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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, 2003


[ ]  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

                      FRONTLINE COMMUNICATIONS CORPORATION

        (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)

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 October 31, 2003 there were outstanding 12,117,480 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                                                         12


Item 4   Controls and Procedures                                                       19


Part II  Other information                                                             20

         Signatures                                                                    22



                                        i




FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets




                                                                                              September 30,      December 31,
                                                                                                  2003               2002
                                                                                               ------------      ------------
                                                                                               (Unaudited)         (Audited)
ASSETS
                                                                                                           
Current:
   Cash and cash equivalents                                                                   $    161,534      $    208,502
   Accounts receivable:
     Trade, net of allowance for doubtful accounts                                                6,564,240           212,397
     Related parties                                                                                507,031
     Other                                                                                          173,526
                                                                                               ------------      ------------
Total accounts receivable                                                                         7,244,797           212,397

  Value-added tax recoverable                                                                       469,165
  Inventory                                                                                       1,347,725
  Prepaid expenses                                                                                  755,766            57,778
                                                                                               ------------      ------------
Total current assets                                                                              9,978,987           478,677

Property and equipment, net                                                                         506,258           671,013
Investment nonproductive properties                                                               1,955,012
Deferred income taxes                                                                               130,772
Costs in excess of net assets acquired, goodwill                                                  5,343,741
Other assets                                                                                        643,155           108,877
                                                                                               ------------      ------------
                                                                                               $ 18,557,925      $  1,258,567
                                                                                               ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt                                                           $  1,166,903      $    940,202
Payable under supplier credit facility                                                            3,692,944
Related parties                                                                                     711,256
Accounts payable and accrued expenses                                                             2,697,686         1,669,459
Income taxes payable                                                                                617,657
Deferred taxes                                                                                      375,897
Deferred revenue                                                                                    460,046           524,738
                                                                                               ------------      ------------
Total current liabilities                                                                         9,722,389         3,134,399

Long-term debt, less current maturities                                                           1,462,562           153,120
Payable under supplier  credit facility, less current maturities                                  2,416,216
                                                                                               ------------      ------------
Total long-term debt                                                                              3,878,778           153,120
                                                                                               ------------      ------------
Total liabilities                                                                                13,601,167         3,287,519
                                                                                               ------------      ------------

Minority Interest                                                                                    25,239

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             4,964
   Series C Preferred stock, $.01 par value, issued and outstanding 220,000 shares
     and none, respectively. Liquidation preference $ 2,200                                           2,200
   Series D Preferred stock, $.01 par value, issued and outstanding 35,500 shares                       355
     and none, respectively. Liquidation preference $ 355
   Common Stock, $.01 par value, 25,000,000 shares authorized, 12,762,932 and
       9,940,424 issued, respectively, 12,117,480 and 9,294,972 outstanding, respectively           127,629            99,404
   Additional paid-in capital                                                                    44,063,895        36,204,292
   Accumulated deficit                                                                          (38,220,364)      (37,466,196)
    Unamortized deferred consulting costs                                                          (187,625)
   Accumulated other comprehensive gain                                                              11,881
   Treasury stock, at cost, 645,452 shares                                                         (871,416)         (871,416)
                                                                                               ------------      ------------
                            Total stockholders' equity (deficiency)                               4,931,519        (2,028,952)
                                                                                               ------------      ------------
                                                                                               $ 18,557,925      $  1,258,567
                                                                                               ============      ============



           See notes to condensed consolidated financial statements.

                                       -1-




FRONTLINE COMMUNICATIONS CORPORATION 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,
                                                                        2003             2002            2003           2002
                                                                     ------------    ------------    ------------    ------------
                                                                                                         
Revenues                                                             $ 17,170,676    $  1,233,792    $ 38,808,789    $  3,873,022

Costs and expenses:
      Cost of revenues (excludes costs $42,064, $43,344, $127,697      16,024,334         618,920      35,645,638       1,948,780
        and $132,266,  included in depreciation and amortization)
      Selling, general and administrative                               1,322,511         608,246       3,494,743       1,907,825
          (excludes equity related noncash compensation of
            $51,445, $0, $51,445  and $0)
      Depreciation and amortization                                       147,477         186,144         443,608         573,863
      Noncash compensation                                                 51,445                          51,445
                                                                     ------------    ------------    ------------    ------------
                                                                       17,545,767       1,413,310      39,635,434       4,430,468
                                                                     ------------    ------------    ------------    ------------
Loss from operations                                                     (375,091)       (179,518)       (826,645)       (557,446)

Other income (expense):
   Interest income                                                             58           1,238          13,724           7,300
   Interest expense                                                      (175,550)        (26,439)       (391,369)        (70,159)
   Amortization of deferred financing costs and conversion benefit        (58,200)                       (247,613)
   Other income ( expense)                                                 15,432                         110,529          (3,214)
   Gain on assets transferred in settlement of supplier payables          721,010                         721,010
Net loss before income tax, minority interest
  and gain on debt settlement                                             127,659        (204,719)       (620,364)       (623,519)
                                                                     ------------    ------------    ------------    ------------

Gain on debt settlement                                                                                   449,850
                                                                     ------------    ------------    ------------    ------------
Income (loss)  before income taxes and minority interest                  127,659        (204,719)       (170,514)       (623,519)

Income tax expense                                                        288,189                         378,185

Minority interest                                                         (18,512)                        (17,932)
                                                                     ------------    ------------    ------------    ------------
Net  (loss)                                                              (142,018)       (204,719)       (530,767)       (623,519)
                                                                     ------------    ------------    ------------    ------------

Preferred dividends                                                        74,467          76,717         223,401         231,217

                                                                     ------------    ------------    ------------    ------------
Net loss available to common shareholders                            ($   216,485)   ($   281,436)   ($   754,168)   ($   854,736)
                                                                     ============    ============    ============    ============

Loss per common share-basic and diluted                              ($      0.02)   ($      0.03)   ($      0.07)   ($      0.09)
                                                                     ============    ============    ============    ============

Weighted average number of  common shares
   outstanding- basic and diluted                                      11,069,102       9,223,208      10,317,898       9,077,411
                                                                     ============    ============    ============    ============



See notes to condensed consolidated financial statements.

                                       -2-




FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)




                                                                For the nine months ended
                                                               September 30,  September 30,
                                                                  2003            2002
                                                               -----------    -----------
                                                                        
Cash flow from operating activities:
   Net loss                                                    ($  530,767)   ($  623,519)
   Adjustments to reconcile net loss to net cash provided by
    (used in) operating activities:
     Minority interest                                             (17,932)
      Depreciation and amortization                                443,608        573,863
      Debt discount amortization                                    18,750          8,333
      Amortization of deferred financing cost                      247,613
      Gain on debt and supplier credit settlement                (1,170,860)
      Noncash compensation charge                                   51,445         58,500
      Deferred income taxes                                       (174,257)
      Loss on disposal of property and equipment                                    3,214
      Changes in operating assets and liabilities
         Accounts receivable                                     1,357,742         55,886
         Value-added tax recoverable                                81,300
         Inventory                                                 372,568
         Prepaid expenses and other                               (210,425)       (33,654)
         Other assets                                               15,929            757
         Accounts payable and accrued expenses                    (472,448)      (359,171)
         Deferred revenue                                          (64,692)       (38,008)
         Income taxes payable                                      434,507
                                                               -----------    -----------
Net cash  provided  by (used in) operating activities              382,081       (353,799)
                                                               -----------    -----------

Cash flows from investing activities:
   Acquisition of property and equipment                           (60,703)       (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                            (215,566)        (9,895)
                                                               -----------    -----------

Cash flows from financing activities:
   Principal payments on long-term debt                           (183,667)      (193,064)
   Proceeds from private sale of notes payable                     100,000        200,000
   Proceeds from private sale of common stock                      250,000
   Payments to acquire treasury stock                                              (6,764)
   Supplier credit facility                                       (532,284)
   Net proceeds from bridge loan                                   465,587
   Seller note settlement & repayment of bridge loan              (325,000)
                                                               -----------    -----------
Net cash provided by (used in)  financing activities              (225,364)           172
                                                               -----------    -----------

Effects of changes in foreign currency
    exchange rate changes on cash                                   11,881
                                                               -----------    -----------
Net decrease in cash and cash equivalents                          (46,968)      (363,522)
                                                               -----------    -----------

Cash and cash equivalents, beginning of period                     208,502        602,534

Cash and cash equivalents, end of period                       $   161,534    $   239,012
                                                               ===========    ===========

Supplemental information:
Approximate interest paid during the period                    $   361,000    $    49,000
                                                               ===========    ===========
Approximate dividends on Series B Preferred stock accrued      $   223,000    $   231,000
                                                               ===========    ===========
Approximate gain on assets transferred in settlement
    of supplier payable                                        $   721,000               
                                                               ===========    ===========



See notes to condensed consolidated financial statements.

                                       -3-




FRONTLINE COMMUNICATIONS CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)
September 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 was to automatically convert into 150
shares of the Company's common stock upon approval of the conversion by the
Company's shareholders (see Note B for the subsequent exchange of Series C
Preferred into Series E convertible preferred stock). In the event that, the
Company's shareholders 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 to 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.

                                       -4-




NOTE B- 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").

         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 shareholders. In connection with the transaction, the Company will
require shareholder 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.

         In November 2003, the Company issued 220,000 shares of its Series E
Convertible Preferred Stock ("Series E Preferred") to the former stockholders of
Provo in exchange for their shares of Series C Preferred. The Series E Preferred
is similar to the Series C Preferred except for the provision in Series E
Preferred that precludes the holders from any conversion into the Company's
common stock that will result in their ownership of greater than 49.5% of the
Company's outstanding common stock.

         In the event the Company's shareholders do not approve the conversion
of Series E Preferred into the Company's common stock on or prior to January 31,
2004, 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 if the
Series E Preferred is not converted into Frontline's common stock by January 31,
2004. 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 ("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 shareholder 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 shares 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. This represents an eleven trading day average quoted
market price of the Company's stock, which included the day the acquisition was
signed and announced, five days prior to the announcement and five days
following the announcement.

                                       -5-







                                                                           
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:




                                                              
     Fair value of Provo's assets                                $ 13,315,129
     Fair value 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.




Nine months ended September 30                     2003                2002
                                                   ----                ----
                                                             
Revenues                                        $ 58,358,079       $ 79,218,001
Net loss                                            (706,975)          (768,453)
Net loss per share- basic and diluted           ($      0.07)      ($      0.09)




The weighted average number used to calculate the net loss per share excludes
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.

                                       -6-




         In June 2003, the Company's Mexican subsidiary purchased the minority
owners' shares in two of its subsidiaries for a nominal amount.

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 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, 2003, there were outstanding
3,292,200 options and warrants, preferred stock convertible into an aggregate of
40,012,913 shares of common stock and a promissory note convertible into 440,000
shares of common stock that could potentially dilute basic EPS in the future.

         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 three and nine
months ended September 30, 2003 would have been $0.00 and $0.02, respectively.

NOTE D- 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.

         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 results of
operations.

                                       -7-




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




                                                    Three months ended        Nine months ended
                                              September 30, September 30, September 30, September 30,
                                                  2003          2002          2003         2002
                                               ----------    ----------    ----------    ----------
                                                                            
Net loss available to common shareholders:
     As reported                                 (216,485)     (281,436)     (754,168)     (854,736)
     Stock-based compensation using the fair
       value method                                             (55,991)                    (55,991)
                                               ----------    ----------    ----------    ----------
    Pro forma                                    (216,485)     (337,427)     (754,168)     (910,727)
                                               ----------    ----------    ----------    ----------

Net loss per share (basic and diluted)
     As reported                                    (0.02)        (0.03)        (0.07)        (0.09)
                                               ----------    ----------    ----------    ----------
     Pro forma                                      (0.02)        (0.04)        (0.07)        (0.10)
                                               ==========    ==========    ==========    ==========




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. In September 2003, the Company repaid $125,000due under the Note.
The Note was payable on July 2, 2003 and by mutual agreement, the repayment date
was extended to October 3, 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 recognized
a gain on debt settlement of approximately $449,850 during the three months
ended June 30, 2003.

                                       -8-




         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. Based on the fair
value of the Company's common stock and warrants at the date of issuance,
approximately $110,000 was allocated as the value of the conversion feature. The
amount attributable to the conversion feature is being charged to operations
over the term of the note.

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 the Provo acquisition, the Company issued 220,000
shares of Series C Preferred (see Note B for the exchange of Series C Preferred
into Series E 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
shareholders 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 of $0.204 per
share (see Note B) 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 conversion of
27,500 shares of Series D shares issued to officers and employees will be
determined upon the Company's shareholders approval of the conversion.
Accordingly, noncash compensation expense for the fair value of the shares
issued will be recorded after the Company's shareholders approval. For pro forma
purposes (see Note B), Series D shares are valued in the same manner as Series C
shares and the pro forma is adjusted for noncash compensation of $750,622.

         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.
The commitment fee costs, based on the fair value of the shares issued,
approximating $210,000 are deferred and included as other assets at September
30, 2003.

                                       -9-




         In August 2003, the Company sold to an unaffiliated individual 333,333
shares 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.

         In September 2003, the Company sold to an unaffiliated entity 500,000
shares of its common stock for $150,000. In additional the Company issued the
entity warrants to acquire 150,000 shares of its common stock at an exercise
price of $.40.

         During the three months ended September 30, 2003, the Company entered
into consulting agreements with four consultants and issued them an aggregate of
614,175 shares of common stock and warrants to 150,000 shares of its common
stock. Based on the fair value of the common shares and warrants (using the
Black Scholes option-pricing model), the aggregate consulting costs approximated
$239,000 and is being charged to operations over the term of the respective
consulting agreements. The unamortized balance of the consulting costs at
September 30, 2003 was $187,625.

NOTE H- 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, 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.

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




                                                 Three months ended                 Nine months ended
                                                    September 30,                      September 30,
                                               2003              2002              2003               2002
                                           ------------      ------------      ------------      ------------
                                                                                     
Revenues:
  Internet business                        $    998,722      $  1,233,972      $  3,052,067      $  3,873,022
  Sale and distribution of phone cards       16,171,954                          35,756,722
                                           ------------      ------------      ------------      ------------
           Consolidated                    $ 17,170,676      $  1,233,972      $ 38,808,789      $  3,873,022
                                           ------------      ------------      ------------      ------------

Operating loss:
   Internet business                       ($   266,305)     ($   179,518)     ($   725,058)     ($   557,446)
  Sale and distribution of phone cards         (108,786)                           (101,587)
                                           ------------      ------------      ------------      ------------
           Consolidated                    ($   375,091)     ($   179,518)     ($   826,645)     ($   557,446)
                                           ------------      ------------      ------------      ------------



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

                                      -10-




NOTE I- 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 three months ended September 30, 2003, the
Company recorded a translation loss of $46,967 to its stockholders equity as
accumulated other comprehensive income. For the nine months ended September 30,
2003, the Company recorded a translation gain of $11,881 to its stockholders
equity as accumulated other comprehensive income.

NOTE J- TRANSACTIONS WITH RELATED PARTIES

         The Company's Mexican subsidiary subcontracts personnel services from
an entity affiliated with one of the directors of the Company. During the nine
months ended September 30, 2003, the subsidiary paid approximately $940,000 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 nine months ended September 30,
2003, the Mexican subsidiary sold prepaid cards to entities affiliated with one
of the directors of the Company in the aggregate amount of approximately
$234,000 under normal trade terms.

NOTE K -GAIN ON ASSETS TRANSFERRED IN SETTLEMENT OF SUPPLIER PAYABLES

         In March 2003, the Company's Mexican subsidiary, Provo, entered into a
settlement agreement with Telmex and transferred to Telmex its office building
in Mexico and certain non-revenue generating real estate properties for an
aggregate consideration of approximately $4.5 million. In September 2003, Provo
and Telmex entered into an amendment to the settlement agreement, whereby Telmex
agreed to increase the value assigned to certain of the properties previously
transferred by Provo and reduce Provo's indebtedness by $721,000. The gain
resulting from the reduction of indebtedness has been recorded during the three
months ended September 30, 2003.

                                      -11-




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 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.

PROVO ACQUISITION

         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"). Provo
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.

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
and businesses. 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.

                                      -12-




         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 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 retains. Cash (C.O.D) purchases result in
a higher discount to Provo compared to purchases on credit terms from Telmex or
Telcel. In addition, the discount obtained by Provo varies by the type of card,
face value of the card and volume levels met. Similarly, the discount 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 discount and rebates based
on certain special programs. Provo'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.

RESTRUCTURING PROGRAM

         In October 2000, we initiated a restructuring program designed, among
other things, to reduce our operating losses. The program consisted of
reductions of personnel and marketing and promotional expenses, consolidation of
certain operations, exit from certain marginal product lines not related to our
core business and closure of regional offices. The restructuring program was
substantially completed by December 31, 2002.

         We believe that the restructuring program and related cost reductions,
will permit us to maintain service quality to our customers while our more
focused product offering portfolio will enhance our ability to grow our revenue
base. To date we have realized significant cost reductions. However, there can
be no assurance that the restructuring program will achieve the desired results,
that it will not give rise to any disruption of any services offered by us, or
resulting loss of revenues from reduced product lines and marketing
expenditures.

                                      -13-




RESULTS OF OPERATIONS

Comparison of three and nine months ended September 30, 2003 and 2002:

Revenues. Our revenues increased for the three and nine months ended September
30, 2003 by $15,936,884 or 1,291.7%, and by $34,935,767 or 902.0%, respectively
over the same periods of the prior year. The increases in revenues were due to
the Provo acquisition. Excluding the acquisition, revenues decreased for the
three and nine months by $235,070 or 19.1% and by $820,955 or 21.2%,
respectively over the same periods 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 2003. We anticipate that our revenues for the
rest of 2003 will increase due to the Provo acquisition.

Cost of Revenues. For the three months ended September 30, 2003, our cost of
revenues increased by $15,405,414 to $16,024,334. For the nine months ended
September 30, 2003, our cost of revenues increased by $33,696,858 to
$35,645,638. The increase in cost of revenues was due to the Provo acquisition.
Cost of revenues as a percentage of revenues for the three months and nine
months ended September 30, 2003 were 93.3% and 91.9%, respectively, compared to
50.2% and 50.3%, respectively, in 2002. In percentage terms of revenues, cost of
Provo's products are generally higher than ours, and with a greater mix of
Provo's share in our consolidated revenues, cost of revenue as a percentage of
revenues is expected to increase. Excluding Provo's operations, our cost of
revenues as a percentage of revenues for the three and nine months ended
September 30, 2003 were 44.8% and 46.7%, respectively, compared to 50.2% and
50.3%, respectively in 2002. The decrease in cost of revenues as a percentage of
revenues, excluding Provo's operations, was due to cost reductions realized
through our continued focus on network cost reductions. We anticipate that our
cost of revenues in absolute dollars for the rest of 2003 will increase due to
the Provo acquisition.

Selling, General and Administrative. For the three months ended September 30,
2003, selling, general and administrative expenses increased by $714,265
compared to the same period of the prior year; as a percentage of revenues,
selling, general and administrative expenses decreased from 49.3% in 2002 to
7.7% in 2003. For the nine months ended September 30, 2003, selling, general and
administrative expenses increased by $1,586,918 compared to the same period of
the prior year; as a percentage of revenues, selling, general and administrative
expenses decreased from 49.3% in 2002 to 9.0% in 2003. The absolute dollar
increase in selling, general and administrative expenses was principally due to
the Provo acquisition. In terms of percentage of revenues, Provo has a lower
selling, general and administrative expenses structure than ours, and with a
greater mix of Provo's share in our consolidated revenues, selling, general and
administrative expenses as a percentage of revenues are expected to decrease.

Depreciation and Amortization. For the three months ended September 30, 2003,
depreciation and amortization decreased by $38,667 to $147,477. For the nine
months ended September 30, 2003, depreciation and amortization decreased by
$130,255 to $443,608. Depreciation and amortization decreased as many of our
long-lived assets are fully depreciated or amortized over their estimated useful
lives.

                                      -14-




Interest Expense. Interest expense for three months ended September 30, 2003 was
$175,550 compared to an interest expense of $26,439 during the comparable period
in 2002. Interest expense for the nine months ended September 30, 2003 was
$391,369 compared to an interest expense of $70,159 during the comparable period
in 2002. Interest expense for the three and nine months ended September 30, 2003
increased compared to the same periods of the prior year principally due to the
increased debt level that resulted from the Provo acquisition.

Income Taxes. Represent Provo's tax expense, as determined in accordance with
Mexico's income tax laws. The effective tax rate was higher than the statutory
rate of 34% due to certain non-deductible expenses and due to certain revised
estimates on deferred taxes. In addition, presently Provo is unable to file its
Mexican tax returns on a consolidated basis and avail the tax benefit of
offsetting losses of some of its subsidiaries.

Net loss. As a result of the foregoing and after recognizing $721,010 gain on
assets transferred in settlement of supplier payables, for the three months
ended September 30, 2003, net loss decreased by $62,701 to $142,018 compared to
a net loss of $204,719 for the corresponding period in 2002. For the nine months
ended September 30, 2003, net loss decreased by $92,752 to $530,767 compared to
a net loss of $623,519 in the comparable period in 2002.

LIQUIDITY AND CAPITAL RESOURCES

         Our working capital at September 30, 2003 was $ 256,598 compared with a
working capital deficiency of $ 2,655,722 at December 31, 2002. The increase in
working capital was primarily due to approximately $3.6 million of additional
working capital that resulted from the Provo acquisition.

         Our primary capital requirements are to fund Provo's working capital.
To date, we have financed our capital requirements primarily through 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 2003, we borrowed $550,000 as a bridge loan, raised $250,000 through
private sale of our common stock, and sold a convertible promissory note in the
principal amount of $110,000.

         At September 30, 2003, Provo had aggregate borrowings of $ 1,812,009
under four lines of credit with two banks. The lines are secured by real estate
owned by family members of Provo's former majority stockholders. At September
30, 2003, the current interest rates on the lines range between 8.8% and 9.3%.
The lines expire at various dates between July 2004 and September of 2005 and
one line requires a monthly payment of approximately $14,000 in 2003.

                                      -15-




         Historically, Provo relied on Telmex to finance its inventory purchases
with a line of credit. In March of 2003, Provo restructured its credit line with
Telmex. At September 30, 2003, we owe Telmex approximately $6.1 million. Of the
balance, approximately $ 2.9 million is payable on November 10, 2003 and the
balance of $3.2 million will be payable in 54 monthly installments commencing in
July of 2003. However no monthly payments have been made to date. We are
currently in negotiation with Telmex to extend the November repayment date and
reschedule the repayment terms of the entire line of credit. If we are unable to
renegotiate the term of our debt to Telmex, Telmex may cease to provide us with
products, may refuse to do business with us or may otherwise attempt to collect
the debt. Should Telmex take any such action, our operations would be adversely
affected.

         In April 2003, we borrowed as a bridge loan $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 our assets. Two officers have pledged shares
of the our common stock owned by them to the Lender as additional collateral. In
September 2003, we repaid $125,000 due under the Note. The Note was payable on
July 2, 2003 and by mutual agreement, the repayment date was extended to October
3, 2003. We are presently attempting to negotiate a further extension with the
Lender.

         We plan to raise additional financing. The availability of capital
resources is dependent upon prevailing market conditions, interest rates and our
financial condition. In July 2003, we entered into a common stock purchase
agreement with Fusion Capital Fund II, LLC, whereby, Fusion Capital has agreed
to purchase up to $13 million of our common stock over a 40-month period. The
transaction is subject to satisfaction of several conditions and there can be no
assurance that we will in fact complete the transaction.

       We believe that our acquisition of Provo will improve our financial
situation in two ways. Our annual expense related to our status as a public
reporting company total approximately $350,000. 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. In
addition, Provo will be able to increase its revenue in the near term if
additional working capital is available for inventory procurement. 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, such as
the Provo payroll card, thereby increasing the combined company's revenue both
in the U.S. and Mexico.

       We currently plan to continue both Frontline and Provo operations, and
hope 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 and cash flow from operations will satisfy our 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, we were
required to repay $425,000 due under a bridge financing to IIG Equity
Opportunities Fund, Ltd. on October 3, 2003.

                                      -16-




       We are presently attempting to negotiate a further extension with the
noteholder and Telmex. 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 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 AND ESTIMATES

         Our discussion and analysis of our financial conditions 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.

         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 cards 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.

                                      -17-




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 customer's 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.

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.

INVESTMENT NONPRODUCTIVE PROPERTIES. Our real estate held for sale and
investment nonproductive properties represents 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 no assurance that these amounts will prove to be
realizable over time.

                                      -18-





I
TEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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, 2003, pursuant to Exchange Act Rules
13a-15(e) and 15(d)-15(e). Based upon that evaluation, 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

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.

                                      -19-




                                     PART II
                                OTHER INFORMATION


Item 2.           Changes in Securities and Use of Proceeds

                  Recent Sales of Unregistered Securities

                  During the three months ended September 30, 2003,

                  In July 2003, the Company issued 300,000 shares of common
                  stock to Investor Relations Group, Inc. in exchange for
                  services to be rendered pursuant to a consulting agreement.

                  In July 2003, the Company issued 120,000 shares of common
                  stock to Fusion Capital Fund II, LLC in exchange for services
                  to be rendered pursuant to a consulting agreement.

                  In July 2003, the Company issued 500,000 shares of common
                  stock to Fusion Capital Fund II, LLC as commitment fees
                  pursuant to a common stock purchase agreement.

                  In July 2003, the Company issued a convertible promissory note
                  and warrants to purchase 220,000 shares of common stock to
                  Fusion Capital II, LLC for an aggregate consideration of
                  $110,000. 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 $0.25.

                  In July 2003, the Company issued 194,175 shares of its common
                  stock to The Research Works, Inc. in exchange for services to
                  be rendered pursuant to a consulting agreement.

                  In August 2003, the Company issued to an unaffiliated
                  individual 333,333 shares of its common stock and warrants to
                  acquire 150,000 shares of its common stock for an aggregate
                  consideration of $100,000.

                  In September 2003, the Company issued to an unaffiliated
                  entity 500,000 shares of its common stock and warrants to
                  acquire 150,000 shares of its common stock for $150,000.

                  In September 2003, the Company issued warrants to acquire
                  150,000 shares of its common stock to Stern & Co in exchange
                  for services to be rendered pursuant to a consulting
                  agreement.

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

                                      -20-





Item 6.           Exhibits and Reports on Form 8-K

                  a)  Exhibits:

                           10.1 Common Stock Purchase Agreement dated July 7,
                           2003 by and between the Company and Fusion Capital
                           Fund II, LLC. Incorporated by reference to Annexure H
                           to the Company's definitive proxy on Schedule 14A
                           filed with SEC the SEC on November 13, 2003.

                           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

                  b)  Reports on Form 8-K:

                      During the three months ended September 30, 2003, a
                      current report on Form 8-K was filed under Item 9 to
                      comply with regulation FD.

                                      -21-





                                   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.

November 14, 2003


                                       Frontline Communications Corporation

                                 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


                                      -22-






EXHIBIT 31(A)

                                  CERTIFICATION

I, Stephen J. Cole-Hatchard, certify that:

     1.   I have reviewed this quarterly report on Form 10-QSB of Frontline
          Communications Corporation;

     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: November 14, 2003

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



                                      -23-




EXHIBIT 31(B)

                                 CERTIFICATION


          I, Vasan Thatham, certify that:

     1.   I have reviewed this quarterly report on Form 10-QSB of Frontline
          Communications Corporation;
 
     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: November 14, 2003

                                        /s/ Vasan Thatham  
                                        -----------------------
                                        Chief Financial Officer


                                      -24-




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. SS. 1350


     I, Stephen J. Cole-Hatchard, Chief Executive Officer of Frontline
Communications Corp. (the "Company"), certify that:

     (1)  The Company's Quarterly Report on Form 10-QSB for the quarterly period
          ended September 30, 2003 (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
                                 Frontline Communications Corp.
                                 November 14, 2003


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


                                      -25-






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 Frontline
Communications Corp. (the "Company"), certify that:

     (1)  The Company's Quarterly Report on Form 10-QSB for the quarterly period
          ended September 30, 2003 (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
                                 Frontline Communications Corp.
                                 November 14, 2003


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


                                      -26-