Report of unscheduled material events or corporate changes.
8-K
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
April 8, 2005 ( March 25, 2005)
Provo International, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
001-15673 13-3950283
---------------- ---------------------------------
(Commission File No.) (IRS Employer Identification No.)
One Blue Hill Plaza
P.O. Box 1548
Pearl River, New York 10965
(845) 623-8553
(Address and telephone number of principal
executive offices and place of business)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below)
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13ed-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing
Rule or Standard; Transfer of Listing.
Provo International, Inc. (the "Company") (formerly Frontline
Communications Corp.) received a notice from the American Stock Exchange on
March 25, 2005, advising the Company that they have not accepted the Company's
plan of compliance submitted to them on February 25, 2005. The Exchange's letter
indicates that the Company's common stock is not in compliance with Sections
1003(a) (i), 1003 (a) (ii) and 1003 (a) (iv) of the Exchange's continued listing
standards due to the Company's losses from continuing operations and the
Company's shareholders equity being less than the amounts specified in the
Exchange's continued listing standards. The Exchange staff has advised the
Company of non-compliance of Section 1003 (f) (v) of the Exchange's Company
Guide since the Company's common stock has been trading at a low price per share
for a significant period of time. In addition, the Exchange has notified the
Company of the Company's non-compliance with Section 301 of the Exchange's
Company Guide due to the Company's failure to file an application for listing of
additional shares and for the Company's failure to receive shareholder approval
pursuant to Section 711 of the Exchange's Company Guide.
Pursuant to an extension provided by the Exchange, the Company had the
option to appeal the Exchange's decision until April 8, 2005. After evaluating
the situation, on April 8, 2005, the Company decided not to appeal the
Exchange's decision. Accordingly, the Exchange will suspend trading in the
Company's securities and submit an application to the Securities and Exchange
Commission to strike the Company's common stock from listing and registration
with the Exchange in accordance with Section 12 of the Securities Exchange Act
of 1934 and the rules promulgated there under.
Item 9.01 Financial Statements and Exhibits
( c ) Exhibits
99.1 Copy of Press Release of April 8, 2005.
99.2 The Company's proposed plan of compliance as submitted to the
American Stock Exchange.
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 hereunto duly authorized.
Dated: April 8, 2005
Provo International, Inc.
By: /s/ Stephen J. Cole-Hatchard
--------------------------------
Stephen J. Cole-Hatchard, CEO
3
Exhibit 99.1
Provo Decides Not to Appeal AMEX Decision
PEARL RIVER, N.Y.--(BUSINESS WIRE)--April 8, 2005--Provo
International, Inc. (formerly Frontline Communications Corp., formerly
traded on AMEX: FNT) announced today that the company will not appeal
the previously announced notice from the American Stock Exchange
(AMEX) that it will not accept the company's proposed plan of
compliance (the "plan"). (A complete copy of the plan will be filed by
the company under a Form 8-K.) In order to file the appeal, the
company would have been required to pay AMEX a substantial amount for
various continued listing and application fees, which the company
believes would place too great a strain on cash flow with no
reasonable assurance that the company would succeed on appeal.
The company common stock is now quoted in the over-the counter
pink sheets. It is management's goal to have the company's common
stock listed on the OTC Bulletin Board and to continue to execute its
business plan similar to that which is described in the compliance
plan submitted to AMEX. The company recently filed an extension to
file Form 10-KSB no later than April 15, 2005. As a result of auditing
delays of our Provo Mexico subsidiary, it is likely that Form 10-KSB
will
not be filed with the Securities and Exchange Commission until
the middle of May 2005. In order to have our common stock trading on
the OTC Bulletin Board, we need to be current with our reports under
the Exchange Act and to have a market maker file an appropriate
application with the NASD.
In a related matter, CEO Stephen J. Cole-Hatchard will be stepping
down as CEO and Chairman of the Board. Cole-Hatchard stated that his
expected resignation as CEO and Chairman at this time was appropriate,
in that his primary tasks were to deal with SEC and AMEX matters. "Our
company," Cole-Hatchard said, "will save a substantial amount of money
by not having its common stock listed on the AMEX and not paying me
for the extensive time involved in dealing with the myriad rules,
filings and deadlines of AMEX". He continued, "It appears that our
potential investors, as well as our various licensing and acquisition
targets, are still willing to proceed, but with a downsized and
modified business plan, with a concomitant reduction in financing
amounts. As a result, it just makes good business sense to reflect
those reductions in corporate overhead as much as possible."
About Provo International Inc.
Founded in 1995 as Frontline Communications Corporation and
currently traded on the American Stock Exchange under the symbol FNT,
Provo International Inc. has three operating divisions, involving the
sale of internet bandwidth, web development and services, and payroll
(paycard) disbursement and transfer products and services.
The statements which are not historical facts contained in this
press release are forward looking statements that involve certain
known and unknown risks and uncertainties, including but not limited
to, changes in the market for Internet or distribution services,
regulatory and technological changes, economic factors, increased
competition, and the nature of supplier and customer arrangements
which become available to the Company in the future. The Company's
actual results may differ materially from the results discussed in or
implied by any forward-looking statements. The words "intend,"
"expect," "should," "project," and "anticipate," and similar
expressions identify forward looking statements. Readers are cautioned
not to place undue reliance on these forward looking statements which
speak only as of the date they were made.
CONTACT: Investor Relations:
Stephen Cole-Hatchard, 845-623-8553, x2200
Fax: 845-623-8669
investorrelations@frontline.net
PROVO INTERNATIONAL Inc.
One Blue Hill Plaza, POB 1548
Pearl River, NY 10965
845-623-8553
February 25, 2005
Mr. James Mollen
Associate Director - Listing Qualifications
American Stock Exchange
86 Trinity Place
New York, NY 10006
RE: Notification of Continued Listing Deficiencies
Proposed Company Plan of Compliance
Dear Mr. Mollen:
I am in receipt of your letter of January 18, 2005, notifying the company
of certain continued listing deficiencies.(1) I respectfully submit this
correspondence and attached exhibits in response thereto, and as our plan, on
behalf of Provo International Inc. (formerly Frontline Communications Corp.,
hereinafter "Provo"), to bring the company back into compliance with the
continued listing standards of the American Stock Exchange. Exhibits referred to
herein are attached hereto and identified as "Exhibit A" through "Exhibit N".
First, a brief explanation of the company's overall business plan is
necessary both as an introduction to the specific corporate and compliance
strategies detailed below, and as an explanation as to why the company has
elected to focus primarily on the equity requirements of the continued listing
standards of the American Stock Exchange in this plan
of compliance.
--------
(1) For summary purposes, the company has been notified that it has failed to
meet the minimum shareholders equity requirements with specific operational
losses, has failed to file a required additional listing application, and
should implement a reverse stock split to address the low price per share
of its common stock. Each of these three compliance matters are addressed
in this response in separate sections below.
Provo International Inc.
February 25, 2005
Page 2 of 31
Provo has always been an innovative, technology oriented company. Provo
became involved in internet related services early in the internet cycle, and
expanded into other technology related fields as the internet became more
common. The company recently completed the development of its payroll and cash
transfer card (the "Provo Paycard"), the plan for which was acquired as part of
the Provo Mexico acquisition detailed in the "Corporate Background" section
below.(2) Simultaneously, the company began divesting itself of most of its
older internet related products and services. The company intends to continue
the introduction of the Provo Paycard, and to engage in multiple acquisitions(3)
and licensing ventures in other related areas of anti-terrorism and homeland
security. Numerous potential targets are currently in various stages of
negotiation, and a letter of intent to license and develop an additional product
line in this field has been executed(4) (see exhibit "A" included herewith). It
is anticipated that these license transactions and acquisitions will include
both development stage products and services, as well as revenue producing
products and services.
However, because specific acquisition targets are extremely difficult to
identify and discuss with a reasonable degree of certainty until legal documents
are executed, for the purposes of describing the company's core plan and
resultant goals as regarding shareholder equity and operational losses, this
compliance plan focuses primarily on the $6 million shareholder equity
-----------------
(2) The company's cash/payroll card (hereinafter "Provo Paycard"), is a line of
products and services directed at the roughly 13% of the U.S. population
who do not have checking accounts. The Provo Paycard is used as a payroll
and cash card, which, inter alia, allows for the transfer of money, both
domestically and internationally, in compliance with Title III of the
United State Patriot Act, known as the "International Money Laundering
Abatement and Financial Anti-Terrorism Act of 2001".
(3) The company has vast experience in successfully negotiating and closing
acquisitions, as evidenced in the attached annual reports. Moreover, the
company's previous efforts to grow revenue and reach profitability through
acquisitions were proving extremely effective, until the somewhat
unexpected loss of a substantial amount of the revenue and profits of Provo
Mexico within a short time after being acquired by the company.
(4) A letter of intent has been executed by the company and University College
Cardiff Consultants Ltd. describing the terms upon which the company will
license from Cardiff University a compound for use against viral agents of
bio-terror, specifically involving the small pox virus. This will be the
second product line in which the company will become involved dealing with
issues of terrorism prevention and anti-terrorist activities, commonly
referred to as matters of "homeland security", the first being the Provo
Paycard. Further explanation of this direction of the company is detailed
in the section entitled "Corporate Background", below.
Provo International Inc.
February 25, 2005
Page 3 of 31
requirement(5) and the planned financings which are anticipated. Thus, the
projected quarterly financial statements included herein for the first half of
the plan period (9 months) reference only the various financing and equity goals
as measurable thresholds for each period, with operations running at nominal
levels. Moderate increases in revenue from operations are included subsequent to
that period based upon moderate growth of revenue producing operations
(primarily the Paycard) and modest revenue producing acquisitions. Nonetheless,
as recommended in the Company Guide, estimates of revenue and profit increases
(loss decreases) even for the earlier periods are footnoted throughout as
strategic alternatives and contingencies in the event critical financing and
shareholder equity accomplishments are not met as planned.
Financing for these various projects as well as for general corporate
purposes in the amount of a minimum of $8.5 million over the plan period has
been agreed to in principle with a number of financing groups which have
participated in numerous equity financings with the company in the past (see
exhibit "B", financing term sheet). The estimated closing periods and amounts
for each financing segment are set forth in the appropriate quarterly
projections below.
A. CORPORATE BACKGROUND
The mission of Provo has remained consistent since the company's
inception in 1995, though the means of implementation and execution have varied.
The fundamental goal of Provo is to create revenue and profits through the
development and application of new technology product and service solutions to
contemporary economic opportunities. The company's motto, "Solutions through
Technology", accurately represents the broad company belief that a particular
industry or business line is not our critical focus, rather, that the ability to
obtain and/or develop technological solutions to any emerging or growing
business opportunity is the key to success.(6)
-------------------
(5) Specifically, your attention is respectfully directed to Section
1003(a)(ii) of the Company Guide, which requires a minimum of $6 million in
shareholders equity when a company has experienced 5 consecutive years of
operational losses, as is anticipated here upon filing year end 2004
financial statements.
(6) This concept is clearly exhibited in an historical review of the myriad
products and services in which Provo has been involved. For example, the
company has been involved in the sale of internet bandwidth, the
distribution of calling cards, the development of a wireless data satellite
system, and more recently in the area of homeland security, cash
Provo International Inc.
February 25, 2005
Page 4 of 31
Provo began operations in 1995 as a regional internet service provider,
offering internet access, website design, web hosting, and related services to
residential and small business customers throughout the Northeast United States,
and, through a network partnership agreement, internet access to customers
nationwide. In accordance with the company's mission statement, these products
and services were developed in the very early stages of the internet "explosion"
and kept the company on the leading edge of wired and wireless technology.
In preparation for and anticipation of the company's initial public
offering in 1998, during February of 1997, we reorganized as a Delaware
corporation with offices at One Blue Hill Plaza, Pearl River, New York, 10965.
From 1998 through 2000, primarily through 18 acquisitions in the same
or related business areas, the company's revenue grew from $30,000 per month to
over $400,000 per month (see exhibits "C", "D" and "E" attached hereto). Revenue
for the calendar years ending in 1998, 1999, and 2000 was $575,000, $3 million,
and $5.3 million, respectively. Year end shareholder equity for the same three
year period was $5 million, $4.3 million, and $5.8 million, respectively.
In the latter part of 2001, and early 2002, the company began to
eliminate certain less advanced products and services which were becoming more
readily available in the marketplace, and developed a broadband wireless
satellite internet access product line to our group of services. The company was
one of the first in the Country to offer this type of technology to consumers
and small businesses, effectively solving distance limitations of other
available wired broadband products.
--------------------------------------------------------------------------------
transactions and international cash transfers within the guidelines of the
United States Patriotic Act. Although many of the underlying products and
services seem to be in different industries and sectors, Provo's role has
been consistent - enter an emerging area of business with substantial
growth potential, and develop or acquire, then implement, technological
improvements and advancements to leverage the potential success and
profitability of that business. The common thread in all of these products,
services and industries in which we have been involved is the need for
technological solutions to overcome inefficiencies and business barriers.
Provo International Inc.
February 25, 2005
Page 5 of 31
Year end revenue for the calendar years ending 2001 and 2002 was $6.5
million and $5 million, respectively (see exhibits "F" and "G" attached hereto).
Year end shareholder equity for the same two year period was [$1
million](deficiency), and [$2 million](deficiency).
Toward the end of 2002, the company sought additional business
opportunities which would allow it to continue its growth through the concept of
applying technological solutions to existing or developing business
opportunities. In this regard, the company identified Proyecciones y Ventas
Organizadas, S.A. de C.V., based out of Mexico City, Mexico (hereinafter
referred to as "Provo Mexico"). The company's interest in Mexico was threefold:
1) first, at the time the company negotiated the acquisition, Provo Mexico had
annual operating revenue of $100 million, and an operating profit of $800,000,
primarily from the sale and distribution of calling cards and cell phone calling
cards in Mexico; 2) secondly, it was clear that Provo Mexico had virtually no
technology based systems in place, lending itself greatly to the possibility of
substantially increased profit margins with the implementation of even the most
basic technological business solutions; and 3) most importantly to Provo, Provo
Mexico had spent almost 2 years developing a completely new business line,
referred to as its "Cash Card" program (the "Provo Paycard"), and although 90%
completed, was prevented from finishing the development of the program and
launching it in a commercially viable manner as a result of their inability to
obtain the necessary technological and intellectual property solutions it
required.
As described further at footnote "2" above, the Provo Paycard program
refers to a broad line of products and services, including prepaid cash and
credit cards, direct deposit payroll cards, and numerous other forms of
electronic payroll and money transfer procedures. A complete listing of the full
array of services are included herewith at exhibit "H". As noted, the company's
fundamental interest, however, was the ability of the product line to allow
users to transfer money, both domestically and internationally, in compliance
with Title III of the United States Patriot Act, known as the "International
Money Laundering Abatement and Financial Anti-Terrorism Act of 2001". The
company completed the development of the Paycard, and has commenced sales,
marketing and distribution.
Provo International Inc.
February 25, 2005
Page 6 of 31
On April 3, 2003, the company issued 220,000 shares of preferred
convertible stock to the shareholders of Provo Mexico, convertible into 22
million shares of common stock, in exchange for all of the issued and
outstanding shares of Provo Mexico. The acquisition included existing Provo
Mexico Operations, as well as all rights to the Provo Paycard program. Revenue
for the calendar year ending 2003 was $58.2 million, and year end shareholder
equity was $3.4 million (see exhibit "I" attached hereto). Revenue for the 6
month period ending June 30, 2004 was $32.8 million, and shareholder equity at
June 30, 2004 was $5.2 million (see exhibit "J").
B. FACTORS LEADING TO THE COMPANY FALLING OUT OF COMPLIANCE
Upon closing of the acquisition of Provo Mexico, the company intended
to divest itself of its "low tech" and widely available services, including the
dial up internet access portion of its business, and the specialized web sites
products, and operate two divisions. The Provo Mexico division was to focus on
the operational aspects of the business, including marketing, sales and
distribution, with the ultimate plan of expanding its existing distribution
network into the United States. The Provo U.S. division was to concentrate on
the continued development and implementation of technology related products and
solutions, especially the Provo Paycard and the international cash transfer
portion of the business. A longer term goal was, and continues to be, the
expansion the company's technology efforts into other areas of homeland security
and anti-terrorist products and services, such as biometrics and cryptology.
The technology side of the Provo Mexico acquisition plan progressed as
intended, with the Paycard program being completed and in the process of being
launched. However, the operating side of the strategy met with much less
success, facing numerous unexpected and substantial issues and costs, both
operationally and administratively.
Operationally, soon after the acquisition closed, the relationship
between Provo Mexico and their primary supplier of calling cards, Telefonos de
Mexico (hereinafter "Telmex"), inexplicably and substantially deteriorated. In
this regard, it became necessary for the company to satisfy a $6.9 million
credit balance owed to Telmex, which had previously been a revolving credit line
used by Provo Mexico for the purchase of calling cards. As a result, on April 7,
2004, Provo Mexico entered into a settlement agreement whereby it transferred
certain company properties and vehicles to Telmex in return for the satisfaction
of that debt. That agreement required Provo Mexico to cease distribution of
Telmex prepaid phone cards as of May, 2004, which equated to over 50% of Provo
Mexico's total sales.
Provo International Inc.
February 25, 2005
Page 7 of 31
Administratively, the auditing of Provo Mexico's books and records
proved to be extremely difficult and unreasonably costly. The time constraints
for the filing of financial reports for a U.S. public company turned out to be
very difficult for the auditors in Mexico to meet (see exhibit "K", form 8K
previously filed by the company reporting a late financial filing). Moreover,
the auditing firm the company was using at the time, B.D.O. Seidman, effectively
required a full audit review by their U.S. offices after completion of the full
audit by their Mexican affiliate, resulting in even further delays, missed
timelines, and costs almost double those estimated and expected, ending up in
the hundreds of thousands of dollars (see exhibit "L", billing statements of BDO
Mexico).
For these reasons, among numerous others, the company determined it
would be in the best interests of its shareholders if the acquisition of Provo
Mexico was unwound, provided, however, the company retained all rights to the
Paycard program. Thus, in July of 2004, the company entered into an agreement
with the former shareholders of Provo Mexico to sell back to them Provo Mexico,
except the Paycard program, in exchange for substantially all of the preferred
and common shares of stock issued to them in the original acquisition (see
exhibit "M", Provo Mexico unwind agreement). The measurement date for the
disposal of the Provo Mexico assets for financial reporting purposes has been
established as December 31, 2004.
Provo International Inc.
February 25, 2005
Page 8 of 31
C. CURRENT CONDITION OF COMPANY and SPECIFIC AREAS IN WHICH THE COMPANY IS NOT
IN COMPLIANCE
As a result of the Telmex settlement described above(7), revenue
decreased from $10 million for the three months ending June 30, 2004, to $4.5
million for the three months ended September 30, 2004 (see exhibits "J" and "N",
respectively). The company went from a net profit of $900,000 for the three
months ended June 30, 2004, to a net loss of [$5.5 million] for the three months
ended September 30, 2004.
Furthermore, primarily as a result of the company recognizing the
impairment of $4.8 million in goodwill from the Provo Mexico acquisition in
anticipation of the signing of the unwind agreement, shareholder equity went
from $5.2 million at June 30, 2004, to [$308,000] (deficiency) at September 30,
2004. It is respectfully submitted that this event alone is primarily
responsible for the company's current non-compliance with the continued listing
standards of the American Stock Exchange.
It is anticipated that the company will recognize the unwind of the
Provo Mexico transaction as of December 31, 2004. Upon completion of that
unwind, the company will lose a substantial portion of its revenue. Thus,
although the company will report substantial revenue for the 12 months ending
December 31, 2004, for the purposes of this compliance plan, the company will
project nominal revenue for the first 9 months of the plan, based upon existing
non-Provo Mexico operations.
In the event this plan is not ultimately accepted by the staff, and
thereafter implemented by the company, it is believed that the deficit in
shareholder's equity as of March 31, 2005 would be [$800,000]. This deficit is
based upon: 1) the actual shareholder's deficit at September 30, 2004 of
[$308,000], 2) the affect of the Provo Mexico unwind; 3) an anticipated $208,000
gain on the sale of certain assets during the 3 months ending December 31, 2004,
and 4) the projected loss from operations of approximately $200,000 for the 3
months ending March 31, 2005. The projected income statement and balance sheet
for the 3 months ending March 31, 2005 under these circumstances would be as
follows:
-------------------
(7) As stated above, the Telmex matter and subsequent settlement was also a
substantial factor in the decision to unwind the acquisition.
Provo International Inc.
February 25, 2005
Page 9 of 31
Projected Income Statemen
US $ 000's
31-Mar-05
-----------
Revenues 150
Cost of Revenues (85)
Selling, general & admin* (240)
-----------
EBITDA (175)
Depreciation & amortization 0
Interest (25)
Taxes 0
-----------
Net Income (200)
===========
SG&A; represents approximately $180,000 in corporate overhead and expenses,
including legal and accounting, and an additional $60,000 relating to actual
operations.
Projected Balance Sheet
US $ 000's
30-Sep-04 Provo Mx Projected Quarter 1
Historical Unwind 31-Dec-04* 31-Mar-05
ASSETS
Current assets 5,016 (4,848) 376 176
Property & Equipment-net 186 (113) 73 73
Goodwill 487 (487) 0 0
Other assets 549 (461) 88 88
------------- ------------ ------------ -------------
6,238 (5,909) 537 337
============= ============ ============ =============
LIABIITIES & STOCKHOLDER'S EQUITY
Current liabilities 5,679 (5,249) 430 430
Debt 867 (160) 707 707
Equity (308) (500) (600) (800)
------------- ------------ ------------ -------------
6,238 (5,909) 537 337
============= ============ ============ =============
* Includes gain of $208,000 from asset sale during period
These results as regarding shareholder equity will be substantially
improved upon staff's acceptance of this plan of compliance, and the company's
commencement of execution thereof, as described in the detailed strategic plan
of compliance set forth below.
Provo International Inc.
February 25, 2005
Page 10 of 31
Specifically, the company is not in compliance with the following
sections of the Amex Company Guide (the "Company Guide"):
Shareholder Equity and Losses from Operations
Section 1003(a)(i): shareholders equity less than $2,000,000; and
losses from continuing operations and/or net
losses in the last two of three years;
Section 1003(a)(ii): shareholders equity less than $4,000,000 and
losses from continuing operations and/or
net losses in the last three of four years;
and
Section 1003(a)(iv): losses so substantial in
relation to operations or its existing
financial resources, or financial condition
has become so impaired, it is questionable
whether the company will be able to continue
or meet its obligations as they mature.
In addition to the above, as a result of the unwinding of the Provo
Mexico acquisition, the company believes it will report for the calendar year
ending 2004 a net loss from operations, and shareholder equity of less than $6
million. Thus, the company will also fail to comply with the following section
of the Company Guide:
Provo International Inc.
February 25, 2005
Page 11 of 31
Section 1003(a)(iii): shareholders equity less than $6,000,000 and
losses from continuing operations for five
consecutive years.
Listing of Additional Shares
Section 301: Appearance that company issued shares
without filing a Listing of Additional
Shares Application (LAS).
Low Per Share Stock Price
Section 1003(f)(v): Low selling price of stock requiring reverse
stock split
As in the past, management is confident that it is fully capable of
overcoming the current adverse situation, and can bring the company back into
compliance with the continued listing standards of the Exchange, as outlined and
detailed below.
For the purposes of this plan of compliance, and in order to facilitate
the review of this plan by American Stock Exchange staff members, the above
deficiencies will be addressed below in three sections, under the heading
"Compliance Plan - Overview", and entitled: 1) "Strategic Plan of Compliance as
Relating to Shareholder's Equity and Losses from Operations"; 2) "Response
Relating to Section 301 Compliance Regarding the Listing of Additional Shares";
and 3) "Strategic Plan of Compliance as Relating to the Low Per Share Stock
Price of the Company".
D. COMPLIANCE PLAN - OVERVIEW
For the reasons set forth hereinabove, the first 9 months of this plan
as relating to shareholder's equity and losses from operations are based upon
the equity financing of the company's current developing technologies, nominal
revenue from existing operations, and $200,000 per quarter in operating losses,
which includes normal operating expenses as well as legal, accounting and
auditing fees necessary for the company's required SEC and AMEX filings.
Thereafter, revenue produced from its Paycard division, and its other existing
business divisions developed internally and through revenue producing
acquisitions, will be reflected as indicated.
The plans relating to the per share stock price and additional listing
application which follow this section are self explanatory, with appropriate
timeframes set forth therein.
Provo International Inc.
February 25, 2005
Page 12 of 31
1. STRATEGIC PLAN OF COMPLIANCE AS RELATING TO SHAREHOLDER'S EQUITY AND
LOSSES FROM OPERATIONS
3 Months Ending March 31, 2005
During the 3 month period ending March 31, 2005, the company will
engage in a substantial amount of planning and approval processes. In addition,
the company will finalize the various charges to equity reflecting the unwind of
the Provo Mexico acquisition, begin its plan to negotiate the conversion of
certain existing debt to equity, and close on additional equity financing.
Specifically, the company will finalize this plan of compliance with
staff of the American Stock Exchange (herinafter "AMEX", or "Staff"), make
required and suggested amendments, provide staff with copies of all requisite
board resolutions related hereto, and publicly announce the status hereof when
appropriate.
Thereafter, the Board of Directors will begin the process necessary to
obtain shareholder approval for the Provo Mexico unwind, and the proposed
financing, if necessary, as well as authorize the preparation and mailing of
necessary proxy and/or informational proxy material.(8) It is anticipated that
the company will obtain the requisite shareholder approval by written consent of
a majority of shareholders, subsequent to the appropriate filing with and
approval by the U.S. Securities and Exchange Commission of the requisite
informational statement. Although preparations will be commenced to file the
informational statement, it should be noted that the company must first file its
form 10-KSB for the 12 month period ending December 31, 2005. The company
anticipates filing its 10-KSB in a timely manner, that being by March 31, 2005,
or in the event an extension is obtained, by April 15, 2005.
--------------------
(8) The company will include in the process of obtaining shareholder
approval, provisions for the proposed reverse stock split, as further
described below.
Provo International Inc.
February 25, 2005
Page 13 of 31
The Board will also provide the necessary approvals and resolutions
allowing the company to proceed with the proposed financing, and the proposed
licensing agreement with Cardiff University.
Finally, during this 3 month period the company will complete at least
$750,000 in additional equity financing and conversion of existing debt.(9) In
addition to setting the stage for continued plan execution, by the end of this
quarter, March 31, 2005, shareholder's deficit will thereby be reduced to
[$50,000].
The projected income statement and balance sheet for the 3 months
ending March 31, 2005 under these circumstances would be as follows:
Projected Income Statement
US $ 000's
31-Mar-05
-----------
Revenues 150
Cost of Revenues (85)
Selling, general & admin* (240)
-----------
EBITDA (175)
Depreciation & amortization 0
Interest (25)
Taxes 0
-----------
Net Income (200)
===========
-----------------
(9) This equity financing and debt conversion reference relates
specifically to paragraph 3 of the attached financing term sheet
(exhibit "B"), and represents the first half (50%) of the initial $1.5
million in equity financing and debt conversion.
Provo International Inc. February 25, 2005 Page 14 of 31 SG&A; represents approximately $180,000 in corporate overhead and expenses, including legal and accounting, and an additional $60,000 relating to actual operations.
Projected Balance Sheet
US $ 000's
Projected Quarter 1 Effect of Per Plan
31-Dec-04 31-Mar-05 Plan 31-Mar-05
ASSETS
Current assets 376 176 200 376
Property & Equipment-net 73 73 73
Goodwill 0 0 0
Other assets 88 88 88
---------- ----------- --------- -----------
537 337 537
========== =========== ========== ===========
LIABIITIES & STOCKHOLDER'S EQUITY
Current liabilities 430 430 (150) 280
Debt 707 707 (400) 307
Equity (600) (800) (50)
---------- ----------- --------- -----------
537 337 537
========== =========== ========= ===========
* Effect of plan represents $750,000 in debt conversion and equity financing
For the purpose of facilitating staff review of the company's level of
success in meeting its goals for this plan period, the following is a summary of
the measurable and demonstrable events expected to be completed by March 31,
2005:
1. Completion and acceptance by AMEX of plan of compliance;
2. Approval and adoption by Board of Directors of final plan of
compliance;
3. Publicly announce status of plan of compliance;
4. Resolution by Board of Directors accepting final financing term sheet;
5. File form 10-KSB for 12 months ending December 31, 2004;
6. Resolution by Board of Directors authorizing information proxy relating
to Provo Mexico unwind and financing, as required;
7. Commence preparation of informational statement or proxy statement, as
appropriate;
Provo International Inc.
February 25, 2005
Page 15 of 31
8. Resolution by Board of Directors authorizing execution of final
licensing agreement with Cardiff College Consultants, Inc.;
9. Complete new equity financing and debt conversion totaling $750,000;
and
10. Show 3 month period ending March 31, 2005 balance sheet reflecting
shareholder's deficit of [$50,000].(10)
3 Months Ending June 30, 2005
During the 3 month period ending June 30, 2005, the company will
continue to focus on launching its Paycard product line, and developing,
acquiring and licensing additional technology products and services primarily
related to areas of anti-terrorism and homeland security. In addition, the
company will continue with the administrative process and details necessary to
complete the Provo Mexico unwind and financing program.
In this regard, the company will close on the licensing agreement
addressed in the previously described letter of intent with University College
Cardiff Consultants Ltd., which relates to a compound for use against viral
agents of bio-terror, specifically involving the smallpox virus. The company
will also endeavor to execute a letter of intent for the licensing or
acquisition of an additional compound or product line similarly related to
bio-terrorism, homeland security, or other high tech opportunity.
The company will also establish a record date for the purpose of filing
its preliminary informational statement with the SEC, and file its preliminary
statement. Thereafter, the company will file its definitive informational
statement with the SEC, and approximately 21 calendar days later, formalize the
shareholder vote by written majority consent.(11)
-------------------------
(10) In the event an unexpected loss occurs during any given quarterly
period, or the company otherwise fails to substantially comply with its
projected shareholder's equity goals, such shortfall will be addressed
and compensated for during the subsequent 3 month plan period by
additional equity financing or debt conversion.
(11) The actual record date and date of filing of the definitive
informational statement is subject to change based upon the response
and depth of comments from the SEC. Any postponements or other delays
as a result of SEC comments will not affect the other goals set forth
in this plan.
Provo International Inc.
February 25, 2005
Page 16 of 31
Financial results for the 3 month period ending June 30, 2005, will be
as planned. The company will close a total of $1.25 million in equity financing
and debt conversion during the period, with shareholder equity increasing to
$800,000. This shareholder equity reflects: 1) the projected shareholder's
deficit at March 31, 2005 of [$50,000], 2) the projected loss from operations of
approximately $200,000 for the 3 months ending June 30, 2005; and 3) the closing
of an additional $1.05 million (net of $1.25 million less $200,000 in costs and
fees) in equity financing and debt conversion. The projected income statement
and balance sheet for the 3 months ending June 30, 2005 under these
circumstances would be as follows:
Projected Income Statement
US $ 000's
30-Jun-05
--------------------
Revenues 150
Cost of Revenues (85)
Selling, general & admin* (240)
--------------------
EBITDA (175)
Depreciation & amortization 0
Interest (25)
Taxes 0
--------------------
Net Income (200)
====================
*SG&A; represents approximately $180,000 in corporate overhead and expenses,
including legal and accounting, and an additional $60,000 relating to
operations.
Provo International Inc. February 25, 2005 Page 17 of 31
Projected Balance Sheet
US $ 000's
Projected Quarter 2 Effect of Per Plan
31-Mar-05 30-Jun-05 Plan* 30-Jun-05
ASSETS
Current assets 376 176 700 876
Property & Equipment-net 73 73 73
Goodwill 0 0 0
Other assets 88 88 88
------------ ----------- -------- ----------
537 337 700 1,037
============ =========== ======== ==========
LIABIITIES & STOCKHOLDER'S EQUITY
Current liabilities 280 280 (150) 130
Debt 307 307 (200) 107
Equity (50) (250) 1,050 800
------------ ----------- -------- ----------
537 337 700 1,037
============ === ============ ======== ==========
* Effect of plan represents $1.25 million gross/ $1.05 million net debt
conversion and new equity financing
For the purpose of facilitating staff review of the company's level of
success in meeting its goals for this plan period, the following is a summary of
the measurable and demonstrable events expected to be completed by June 30,
2005:
1. Close licensing agreement with Cardiff University;
2. Enter into LOI for the license or acquisition of additional product or
compound;
3. Establish record date for shareholder approval of unwind, financing,
and reverse stock split;
4. File preliminary informational statement with SEC;
5. Respond to SEC comments on preliminary statement;
6. File definitive statement with SEC (but see footnote "11");
7. Mail definitive statement to shareholders of record;
8. Formalize shareholder vote by consent of majority;
Provo International Inc.
February 25, 2005
Page 18 of 31
9. Close Provo Mexico unwind;
10. Close $1.25 million gross in new equity financing; and
11. Show 3 month period ending June 30, 2005 balance sheet reflecting
shareholder's equity of $800,000.
3 Months Ending September 30, 2005
In the third calendar quarter of 2005, the company will continue the
technological development of its existing products and services, and begin
trending toward creating additional and new revenue sources from both company
owned and licensed products and services, as well as potential operating and
revenue producing acquisition and licensing targets.
During this period, the company will close on an additional licensing
or acquisition transaction, as referred to in the prior period (reference is
made in the above discussion for the 3 month period ending June 30, 2005, to the
execution of a letter of intent to license or acquire an additional compound or
product line similarly related to bio-terrorism, homeland security, or other
high tech opportunity). Also during this time the company will identify a third
new product line or compound in a related industry, but with a stronger focus on
a revenue producing entity or product. A letter of intent to acquire or license
this new product or entity will be executed during this period.
In the event the company has not yet filed its definitive informational
statement as a result of delays caused by SEC comments, the company will also
continue with those efforts.
Financial results for the 3 month period ending September 30, 2005,
will show that the company closed on an additional $1.5 million in new equity
financing, with shareholder equity increasing to $1.9 million. This increased
shareholder equity is a result of:: 1) the projected shareholder's equity at
June 30, 2005 of $800,000; 2) the projected loss from operations of
approximately $200,000 for the 3 months ending September 30, 2005; and 3) the
closing of an additional $1.3 million (net of $1.5 million gross) in equity
financing. The projected income statement and balance sheet for the 3 months
ending September 30, 2005, are as follows:
Provo International Inc.
February 25, 2005
Page 19 of 31
Projected Income Statement
US $ 000's
30-Sep-05
---------------
Revenues 150
Cost of Revenues (85)
Selling, general & admin* (240)
---------------
EBITDA (175)
Depreciation & amortization 0
Interest (25)
Taxes 0
----------------
Net Income (200)
================
*SG&A; represents approximately $180,000 in corporate overhead and expenses,
including legal and accounting, and an additional $60,000 relating to
operations.
Projected Balance Sheet
US $ 000's
Projected Quarter 3 Effect of Per Plan
30-Jun-05 30-Sep-05 Plan* 30-Sep-05
ASSETS
Current assets 876 676 1,100 1,776
Property & Equipment-net 73 73 73
Goodwill 0 0 0
Other assets 88 88 88
----------- -------- --------- ----------
1,037 837 1,100 1,937
=========== ======== ========== ===========
LIABIITIES & STOCKHOLDER'S EQUITY
Current liabilities 130 130 (100) 30
Debt 107 107 (100) 7
Equity 800 600 1,300 1,900
----------- -------- --------- ----------
1,037 837 1,100 1,937
=========== ======== ========= ==========
* Effect of plan represents $1.5 million gross/ $1.3 million net new
equity financing
Provo International Inc.
February 25, 2005
Page 20 of 31
As in each section above, for the purpose of facilitating staff review
of the company's level of success in meeting its goals for this plan period, the
following is a summary of the measurable and demonstrable events expected to be
completed by September 30, 2005:
1. Close on second licensing or acquisition transaction;
2. Identify and execute LOI for the license or acquisition of a third new
product or compound;
3. If not yet completed, continue to respond to SEC comments, file
definitive statement, mail to shareholders, obtain shareholder
approval, and close Provo Mexico unwind;
4. Close $1.5 million gross in new equity financing; and
5. Show 3 month period ending September 30, 2005 balance sheet reflecting
shareholder's equity of $1.9 million.
3 Months Ending December 31, 2005
During the 3 month period ending December 31, 2005, the company will
begin to realize the effects of its growth strategy from an income statement
perspective, recognizing increased revenue and lower operational losses for the
first time in this plan. The income statement for this period will reflect an
increase in revenue from the previously stable $150,000 per quarter, to $225,000
for the current quarter. Moreover, operational losses will decrease for the
period from the ($200,000) during the previous quarters, to ($100,000). The
decrease in losses will be a direct result of the increase in revenue, and the
elimination of interest expenses.
As the company continues its product development and acquisition
programs, it will further its goals of creating revenue and profits through a
diversified portfolio of high tech products and services. During this quarter,
the company will close on its third licensing or acquisition transaction as
identified in the previous quarter. In addition, the company will develop a
detailed plan for calendar year 2006 for the purpose of growing revenue and
producing profits.
Financial activity for the 3 month period ending December 31, 2005 will
include an additional $2 million in equity financing with shareholder equity
increasing to $3.6 million. This increase in shareholder equity will be the
result of: 1) the projected shareholder's equity at September 30, 2005 of $1.9
million; 2) the projected loss from operations of $100,000 for this period; and
3) the closing of an additional $1.8 million (net of $2 million less $200,000 in
costs and fees) in equity financing. Thus, the income statement and balance
sheet for the 3 month period ending December 31, 2005, will be as follows:
Provo International Inc.
February 25, 2005
Page 21 of 31
Projected Income Statement
US $ 000's
31-Dec-05
---------------------
Revenues 225
Cost of Revenues (85)
Selling, general & admin* (240)
--------------------
EBITDA (100)
Depreciation & amortization 0
Interest 0
Taxes 0
--------------------
Net Income (100)
====================
*SG&A; represents approximately $180,000 in corporate overhead and expenses,
Including legal and accounting, and an additional $60,000 relating to
operations.
Provo International Inc. February 25, 2005 Page 22 of 31
Projected Balance Sheet
US $ 000's
Projected Quarter 4 Effect of Per Plan
30-Sep-05 31-Dec-05 Plan* 31-Dec-05
ASSETS
Current assets 1,776 1,676 1,800 3,476
Property & Equipment-net 73 73 73
Goodwill 0 0 0
Other assets 88 88 88
----------- ----------- ---------- -----------
1,937 1,837 1,800 3,637
=========== =========== ========== ===========
LIABIITIES & STOCKHOLDER'S EQUITY
Current liabilities 30 30 30
Debt 7 7 7
Equity 1,900 1,800 1,800 3,600
----------- ----------- ---------- -----------
1,937 1,837 1,800 3,637
=========== =========== ========== ===========
* Effect of plan represents $2 million gross/ $1.8 million net new equity
financing
The following is a summary of the measurable and demonstrable events
expected to be completed by December 31, 2005:
1. Show financial results reflecting revenue increase to $225,000 for
period, and decrease in operational losses to ($100,000);
2. Close third new licensing or acquisition transaction;
3. Develop and adopt revenue growth and profitability plan for January 1,
2006 execution;
4. Close $2.0 million in equity financing; and
5. Show 3 month period ending December 31, 2005 balance sheet reflecting
shareholder's equity of $3.6 million.
Provo International Inc.
February 25, 2005
Page 23 of 31
3 Months Ending March 31, 2006
The first calendar quarter of 2006 will continue to show growth in
revenue and a decrease in losses, in addition to the expanded capitalization of
the company and continued increase in shareholder equity. The income statement
at quarter end will show $400,000 in revenue, up from $225,000 in the prior
quarter. As a result of the increased revenues, operations will be breakeven for
the period. In furtherance of these advancements toward revenue growth and
operational profitability, the company will adopt and commence execution of the
revenue growth and profitability plan developed during the prior 3 month period.
As always, the company will continue the technological development of
its existing products and services. Additionally, the company will identify and
attempt to execute a letter of intent with a revenue producing acquisition
target within the company's realm of development and operations.
Financial activity for the 3 months ending March 31, 2006, will include
the closing on an additional $1.5 million in new equity financing, and an
increase in shareholder equity to $4.9 million. This increase in shareholder
equity will be the result of: 1) the projected shareholder's equity at December
31, 2005 of $3.6 million; 2) no operational losses for the period; and 3) the
closing of an additional $1.3 million (net of $1.5 million gross) in equity
financing. The projected income statement and balance sheet for the 3 months
ending March 31, 2006, are as follows:
Provo International Inc.
February 25, 2005
Page 24 of 31
Projected Income Statement
US $ 000's
31-Mar-06
-----------
Revenues 400
Cost of Revenues (160)
Selling, general & admin* (240)
-----------
EBITDA 0
Depreciation & amortization 0
Interest 0
Taxes 0
-----------
Net Income 0
===========
Projected Balance Sheet
US $ 000's
Projected Quarter 1 Effect of Per Plan
31-Dec-05 31-Mar-06 Plan* 31-Mar-06
ASSETS
Current assets 3,476 3,476 1,300 4,776
Property & Equipment-net 73 73 73
Goodwill 0 0 0
Other assets 88 88 88
------------ ------------ ------------ -----------
3,637 3,637 1,300 4,937
============ ============ ============ ===========
LIABIITIES & STOCKHOLDER'S EQUITY
Current liabilities 30 30 30
Debt 7 7 7
Equity 3,600 3,600 1,300 4,900
------------ ------------ ------------ -----------
3,637 3,637 1,300 4,937
============ ============ ============ ===========
* Effect of plan represents $1.5 million gross/ $1.3 million net new equity
financing
The following is a summary of the measurable and demonstrable events
expected to be completed by March 31, 2006:
Provo International Inc.
February 25, 2005
Page 25 of 31
1. Show financial results reflecting revenue increase to $400,000 for
period, and decrease in operational losses to breakeven;
2. Commence execution of revenue growth and profitability plan developed
in the 4th quarter of 2005;
3. Identify revenue producing product or entity and execute letter of
intent to acquire;
4. Close $1.5 million in equity financing; and
5. Show 3 month period ending March 31, 2006 balance sheet reflecting
shareholder's equity of $4.9 million.
3 Months Ending June 30, 2006
The 3 month period ending June 30, 2006 will be the final full 3 month
period of the company's plan of compliance. The complete results of the plan
will be reflected at the end of this quarter in revenue, profit, substantial
shareholder equity, and the continuing operation of a strong, growing American
Stock Exchange listed high technology company with a multitude of successful
divisions, products and services.
Specifically, the company will show revenue of at least $800,000 for
the period, with an operating profit of no less than $300,000, and net income of
$210,000. Execution of the company's revenue growth and profitability plan will
be clear, obvious and measurable as reflected above. The company will close the
revenue producing acquisition identified in the prior quarter, as well as an
additional $1.5 million in equity financing.
The balance sheet at period end will reflect an increase in shareholder
equity to $6.41 million, resulting from: 1) the projected shareholder's equity
at March 31, 2006 of $4.9 million; 2) net profit for the period of $210,000; and
3) the closing of an additional $1.3 million (net of $1.5 million gross) in
equity financing. The projected income statement and balance sheet for the 3
months ending June 30, 2006 are as follow:
Provo International Inc.
February 25, 2005
Page 26 of 31
Projected Income Statement
US $ 000's
30-Jun-06
-----------
Revenues 800
Cost of Revenues (200)
Selling, general & admin* (300)
-----------
EBITDA 300
Depreciation & amortization 0
Interest 0
Taxes (90)
-----------
Net Income 210
===========
Projected Balance Sheet
US $ 000's
Projected Quarter 2 Effect of Per Plan
31-Mar-06 30-Jun-06 Plan* 30-Jun-06
ASSETS
Current assets 4,776 4,986 1,300 6,286
Property & Equipment-net 73 73 73
Goodwill 0 0 0
Other assets 88 88 88
------------ ----------- ----------- -----------
4,937 5,147 1,300 6,447
============ ============ =========== ===========
LIABIITIES & STOCKHOLDER'S EQUITY
Current liabilities 30 30 30
Debt 7 7 7
Equity 4,900 5,110 1,300 6,410
------------ ----------- ----------- -----------
4,937 5,147 1,300 6,447
============ ============ =========== ===========
* Effect of plan represents $1.5 million gross/ $1.3 million net new equity
financing
The following is a summary of the measurable and demonstrable events
expected to be completed by June 30, 2006, being the final full quarter of the
company's plan, thus available for the staff as a tool for use in determining
the company's substantial compliance with this plan:
Provo International Inc.
February 25, 2005
Page 27 of 31
1. Show financial results reflecting revenue for the period of $800,000,
up 433% from the start of the compliance plan period;
2. Show financial results reflecting operational profit for the period of
$300,000, and net income of $210,000, up from a quarterly loss of
($200,000);
3. Continued execution of revenue growth and profitability plan, evidenced
by revenue and profit growth;
4. Close on acquisition of revenue producing product or entity;
5. Close $1.5 million in equity financing; and 6. Show 3 month period
ending June 30, 2006 balance sheet reflecting shareholder's equity of
$6.41 million.
End of Plan Period - July 18, 2006
The company's plan of compliance is expected to be completed by June
30, 2006. However, the company believes it is prudent to request the full amount
of time available pursuant to the Company Guide of 18 months from the date of
the notification letter, allowing for the incidental completion of any minor
matters, including the preparation of financial reports for the period ending
June 30, 2006. Thus, the company respectfully requests the period of July 1,
2006 through July 18, 2006, to be available for any incidental matters which may
be required for completion of this plan.
Provo International Inc.
February 25, 2005
Page 28 of 31
Section Closing
It is respectfully brought to the attention of the reviewing staff that
the end results shown here are compelling for a number of reasons. First,
assuming the company performs as planned, at June 30, 2006, as regarding the
issues of operational losses and shareholder's equity, the company will be back
in compliance with the continued listing standards of the American Stock
Exchange as a result of its shareholder's equity of $6.41 million, and the
discontinuation of substantial operational losses.(12) However, and even more
gripping, the company's operations at plan end will be profitable and growing.
As a result, at year end 2006, with a profitable operation for the year,
pursuant to section 1003(a)(ii) of the Company Guide, the shareholder's equity
requirement will be reduced to $4 million, yet the company will have at least
$6.8 million in shareholder's equity without any further percentage increase in
revenue or profits for the remainder of 2006.
------------------------
(12) It is further respectfully submitted that these results will satisfy
not only section 1003(a)(iii) of the company guide requiring $6 million
in shareholder's equity, but the requirements of section 1003(a)(iv)
will also be fulfilled since there will be very little debt, and
substantial current assets.
Provo International Inc.
February 25, 2005
Page 29 of 31
2. RESPONSE RELATING TO SECTION 301 COMPLIANCE REGARDING THE LISTING OF
ADDITIONAL SHARES
The company has been advised that there is the appearance that it may
have issued additional securities without having first filed an application with
the Exchange for such issuances. In accordance with the Exchange's letter of
January 18, 2005, this matter has been addressed under separate cover by letter
to the Exchange dated February 2, 2005. As part of this compliance plan, it is
represented herein that the company will follow all instructions relating
thereto as received from the Exchange, and continue to respond in a timely
manner.
Provo International Inc.
February 25, 2005
Page 30 of 31
3. STRATEGIC PLAN OF COMPLIANCE AS RELATING TO THE LOW PER SHARE STOCK
PRICE OF THE COMPANY
In its letter to the company dated January 18, 2005, the Exchange
notified the company that, among other items as described and addressed above,
the company's common stock has been trading at a low level, raising the question
whether the stock is suitable for auction market trading. In furtherance of this
issue, the Exchange has deemed it appropriate for the company to effect a
reverse stock split as a measure to address the low stock price.
The company fully intends to comply with the recommendations of the
Exchange. After lengthy consultations with company counsel and its investment
bankers relating to this issue, we have determined that it is appropriate,
reasonable and necessary to effectuate a 1 share for 20 shares reverse stock
split as part of this compliance plan. Upon execution of this reverse stock
split, and assuming the completion of the Provo Mexico unwind described above,
the company expects that the number of shares issued and outstanding will be
reduced from approximately 45 million currently, to approximately 1.15
million.(13) With a current market capitalization of approximately $5 million,
the theoretical result of the Provo Mexico share retirement and a 1 for 20
reverse split should be an increase in the company's stock price from the
current $.11 to approximately $4.34. Although there can be no assurance the
actual stock price will be or remain at such a price, the reduction in the
number of outstanding shares appears to be reasonable and necessary under the
circumstances.
As regarding the timing of the proposed reverse split, the staff's
attention is respectfully directed to that section of the compliance plan above
entitled "3 Months Ending June 30, 2005", and footnote "8" related thereto.
There, the company describes its immediate need and intention to obtain
shareholder approval for the Provo Mexico unwind, among other matters. As noted
in footnote "8", the company will include in its preliminary and definitive
informational statement filings information regarding this proposed 1 for 20
reverse stock split, and will obtain shareholder approval as soon as possible.
----------------------
(13) Of the approximately 45 million shares of common stock currently issued
and outstanding, the prior owners of Provo Mexico hold about 22 million
shares of the company's common stock and common stock equivalents.
These shares will be retired upon the completion of the Provo Mexico
unwind, leaving 23 million shares outstanding. Upon effectuation of the
proposed 1 for 20 reverse split, the company will then have
approximately 1.15 million shares outstanding.
Provo International Inc.
February 25, 2005
Page 31 of 31
CONCLUSION
The company is prepared to provide any additional material or
information required, as well as to make any recommended modifications or
clarifying entries to this plan as necessary. We are appreciative for this
opportunity to provide to the Exchange our plans for the company's future, and
for compliance with the continued listing standards of AMEX. Thank you for your
kind attention and continued assistance.
Sincerely,
/s/ Stephen J. Cole-Hatchard, CEO
---------------------------------
Stephen J. Cole-Hatchard, CEO
Provo International Inc.