<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                   FORM 10-KSB

[X]  Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
     1934.

                   For the fiscal year ended December 31, 2002

                                       OR

[ ]  Transition Report Under 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
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

                 Delaware                                 13-3950283
      --------------------------------                -------------------
        (State or Other Jurisdiction                   (I.R.S. Employer
      of Incorporation or Organization)               Identification No.)

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)

     Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class               Name of each exchange on which registered
-------------------------------   -----------------------------------------

Series B Convertible Redeemable            American Stock Exchange
Preferred Stock, $.01 par value

Common Stock, $.01 par value               American Stock Exchange

     Securities registered pursuant to Section 12(g) of the Exchange Act:

     Common Stock Purchase Warrants

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 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 past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]





<PAGE>

The issuer's revenues for the year ended December 31, 2002 were $5,047,098.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates as of April 3, 2003 was $1,808,932. As of April 3, 2003, there
were 10,169,972 shares of the issuer's Common Stock outstanding.

                      Documents Incorporated by Reference:

                                      None.





<PAGE>

                                     PART I

Item 1. Business.

Overview

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

          Primarily through 18 acquisitions, we grew our monthly revenue from
$30,000 as of October 1998 to approximately $400,000 per month at December 31,
2002. During that same period, we expanded our owned Internet access geographic
footprint from the New York/New Jersey metropolitan area, to a region that now
includes Delaware, Eastern Pennsylvania, and Northern Virginia. At December 31,
2002, we owned and operated eight points-of-presence ("POPs") which, when
combined with 1,100 POPs licensed from third parties, provide us with the
capability to serve over 75% of the U.S. population.

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

          We also streamlined our product offerings in 2002, eliminating certain
low margin products and services, and added a broadband one-way satellite
Internet access product line to our group of services. We also standardized our
product pricing, and raised the monthly rates to most of our dial-up access
customers to between $17.95 and $19.95 per month, depending on the term of
service purchased.

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

Recent Developments

          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 distribution of prepaid calling card and
cellular phone airtime in Mexico.


                                       2





<PAGE>

          We issued to the two stockholders of Provo (the "Sellers") 220,000
shares of our Series C Convertible Preferred Stock (the "Series C Preferred").
Each share of Series C Preferred automatically converts into 150 shares of our
common stock upon receipt of the approval of our stockholders (the "Requisite
Approvals") of (i) the issuance of shares of common stock upon conversion of the
Series C Preferred (ii) an increase in our authorized common stock to 75 million
shares and (iii) a 1 for 1.5 share reverse split of our common stock. As a
result, if the Requisite Approvals are obtained, we will issue 33 million shares
of common stock (before giving effect to the proposed reverse split) to the
Sellers and a change of control of our company will occur.

          In the event we do not receive the Requisite Approvals on or prior to
July 18, 2003 or such later date as agreed to by the holders of a majority of
the Series C Preferred, and which date shall be extended for a period of up to
30 days due to the actions or inactions of the Securities and Exchange
Commission or American Stock Exchange in connection with the Company seeking the
Requisite Approvals (the "Conversion Date"), the Series C Preferred will not
convert into common stock and the compensation payable to the Sellers shall be
increased by $20,000,000, payable in the form of a Note (the "Acquisition
Note"). The increase in the purchase price will be effected as a result of our
obligations arising under the Acquisition Note. The Acquisition Note is a
$20,000,000 principal amount promissory note we issued to the Sellers in
connection with the acquisition, which only takes effect if the Series C
Preferred is not converted into common stock on the Conversion Date. The
Acquisition Note bears interest at the rate of 8% per annum, is due 15 days
after the Conversion Date and is secured by substantially all of our assets
including the capital stock of Provo issued to us in the transaction. If the
repayment obligations under the Acquisition Note become effective and the
Company is not able to repay the Acquisition Note when due and the Sellers
foreclose on the shares pledged as collateral then the Sellers will regain
control of Provo. Moreover, after a foreclosure the Company may remain obligated
to the Sellers if the value of the collateral is insufficient to cover the
Company's obligations under the Acquisition Note.

          Each share of Series C Preferred has a liquidation preference of $.01
per share and ranks senior to our common stock but pari passau to our Series B
preferred stock. The holders of Series C Preferred have no voting rights, except
(i) as required by law and (ii) the holders of Series C Preferred vote
separately as to (a) any amendment, alteration or repeal of the certificate of
designation of Series C Preferred if the rights, preferences or privileges of
the Series C Preferred are affected and (b) the creation, authorization or
issuance by our company of any stock on parity with, or senior to the Series C
Preferred as to dividends, liquidation, redemption, conversion, voting or
assets, or any increase in the amount of authorized shares of any such stock
("Senior Stock"). In addition, prior to the Conversion Date, we may not do any
of the following:

          (i)   authorize any merger or certain other business combination
                transactions;

          (ii)  take any action which would result in our voluntary or
                involuntary dissolution or winding-up;

          (iii) amend, repeal or add any provision to our certificate of
                incorporation or by-laws if it would materially adversely effect
                the holders of Series C Preferred;

          (iv)  issue any options, warrants or other securities convertible into
                or exchangeable for Senior Stock;

          (v)   incur, refinance or amend the terms of any indebtness or any
                other obligation for the payment of money in an aggregate amount
                of $1,000,000; or


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<PAGE>

          (vi) enter into any agreement for the sale of our securities or any
               capital financing transaction in which the Company issues capital
               stock or other securities at per share (or effective per share
               price) less than $1.50.

          In connection with the acquisition, we issued an aggregate of 35,500
shares of our Series D Convertible Preferred Stock (the "Series D Preferred") to
certain brokers, finders and insiders in accordance with the terms of certain
consulting agreements. See Item 12- Certain Relationships and Related
Transactions.

          In April 2003, we borrowed $550,000 from an unaffiliated entity
("Lender") and issued a secured promissory note ("Note") to the lender. The Note
bears interest of 14% per annum and is secured by substantially all of our
assets. Two of our officers, Mr. Nicko Feinberg and Mr. Stephen J. Cole-Hatchard
have pledged shares of our common stock owned by them as additional collateral
to the lender. In addition, Mr. Cole-Hatchard has personally guaranteed the
repayment of the Note. In connection with the financing, we issued 500,000
shares of our common stock to the lender as additional consideration. The Note
is repayable at the earlier of 90 days or upon financing of Provo's accounts
receivable. Out of the proceeds, we used $200,000 to settle a promissory note,
issued as part of a business acquisition, in the principal amount of $728,600.
The balance of the $728,600 promissory note was repaid through issuance of
375,000 shares of our common stock to the promissory note holders.

Provo's Business

          Provo was formed in 1995 as a private company with headquarters in
Mexico City. Its primary business is the sale and distribution of prepaid
Latadel public calling cards for Telmex, the dominant telecommunications
provider in Mexico. Provo is also engaged in the sale and distribution of
Multifon prepaid landline telephone time provided by Telmex and prepaid digital
PCS cellular airtime provided by TelCel. TelCel is the dominant provider of
cellular airtime in Mexico. Sales of Provo's pre-paid calling cards account for
approximately 10% of all such sales in Mexico.

          Provo distributes its products through a network of approximately 60
independently-owned distributorships that collectively employ more than 400
sales people. Provo also employs its own in-house sales staff. Provo and its
distributors have established a distribution network that includes over 20,000
point-of-sale locations.

          Provo competes with approximately 40 other distributors who also
wholesale prepaid calling time purchased from Telmex and TelCel throughout
Mexico. Two other distributors, Tarjetas Del Noreste and DiCasa, maintain market
positions comparable to Provo's.

          All of Provo's revenues are currently generated in Mexico. As a
result, Provo's business may involve certain considerations and risks not
typically associated with those of domestic origin as a result of, among other
factors, the level of governmental supervision and regulation of foreign
businesses, the possibilities of political or economic instability and
volatility in currency exchange rates.

Acquisitions in Year 2000

          In 2000, we acquired substantially all of the assets of The PressRoom
Online Services, Application Resources Information Services, Inc d/b/a Way
Communications, The First Street Corporation, Wizardnet, Inc., Delanet, Inc.
(internet access service providers) and PNM Group, Inc., a Web design company.
We also acquired certain


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<PAGE>

customers of Double D Network Services, Inc. pursuant to an agreement whereby we
paid Double D a referral fee for each Double D customer who signed up for our
dial-up service.

Internet Products and Services

          Our products and services are focused around three key Internet
business areas - access, presence, and development.

Internet Access Products

     o    Dial-Up Accounts: Frontline offers residential and business dial-up
          and ISDN Internet access on a national basis. Customers may order
          these products on our websites or by calling our 800 number. Utilizing
          our branded software, available via CD or downloadable from our
          website, customers can quickly order and activate a new account,
          billable to the client's credit card. The standard Frontline dial-up
          product provides clients two Internet e-mail addresses, a customizable
          homepage, access to our Customer Service telephone support center, and
          the latest access tools including browsers from Netscape and
          Microsoft.

     o    Satellite Access: In late 2001, Frontline launched a line of broadband
          one-way satellite access products primarily for residential users. The
          satellite service provides customers with download speeds
          approximately 10 times faster than standard dial up accounts, uses a
          dial-up line for outbound service, and starts at $34.99 per month. A
          standard dial-up account is included with the service for outbound
          traffic and backup for downloading.

     o    DSL: We are a reseller of Digital Subscriber Line high-speed Internet
          access services for DSL.net, Inc., and Covad Communications Company.
          We offer Digital Subscriber Line, ISDN Digital Subscriber Line,
          Asymmetric Digital Subscriber Line and Symmetric Digital Subscriber
          Line services in the Mid-Atlantic and Northeast United States. These
          products provide our residential and business customers with
          high-speed dedicated Internet connectivity at an affordable cost.

     o    Dedicated Access: Frontline offers high-speed, high-bandwidth
          dedicated leased lines to customers, principally for business users
          who require high-speed internet connectivity 24 hours a day, seven
          days a week.

Internet Presence Products

     o    Virtual Website hosting: We offer virtual website hosting services to
          residential and small business customers who require 24 hour presence
          on the Internet. By renting space on our Internet servers, customers
          avoid costly hardware investment, maintenance, and other costs
          associated with operating their own servers. Marketed partly under our
          brand name FrontHost(SM), the Company's hosting services include
          domain name registration, e-mail addresses, file upload and download
          capability and statistical logs.

     o    Dedicated Hosting: Frontline offers website hosting and maintenance
          services to clients wishing to rent secure web-servers. In addition,
          Frontline offers co-location services to those customers preferring to
          install their own equipment at our facilities and connect their
          systems directly to the Internet.


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<PAGE>

     o    FrontHost(SM): Our do-it-yourself web hosting service, which includes
          the "Website Wizard" products, assists customers in developing and
          hosting their own Websites and e-commerce `stores' by using our
          FrontHost(SM) user-friendly tools. The product line is simple, self
          service, and economical.

Internet Development Services

     o    Website design services: PlanetMedia(SM), our website design,
          consulting, and development division, assists business customers with
          Internet marketing strategy, graphic design and layout, writing and
          editing and Website information architecture (including Website
          navigation and searching systems). Our in-house professionals provide
          full life-cycle support to customers: from the design phase through
          website installation and maintenance.

Marketing and Sales

          We currently handle sales and marketing utilizing in-house staff,
including our customer service and technical groups. We market and sell our
products through direct sales efforts, and a network of external, commissioned
resellers we refer to as "Value Added Resellers" (VARs).

          Marketing activities focus primarily on regional efforts such as
radio, trade and local business print media, as well as local event marketing in
each of the different areas in which we have a physical presence, which includes
the East coast from Virginia through the New York metropolitan area.

POPS and Network infrastructure

          Our Internet access network is comprised primarily of a
Company-managed network and third-party POPs provided primarily through an
agreement with Megapop, Inc. The Company believes that this combination of owned
and leased access enables Frontline to most economically provide Internet access
services to its customers on a national level while leveraging the competitive
advantages associated with the Company's own, uniquely-located, POPs.

          Broadband access to the Internet for Company-managed POPs is provided
through high speed T1, T3, or Ethernet connections supplied under contracts with
national broadband suppliers such as Verio, Inc. and by certain regional
broadband suppliers such as Focal, Inc., and AboveNet, Inc. DSL access is
similarly provided through direct connections or reseller agreements with Covad
Communications Company and DSL.net, Inc.

          Network and service delivery stability is provided through the use of
redundant computing and server facilities located at our larger owned POPs. We
have duplicate bandwidth access at each of our major locations. We have
installed backup power supply, remote alarm, computer virus protection, and
monitoring software throughout our network, which is monitored 24 hours a day, 7
days-a-week.

Customer and Product Support Services

          We believe that reliable customer and product support is critical to
retaining existing subscribers and in attracting new customers. We provide the
following Customer and Product support services:


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               o    Toll-free, live telephone assistance available seven days a
                    week, during peak load hours (10 hours per day; 8 hours on
                    weekends);

               o    Email-based assistance available seven days a week;

               o    Internet help at our www.fcc.net Web site;

               o    Fax support for higher-end business hosting customers.

          In 2001, we consolidated our Howell, New Jersey and Pearl River, New
York customer service centers into the Pearl River location. All calls and
emails for customer service are now received in Pearl River, of which we receive
approximately 300, from both residential and business customers, per day.

Product and Service Development

          Our Product Service Division develops proprietary applications, and
reviews new technologies and third-party software products that are incorporated
into our network and service products. A revised, interactive website
(www.fcc.net) was activated by us during February 2001. In addition, a new
broadband one-way satellite system was developed and launched in late 2001, and
we distributed updated dial-up access CDs to our sales force and customers
during March 2001, December 2001, and March 2002.

Industry and Competition

          The market for Internet access, hosting, and web design and
development services is highly competitive, rapidly evolving, and subject to
technological change. There are no substantial barriers to entry, and we expect
that competition will increase.

          Our current and prospective competitors include many large companies
that have substantially greater market presence, financial, technical, and
marketing and other resources than we have. We compete directly or indirectly
with the following categories of companies:

               o    Established online services, such as America Online, the
                    Microsoft Network, and Earthlink;

               o    Local, regional and national ISPs, public or privately
                    owned;

               o    National and regional telecommunications companies, such as
                    AT&T and Verizon;

               o    Cable TV and online services;

               o    Satellite companies, such as Direct TV and Starband; and

               o    Large independent DSL providers.

          We believe that competition is likely to increase and that existing or
future competitors may develop or offer services that are superior to ours at a
lower price. These factors could have a material adverse effect on our business,
financial condition, and results of operations.


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Company Strategy and Restructuring Program

          During 1998, the Company announced, as a strategic goal, to become a
leading provider of Internet access, development, and presence services for
small and medium-sized businesses throughout the United States. To achieve this
objective, we embarked on a program to expand our network infrastructure and
internet dial-up access subscriber base by acquiring local and regional ISPs,
utilizing acquired web-portal and e-commerce websites as a vehicle to promote
the sale of our Internet services, and developing co-marketing alliances with
value-added partners.

          During the period between October 1998 and September 2000, Frontline
acquired 18 companies, and as a result grew our monthly revenue from $30,000 to
approximately $400,000 per month at December 31, 2002, and acquired two
web-portal websites: WoWFactor.com'r' and iShopNetworks(SM).

          Marketplace and technological changes during the year 2000 caused us
to revise our strategy and restructure our operations during the last two
quarters of the year 2000, in 2001 and 2002. We refined our product offerings to
exclude numerous low margin products and services as well as those which were no
longer in high demand, and raised our standard pricing for dial up customers to
between $17.95 and $19.95 per month. As a result, our actual customer count
decreased, while our revenue remained fairly constant. In an effort to offset
the reduction in customers, we added a broadband satellite access product line
in late 2001.

          In addition, the marketplace failure of many so-called dot-com
companies and our inability to cost-effectively market our core products through
our owned websites resulted in our decision to abandon the use of web-portals as
a primary marketing tool of the Company. As a result, during January 2001, we
announced the sale of a majority of our equity interest in iShopNetworks, Inc.
and the closure of our WoWFactor.com'r' web-portal. We also announced that we
would cease funding our subsidiary, CLEC Communications Corp.

          In 2001 and 2002 the DSL market also suffered turmoil with many
substantial DSL providers entering bankruptcy or ceasing operations. As a
result, we sustained a loss of certain DSL customers and revenues. However, we
continue offering the DSL product line through Covad Communications Company and
DSL.net, Inc.

          During the last quarter of 2000, we commenced a restructuring program
(the "Restructuring Program") designed to consolidate our operations and improve
cost-effectiveness, combine personnel of our key products and customer service
divisions to leverage our manpower skills, and upgrade our access network
infrastructure. As of March 31, 2003, we have accomplished the following in
connection with our Restructuring Program:

          o    Total workforce reduction of about 75%, from a high of
               approximately 120 employees to 31 employees as of March 31, 2003.

          o    Elimination of our marginal products and services, reducing the
               number of discrete product offerings from over 100 to
               approximately 25;

          o    Upgrading and improvement of our user-friendly website
               (www.fcc.net) promoting our products and services, and allowing
               for on line ordering;


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          o    Development of a third-party network of selling agents (VARs) for
               the sales and marketing of our products and services, which had
               approximately 130 Frontline VARs registered as of March 14, 2003;

          o    Closure of two of our four offices and the consolidation of two
               owned POPs;

          o    Integration of our Product and Customer Service Divisions at our
               Pearl River, New York headquarters including closure of our
               Howell, New Jersey Call Center; and

          o    Discontinuation of expenditures related to our CLEC
               Communications Corp. subsidiary.

          We intend to continue our efforts to reduce costs, without sacrificing
the levels of service we provide to our customers, while adjusting our business
strategy, where necessary, in response to changing technology, market
conditions, and financial matters.

Trademarks and Service Marks

          We have filed an application for Federal Trademark Registration and
claim rights to the following mark: Frontline Communications Corp. We have been
granted Federal Trademark Registrations for the following trademarks:
Frontline.net and Frontline.net Effortless E-Commerce and Internet Access (name
and two logos). All other trademarks and service marks used in this report are
the property of their respective owners.

Industry Regulation

         The following summary of regulatory developments and legislation
relating to our Internet business does not describe all present and proposed
federal, state and local regulations and legislation affecting us and our
industry. Other proposed and existing federal, state and local legislation
and regulations are currently the subject of judicial proceedings, legislative
hearings and administrative proposals which could change the manner in which
our industry operates. Neither the outcome of these proceedings, nor their
impact upon us or our industry, can be predicted at this time.

          Internet Service Provider Regulation. Currently, few U.S. laws or
regulations specifically regulate communications or commerce over the Internet.
However, changes in the regulatory environment relating to the Internet
connectivity market, including regulatory changes which directly or indirectly
affect telecommunications costs or increase the likelihood or scope of
competition from the regional Bell operating companies or other
telecommunications carriers, could affect the prices at which we may sell our
services and impact competition in our industry. Congress and the Federal
Communications Commission will likely continue to explore the potential
regulation of the Internet. For instance, the Federal Communications Commission
may subject certain services offered by ISPs to regulation as
"telecommunications service", which could result in us being subject to
universal service fees, regulatory fees and other fees imposed on regulated
telecommunications providers, which could cause our costs of doing business to
increase substantially.

          Future laws and regulations could be adopted or modified to address
matters such as user privacy, copyright and trademark protection, pricing,
consumer protection, child protection, characteristics and quality of Internet
services, libel and


                                       9





<PAGE>

defamation, and sales and other taxes. Internet-related legislation and
regulatory policies are continuing to develop, and we could be subject to
increased regulation in the future. Laws or regulations could be adopted in the
future that may decrease the growth and expansion of the Internet's use,
increase our costs, or otherwise adversely affect our business.

          In 1998, Congress passed the Digital Millennium Copyright Act. That
act provides numerous protections from certain types of copyright liability to
Internet service providers that comply with its requirements. We have adopted
policies and procedures in accordance with the act, however, to the extent that
we have not met those requirements, third parties could seek recovery from us
for copyright infringements caused by our Internet customers.

          The law relating to the liability of Internet service providers for
information carried on or disseminated through their networks is currently
unsettled. It is possible that claims could be made against Internet service
providers for defamation, negligence, copyright or trademark infringement or on
other theories based on the nature and content of the materials disseminated
through their networks. We could be required to implement measures to reduce our
exposure to potential liability, which could include the expenditure of
resources or the discontinuance or modification of certain product or service
offerings. Costs that may be incurred as a result of contesting any claims
relating to our services or the consequent imposition of liability could have a
material adverse effect on our financial condition, results of operations and
cash flow.

Employees

          As of March 31, 2003, we had 31 full-time employees including 4
executive officers. We also engage part-time employees from time to time. None
of our employees are represented by a union. We consider our employee relations
to be good. Provo and its affiliates have 135 employees, 134 of whom are full
time.

Item 2. Properties

          Our executive offices are located in Pearl River, New York, where we
lease approximately 12,000 square feet of space through a lease that expires in
August of 2004. We also lease approximately 2,700 square feet of space in
Babylon, New York that was assumed in connection with our purchase of PNM group,
Inc. (d/b/a) Planet Media. The lease expires in August of 2003. The aggregate
annual rent of the two offices is approximately $308,000.

          In 2001, as a part of our Restructuring Program, we closed our
regional offices in Delaware and Virginia and have terminated the leases with
the landlords. We lease approximately 2,400 square feet in Howell, New Jersey
under a lease that expires in May 2004 and provides for monthly rental of
approximately $3,500. We have closed our office at this location and are
attempting to terminate the lease.

          We also lease space (typically, less than 100 square feet) in various
geographic locations to house the telecommunications equipment for each of our
POPs. Leases for the POPs have various expiration dates through (June 2003).
Aggregate annual rentals for POPs are approximately $6,000.


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          Provo's principal office is a leased building located in Mexico City.
Provo also leases 16 additional smaller offices at various locations throughout
Mexico, where it maintains staff dedicated to sales and distribution.

Item 3. Legal Proceedings

          The Company is subject to various proceedings in the normal course of
its business. We do not anticipate any substantial impact or effect on the
Company from any such proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

          Not applicable.

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

          Market Information. Commencing on February 7, 2000 our Common Stock
has been listed on the American Stock Exchange ("AMEX") under the symbol "FNT".
From May 14, 1998 until February 7, 2000, our Common Stock was traded on the
NASDAQ SmallCap Market under the symbol "FCCN". The following table sets forth,
for the periods indicated, the range of the high and low closing prices for the
Common Stock as reported by AMEX.

<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 2002   High   Low
-----------------------------------   ----   ---
<S>                                    <C>   <C>
First Quarter                          .29   .14

Second Quarter                         .31   .15

Third Quarter                          .43   .14

Fourth Quarter                         .36   .13
</TABLE>

<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 2001   High   Low
-----------------------------------   ----   ---
<S>                                    <C>   <C>
First Quarter                          .31   .18

Second Quarter                         .59   .18

Third Quarter                          .27   .15

Fourth Quarter                         .38   .15
</TABLE>

          The number of record holders of our Common Stock was 237 as of April
3, 2003. We believe that there are in excess of 2,700 beneficial owners of our
Common Stock.

          Dividend Policy. To date, we have not declared or paid any cash
dividends on our common stock. The payment of dividends on our common stock, if
any, in the future is within the discretion of the Board of Directors and will
depend upon the Company's earnings, its capital requirements and financial
condition and other relevant factors such as the rights of holders of capital
stock that ranks senior with respect to dividends, such as our Series B
Convertible Redeemable Preferred Stock. We presently


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<PAGE>

intend to retain any earnings to finance our business and do not expect to
declare or pay any cash dividends on our common stock in the foreseeable future.

          Holders of our Series B Convertible Redeemable Preferred Stock are
entitled to receive annual cumulative dividends of $.60 per share payable
semi-annually in June and December of each year. The dividends are paid in cash
or in shares of Common Stock, at our discretion. In June and December 2002, our
directors elected not to declare a dividend on our Series B Convertible
Redeemable Preferred Stock. Accrued expense at December 31, 2002 includes
$297,867 representing unpaid dividends.

Changes in Securities and Use of Proceeds

          During the three months ended December 31, 2002, we issued 51,000
shares of common stock upon conversion of 15,000 shares of Series B Convertible
Redeemable preferred stock. The foregoing shares were issued pursuant to
exemptions from registration under Sections 3(a)(9) and 4(2) of the Securities
Act of 1933.

Equity Plan Compensation Information

The following table sets forth information as of December 31, 2002 regarding
compensation plans under which our equity securities are authorized for
issuance.

<TABLE>
<CAPTION>
                                                                                    Number of
                                          Number of                           securities remaining
                                      Securities to be        Weighted-       available for future
                                         issued upon           average           issuance under
                                         exercise of        exercise price     equity compensation
                                         outstanding        of outstanding      plans (excluding
                                      options, warrants   options, warrants   securities reflected
                                          and rights          and rights          in column (a))
Plan Category                                (a)                 (b)                  (c)
-------------                         -----------------   -----------------   --------------------
<S>                                       <C>                   <C>                  <C>
Equity compensation plans
   approved by security holders (1)       1,289,0000            $2.81                556,500

Equity compensation plans not
   Approved by security holders (2)        1,676,300            $3.00

                                          ----------            -----                -------
Total                                      2,965,300            $2.92                556,500
                                          ==========            =====                =======
</TABLE>

     (1)  Pursuant to our 1997 Stock Option Plan.

     (2)  Outstanding warrants to acquire shares of common stock. The warrants
          expire at various times through 2005 and the warrant holders have
          certain anti-dilution rights. Excludes warrants to acquire 1,840,000
          shares of common stock sold in our initial public offering.

Item 6. 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 6 and elsewhere in this Form
10-KSB which are not


                                       12





<PAGE>

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. These "forward looking statements" are subject to a number
of known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company 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, risks associated with the Company's ability to attract and
retain new subscribers, ability of the Company to successfully integrate newly
acquired subscribers and business entities into its operations, ability to
manage any future growth, uncertainties regarding future operating results,
risks relating to changes in the market for internet services, regulatory and
technological changes, possible inability to protect proprietary rights, changes
in consumer preferences and demographics, competition, reliance on
telecommunication carriers, ability to expand the Company's network structure,
ability to obtain any necessary future financing, unfavorable general economic
conditions, uncertainty of customer and supplier plans and commitments, risk
related to the acquisition of Provo, the ability to maintain the American
Stock Exchange and Nasdaq Small Cap Market listing of the Company's
securities and other risks detailed in this report and in the Company's
other Securities and Exchange Commission filings. The words "believe",
"expect", "anticipate", "intend" and "plan" and similar expressions identify
forward-looking statements, which speak only as of the date they were made.
We undertake no obligation to update any forward-looking statements contained
in this report.

Overview

          During 2002 and 2001, 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.

Restructuring Program.

          In October 2000, we initiated a Restructuring Program designed to,
among other things, reduce our operating losses. The program consists of
reductions of personnel, reduction in 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.

          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 there will not be any disruption of any services offered by us, or
resulting loss of revenues from reduced product lines and marketing
expenditures. The restructuring program was substantially completed by December
31, 2002.


                                       13





<PAGE>

Results of Operations

Comparison of Years ended December 31, 2002 and 2001:

Revenues. Revenues decreased for the year ended December 31, 2002 by $1,456,022
or 22.4% over the prior year. The decrease in revenues were in part due to
closure of our unprofitable satellite offices and due to lesser website
development work performed by us in 2002.

Cost of Revenues. For the year ended December 31, 2002, cost of revenues
decreased by $989,617 to $2,493,337. As a percentage of revenues, cost of
revenues decreased to 49.4% from 53.6%. The decrease in cost of revenues was due
to cost reductions realized through our Restructuring Program.

Selling, General and Administrative. For the year ended December 31, 2002
selling, general and administrative expenses decreased by $1,414,183. As a
percentage of revenues, selling, general and administrative expenses decreased
from 59.4% in 2001 to 48.5% in 2002. The decrease in selling, general and
administrative expenses was due to cost reductions realized through our
Restructuring Program. The principal component of the decrease was in payroll
and related costs due to workforce reduction.

Depreciation and Amortization. For the year ended December 31, 2002,
depreciation and amortization decreased by $2,198,543 to $745,135. The decrease
was due to reduced amortization resulting from our intangibles written off as
impaired in the fourth fiscal quarter of 2001.

Non cash compensation charges. In September 2001, we granted 1,376,700
restricted shares of our common stock to our employees under the Company's 2001
Stock Incentive Plan. Accordingly, $206,505 representing the fair value of the
shares granted, was charged to operations as a non-cash compensation charge.
During 2002, we recognized a non-cash compensation charge of $58,500 for shares
issued in exchange for services from consultants.

Impairment of intangibles. During the year ended December 31, 2001, due to
changes in circumstances, we determined that the carrying amount of intangible
assets of The PressRoom Online Services, Wizardnet, Inc., Delanet and PNM Group,
which we acquired in 2000, were impaired. Accordingly we recorded an impairment
charge of approximately $2,800,000 on these assets.

Interest Expense. Interest expense for 2002 was $95,417 compared to an interest
expense of $131,778 for 2001. Interest expense decreased in 2002 due to
decreased debt levels.

Net loss. As a result of the foregoing, for the year ended December 31, 2002,
net loss decreased by 88.8% or $6,241,762 to $787,525 compared to a net loss of
$7,029,287 in 2001. We incurred significant losses as revenues generated were
not sufficient to offset the substantial up-front expenditures and operating
costs associated with attracting and retaining additional customers.


                                       14





<PAGE>

Liquidity and Capital Resources.

          Our working capital deficiency at December 31, 2002 was $2,655,722
compared with a working capital deficiency of $1,725,323 at December 31, 2001.
The increase in working capital deficiency was primarily due to the effect of a
promissory note that is payable in June 2003 in the principal amount of $728,600
becoming a current liability and also from operating losses.

          Our primary capital requirements are to fund acquisition of customer
bases and related Internet businesses, install network equipment, and working
capital. To date, we have financed our capital requirements primarily through
issuance of debt and equity securities. We currently do not have any bank lines
of credit. 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 June 2002, we completed a private placement of 8% promissory notes
and received proceeds of $200,000 (including $50,000 from our Officers and
Directors). The promissory notes bear interest at 8% and mature in three years
from the date of issuance. We have the option to convert the principal amount
due under the promissory notes into shares of our common stock at a conversion
price of $4.80 per share, under certain circumstances, as defined in the
agreement with the promissory note holders, such as the market price of our
common stock exceeding $6 per share. We also issued to the note holders warrants
to purchase an aggregate of 1,000,000 shares of our common stock at an exercise
price of $.08 per share. Out of the proceeds, $75,000 was allocated as the value
of the warrants and deducted from the current value of the notes payable in the
accompanying balance sheet (Discount). The debt issue discount arising from the
value of the warrants is being amortized as additional interest over the life of
the promissory notes.

          As discussed in Item 1-Business, in April 2003, we acquired Provo. If
we receive the Requisite Approvals from our stockholders, which will result in
the obligations under the Acquisition Note not becoming effective, we believe
that the addition of Provo's operations to our operations will enable us to meet
our obligations as they come due and that we will be able to continue as a going
concern. If we are unable to obtain the Requisite Approvals from our
stockholders which will result in our being liable to the Sellers under the
Acquisition Note, then we will need additional financing in 2003 to continue
operations as currently conducted. We have no available standby sources of
financing and there can be no assurance that any additional financing will be
available to us on acceptable terms, or at all.

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 are believed to be reasonable under the current
circumstances, the results of which form the basis for making judgments


                                       15





<PAGE>

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 use in preparation of our consolidated
financial statements.

Revenue Recognition

During 2002 and 2001, a significant part of our revenues were derived from
providing Internet access 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, and 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 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 by customers.

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.

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
these assets. When any such impairment exists, the related assets will be
written down to fair value.

Income Taxes

Our net deferred tax assets, consisting of primarily federal and state net
operating loss carry forwards, have been offset by a full valuation allowance.
In determining the need for a valuation, we review both positive and negative
evidence, including current and historical operating results. Based upon our
assessment of all available evidence, we have concluded that it is more likely
than not that deferred tax assets will not be realized.


                                       16





<PAGE>

Item 7. Financial Statements.

          The financial statements appear in a separate section of this report
following Part III.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

          Information regarding the Company's change in accountants may be found
in the Company's Form 8-K for the event dated January 10, 2001.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act.

          The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
Name                            Age   Position
----                            ---   --------
<S>                              <C>  <C>
Ventura Martinez Del Rio, Sr.    53   Chairman of the Board


Stephen J. Cole-Hatchard         45   Chief Executive Officer and Director

Nicko Feinberg                   31   President, U.S. Operations and Director

Vasan Thatham                    45   Vice President and Chief
                                      Financial Officer

Amy Wagner-Mele                  34   Executive Vice President,
                                      Secretary and General Counsel

Ventura Martinez Del Rio, Jr.    29   President, Mexican Operations and Director

Ronald C. Signore                42   Director

William A. Barron                53   Director

Miguel Madero                    54   Director
</TABLE>

          Ventura Martinez Del Rio, Sr. has been our Chairman since April of
2003. Mr. Martinez Del Rio, Sr. earned an undergraduate degree in Economics from
the Universidad Anahuac in Mexico in 1972 and an MBA from the University of
Texas in 1974. He is currently the president of the Texas EX's in Mexico, a
widely popular alumni organization. From 1983 to 1994, Mr. Martinez Del Rio, Sr.
served in many executive leadership roles for the Mexican National Lottery,
developing a vast business contact network that includes numerous senior Mexican
government officials and the leaders of numerous senior Mexican government
officials and the leaders of numerous prominent retail organizations throughout
Mexico. He founded Provo in October of 1995. Mr. Martinez Del Rio, Sr. has
served as chairman of the board of Provo since its inception.

          Stephen J. Cole-Hatchard has been our Chief Executive Officer since
August 1997. Mr. Cole-Hatchard was our Vice President of Finance from February
1997 to August 1997, our President from August 1997 to July 2001, our Chairman
from August 1997 to April


                                       17





<PAGE>

2003 and has been one of our directors since February 1997. Mr. Cole-Hatchard
was Chief Financial Officer of Hudson Technologies, Inc., a refrigerant services
company specializing in recovery and decontamination services, from 1993 to
1996, and has been a licensed attorney since 1988.

          Nicko Feinberg founded our Company in 1995, has been a director since
November 1996, and was appointed as President, U.S Operations in April 2003. He
was our Executive Vice President of Technology from November 1996 to July 2001,
Chief Information Officer from August 1997 to July 2001 and President and Chief
Operating Officer from July 2001 to April 2003. Mr. Feinberg was a Sales Manager
and, from April 1991 to April 1994, a Sales Account Executive for Microage
Computer Outlet, Inc., a company engaged in computer sales.

          Vasan Thatham has been our Vice President and Chief Financial Officer
since February 1999. From 1994 through 1998, Mr. Thatham was Vice President and
Chief Financial Officer of Esquire Communications Ltd., a company engaged in
providing legal support services.

          Amy Wagner-Mele has been our Vice President and General Counsel since
December 1998 and our Secretary since September 1998, and was our Vice
President, Secretary and Corporate Counsel from September 1998 to December 1998.
From September 1997 to August 1998, Ms. Wagner-Mele was an associate with the
law firm of Winston & Strawn. From 1993 to August 1997, Ms. Wagner-Mele was an
associate with the law firm of Podvey, Sachs, Meanor, Catenacci, Hildner &
Cocoziello, P.C.

          Ventura Martinez Del Rio, Jr. has been our director since April 2003
and was appointed as President, Mexican operations in April 2003. Mr. Ventura
Martinez Del Rio, Jr. earned a BBA degree from the Universidad Anahuac in Mexico
in 1994 and a graduate degree in business from Ipade Business School ("IBS").
IBS is a highly-regarded (business management school based in Mexico City. He
joined Provo in 1996 as its Chief Operating Officer, co-led the company through
its rapid growth from 1996 to 2001 and was named its Chief Executive Officer in
2001.

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

          William A. Barron has been one of our directors since January 2000.
Prior to retirement, Mr. Barron served as Vice President and Chief Financial
Officer of Hudson Technologies, Inc. from July 1996 to March 1997. Prior to
that, Mr. Barron was President and Chief Operating Officer for Diagnostek, Inc.,
a pharmacy benefit management company, from May 1994 to October 1995 and
Executive Vice President and Chief Financial Officer for Diagnostek, Inc. from
March 1993 to April 1994. From February 2001 through July 2001, as part of the
Restructuring Program, Mr. Barron served as interim Vice President and Chief
Operating Officer of the Company.

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


                                       18





<PAGE>

Director. Mr. Madero sits on the Board of Directors of Credito Inmobiliario S.A.
de C.V., a real estate financing company in Mexico.

          All directors hold office until the next annual meeting of
stockholders for the ensuing year or until their successors have been duly
elected and qualified. Officers are elected annually by the Board of Directors
and serve at the discretion of the Board.

Item 10. Executive Compensation.

          The following table sets forth compensation paid to our Chief
Executive Officer and our two other most highly compensated executive officers
(each of whom was serving at the end of our fiscal year ended December 31, 2002)
during the years ended December 31, 2002, 2001 and 2000. No other executive
officer of the Company received aggregate compensation which exceeded $100,000
during the year ended December 31, 2002. We refer to these three executive
officers as our "Named Executives".

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

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

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

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

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

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

          The following table sets forth information regarding options granted
during the year ended December 31, 2002 to our Named Executives:

                          Options/SAR Grants in Year Ending December 31,
                          2002

                          Number of Shares    % of Total
                             Underlying      Options/SAR


                                       19





<PAGE>

<TABLE>
<CAPTION>
                            Options/ SARs      Granted     Exercise Price   Expiration
                               Granted         in Year        $/share)         Date
                          ----------------   -----------   --------------   ----------
<S>                              <C>              <C>            <C>            <C>
Stephen J. Cole-Hatchard         --               --             --             --

Nicko Feinberg                   --               --             --             --

Vasan Thatham                    --               --             --             --
</TABLE>

          The following table sets forth information concerning the number of
options owned by our Named Executives, the value of any in-the-money unexercised
options as of December 31, 2002 and information concerning options exercised by
our Named Executives during the year ended December 31, 2002:

<TABLE>
<CAPTION>
                                          Aggregated Option Exercises and Year-End Option/SAR Values
                          --------------------------------------------------------------------------------------
                             Shares                        Number of Securities         Value of Unexercised
                            Acquired       Value          Underlying Unexercised             In-The-Money
                          On Exercise   Realized ($)    Options/SARs at 12/31/2002    Options/SARs at 12/31/2002
                          -----------   ------------   ---------------------------   ---------------------------
                                                       Exercisable   Unexercisable   Exercisable   Unexercisable
                                                       -----------   -------------   -----------   -------------
<S>                            <C>           <C>         <C>         <C>               <C>         <C>
Stephen J. Cole-Hatchard       0             $0          302,000                       $2,080

Nicko Feinberg                 0             $0          245,000                       $2,080

Vasan Thatham                  0             $0          100,000                       $1,080
</TABLE>

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

Employment Agreements

          The Board of Directors has approved the adoption of employment
agreements between the Company and/or its affiliates and Messrs. Thatham,
Feinberg, Martinez del Rio Jr., Cole-Hatchard and Martinez del Rio Sr. that
provide for an annual base compensation of not less than $115,000, $120,000,
$120,000, $150,000 and $150,000, respectively. The agreements will provide for
certain base salary increases in the event the Company completes an equity
financing in excess of $7,000,000, and for certain bonuses in the event the
Company achieves certain revenue objectives. The agreements will also allow for
such bonuses as the Board of Directors may, in its sole discretion, from time to
time determine. The employment agreements with Messrs. Thatham, Feinberg,
Martinez Del


                                       20





<PAGE>

Rio Jr., Cole-Hatchard and Martinez Del Rio Sr. will expire in April 2005
subject to automatic successive one year renewals unless either we or the
employee gives notice of intention not to renew the agreement. With the
exception of Mr. Martinez del Rio Sr., the employment agreements will provide
for employment on a full-time basis, and each of the agreements will contain a
provision that the employee will not compete or engage in a business competitive
with our current or anticipated business during the term of the employment
agreement and for a period of two years thereafter.

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

Director Compensation

          Each of our non-employee directors received $6,000 in 2002 for
attending Board Meetings.

1997 Stock Option Plan

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

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

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


                                       21





<PAGE>

stock) and are not transferable other than by will or by the laws of descent and
distribution.

2001 Stock Incentive Plan

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

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

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

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

          Under the Incentive Plan, the Board or the Committee may grant shares
of restricted Common Stock either alone or in tandem with other Awards.
Restricted and Deferred Stock awards give the recipient the right to receive a
specified number of shares of common stock, subject to such terms, conditions
and restrictions as the Board or the Committee deems appropriate.

          Other Stock-Based Awards, which may include performance shares and
shares valued by reference to the performance of the Company or any parent or
subsidiary of the


                                       22





<PAGE>

Company, may be granted under the Incentive Plan either alone or in tandem with
other Awards.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

          The following table sets forth certain information, as of April 3,
2003 relating to the beneficial ownership of shares of Common Stock by: (i) each
person or entity who is known by the Company to own beneficially five percent or
more of the outstanding Common Stock; (ii) each of the Named Executives; (iii)
each of the Company's directors; and (iv) all directors and executive officers
of the Company as a group.

<TABLE>
<CAPTION>
                                         Number of Shares
Name of Beneficial Owner              Beneficially Owned (1)   Percentage
------------------------              ----------------------   ----------
<S>                                        <C>                    <C>
Nicko Feinberg                               866,500(2)            8.2%
Stephen J. Cole-Hatchard                   1,066,718(3)           10.0%
Ronald Signore                               329,032(4)            3.2%
William Barron                               178,972(5)            1.7%
Ventura Martinez Del Rio, Sr.                  --                   --
Ventura Martinez Del Rio, Jr.                  --                   --
Miguel Madero                                  --                   --
Vasan Thatham                                195,500(6)            1.9%
All Directors and Executive
Officers as a group (nine persons)         2,942,222(7)           25.5%
</TABLE>

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

(2)  Includes warrants to purchase 125,000 shares of Common Stock and options to
     purchase 245,000 shares of Common Stock. The address of Mr. Feinberg is c/o
     the Company at One Blue Hill Plaza, 7th Floor, Pearl River, New York 10965

(3)  Includes 144,000 shares held by the Cole-Hatchard Family Limited
     Partnership, of which Mr. Cole-Hatchard is a general partner, options to
     purchase 302,000 shares of Common Stock and 171,530 shares of Common Stock
     issuable upon exercise of 50,450 shares of Series B Preferred Stock. The
     address of Mr. Cole-Hatchard is c/o the Company.

(4)  Includes warrants to purchase 125,000 shares of Common Stock and options to
     purchase 80,000 shares of Common Stock.

(5)  Includes options to purchase 87,000 shares of Common Stock and 680 shares
     of Common Stock issuable upon conversion of 200 Shares of Series B
     Preferred Stock.

(6)  Includes options to purchase 100,000 shares of Common Stock.

(7)  Includes options and warrants to purchase 1,214,000 shares of Common Stock
     and 172,210 shares of Common Stock issuable upon exercise of 50,650 shares
     of Series B Preferred Stock.

Item 12. Certain Relationships and Related Transactions.

          In June 2002, Mr. Nicko Feinberg and Mr. Ronald Signore, our current
directors, purchased $50,000 in aggregate principal amount of promissory notes
pursuant to our June 2002 private placement, and received warrants to purchase
250,000 shares, in aggregate, of our common stock at an exercise price $.08 per
share. These purchases were all on terms and conditions identical to those of
the other investors in the private placement.


                                       23





<PAGE>

          In connection with the acquisition of Provo, we issued to 18
individuals an aggregate of 35,500 shares of our Series D Convertible Preferred
Stock (the "Series D Preferred"), including 10,000 shares to Stephen J.
Cole-Hatchard, our Chairman of the Board and Chief Executive Officer, 10,000
shares to Nicko Feinberg, our President U.S Operations, and a director, 5,000
shares of Series D to Joseph Donohue, a then director, 1,000 shares of Series D
to Vasan Thatham, our Vice President and Chief Financial Officer and 1,000
shares of Series D to Amy Wagner-Mele, our Executive Vice President and General
Counsel.

          Each share of Series D Preferred is convertible into 150 shares of
common stock upon receipt of the approval by our shareholders of (i) the
issuance of common stock upon conversion of the Series D Preferred, (ii) an
increase in our authorized common shares to 75 million and (iii) a 1 for 1.5
reverse split of our common stock (the "Series D Approvals"). Accordingly, if
the Series D Approvals are obtained, the Series D Preferred will convert into an
aggregate of 5,325,000 shares of common stock (without giving effect to the
proposed reverse split), of which 1,500,000 shares will be issued to Mr.
Cole-Hatchard, 1,500,000 shares will be issued to Mr. Feinberg, 750,000 shares
will be issued to Mr. Donahue, 150,000 shares to Mr. Thatham and 150,000 shares
to Ms. Mele.

          In April 2003, we borrowed $550,000 from an unaffiliated entity
("Lender") and issued a secured promissory note ("Note") to the lender. The Note
bears interest of 14% and is secured by substantially all of our assets. Two of
our officers, Messrs. Nicko Feinberg and Stephen J. Cole-Hatchard have pledged
shares of common stock owned by them in our company as additional collateral to
the lender. In addition, Mr. Cole-Hatchard has personally guaranteed the
repayment of the Note.

Item 13. Exhibits, Lists and Reports on Form 8-K.

          (a) Exhibits

          2.1 Amended and Restated Stock Purchase Agreement between Frontline
Communications Corporation, Proyecciones y Ventas Organizadas, S.A., Ventura
Martinez del Rio Requejo and Ventura Martinez del Rio Arrangoz dated April 3,
2003.

          3.1   Certificate of Incorporation of the Company.+

          3.2   Certificate of Amendment of the Certificate of Incorporation of
                the Company.+++

          3.3   Certificate of Amendment of the Certificate of Incorporation of
                the Company.*

          3.4   By-Laws of the Company.+


                                       24





<PAGE>

          4.1   Certificate of Designation of Series A preferred stock.++

          4.2   Certificate of Designation of Series B preferred stock.*

          4.3   Certificate of Designation of Series C preferred stock.

          4.4   Certificate of Designation of Series D preferred stock.

          10.1  Employment Agreements with Messrs. Stephen Cole-Hatchard and
                Nicko Feinberg.+#

          10.2  Employment Agreement with Vasan Thatham.*#

          10.3  2001 Stock Incentive Plan.***#

          10.4  1997 Stock Option Plan of the Company.+ #

          10.5  Office Lease between Registrant and Glorious Sun Robert Martin
                LLC.+

          10.6  Amendment No. 1 to Office Lease.*

          10.7  Amendment No. 2 to Office Lease.*

          10.8  Asset Purchase Agreement dated June 20, 2000 among Frontline
                Communications Corp., Delanet, Inc., Michael Brown and Donald
                McIntire.**

          10.9  Asset Purchase Agreement dated June 20, 2000 among Frontline
                Communications Corp., Delanet, Inc., Michael Brown and Donald
                McIntire.**

          10.10 Addendum to Amended and Restated Stock Purchase Agreement
                between Frontline Communications Corporation, Proyecciones y
                Ventas Organizadas, S.A., Ventura Martinez Del Rio, Sr. and
                Ventura Martinez Del Rio, Jr. dated April 3, 2003.

          10.11 Registration Rights Agreement dated April 3, 2003 between
                Frontline Communications, Ventura Martinez Del Rio, Sr. and
                Ventura Martinez Del Rio, Jr..

          10.12 Security Agreement dated April 3, 2003 between Frontline
                Communications, Ventura Martinez Del Rio, Sr. and Ventura
                Martinez Del Rio Jr..

          10.13 Secured Promissory Note dated April 3, 2003 between Frontline
                Communications, Ventura Martinez Del Rio, Sr. and Ventura
                Martinez Del Rio, Jr..

          10.14 Term Loan and Security Agreement among Frontline Communications,
                Proyecciones y Ventas Organizadas, S.A., and IIG Equity
                Opportunities Fund Ltd.


                                       25





<PAGE>

          10.15 Pledge Agreement between Stephen J. Cole-Hatchard, Nicko
                Feinberg, Elizabeth Feinberg and IIG Equity Opportunities Fund
                Ltd Dated April 3, 2003.

          10.16 Registration Rights Agreement between Frontline Communications
                Corporation and IIG Equity Opportunities Fund Ltd dated April 3,
                2003.

          10.17 Limited guarantee agreement dated April 3, 2003 between Stephen
                J. Cole-Hatchard and IIG Equity Opportunities Fund Ltd dated
                April 3, 2003.

          10.18 Mortgage by Stephen J. Cole-Hatchard in favor of IIG Equity
                Opportunities Fund Ltd dated April 3, 2003.

          10.19 Mortgage and Security Agreement by Stephen J. Cole-Hatchard in
                favor of IIG Equity Opportunities Fund Ltd dated April 3, 2003.

          10.20 Subordination Agreement between 8% Promissory Note Holders and
                IIG Equity Opportunities Fund Ltd dated April 3, 2003.

          21.1 Subsidiaries of the Company.

          23.1 Consent of Goldstein Golub and Kessler LLP.

          99.1 Certification of the Chief Executive Officer pursuant to Section
               906 of the Sarbanes-Oxley Act of 2002.

          99.2 Certification of the Chief Financial Officer pursuant to Section
               906 of the Sarbanes-Oxley Act of 2002.

(Footnotes from previous page)

----------
*    Incorporated by reference to the applicable exhibit contained in the
     Company's Registration Statement on Form SB-2 (file no.333-92969).

+    Incorporated by reference to the applicable exhibit contained in the
     Company's Registration Statement on Form SB-2 (file no. 333-34115).

++   Incorporated by reference to the applicable exhibit contained in the
     Company's Current Report on Form 8-K dated October 9, 1998.

+++  Incorporated by reference to applicable exhibit contained in the Company's
     Quarterly Report on Form 10-QSB for the quarterly period ended June 30,
     1999.

**   Incorporated by reference to the applicable exhibit contained in the
     Company's Current Report on Form 8-K dated June 20, 2000.


                                       26





<PAGE>

***  Incorporated by reference to Appendix B to the Registrant's definitive
     proxy statement on Schedule 14A filed with the SEC on July 3, 2001.

#    Denotes a management compensation plan or arrangement.

          (b) Reports on Form 8-K filed during the quarter ended December 31,
2002:

          Not applicable.

Item 14. Controls and Procedures

          Within 90-day period prior to the filing of this report, an evaluation
was carried out under the supervision and with participation of our management,
including the Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO"), of the effectiveness of our disclosure controls and procedures. Based
on that evaluation, the CEO and CFO have concluded that our disclosure controls
and procedures are effective to ensure that the information required to be
disclosed by us in reports that we file or submit under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
Subsequent to the date of their evaluation, there were no significant changes in
our internal controls or other factors that could significantly affect the
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.


                                       27





<PAGE>

                                   SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly signed this report on its behalf
by the undersigned, thereunto duly authorized on the 14th day of April 2003.

                               FRONTLINE COMMUNICATIONS CORPORATION


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

In accordance with the requirements of the Securities Exchange Act of 1934, this
report was signed by the following persons in the capacities and on the dates
stated.

<TABLE>
<CAPTION>
Signature                             Title                               Date
---------                             -----                               ----
<S>                                   <C>                                 <C>

/s/ Ventura Martinez Del Rio, Sr.
---------------------------------
Ventura Martinez Del Rio, Sr.         Chairman of the Board               April 14, 2003


/s/ Stephen J. Cole-Hatchard          Chief Executive Officer,            April 14, 2003
---------------------------------     and Director (Principal
Stephen J. Cole-Hatchard              Executive Officer)


/s/ Nicko Feinberg                    President U.S. Operations           April 14, 2003
---------------------------------     and Director
Nicko Feinberg


/s/ Vasan Thatham                     Chief Financial Officer             April 14, 2003
---------------------------------     and Vice President (Principal
Vasan Thatham                         Financial and Accounting Officer)

/s/ Ventura Martinez Del Rio, Jr.
---------------------------------                                         April 14, 2003
Ventura Martinez Del Rio, Jr.         President Mexico Operations
                                      and Director


/s/ Ronald C. Signore                 Director                            April 14, 2003
---------------------------------
Ronald C. Signore


/s/ William A. Barron                 Director                            April 14, 2003
---------------------------------
William A. Barron
</TABLE>


                                       28





<PAGE>

                  Certification of Principal Executive Officer

I, Stephen J. Cole-Hatchard, Chief Executive Officer of Frontline Communications
Corporation, certify that:

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

2. Based on my knowledge, this annual 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 annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

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

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: April 14, 2003


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


                                       29





<PAGE>

                  Certification of Principal Financial Officer

I, Vasan Thatham, Vice President and Chief Financial Officer of Frontline
Communications Corporation, certify that:

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

2. Based on my knowledge, this annual 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 annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

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

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: April 14, 2003


                                      /s/ Vasan Thatham
                                      ------------------------------------------
                                      Vasan Thatham
                                      Vice President and Chief Financial Officer


                                       30






<PAGE>


FRONTLINE COMMUNICATIONS
 CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002





<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

Independent Auditor's Report                                    F-1 - F-2

Consolidated Financial Statements:

   Balance Sheet                                                   F-3
   Statement of Operations                                         F-4
   Statement of Stockholders' Equity (Deficiency)                  F-5
   Statement of Cash Flows                                      F-6 - F-7
   Notes to Consolidated Financial Statements                   F-8 - F-16





<PAGE>

                                                          (Draft April 11, 2003)

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Frontline Communications Corporation

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

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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

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


                                                                             F-1




<PAGE>
                                                          (Draft April 11, 2003)

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


GOLDSTEIN GOLUB KESSLER LLP
New York, New York

February 20, 2003, except for Note 10,
 as to which the date is April 3, 2003


                                                                             F-2




<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                                      CONSOLIDATED BALANCE SHEET
================================================================================

<TABLE>
<CAPTION>
December 31, 2002
-----------------------------------------------------------------------------------------------------
<S>                                                                                      <C>
ASSETS

Current:
  Cash and cash equivalents                                                              $    208,502
  Accounts receivable, less allowances for doubtful accounts of $25,000                       212,397
  Prepaid expenses and other                                                                   57,778
-----------------------------------------------------------------------------------------------------
      Total current assets                                                                    478,677

Property and Equipment, net                                                                   671,013

Other                                                                                         108,877
-----------------------------------------------------------------------------------------------------
      Total Assets                                                                       $  1,258,567
=====================================================================================================

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:
  Accounts payable                                                                       $    765,749
  Accrued expenses                                                                            903,710
  Current portion of long-term debt                                                           940,202
  Deferred revenue                                                                            524,738
-----------------------------------------------------------------------------------------------------
      Total current liabilities                                                             3,134,399

Long-term Debt, less current portion                                                           11,453

Promissory Notes Payable (face value $200,000, including $50,000 payable to officers
 and directors), net of unamortized discount of $58,333                                       141,667
-----------------------------------------------------------------------------------------------------
      Total liabilities                                                                     3,287,519
-----------------------------------------------------------------------------------------------------

Commitments and Contingencies

Stockholders' Deficiency:
  Preferred stock - $.01 par value; authorized 2,000,000 shares, issued and
   outstanding 496,445 shares (liquidation preference of $7,446,675)                            4,964
  Common stock - $.01 par value; authorized 25,000,000 shares, issued 9,940,424 shares         99,404
  Additional paid-in capital                                                               36,204,292
  Accumulated deficit                                                                     (37,466,196)
-----------------------------------------------------------------------------------------------------

                                                                                           (1,157,536)
  Treasury stock, at cost, 645,452 shares                                                    (871,416)
-----------------------------------------------------------------------------------------------------
      Stockholders' deficiency                                                             (2,028,952)
-----------------------------------------------------------------------------------------------------
      Total Liabilities and Stockholders' Deficiency                                     $  1,258,567
=====================================================================================================
</TABLE>

                                  See Notes to Consolidated Financial Statements


                                                                             F-3




<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                            CONSOLIDATED STATEMENT OF OPERATIONS
================================================================================

<TABLE>
<CAPTION>
Year ended December 31,                                                     2002            2001
------------------------------------------------------------------------------------------------
<S>                                                                 <C>             <C>
Revenue                                                             $  5,047,098    $  6,503,120
------------------------------------------------------------------------------------------------

Costs and expenses:
  Cost of revenue                                                      2,493,337       3,482,954
  Selling, general and administrative                                  2,446,816       3,860,999
  Depreciation and amortization                                          745,135       2,943,678
  Impairment of intangibles                                                   --       2,827,993
  Noncash compensation charge                                             58,500         206,505
------------------------------------------------------------------------------------------------
                                                                       5,743,788      13,322,129
------------------------------------------------------------------------------------------------

  Loss from operations                                                  (696,690)     (6,819,009)

Other income (expense):
  Interest income                                                          7,796          53,887
  Interest expense                                                       (95,417)       (131,778)
  Loss on disposal of property and equipment                              (3,214)       (132,387)
------------------------------------------------------------------------------------------------

Net loss                                                                (787,525)     (7,029,287)

Preferred dividends                                                      297,867         320,910
------------------------------------------------------------------------------------------------
Net loss available to common shareholders                           $ (1,085,392)   $ (7,350,197)
================================================================================================

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

Weighted-average number of shares outstanding - basic and diluted      9,119,533       7,333,221
================================================================================================
</TABLE>

                                  See Notes to Consolidated Financial Statements


                                                                             F-4





<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
================================================================================

<TABLE>
<CAPTION>
Years ended December 31, 2002 and 2001
---------------------------------------------------------------------------------------------------------------------

                                                                                                        Additional
                                                          Preferred Stock           Common Stock         Paid-in
                                                         Shares     Amount       Shares      Amount      Capital
--------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>        <C>          <C>         <C>         <C>
Balance at December 31, 2000                            597,800    $   5,978    7,164,793   $  71,648   $ 35,570,119

Purchase of treasury stock, at cost (6,800 shares)           --           --           --          --             --

Conversion of Series B preferred stock                  (70,700)        (707)     240,380       2,404         (1,697)

Common stock issued for services                             --           --    1,376,700      13,767        192,738

Dividends on preferred stock                                 --           --      779,324       7,793        313,117

Net loss                                                     --           --           --          --             --

--------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001                            527,100        5,271    9,561,197      95,612     36,074,277

Purchase of treasury stock, at cost (28,806 shares)          --           --           --          --             --

Common stock issued for services                             --           --      275,000       2,750         55,750

Conversion of Series B preferred stock                  (30,655)        (307)     104,227       1,042           (735)

Dividends on preferred stock                                 --           --           --          --             --

Warrants issued with promissory notes payable                --           --           --          --         75,000

Net loss                                                     --           --           --          --             --
--------------------------------------------------------------------------------------------------------------------

Balance at December 31, 2002                            496,445    $   4,964    9,940,424   $  99,404   $ 36,204,292
====================================================================================================================

<CAPTION>

                                                                                     Total
                                                                       Treasury   Stockholders'
                                                      Accumulated       Stock,       Equity
                                                        Deficit         at Cost   (Deficiency)
----------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>          <C>
Balance at December 31, 2000                          $(29,030,607)   $(860,539)   $ 5,756,599

Purchase of treasury stock, at cost (6,800 shares)              --       (4,113)        (4,113)

Conversion of Series B preferred stock                          --           --             --

Common stock issued for services                                --           --        206,505

Dividends on preferred stock                              (320,910)          --             --

Net loss                                                (7,029,287)          --     (7,029,287)
----------------------------------------------------------------------------------------------

Balance at December 31, 2001                           (36,380,804)    (864,652)    (1,070,296)

Purchase of treasury stock, at cost (28,806 shares)             --       (6,764)        (6,764)

Common stock issued for services                                --           --         58,500

Conversion of Series B preferred stock                          --           --             --

Dividends on preferred stock                              (297,867)          --       (297,867)

Warrants issued with promissory notes payable                   --           --         75,000

Net loss                                                  (787,525)          --       (787,525)
----------------------------------------------------------------------------------------------

Balance at December 31, 2002                          $(37,466,196)   $(871,416)   $(2,028,952)
==============================================================================================
</TABLE>

                                  See Notes to Consolidated Financial Statements


                                                                             F-5





<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                            CONSOLIDATED STATEMENT OF CASH FLOWS
================================================================================

<TABLE>
<CAPTION>
Year ended December 31,                                                        2002           2001
--------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>
Cash flows from operating activities:
  Net loss                                                              $  (787,525)   $(7,029,287)
  Adjustments to reconcile net loss to net cash provided by (used in)
   operating activities:
    Depreciation and amortization                                           745,135      2,943,678
    Debt discount amortization                                               16,667             --
    Noncash compensation charge                                              58,500        206,505
    Impairment of intangibles                                                    --      2,827,993
    Loss on disposal of property and equipment                                3,214        132,387
    Changes in operating assets and liabilities:
      Decrease in marketable securities                                          --      1,808,210
      Decrease in accounts receivable                                        51,860        312,567
      (Increase) decrease in prepaid expenses and other                     (24,755)        93,675
      (Increase) decrease in other assets                                    (4,488)        10,597
      Decrease in accounts payable and accrued expenses                    (390,355)      (563,729)
      Decrease in deferred revenue                                          (90,612)      (474,854)
--------------------------------------------------------------------------------------------------
          Net cash provided by (used in) operating activities              (422,359)       267,742
--------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Acquisition of property and equipment                                     (14,895)       (51,148)
  Proceeds from disposal of property and equipment                            5,000         51,886
--------------------------------------------------------------------------------------------------
          Net cash provided by (used in) investing activities                (9,895)           738
--------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Principal payments on long-term debt                                     (155,014)      (442,915)
  Proceeds from issuance of promissory notes payable                        200,000             --
  Payments to acquire treasury stock                                         (6,764)        (4,113)
--------------------------------------------------------------------------------------------------
          Net cash provided by (used in) financing activities                38,222       (447,028)
--------------------------------------------------------------------------------------------------

Net decrease in cash and cash equivalents                                  (394,032)      (178,548)

Cash and cash equivalents at beginning of year                              602,534        781,082
--------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                $   208,502    $   602,534
==================================================================================================

Supplemental disclosure of cash flow information:

  Cash paid during the year for interest                                $    83,000    $   132,000
==================================================================================================
</TABLE>

                                                                     (continued)

                                  See Notes to Consolidated Financial Statements


                                                                             F-6





<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                            CONSOLIDATED STATEMENT OF CASH FLOWS
================================================================================

<TABLE>
<CAPTION>
Year ended December 31,                                                       2002       2001
---------------------------------------------------------------------------------------------
<S>                                                                       <C>        <C>
Supplemental schedule of noncash investing and financing activities:

  Warrants issued with promissory notes payable                           $ 75,000         --
=============================================================================================
  Capital lease obligations incurred                                            --   $ 48,098
=============================================================================================
  Dividends on Series B preferred stock paid in common stock or accrued   $297,867   $320,910
=============================================================================================
  Common stock issued for services                                        $ 58,500         --
=============================================================================================
</TABLE>

                                  See Notes to Consolidated Financial Statements


                                                                             F-7





<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

      Frontline Communications Corporation ("Frontline" or the "Company") is an
      Internet company that offers Internet access, Web site development and
      Internet presence services.

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

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

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

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

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

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


                                                                             F-8




<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

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

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

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

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

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

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

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

      Year ended December 31, 2001
      -------------------------------------------------------------------------

      Risk-free interest rate                                             4.65%
      Expected life                                                     5 years
      Expected volatility                                                  169%
      Dividend yield                                                       None
      -------------------------------------------------------------------------


                                                                             F-9





<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

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

      Year ended December 31,                             2002           2001
      -----------------------------------------------------------------------

      Net loss available to common shareholders:
        As reported                                $(1,085,392)   $(7,350,197)
        Stock-based compensation using the fair
         value method                                  (55,991)      (100,110)
      -----------------------------------------------------------------------

        Pro forma                                   (1,141,383)    (7,450,307)
      Net loss per share (basic and diluted):
        As reported                                      (0.12)         (1.00)
        Pro forma                                        (0.13)         (1.02)
      -----------------------------------------------------------------------

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

      The Company follows SFAS No. 128, Earnings per Share, which provides for
      the calculation of "basic" and "diluted" earnings per share ("EPS"). Basic
      EPS includes no dilution and is computed by dividing income or loss
      available to common 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 EPS since the effect would be antidilutive.

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

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


                                                                            F-10




<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

2. PROPERTY AND EQUIPMENT:

      Property and equipment, at cost, consists of the following at December 31,
      2002:

<TABLE>
<CAPTION>
                                                                                     Estimated
                                                                                      Useful
                                                                                       Life
      ----------------------------------------------------------------------------------------
<S>                                                             <C>               <C>
      Computer and office equipment                             $ 2,611,297       3 to 5 years
      Furniture and fixtures                                         74,825            5 years
      Leasehold improvements                                        149,365         Lease term
      ----------------------------------------------------------------------------------------
                                                                  2,835,487
      Less accumulated depreciation and amortization             (2,164,474)
      ----------------------------------------------------------------------------------------
                                                               $    671,013
      ========================================================================================
</TABLE>

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

3. ACCRUED EXPENSES:

      Accrued expenses consist of the following at December 31, 2002:

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

4. LONG-TERM DEBT:

      Long-term debt consists of the following at December 31, 2002:

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

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


                                                                            F-11




<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

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

      Year ending December 31,

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

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

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

5. PROMISSORY NOTES:

      In June 2002, the Company completed a private placement of 8% promissory
      notes and received proceeds of $200,000 (including $50,000 from officers
      and directors). The promissory notes bear interest at 8% and mature in
      three years from the date of issuance. The Company has the option to
      convert the principal amount due under the promissory notes into shares of
      its common stock at a conversion price of $4.80 per share, under certain
      circumstances, as defined in the agreement with the promissory note
      holders, such as the market price of the Company's common stock exceeding
      $6 per share. The Company also issued to the note holders warrants to
      purchase an aggregate of 1,000,000 shares of its common stock at an
      exercise price of $.08 per share. Out of the proceeds, $75,000 was
      allocated as the value of the warrants and is recorded as a discount on
      the notes payable in the accompanying consolidated balance sheet. The
      discount is being amortized as additional interest over the terms of the
      promissory notes. At December 31, 2002, the promissory notes payable
      included on the accompanying consolidated balance sheet amounting to
      $141,667 are net of unamortized discounts of $58,333. The fair value of
      the notes approximates the carrying amount based on rates available to the
      Company.


                                                                            F-12




<PAGE>
                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

6. COMMITMENTS AND CONTINGENCIES:

      The Company rents office space and equipment under operating lease
      agreements expiring at various dates through 2005.

      Future minimum rental payments required under operating leases are
      approximately as follows:

      Year ending December 31,

                  2003                                                  $379,000
                  2004                                                   226,000
                  2005                                                     5,000
      --------------------------------------------------------------------------
                                                                        $610,000
      ==========================================================================

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

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

7. STOCK OPTIONS:

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

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

<TABLE>
<CAPTION>
      December 31,                                2002                       2001
      ---------------------------------------------------------------------------------------

                                                       Weighted-                  Weighted-
                                                        average                    average
                                                        Exercise                   Exercise
                                           Shares        Price        Shares        Price
      --------------------------------------------------------------------------------------
<S>                                       <C>          <C>           <C>          <C>
      Outstanding at beginning of year    1,458,900    $     2.67    1,347,768    $     4.19
      Granted                                                          445,000          0.22
      Forfeited                            (169,900)         1.68     (333,868)         4.97
      --------------------------------------------------------------------------------------
      Outstanding at end of year          1,289,000    $     2.81    1,458,900    $     2.67
      ======================================================================================

      Options exercisable at year-end     1,289,000    $     2.81    1,442,900    $     2.64
      ======================================================================================

      Weighted-average fair value of
       options granted during the year                         --                 $     0.21
      ======================================================================================
</TABLE>


                                                                            F-13




<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

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

                                   Options Outstanding and Exercisable
                           -------------------------------------------------
                               Number                              Weighted-
                           Outstanding at     Remaining             average
          Range of          December 31,     Contractual           Exercise
      Exercise Prices           2002             Life                Price
      ----------------------------------------------------------------------

      $0.22 to $1.00            501,000          3.1 years           $0.31
      $1.00 to $2.50            184,800           .9                  2.37
      $2.50 to $4.00             97,000           .8                  3.58
      $4.00 to $6.00            433,200          1.95                 5.16
      $6.00 to $6.75             73,000          1.1                  6.10
      ----------------------------------------------------------------------
                              1,289,000                              $2.81
      ======================================================================

8. STOCKHOLDERS' EQUITY (DEFICIENCY):

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

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

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

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

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

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


                                                                            F-14




<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

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

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

9. INCOME TAXES:

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

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

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

      December 31,                                        2002            2001
      --------------------------------------------------------------------------

      Federal statutory rate                               (34)%           (34)%
      Increase in valuation allowance                       34              34
      --------------------------------------------------------------------------
                                                            -0-%            -0-%
      ==========================================================================

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

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

10. SUBSEQUENT EVENT:

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


                                                                            F-15




<PAGE>

                           FRONTLINE COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

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

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

      In April 2003, the Company borrowed $550,000 from an unaffiliated entity
      (the "Lender") and issued a secured promissory note (the "Note") to the
      Lender. The Note bears interest of 14% and is secured by substantially all
      of the Company's assets. Two officers have pledged shares of the Company's
      common stock owned by them as additional collateral to the Lender. In
      connection with the financing, the Company issued 500,000 shares of common
      stock to the Lender as additional consideration. The Note is payable at
      the earlier of 90 days or upon financing of Provo's accounts receivable.
      Out of the proceeds, the Company used $200,000 to settle a promissory
      note, issued as a part of a business acquisition, in the principal amount
      of $728,600. The balance of the promissory note was settled through
      issuance of 375,000 shares of common stock to the promissory note holders.


                                                                            F-16

                         STATEMENT OF DIFFERENCES
                         ------------------------
The registered trademark symbol shall be expressed as................... 'r'