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Form 10-Q for PROVISION HOLDING, INC.

Quarterly Report
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Forward-Looking Statements

Some of the statements contained in this Form 10-Q that are not historical facts are “forward-looking statements” which can be identified by the use of terminology such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-Q, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

� Our ability to attract and retain management, and to integrate and maintain technical information and management information systems;

� Our ability to raise capital when needed and on acceptable terms and conditions;

� The intensity of competition; and

� General economic conditions.

All written and oral forward-looking statements made in connection with this Form 10-Q that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

Business Overview

On February 14, 2008, MailTec, Inc. (now known as Provision Holding, Inc.) (the “Company”) entered into an Agreement and Plan of Merger, which was amended and restated on February 27, 2008 (as amended and restated, the “Agreement”), and closed effective February 28, 2008, with ProVision Merger Corp., a Nevada corporation and wholly owned subsidiary of the Company (the “Subsidiary”) and Provision Interactive Technologies, Inc., a California corporation (”Provision”). Pursuant to the Agreement, the Subsidiary merged into Provision, and Provision became a wholly owned subsidiary of the Company. As consideration for the merger of the Subsidiary into Provision, the Company issued 20,879,350 shares of the Company’s common stock to the shareholders, creditors, and certain warrant holders of Provision, representing approximately 86.5% of the Company’s aggregate issued and outstanding common stock, and the outstanding shares and debt, and those warrants whose holders received shares of the Company’s common stock, of Provision were transferred to the Company and cancelled.

The Company and Provision are focused on the development and distribution of Provision’s patented three-dimensional, holographic interactive displays focused at grabbing and holding consumer attention particularly and initially in the advertising and product merchandising markets. The systems display a moving 3D image size to forty inches in front of the display, projecting a digital video image out into space detached from any screen, rendering truly independent floating images featuring high definition and crisp visibility from far distances. The nearest comparable to this technology can be seen in motion pictures such as Star Wars and Minority Report, where objects and humans are represented through full-motion holograms.

One of our new products is known as the “HL40 Diamond”, an extraordinary 3D holographic video display system, to the retailing and advertising industries is smaller and lighter than its predecessor, the HL40C. Used to promote all type of products and services, the HL40D is a powerful tool to break through the clutter of traditional in store advertising and merchandising. Our other powerful 3D products can be used for a wide variety of interactive applications including order-taking and information retrieval.

Significant Events and Trends

Our floating image display technologies have multiple market applications across a broad spectrum of industries. Extensive audience migration across and within media categories is driving major shifts in advertising spending, benefiting captive, auditable media vehicles. Traditional media vehicles like radio, TV, newspapers and magazines continue to lose audience share and advertising dollars to new media vehicles, which include the point-of-purchase or wherever there might be a captive audience. The current media and traditional displays (TV, LCD and Plasma screens) are stale and ubiquitous resulting in significant ineffectiveness.

Launching our first products into grocery stores, we have developed a new patent pending application. Known as the “3DEO Rewards Center” or “3DEO”, this device projects 3D video advertisements and allows consumers to print coupons as well as receive non-cash awards. The 3DEO device provides food companies and other advertisers with a new way of promoting their products at the point of purchase, where consumers are making seventy percent of their buying decisions.

We plan to build, own, and operate networks of 3DEO Rewards Centers. In March 2008 we signed three-year agreements with several independent Hispanic grocery store chains to install 3DEO Reward Centers in 47 locations in southern California.

In June 2008, we announced our signed three-year agreement with Fred Meyer Stores, a division of The Kroger, Co., to install Fred Meyer 3DEO Centers in 127 locations in the Pacific Northwest. Installation of the centers will begin this month in Portland, OR, in high traffic, high visibility locations close to the main entrance of the store. We have received advertising placements from some of the largest manufacturers in the country, including Unilever, Proctor & Gamble, Johnson & Johnson, BIC and Kimberly Clark. The manufacturers’ will advertise through digital coupons that customers will receive from Provision’s 3DEO Media Centers located in Fred Meyer stores.

In September 2008, we signed an agreement with the Long Island Gasoline Retailers Association (”LIGRA”) to install its patented 3D holographic displays in up to 800 member stores throughout New York. Provision’s displays will be located inside the independent convenience stores of major franchise gasoline retailers including Shell, ExxonMobil, Citgo, Sunoco, BP, Amoco and Gulf.

In December 2008, we signed an agreement with ADCENTRICITY Inc. to sell advertising on its revolutionary 3D digital signage network. ADCENTRICITIY’s advertisers will be able to feature their messaging on Provision’s extraordinary network in a variety of forms, including 3D holographic videos and digital coupons.

We are still working with one of the world’s largest coffee franchises to test a variety of in-store digital signage applications utilizing Provision’s HL40D displays. Once successful, Provision will install up to 109 systems in the quick service chain’s greater New York City area stores.

We also have continued hardware sales of our patented three-dimensional, holographic interactive video displays. In July 2008, we began shipments to Studio One Media, Inc. of up to 1,000 3D holographic units pursuant to a Strategic Alliance and Purchase Agreement. The contract will generate up to $7 million dollars in revenue for Provision over the next 18 months.

At present, Provision’s patents and patent applications are supplemented by substantial intellectual property we are currently protecting as trade secrets and proprietary know-how. This includes matter related to all three product lines. We expect to file additional patent applications on a regular basis in the future.

We believe that Provision’s intellectual property and expertise constitutes an important competitive resource, and we continue to evaluate the markets and products that are most appropriate to exploit this expertise. In addition, we maintain an active program of intellectual property protection, both to assure that the proprietary technology developed by us is appropriately protected and, where necessary, to assure that there is no infringement of Provision’s proprietary technology by competitive technologies.

 Results of Operation - Three Months Ended March 31, 2009 as Compared to the
Three Months Ended March 31, 2008:

Select Financial Information
                               March 31, 2009       March 31, 2008
Total Assets                   $      1,025,580     $      2,301,756
Total Liabilities              $      2,787,928     $      2,807,254
Total Stockholders' Deficit    $      1,762,348     $        505,498

Revenues                       $         65,275     $         38,963
Cost of Revenues                         33,366               22,411
Gross Profit                             31,909               16,552
Expenses                                492,085              476,170
Loss from Operations                   (460,176 )           (459,618 )
Other Income (Expense)                 (179,178 )           (197,007 )
Net Loss                       $       (639,354 )   $       (658,225 )
Net Loss per Common Share      $          (0.03 )   $          (0.03 )

Revenues for the three months ended March 31, 2009 increased 68% to $65,275 from $38,963 for the three months ended March 31, 2008. Included in revenues for the three months ended March 31, 2009 is $58,525 from the sale of our product coming from international distributors and the beginning shipment of our Studio One purchase agreement as well as $6,750 in advertising revenues. These international product sales came in from countries including Japan and Europe. The Company has announced additional sales to its Japanese distributor supporting the test of the Company’s products by Unisys, as well as recent shipments to the U.K. to its distributor who is working with Samsung. Advertising sales are expected to increase as the Company continues its roll out of its 3D Reward Center in the large top demographic markets of Los Angeles (#2) and New York (#1). We have entered into several agreements with media buying agencies and ad agencies to assist in the selling of 3D holographic ads and coupon promotions; expecting to continue the growth of ad sales on a quarter by quarter basis.

Our cost of revenues were $33,366 for the three months ended March 31, 2009 as compared to $22,411 for the three months ended March 31, 2008. This increase of $10,955 or 49% is a direct result of our increased revenues.

We had a gross profit percentage of 49% for the three months ended March 31, 2009 compared to a gross profit percentage of 42% for the three months ended March 31, 2008. The increase in gross margin percentage was a result of a change in our sales mixture to higher margin items, increase in some sales prices to certain regional, retail customers, along with our additional advertising revenues. As discussed above, we expect advertising revenues to increase in the coming quarters as the Company begins to roll out its 3D Reward Center in the large top demographic markets of Los Angeles (#2) and New York (#1).

General and administrative expenses for the three months ended March 31, 2009 were $442,228 as compared to $476,170 for the three months ended March 31, 2008. General and administrative expenses include fees paid for accounting services in connection with audits and filing requirements, legal services, marketing expenses for marketing campaigns, tradeshows, and travel, and payroll (including payroll taxes) for administration, sales and production staff.

During the three months ended March 31, 2009 our legal fees decreased $24,924 to $10,439 from $35,363 during the three months ended March 31, 2008. This decrease is the result of the completion of our merger in February 2008 and less need for legal services during 2009. We also experienced a decrease in our marketing expense of $18,285 to $13,347 for the three months ended March 31, 2009 from $31,621 during the three months ended March 31, 2008. The decrease in our marketing expenses was due to our attendance at fewer trade shows during the three months ended March 31, 2009. Additionally, our salaries and wages decreased $98,198to $117,233 during the three months ended March 31, 2009 from $215,431 during the three months ended March 31, 2008. This decrease is due to our employee base decreasing to seven employees from nine employees. We don’t currently have plans to replace the departed employees until sales and gross profits increase. These decreases in expenses were partially offset by an increase of $92,500 in non-cash compensation to $142,500 during the three months ended March 31, 2009 from $50,000 during the three months ended March 31, 2008. During the three months ended March 31, 2009 we issued 1,500,000 shares of common stock valued at $142,500 to a consultant for services rendered.

During the three months ended March 31, 2009 we recorded $49,797 of research and development expenses. We did not have any research and development expenses during the three months ended March 31, 2008. Research and development expenses relate to the salary paid to two key employees who conduct ongoing technical engineering tasks for product improvements, cost reductions, new product development, and the like. We expect research and development expenses to increase slightly as the Company has begun to develop the first phases of its consumer oriented product line, as recently announced, with the design of a custom molded enclosure.

Other Income (Expense)

Interest expense decreased 14% to $179,178 during the three months ended March 31, 2009 from $209,287 during the three months ended March 31, 2008. The decrease in interest expense in directly related to reduction in the amortization of the debt discount.

During the three months ended March 31, 2008 we recorded $12,280 of debt forgiveness related to our line of credit that was renegotiated with the bank.

Net Loss

As a result of the aforementioned, our net loss decreased 3% or $18,871 to
$639,354 during the three months ended March 31, 2009 from $658,225 during the
three months ended March 31, 2009.

 Results of Operation - Nine Months Ended March 31, 2009 as Compared to the Nine
Months Ended March 31, 2008

Select Financial Information
                               March 31, 2009       March 31, 2008
Total Assets                   $      1,025,580     $      2,301,756
Total Liabilities              $      2,787,928     $      2,807,254
Total Stockholders' Deficit    $      1,762,348     $        505,498

Revenues                       $        407,392     $        461,245
Cost of Revenues                        204,842              294,921
Gross Profit                            202,550              166,324
Expenses                              1,735,965            1,242,196
Loss from Operations                 (1,533,415 )         (1,075,872 )
Other Income (Expense)                 (556,915 )           (200,536 )
Net Loss                       $     (2,090,330 )   $     (1,278,008 )
Net Loss per Common Share      $          (0.08 )   $          (0.06 )

Revenues for the nine months ended March 31, 2009 decreased 12% to $407,392 from $461,245 for the nine months ended March 31, 2008. Included in revenues for the nine months ended March 31, 2009 is $373,642 from the sale of our product coming from international distributors and the beginning shipment of our Studio One purchase agreement as well as $33,850 in advertising revenues. These international product sales came in from countries including Japan and Europe. The Company has announced additional sales to its Japanese distributor supporting the test of the Company’s products by Unisys, as well as recent shipments to the U.K. to its distributor who is working with Samsung. Advertising sales are expected to increase as the Company continues its roll out of its 3D Reward Center in the large top demographic markets of Los Angeles (#2) and New York (#1).We have entered into several agreements with media buying agencies and ad agencies to assist in the selling of 3D holographic ads and coupon promotions; expecting to continue the growth of ad sales on a quarter by quarter basis.

Our cost of revenues were $204,842 for the nine months ended March 31, 2009 as compared to $294,921 for the nine months ended March 31, 2008. This increase of $90,079 or 31% is a direct result of our decreased revenues as well as the increase in advertising revenue which carries no cost of revenue.

We had a gross profit percentage of 50% for the nine months ended March 31, 2009 compared to a gross profit percentage of 36% for the nine months ended March 31, 2008. The increase in gross margin percentage was a result of a change in our sales mixture to higher margin items same language as above in red along with our additional advertising revenues. As discussed above, we expect advertising revenues to increase in the coming quarters.

Expenses

General and administrative expenses for the nine months ended March 31, 2009 were $1,603,321 as compared to $1,242,196 for the nine months ended March 31, 2008.

During the nine months ended March 31, 2009 our legal fees decreased $37,425 to $45,072 from $82,497 during the nine months ended March 31, 2008. This decrease is the result of the completion of our merger in February 2008 and less need for legal services during 2009. We also experienced a decrease in our marketing expense of $64,415 to $66,665 for the nine months ended March 31, 2009 from $131,080 during the nine months ended March 31, 2008. The decrease in our marketing expenses was due to our decision to not reorder approximately $60,000 of marketing materials that were ordered and used during the nine months ended March 31, 2008. Additionally, our salaries and wages decreased $157,725 to $282,952 during the nine months ended March 31, 2009 from $440,677 during the nine months ended March 31, 2008. This decrease is due to our employee base decreasing to seven employees from nine employees. We don’t currently have plans to replace the departed employees until sales and gross profits increase. These decreases in expenses were partially offset by an increase of $413,375 in non-cash compensation to $463,375 during the nine months ended March 31, 2009 from $50,000 during the nine months ended March 31, 2008. Non-cash compensation relates to the value of common stock, warrants and options issued in exchange for services rendered. While we cannot guarantee it, we do not expect our non-cash compensation to continue this level of increase in the near future. We also experienced an increase of $83,653 in our accounting fees to $165,230 during the nine months ended March 31, 2009 from $81,577 during the nine months ended March 31, 2008. This increase in accounting fees is directly related to our financial statement audit for the year ended June 30, 2008 as well as the requirement for quarterly reviewed financial statements to fulfill our filing requirements with the Securities and Exchange Commission. Our consulting expenses also increased $23,300 to $25,247 during the nine months ended March 31, 2009 from $1,947 during the nine months ended March 31, 2008 as we hired a consultant to assist with investor relations.

During the nine months ended March 31, 2009 we recorded $132,644 of research and development expenses. Research and development expenses relate to the salary paid to two key employees who conduct ongoing technical engineering tasks for product improvements, cost reductions, new product development, and the like. These two employees’ salaries were reclassified to R&D in July 2008 therefore there is no related expense during the nine months ended March 31, 2008.

Other Income (Expense)

Interest expense increased 156% to $559,640 during the nine months ended March 31, 2009 from $218,983 during the nine months ended March 31, 2008. The increase is directly related to the increase in the weighted average interest rate on our term debt to 8.4% from 7.8%, an increase in our term debt to $2,940,000 from $1,760,505 and an increase in the amortization of the debt discount to interest expense.

During the nine months ended March 31, 2008 we recorded $12,280 of debt forgiveness related to our line of credit that was renegotiated with the bank and a note payable balance being forgiven.

Net Loss

As a result of the aforementioned, our net loss increased 64% or $812,322 to $2,090,330 during the nine months ended March 31, 2009 from $1,278,008 during the nine months ended March 31, 2009.

Financial Condition, Liquidity and Capital Resources

Management remains focused on controlling cash expenses. We have limited cash resources and plan our expenses accordingly.

We had cash of $2,424 at March 31, 2009 compared to cash of $287,641 at June 30, 2008. Our working capital deficit increased to $2,188,770 at March 31, 2009 from a deficit of $1,002,346 at June 30, 2008. The reason for the increase in the working capital deficit was the decrease in our cash and inventory of approximately $285,000 and $97,000, respectively, along with the increase in our accrued interest and unearned revenue of approximately $161,000 and $63,000respectively and the amortization of approximately $313,000 of debt discount.

During the nine months ended March 31, 2009, we used $723,342 of cash for operating activities versus $1,498,218 during the nine months ended March 31, 2008. The primary difference was the reduction of liabilities and purchases of inventory in 2009 and the increase in accrued interest during 2008 on the increased debt.

Cash used in investing activities during the nine months ended March 31, 2009 and 2008 was $78,625 and $8,025, respectively. During the nine months ended March 31, 2009, we used $43,319 to purchase additional equipment to support our infrastructure and $35,306 to secure additional patents. During the nine months ended March 31, 2008 we used $8,025 to purchase equipment.

Cash provided by financing activities during the nine months ended March 31, 2009 was $516,750 as a result of the proceeds from notes payable net of fees. Cash provided by financing activities during the nine months ended March 31, 2008 was $466,546 as a result of the proceeds from notes payable, net of fees, in the amount of $800,500 offset by the repayment of notes payable totaling $333,954.

Given our plans and expectation that we will need additional capital, we will need to issue additional shares of capital stock or securities convertible or exercisable for shares of capital stock, including preferred stock, options or warrants. The issuance of additional capital stock may dilute the ownership of the current stockholders.

Off Balance Sheet Arrangements

We do not engage in any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, and liquidity or capital expenditures.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenues and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are based on the Company’s historical results as well as management’s future expectations. The Company’s actual results could vary materially from management’s estimates and assumptions.

Revenue Recognition - We recognize revenue when persuasive evidence of an arrangement exists, title transfer has occurred, the price is fixed or readily determinable, and collectability is probable. We recognize revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition.” Sales are recorded net of sales returns and discounts, which are estimated at the time of shipment based upon historical data.

Going Concern

These financial statements are presented on the basis that the Company is a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. The Company has incurred a loss of approximately $2,100,000 in the current period and has negative working capital of approximately $2,200,000. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing or refinancing as may be required and, ultimately, to attain profitable operations. Management’s plan to eliminate the going concern situation include, but are not limited to, the raise of additional capital through issuance of debt and equity, improved cash flow management.

Accounting for Stock Option Based Compensation

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