terms that are acceptable to the Company.

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

      Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this Item 2 and elsewhere in this Form
10-QSB that are not historical facts are "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended. These "forward looking
statements" are subject to a number of known and unknown risks, uncertainties
and other factors that may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements
expressed or implied by such forward looking statements. Such risk factors
include, but are not limited to, the following: risks associated with our
ability to attract and retain new subscribers to integrate newly acquired
subscribers and business entities into our operations, and to manage any future
growth; uncertainties regarding our future operating results; risks relating to
changes in the market for internet services, regulatory and technological
changes, our possible inability to protect proprietary rights, changes in
consumer preferences and demographics, competition and our reliance on
telecommunication carriers; risks relating to our ability to expand our network
structure and to obtain any necessary future financing; risks relating to
unfavorable general economic conditions, uncertainty of customer and supplier
plans and commitments; risks related to our acquisition of Provo Mexico and our
ability to maintain the American Stock Exchange listing of our securities; and
other risks detailed in this report and in our other Securities and Exchange
Commission filings. The words "believe", "expect", "anticipate", "intend" and
"plan" and similar expressions identify forward-looking statements, which speak
only as of the date they were made. We undertake no obligation to update any
forward-looking statements contained in this report.

OVERVIEW 

Prior to acquiring Provo in 2003 and during 2002, a significant part of
our revenues were derived from providing Internet access services to individuals
(Residential ISP) and businesses (Business ISP). These revenues were comprised
principally of recurring revenues from our customer base, leased line
connections and various ancillary services. We charge subscription fees, which
are billed monthly, quarterly, semi-annually or annually in advance, typically
pursuant to pre-authorized credit card accounts. The balance of our revenues
during those periods were derived from website design, development and hosting
services.

      Monthly subscription service revenue for Internet access is recognized
over the period in which services are provided. Fee revenues for website design,
development and hosting services are recognized as services are performed.
Deferred revenue represents prepaid access fees by customers.


                                      -10-



      On April 3, 2003, we 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 Mexico").
Provo Mexico and its subsidiaries are engaged in the distribution of prepaid
calling cards and cellular phone airtime in Mexico. The acquisition was
accounted for using the purchase method of accounting with the results of the
acquisition included in the consolidated financial statements from the
acquisition date.

      Provo Mexico's primary business is the sale and distribution of prepaid
PCS cellular airtime for Telcel in Mexico. Telcel is the dominant provider of
cellular airtime in Mexico. Until May 2004, Provo sold and distributed Ladatel
payphone calling cards and Multifon prepaid telephone time for Telmex. On April
7, 2004, Provo Mexico entered into a settlement agreement with Telmex, whereby
Provo Mexico transferred eight non-revenue generating real estate properties and
certain vehicles carried at a net book value of approximately $2.1 million to
Telmex in full satisfaction and release of the $6.9 million credit balance to
Telmex. The gain resulting from the reduction of indebtedness approximated $4.8
million, and has been recorded during the three months ended June 30, 2004.

      The Telmex agreement required Provo Mexico to stop distribution of Telmex
prepaid cards from May of 2004. In addition, the settlement agreement requires
that for a period of 15 years from the date of the agreement, certain affiliates
of Provo Mexico can not participate in any companies or transactions involving
the wholesale distribution of Telmex issued prepaid calling cards.

      Nothing in the settlement agreement restricts the Company or Provo Mexico
from continuing to distribute cellular cards issued by Telcel or prepaid
telecommunications cards issued by other telecommunications carriers in Mexico,
other than Telmex. For the year ended December 31, 2003, Telcel airtime sales
represented about 48.3% of Provo Mexico's total annual sales. All purchases of
Telcel cards are made in cash and Provo Mexico has no lines of credit with
Telcel. As a result of the settlement agreement, Provo Mexico is currently
distributing only Telcel 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 Telcel and sells the cards in smaller quantities
to retailers either directly or through agents or distributors.

      Provo Mexico purchases prepaid cards at a discount from the face value of
the card, and resells them to retailers or distributors at a slightly lower
discount. The difference between the two discount rates, typically from 1% to
7%, represents the gross margin Provo Mexico retains. Cash (C.O.D.) purchases
result in a higher discount to Provo Mexico compared to purchases on credit
terms from Telmex. In addition, the discount obtained by Provo Mexico varies by
the type of card, face value of the card and volume levels met. Similarly, the
discount offered by Provo Mexico 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 Mexico in any
period is impacted by several factors. In addition, Telmex and Telcel provide
Provo Mexico with additional discounts and rebates based on certain special
programs. Provo Mexico's management tries to optimize the gross margins earned
by balancing volume levels with its working capital availability, and from time
to time has scaled back volume levels due to working capital constraints.


                                      -11-



      In July 2004, the Company entered into an agreement with the former
shareholders of Provo Mexico to sell back Provo Mexico to them in exchange for
them returning back to the Company substantially all of the Company's shares of
common stock and preferred stock issued to them (the "Unwind"). For the Unwind
to take effect, the Company has to comply with several requirements including
acquiring another line of business and obtaining stockholder and lender
approval. Upon the Company complying with the requirements and when the
likelihood of the unwind is more likely, the measurement date for disposal of
Provo Mexico will be established for financial reporting purposes. Once the
measurement date is established, the Company will recognize the loss on disposal
of Provo Mexico and the Company's financial statements for periods that include
results of Provo Mexico operations prior to the measurement date will be
reclassified as results of discontinued operations. However, there can be no
assurance that the Company will complete the Unwind.

RESULTS OF OPERATIONS

Comparison of three and nine months ended September 30, 2004 and 2003:

Revenues. Our revenues decreased for the three months ended September 30, 2004
by $12,655,128 or 73.7% to $4,515,548 over the same period of the prior year.
The decrease in revenues was principally due to the discontinuation of wholesale
distribution of Ladatel and Multifon cards for Telmex in May of 2004. Our
revenues decreased for the nine months ended September 30, 2004 by $1,392,212 or
3.6% to $37,416,577. The decrease in revenues was principally due to the
discontinuation of wholesale distribution of Ladatel and Multifon cards for
Telmex in May of 2004. In 2003, Provo Mexico's results were included for the
post acquisition period. Excluding the Provo Mexico acquisition, revenues
decreased for the nine months by $699,110 or 22.9% over the same period of the
prior year. The decrease in revenues was in part due to customer attrition and
due to the reduced amount of website development work we performed in 2004.
Pursuant to a settlement agreement with Telmex, Provo Mexico has discontinued
the wholesale distribution of Ladatel and Multifon time. Therefore, we
anticipate that our revenues for the rest of 2004 will decrease.

Cost of Revenues. For the three months ended September 30, 2004, our cost of
revenues decreased by $11,942,819 to $4,081,515. The decrease in cost of
revenues was due to decreased revenues in 2004 compared to the same period of
the prior year. Cost of revenues as a percentage of revenues for the three
months ended September 30, 2004 was 90.4% compared to 93.3% in 2003. For the
nine months ended September 30, 2004, our cost of revenues decreased by $295,283
to $35,350,355. The decrease in cost of revenues was due to decreased revenues
in 2004 compared to the same period of the prior year. Cost of revenues as a
percentage of revenues for the nine months ended September 30, 2004 was 94.5%
compared to 91.8% in 2003.In percentage terms of revenues, the cost of Provo
Mexico's products are generally higher than that of our U.S. operations, and
with a greater mix of Provo Mexico's share in our consolidated revenues, cost of
revenue as a percentage of revenues is expected to increase. We anticipate that
our cost of revenues in absolute dollars for the rest of 2004 will decrease in
line with the anticipated decrease in revenues.


                                      -12-



Selling, General and Administrative. For the three months ended September 30,
2004, selling, general and administrative expenses decreased by $306,287 to
$1,016,224. The decrease was due to cost reduction measures implemented due to a
reduced level activity in Provo Mexico. For the nine months ended September 30,
2004, selling, general and administrative expenses increased by $2,536,420 to
$6,031,163 compared to the same period of the prior year. The increase in
selling, general and administrative expenses was principally due to the addition
of $2.7 million to the allowance for doubtful accounts during the three months
ended June 30, 2004. Due to the discontinuation of the wholesale distribution
for Telmex, Provo Mexico has lost the continuity of the relationship with many
of its customers. Therefore, Provo Mexico's management evaluated its accounts
receivable situation and increased the allowance for doubtful accounts.

Depreciation and Amortization. For the three months ended September 30, 2004,
depreciation and amortization decreased by $82,799 to $64,678. For the nine
months ended September 30, 2004, depreciation and amortization decreased by
$208,171 to $235,437. Depreciation and amortization decreased as many of our
long-lived assets are fully depreciated or amortized over their estimated useful
lives.

Impairment of Goodwill. The Company's management evaluated Provo Mexico's
operations and the near term business conditions in which Provo Mexico operates.
Based on this evaluation, management determined that the goodwill related to
Provo Mexico is impaired. Based on the estimated fair value of Provo Mexico,
management estimated an impairment loss of $4,856,476 at September 30, 2004 and
the impairment loss was charged to operations for the three months ended
September 30, 2004. The measurement of impairment loss is an estimate and any
further adjustment shall be recognized in the three months ended December 31,
2004 in connection with the execution of the unwind.

Interest Expense. Interest expense for three months ended September 30, 2004 was
$63,124 compared to an interest expense of $175,550 during the comparable period
in 2003. Interest expense for the nine months ended September 30, 2004 was
$319,333 compared to an interest expense of $391,369 during the comparable
period in 2003. Interest expense for the three and nine months ended September
30, 2004 decreased compared to the same periods of the prior year, principally
due to the decreased debt level that resulted from the settlement of supplier
credit payable to Telmex in April 2004.

Noncash Compensation Charges. In 2004, we issued 2,016,667 shares of common
stock to directors, employees and officers. Accordingly, $302,500, representing
the fair value of the shares issued, was charged to operations as a noncash
compensation charge. In 2003, we entered into consulting agreements with five
consultants and issued them an aggregate of 426,117 shares of common stock, and
warrants to acquire 100,000 shares of common stock. Based on the fair value of
the common shares and warrants, the aggregate consulting costs approximated
$294,750 and is being charged to operations over the terms of the respective
consulting agreements.

Income Taxes. Represent Provo Mexico's tax, as determined in accordance with
Mexico's income tax laws. The effective tax rate was lower than the statutory
rate of 34% due to certain revised estimates on deferred taxes. Approximately
$330,000 of tax benefit of tax loss carryforward was previously offset by a
valuation allowance due to the uncertainty of its realization. For both 2004 and
2003, our U.S. operations did not incur any income tax expense due to losses.
The tax benefit of these losses has been completely offset by a valuation
allowance due to the uncertainty of its realization.


                                      -13-



Net loss. As a result of the foregoing for the three months ended September 30,
2004 net loss increased by $5,300,361,which includes goodwill impairment of
$4,856,476 to a loss of $5,516,846 compared to a net loss of $216,485 for the
corresponding period in 2003. For the nine months ended September 30, 2004,
after recognizing a $4.8 million gain on settlement of supplier payable and
$4,856,476 of goodwill impairment, net loss increased by $5,153,190 to a loss of
$5,907,358 compared to a net loss of $754,168 for the corresponding period in
2003.

LIQUIDITY AND CAPITAL RESOURCES

      Our working capital deficiency at September 30, 2004 was $663,341 compared
with a working capital deficiency of $4,058,244 at December 31, 2003. The
increase in working capital was primarily due to approximately $1.6 million of
additional financing completed in the nine months ended September 30, 2004 and
due to the settlement of the supplier payable to Telmex.

      Our recent primary capital requirements were to fund Provo Mexico's
working capital. To date, we have financed our capital requirements primarily
through the issuance of debt and equity securities. The availability of capital
resources is dependent upon many factors, including, but not limited to,
prevailing market conditions, interest rates, and our financial condition.

      In 2004, we borrowed an aggregate principal amount of $1,350,000 through
the sale of five convertible promissory notes and eight promissory notes, and we
issued 4,400,000 shares of common stock upon exercise of warrants and received
gross proceeds of $620,000 (net proceeds of $568,000).

      At September 30, 2004, Provo Mexico had aggregate borrowings of $997,428
under four lines of credit with two Mexican banks. The lines are secured by real
estate owned by family members of Provo Mexico's former majority stockholders.
At September 30, 2004, the current interest rates on the lines range between
10.8% and 11.3%. The lines expire at various dates through September of 2005 and
one line requires a monthly payment of approximately $17,858 in 2004.

      Historically, Provo Mexico relied on Telmex to finance its inventory
purchases with a line of credit. In April 2004, Provo Mexico entered into a
settlement agreement with Telmex, whereby Provo Mexico transferred eight
non-revenue generating real estate properties and certain vehicles with a net
book value of $2.1 million to Telmex in full satisfaction and release of the
$6.9 million credit balance to Telmex. The gain resulting from the reduction of
indebtedness approximated $4.8 million, and has been recorded during the three
months ended June 30, 2004.

      The Telmex agreement required Provo Mexico to stop distribution of Telmex
prepaid cards from May of 2004. Nothing in the settlement agreement restricts
the Company or Provo Mexico from continuing to distribute cellular cards issued
by Telcel or prepaid telecommunications cards issued by other telecommunications
carriers in Mexico, other than Telmex. For the year ended December 31, 2003,
Telcel airtime sales represented about 48.3% of Provo Mexico's total annual
sales. All purchases of Telcel cards are made in cash and Provo Mexico has no
lines of credit with Telcel. As a result of the settlement agreement, Provo
Mexico is currently distributing only Telcel cards in Mexico.


                                      -14-



      As a result of the settlement agreement with Telmex, Provo Mexico has
scaled back and continues to scale back its operations in Mexico to reduce
costs. Management believes that it can successfully restructure its Mexican
operations and reduce costs to mitigate the loss of margin due to the
discontinuation of Ladatel sales. However there is no assurance that we will be
successful in completing our restructuring on a timely basis. A significant
amount of our working capital in Mexico is not required since we have
discontinued Ladatel card sales. We anticipate that the collection of existing
receivables will provide us with substantial liquidity. However there is no
assurance that we will be successful in collecting the receivables in a timely
manner.

      In July 2004, we entered into an agreement with the former shareholders of
Provo Mexico to sell back Provo Mexico to them in exchange for them returning
back to us substantially all of the Company's shares of common stock and
preferred stock issued to them (the "Unwind"). For the Unwind to take effect, we
have to comply with several requirements including acquiring another line of
business and obtaining stockholder and lender approval. However, there can be no
assurance that we will complete the Unwind.

      In December 2004, we repaid $300,000 and entered into an agreement with
the holders of secured convertible notes (aggregate face amount of $920,000 at
September 30, 2004) whereby the noteholders have agreed to release their
security interest in Provo Mexico. In connection therewith, we have agreed to
sell certain of our customer bases to fund the partial repayment of the
convertible notes by a specified date. The agreement with the noteholders also
provides for payment of the balance due on the notes in shares of the Company's
common stock at a conversion price specified in the agreement. We are in
negotiation with potential buyers to sell certain of our customer bases,
however, there is no definitive agreement and there can be assurance that we
will be successful in selling our customer bases by the specified date or on
terms that are acceptable to us.

      Our plans are to complete the Provo Mexico unwind, sell certain of our
customer bases to satisfy our debt obligation and to acquire certain assets from
a biopharmaceutical company. In addition, we will continue with our Business ISP
operations. In order to continue our operations, execute our plans and satisfy
our debt obligations, we need to secure additional financing. We are currently
pursuing additional sources of financing. There can be no assurance, however,
that such plans will be successfully pursued or that additional financing will
be available on terms that are acceptable to us, or on any terms. If we cannot
obtain the additional funding we require, or raise money by selling some of our
assets, we will have to negotiate with our lenders to extend the repayment dates
of our indebtedness. There can be no assurance, however, that we will be able to
successfully restructure our debt obligations in the event we fail to obtain
additional financing.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      Our discussion and analysis of our financial condition and results of
operations is based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP"). The preparation of these financial statement requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those
related to revenue recognition, accounts receivable, long-lived assets and
income taxes. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the current
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.


                                      -15-



      We believe the following critical accounting policies affect our
significant judgment and estimates used in preparation of our consolidated
financial statements.

REVENUE RECOGNITION. A part of our revenues are derived from providing Internet
access to individuals and businesses. These revenues consist principally of
recurring revenues from our customer base, leased line connections and various
ancillary services. We charge subscription fees, which are billed monthly,
quarterly, and semi-annually or annually in advance, typically pursuant to
pre-authorized credit card accounts. Monthly subscription revenue for Internet
access is recognized over the period in which services are provided. Fee revenue
for website design, development and hosting services are recognized as services
are performed. Deferred revenue represents prepaid access fees paid by
customers.

      We recognize prepaid phone card revenues 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. We believe that our revenue recognition
policy is critical because revenue is a very significant component of our
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; our recognized results may be affected.

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

      With respect to the prepaid phone cards business, we perform ongoing
credit evaluations of our customers and adjust credit limits based upon our
customers' payment history and current credit worthiness, as determined by a
review of their current credit information. We continuously monitor collections
and an allowance for estimated credit losses is maintained based upon our
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. In this line
of business, we have a limited number of customers with individually large
amounts due at any balance sheet date. Any unanticipated change in one of those
customers' credit position could have a material effect on our results of
operations in the period in which such changes or events occur.

LONG-LIVED ASSETS. We assess the impairment of long-lived assets, which include
property and equipment, intangibles and customer bases 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
those assets. When any such impairment exists, the related assets will be
written down to fair value.

INVENTORY. Inventory consists of prepaid phone cards, purchased for resale.
Inventory is valued at the 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.


                                      -16-



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 from management's estimates or assumptions change, the provision for
income taxes could be materially impacted.


I
TEM  3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

On December 15, 2004, the Company's independent registered public accounting
firm notified management that they had identified significant deficiencies
regarding the internal controls of the Company's subsidiary in Mexico. The
deficiencies noted were related to (a) the subsidiary's financial reporting
closing and review process and (b) the lack of account analysis and
reconciliations. The Company believes such deficiencies were primarily
attributable to changes in personnel within its Mexican subsidiary's accounting
department due to the restructuring of operations. The Company is addressing the
situation after taking into consideration the planned unwind of the subsidiary.

Our management, including our chief executive officer and chief financial
officer, have carried out an evaluation of the effectiveness of our disclosure
controls and procedures as of September 30, 2004, pursuant to Exchange Act Rules
13a-15(e) and 15(d)-15(e). Not withstanding these observations related to
internal controls in our Mexican subsidiary, our chief executive officer and
chief financial officer have concluded that as of such date, our disclosure
controls and procedures in place are adequate to ensure material information and
other information requiring disclosure is identified and communicated on a
timely basis.

Changes in Internal Control Over Financial Reporting

Except for the foregoing, during the period covered by this report, there have
been no changes in our internal control over financial reporting that have
materially affected or are reasonably likely to materially affect our internal
control over financial reporting.


                                      -17-



                                     PART II
                                OTHER INFORMATION


Item 1. Legal Proceedings

        On or about September 20, 2004, the Company was served a complaint
        in an action entitled Vertex Corporation vs. Provo US, Inc, and
        Provo International, Inc. (Delaware Court of Chancery No. 702-N). In
        that action, Vertex seeks an order compelling defendants to submit
        to arbitration of a claim involving finder's fee based upon services
        allegedly rendered to Provo US, Inc., a subsidiary of Provo Mexico.
        The Company believes that the claim lacks merit, and plans to move
        for a dismissal on the ground that it was not a party to the
        agreement. In addition, the alleged services took place prior to the
        Company acquiring Provo Mexico and the former owners of Provo Mexico
        have agreed to indemnify the Company for pre acquisition claims.
        Therefore, the Company believes that the legal action will not have
        a material impact on its operations and financial condition,
        although there can be no assurance given in this regard.


Item 2. Changes in Securities and Use of Proceeds

        Recent Sales of Unregistered Securities

        During the three months ended September 30, 2004, the Company issued
        534,684 shares of its common stock upon conversion of convertible
        promissory notes and sold 1,000 shares of its common stock. In
        addition, the Company issued 43,241 shares of its common stock upon
        exercise of warrants.

        The foregoing shares were issued pursuant to exemptions from
        registration under Sections 3(a)(9) and 4(2) of the Securities Act
        of 1933.


Item 6. Exhibits and Reports on Form 8-K

        a)    Exhibits:

                  31 (a) Certification of the Chief Executive Officer pursuant
                  to Section 302 of the Sarbanes-Oxley Act of 2002

                  31 (b) Certification of the Chief Financial Officer pursuant
                  to Section 302 of the Sarbanes-Oxley Act of 2002

                  32 (a) Certification of Periodic Financial Report by Chief
                  Executive Officer Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350,
                  furnished herewith

                  32 (b) Certification of Periodic Financial Report by Chief
                  Financial Officer Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350,
                  furnished herewith


                                      -18-



        b)    Reports on Form 8-K:

              During the three months ended September 30, 2004, the Company
              filed:

                  (1) an 8-K for the event dated July 14, 2004 under Item 5 to
                      report the agreement with certain noteholders.

                  (2) an 8-K for the event dated September 26, 2004 under Item
                      4.01 to report changes to its Certifying Accountant.


                                      -19-




                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

December 16, 2004
                                       Provo International, Inc.

                                       By: /s/ Stephen J. Cole-Hatchard
                                           -------------------------------------
                                           Stephen J. Cole-Hatchard
                                           Chief Executive Officer

                                      By:  /s/ Vasan Thatham
                                           -------------------------------------
                                           Vasan Thatham
                                           Principal Financial Officer and
                                           Vice President

                                      -20-




Exhibit 31(a)

                                  CERTIFICATION

I, Stephen J. Cole- Hatchard certify that:

1.  I have reviewed this quarterly report on Form 10-QSB of Provo 
    International, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of
    a material fact or omit to state a material fact necessary to make the
    statements made, in light of the circumstances under which such statements
    were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial
    information included in this report, fairly present in all material respects
    the financial condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for
    establishing and maintaining disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our 
         supervision, to ensure that material information relating to the 
         registrant, including its consolidated subsidiaries, is made known to
 
         us by others within those entities, particularly during the period in 
         which this report is being prepared;

     (b) Evaluated the effectiveness of the registrant's disclosure controls and
         procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the end
         of the period covered by this report based on such evaluation; and

     (c) Disclosed in this report any change in the registrant's internal
         control over financial reporting that occurred during the registrant's
         most recent fiscal quarter (the registrant's fourth fiscal quarter in
         the case of an annual report) that has materially affected, or is
         reasonably likely to materially affect, the registrant's internal
         control over financial reporting; and

5.  The registrant's other certifying officer(s) and I have disclosed, based
    on our most recent evaluation of internal control over financial reporting, 
    to the registrant's auditors and the audit committee of the registrant's 
    board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         control over financial reporting.

Date: December 16, 2004

                                                    /s/ Stephen J. Cole-Hatchard
                                                    ----------------------------
                                                    Chief Executive Officer



Exhibit 31(b)

                                  CERTIFICATION
                                  -------------

     I, Vasan Thatham, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Provo
     International, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)   Designed such disclosure controls and procedures, or caused such 
           disclosure controls and procedures to be designed under our
           supervision, to ensure that material information relating to the
           registrant, including its consolidated subsidiaries, is made known to
           us by others
 within those entities, particularly during the period in
           which this report is being prepared;

     (b)   Evaluated the effectiveness of the registrant's disclosure controls 
           and procedures and presented in this report our conclusions about the
           effectiveness of the disclosure controls and procedures, as of the 
           end of the period covered by this report based on such evaluation; 
           and

     (c)   Disclosed in this report any change in the registrant's internal
           control over financial reporting that occurred during the
           registrant's most recent fiscal quarter (the registrant's fourth
           fiscal quarter in the case of an annual report) that has materially
           affected, or is reasonably likely to materially affect, the
           registrant's internal control over financial reporting; and

5.   Disclosed in this report any change in the registrant's internal control
     over financial reporting that occurred during the registrant's most recent
     fiscal quarter (the registrant's fourth fiscal quarter in the case of an
     annual report) that has materially affected, or is reasonably likely to
     materially affect, the registrant's internal control over financial
     reporting; and

     (a)  All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are 
          reasonably likely to adversely affect the registrant's ability to 
          record, process, summarize and report financial information; and

     (b)  Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal 
          control over financial reporting.


Date: December 16, 2004
                                               /s/ Vasan Thatham
                                               ----------------------------
                                               Chief Financial Officer



Exhibit 32(a)


                  Certification of Periodic Financial Report by
                       Chief Executive Officer Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002
                           and 18 U.S.C. Section 1350


     I, Stephen J. Cole-Hatchard, Sr. Chief Executive Officer of Provo
International, Inc. (the "Company"), certify that:


1. The Company's Quarterly Report on Form 10-QSB for the quarterly period ended
September 30, 2004 (the "Report") fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.


                                                /S/ Stephen J. Cole-Hatchard
                                                ----------------------------
                                                Stephen J. Cole-Hatchard
                                                Chief Executive Officer
                                                Provo International, Inc.
                                                December 16, 2004



     A signed original of this written statement required by Section 906 has
been provided to Provo International, Inc. and will be retained by Provo
International, Inc. and furnished to the Securities and Exchange Commission or
its staff upon request.





Exhibit 32(b)


                  Certification of Periodic Financial Report by
                       Chief Financial Officer Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002
                             and 18 U.S.C. ss. 1350


     I, Vasan Thatham, Vice President and Chief Financial Officer of Provo
International, Inc. (the "Company"), certify that:


(1) The Company's Quarterly Report on Form 10-QSB for the quarterly period ended
September 30, 2004 (the "Report") fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.


                                                /s/ Vasan Thatham
                                                -----------------
                                                Vasan Thatham
                                                Vice President and
                                                Chief Financial Officer
                                                Provo International, Inc.
                                                December 16, 2004



     A signed original of this written statement required by Section 906 has
been provided to Provo International, Inc. and will be retained by Provo
International, Inc. and furnished to the Securities and Exchange Commission or
its staff upon request.