UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
CURRENT REPORT
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
--- THE EXCHANGE ACT
For the transition period from _______to _________
Commission file number 0-25389
FOREFRONT, INC.
----------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 98-0199128
----------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1413 South Howard Avenue, Suite 104, Tampa, Florida 33606
----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: 813-253-2267
------------
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
As of February 15, 2001, the small business issuer had a total of 16,911,714
shares of its Common Stock outstanding.
Table of Contents
Part 1
Item 1
Balance Sheet
Income Statement
Cash Flow Statement
Item 2
Part 2- OTHER
ITEM 6
2
FOREFRONT, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS ANYOX RESOURCES, INC.)
(A DEVELOPMENTAL STAGE COMPANY)
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, 2001 June 30, 2000
ASSETS
Current Assets
Cash 5,260 3,615
Accounts Receivable 5,000 -0-
Accounts Receivable - Employee 38,431 -0-
Due from Related Party 55,826 55,826
Employee Advances and Loans 183,119 -0-
Prepaid Expenses 320,558 21,734
Shareholder Receivable 28,422 -0-
Accrued Interest Receivable 2,946 -0-
--------------- --------------
Total Current Assets 639,562 81,175
--------------- --------------
Property and Equipment, Net 254,119 628,583
--------------- --------------
Other Assets
Goodwill - Net 5,196,027 7,091,997
Deposits 2,655 7,577
Loan Cost 27,000 -0-
Capitalized Software Costs
Less Accumulated Amortization of $53,075 54,812 74,916
and $74,916 respectively
Patent Rights
Less Accumulated Amortization of $72,499 0 38,822
and $38,822 respectively
--------------- --------------
Total Other Assets 5,280,494 7,213,312
--------------- --------------
TOTAL ASSETS 6,174,175 7,923,070
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 755,429 508,490
Accounts Payable - Related Party 355,743 318,243
Accrued Liabilities 891,920 172,572
Current Portion of Capital Leases 47,022 54,626
Current Portion of Long Term Debt 119,881 191,686
Notes Payable - Convertible Debentures 130,000 -0-
Notes Payable 500,000 500,000
Notes Payable - Related Party 212,663 106,000
--------------- --------------
Total Current Liabilities 3,012,658 1,851,617
--------------- --------------
3
FOREFRONT, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS ANYOX RESOURCES, INC.)
(A DEVELOPMENTAL STAGE COMPANY)
UNAUDITED CONSOLIDATED BALANCE SHEETS
LONG TERM LIABILITIES
Long Term Debt 270,000 -0-
Long Term Capital Lease Liability -0- -0-
Commitments and Contingencies - Note 5 -0- -0-
--------------- --------------
Total Long Term Liabilities 270,000 -0-
--------------- --------------
Stockholders' Equity (Deficit)
Class A - Preferred Stock, $0.001 par value,
200,000 shares authorized, issued and
outstanding 1,000,000 shares 200 200
Stock Options 130,938
Common Stock, $0.001 par value, 200,000,000
shares authorized, 18,283,591 shares issued
and outstanding, and 15,090,011 outstanding,
respectively 18,284 15,091
Additional Paid In Capital 8,472,940 8,070,386
Deficit accumulated during the development stage (5,730,845) (2,014,224)
--------------- --------------
Total Stockholders' Equity (Deficit) 2,891,517 6,071,453
--------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 6,174,175 7,923,070
=============== ==============
4
FOREFRONT, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS ANYOX RESOURCES, INC.)
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED INCEPTION TO
MARCH 31, 2001 MARCH 31. 2000 MARCH 31, 2001
REVENUE
Sales -0- 20,831
Interest -0- 6,916
Other Income 7,921 -0- 7,921
--------------- --------------- ---------------
Total Revenue 7,921 -0- 35,668
--------------- --------------- ---------------
EXPENSES
Selling, General and Administrative 358,542 3,894 4,103,209
Research and Development -0- 1,307,340
Depreciation and Amortization 694,911 2,746,026
--------------- --------------- ---------------
Total Expenses 1,053,453 3,894 8,156,575
=============== =============== ===============
OTHER INCOME
Gain (Loss) on Disposition of Assets (105,097) -0- (113,553)
--------------- --------------- ---------------
NET (LOSS) BEFORE MINORITY SHARE (1,150,629) (3,894) (8,234,460)
LESS: MINORITY SHARE OF OPERATIONAL
LOSSES 2,503,615
NET (LOSS) (1,150,629) (3,894) (5,730,845)
=============== =============== ===============
BASIC AND FULLY DILUTED LOSS PER SHARE (01) (00)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 24,076,037 10,028,500
=============== ===============
5
(FORMERLY KNOWN AS ANYOX RESOURCES, INC.)
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001, 2000
FOR THE THREE MONTHS ENDED INCEPTION TO
March 31, 2001 March 31, 2000 March 31, 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss (1,150,629) (3,894) (8,234,460)
Adjustment to reconcile net loss to net cash
used in operating activities (105,097) -0- (105,097)
Minority interest in net loss of consolidated
subsidiary - net of capital -0- -0- 1,222,385
Depreciation and Amortization 821,140 -0- 2,872,255
Loss on disposition of assets 105,097 -0- 113,553
Expenses in-kind -0- -0- 3,300
Changes in operating assets & liabilities
Decrease and (increase) in due from related party 2,395 -0- (55,826)
Increase in accounts receivable (22,600) -0- (43,431)
Increase in prepaid expenses (320,557) -0- (320,557)
Increase in employee advances & loans (76,220) -0- (183,119)
Increase in deposits -0- -0- (2,654)
(Decrease) and increase in accounts payable (32,672) (813) 1,048,209
Increase in accrued liabilities 162,077 -0- 896,065
Increase in accounts payable - related party 7,500 3,000 7,500
Decrease in accrued interest -0- -0- (3,124)
--------------- --------------- ---------------
Net cash (used) provided in operating activities (609,566) (1,707) (2,785,001)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures -0- -0- (405,646)
Intangible asset expenditures -0- -0- (179,416)
--------------- --------------- ---------------
Net cash (used) in investing activities 0 -0- (585,062)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 243,000 -0- 1,063,000
Payments on long-term debt (2,995) -0- (27,778)
Capital lease payments (7,000) -0- (28,129)
Issuance of common stock 2,868 -0- 248,830
Capital contribution 370,394 780 370,394
Cost of Capital -0- -0- (15,000)
Proceeds from equity investors net of issue costs -0- -0- 1,761,611
Other financing activities -0- -0- -0-
--------------- --------------- ---------------
Net cash provided by financing activities 606,267 -0- 3,372,928
NET INCREASE (DECREASE) IN CASH (3,299) (927) 5,260
Cash - beginning of period 8,559 1283 -0-
--------------- --------------- ---------------
CASH - END OF PERIOD 5,260 356 5,260
=============== =============== ===============
<FN>
NON-CASH OPERATING ACTIVITIES
- -------------------------------
For the quarter ended March 31, 2001, the Company issued 1,371,877 shares of
stock for services to be provided to the Company in the future.
For the quarter ended March 31, 2001, the Company issued 1,142,860 shares of
stock for equity financing.
6
FOREFRONT, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS ANYOX RESOURCES, INC.)
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2001
COMMON STOCK PREFERRED STOCK
---------------------- ---------------
ADDITIONAL PAID IN CAPITAL SHARES AMOUNT SHARES AMOUNT
- -------------------------- ------------ -------- ------- ------
Balance December 31, 2000 77,528,055 77,529 200,000 200
8,100,265
Adjust December 2000 stock balance
to include stock that was issued but not
recorded 38,802,875 38,802
54,691
Forefront, Inc. had a 5/1 Reverse Split (94,275,416) (94,275)
Common Shares Issued in Private
Placement January, 2001 2,656,200 2,656
1,143
Cancellation of Common Shares
issued in Private Placement (7,800,000) (7,800)
0
Common Shares Issued in Private
Placement February 2001 800,000 800
236,720
Common Shares Issued in Private
Placement March 2001 160,000 160
24,832
Common Shares Issued in Private
Placement March 2001 140,000 140
19,824
Common Shares Issued in Private
Placement March 2001 121,877 122
7,490
Common Shares Issued in Private
Placement March 2001 150,000 150
27,975 ------------ -------- ------- ------
Net Operating Loss
TOTALS 18,283,591 18,284 200,000 200
============ ======== ======= ======
8,472,940
200
7
FOREFRONT, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS ANYOX RESOURCES, INC.)
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2001
DEFICIT ACCUMULATED
ADDITIONAL DURING THE
PAID IN CAPITAL DEVELOPMENTAL STAGE
-------------------- -------------------
8,100,265 (4,580,216)
54,691
1,143
0
236,720
24,832
19,824
7,490
27,975
-------------------- -------------------
(4,580,216)
(1,150,629)
-------------------
8,472,940 (5,730,845)
==================== ===================
8
FOREFRONT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
(Unaudited - Prepared by Management)
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on July 13,
1998, with the authorized common shares of 200,000,000 shares at $0.001 par
value. Although the Company was organized for the purpose of acquiring and
developing mineral properties, it disposed of its mineral properties and
acquired 57% of Web Partners, Inc. (WPI) during March 2000, and the remaining
43% in May 2000. WPI, a Florida Corporation formed in September 1998, is a
development-stage company with its core business focused on the research and
development of new web-based technologies. As part of the merger transaction,
WPI was dissolved into the Company and a new Nevada corporation (Forefront
Technologies, Inc.) was simultaneously formed and carries on in place of WPI.
Since its inception, the Company has completed a series of Regulation D
offerings of 12,028,500 shares of its capital stock for cash. In March 2000 it
exchanged 4,000,000 shares of stock for its 57% interest in WPI. In addition,
4,000,000 shares were returned to treasury in March 2000 and canceled. In May,
2000 the Company issued 3,024,754 shares for the remaining 43% of WPI. In
August 2000, the Company issued 4,500,000 shares in two separate transactions
that were never funded. The 4,500,000 shares were returned and canceled in
October 2000. On November 16, 2001 the Company completed a Five-For-One forward
stock split resulting in tax issuance of 61,360,044 shares. Authorized common
shares were increased to 800,000,000 shares. On January 09, 2001, the Company
announced a Five-For-One reverse stock split resulting in a decrease of
issued/outstanding shares to 23,568,854.The authorized common shares were
decreased to 200,000,000 shares. The Company issued 2,514,737 shares in the past
quarter as compensation to various companies and individuals for services to the
company.
2. BASIS OF PRESENTATION
The accompanying unaudited balance sheets of Forefront, Inc. (the "Company") (a
development stage company, and the unaudited statements of operations and
unaudited statements of cash flow for the three months ended March 31, 2001 and
2000 have been prepared by the Company's management and they do not include all
information and notes to the financial statements necessary for a complete
presentation of the financial position, results of operations,
9
FOREFRONT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2001
(Unaudited - Prepared by Management)
and cash flows in conformity with generally accepted accounting principles. In
the opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
Operating results for the quarter ended March 31, 2001, are not necessarily
indicative of the results that can be expected for the year ending June 30,
2001, in part because of serious cash flow deficiencies the Company experienced
during the past several months.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
The Company and WPI (now Forefront Tech) recognize income and expenses based on
the accrual method of accounting. Forefront Tech - WPI revenue recognition
practices will conform to appropriate software revenue recognition standards.
Dividend Policy
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
On June 30, 2000, the Company had a net loss carry forward of $4,517,839. These
losses, in addition to current period losses of $3,716,621 will be available to
offset income in future years. The Company has fully reserved the tax benefit
of these losses. As part of the acquisition of 57% of the outstanding stock of
WPI on March 15, 2000, the
10
FOREFRONT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2001
(Unaudited - Prepared by Management)
Company also has available approximately $2,205,000 of net operating loss carry
forwards that are subject to certain annual limitations under Internal Revenue
Code. These losses were incurred prior to the ownership change.
Loss per Share
Loss per share amounts are computed based on the weighted average number of
shares actually outstanding using the treasury stock method in accordance with
FASB Statement No. 128.
Foreign Currency Translation
Part of the transactions of the Company in 2000 and 1999 were completed in
Canadian dollars and have been translated to US dollars as incurred, at the
exchange rate in effect at the time, and therefore, no gain or loss from the
translation is recognized. All WPI transactions have been in US dollars.
4. GOING CONCERN
The Company and Forefront Tech will need additional working capital to be
successful in its planned activity and therefore continuation of the Company as
a going concern is dependent upon obtaining additional working capital.
Management of the Company and Forefront Tech have developed a strategy, which it
believes will accomplish this objective through additional equity funding, and
long term financing, which will enable the Company and Forefront Tech to operate
for the coming years. Due to the market conditions, this strategy has been slow
in execution, and accordingly, the Company has run out of cash.
11
FOREFRONT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2001
(Unaudited - Prepared by Management)
As discussed in more detail under "Managements Discussion and Analysis", the
Company is in immediate need of capital due to significant cash flow deficiency
and may not continue as a going concern. The Company has no cash to run its
operation. In short, the Company requires an immediate cash infusion or may
have to suspend operations, with one alternative being to seek protection under
the appropriate Federal Bankruptcy procedures. Should the Company be unable to
continue as a going concern, the assets and liabilities listed in the
accompanying financial statements would require restatement on a liquidation
basis which would differ materially from the values as a going concern.
5. COMMITMENTS AND CONTINGENCIES
As part of the merger agreement with Web Partners, Inc. on May 25, 2000, the
Company is obligated to make its best efforts to implement a stock option plan
and match, in similar terms, the options previously available to Web Partners,
Inc. shareholders and vendors approximating 2,041,000 options. The Web Partners
plan was terminated at the merger date. The Company has not yet completed the
required Securities and Exchange Commission filings as of the balance sheet
date. Accordingly, no new options have been granted. This contingency may
affect the reported acquisition costs of Web Partners, Inc. in the future when
the stock option grants are issued.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
This Form 10-QSB contains forward-looking statements. The words "anticipate",
"believe", "expect", "plan", "intend", "estimate", "project", "could", "may",
"foresee", and similar expressions identify forward-looking statements that
involve risks and uncertainties. You should not place undue reliance on
forward-looking statements in this Form 10-QSB because of their inherent
uncertainty. The following discussion and analysis should be read in
conjunction with the Financial Statements and Notes thereto and other financial
information included in this Form 10-QSB and our Form 10-KSB filed November 14,
2000. Actual results could differ materially from the results discussed in the
forward-looking statements.
Plan of Operation - Background
Forefront, Inc. (the "Company"), was formerly named Anyox Resources, Inc.
("Anyox"). Anyox, a Nevada corporation, was formed in 1998 and operated as an
early development state company until March 2000 when it acquired 57% of Web
Partners, Inc. ("WPI"), a Florida corporation. The remaining 43% minority
interest was subsequently acquired in May 2000. At that time, WPI was merged
into a subsidiary of Anyox; Forefront Technologies, Inc. ("Forefront Tech")
which took on the assets, liabilities and business of WPI. Anyox changed its
name to Forefront, Inc. At that time, Forefront Tech
12
FOREFRONT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2001
(Unaudited - Prepared by Management)
(formerly WPI) was an early development stage company, which was formed in
September 1998 and began operations in August 1999. Forefront Tech's core
business is focused on the research and development of new web-based
technologies. Forefront Tech also provides creative production services in
connection with developing online 30-second commercial spot advertisements.
Forefront Tech had accumulated approximately $4,517,839 in deficits through June
30, 2000. Due to minority interest accounting, the Company reported only
$2,014,224 of this accumulated deficit at June 30, 2000.
The major spending areas comprising the approximately $4,500,000 of Forefront
Tech deficits at June 30, 2000 include advertising expenses of $162,000 and
other selling, general, and administrative expenses of $2,500,000, research and
development cost approximated $1,200,000 and depreciation and amortization
$624,000.
Forefront Tech's technology toolkit is designed to deliver a complete online
advertising platform. The toolkit is comprised of a 30-second online commercial
spot system, called a CyberSpot, and is in the process of completing an audience
measurement and commercial delivery verification system, called Delivery
Verification Technology ("DVT"). CyberSpots are Web-based interactive
multi-media commercial spots which use Forefront Tech's Instant On User
Interface ("IOUI") technology which enables the spot to reach the audience
quickly and with minimal disruptions. DVT provides an online advertising
measurement system that verifies audience reach and spot delivery.
Forefront Tech intends to generate revenue from licensing fees,
creative/production fees and a technology license based on a cost-per-play
model. Forefront Tech plans to produce and
13
FOREFRONT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2001
(Unaudited - Prepared by Management)
distribute CyberSpot production software that will enable global production of
CyberSpots by advertisers, agencies and web development firms. WPI plans to
license its family of technologies within the U.S., Asia and Europe.
Forefront Tech's revenue model currently focuses on four distinct revenue
drivers: (1) the development of CyberSpot ads; (2) the delivery of CyberSpot
ads; (3) CyberSpot enterprise licensing; (4) CyberSpot reseller licensing; and
(5) DVT licensing.
Each revenue driver has associated variable expenses. Ad production variable
costs are comprised entirely of human resources. A certain number of personnel
are needed to produce and test each ad. The CyberSpot per play variable cost is
comprised of the fee charged by the ad delivery strategic partner. DVT variable
costs are also comprised entirely of human resources. The DVT team will be
responsible for marketing the DVT technology and identifying addition
applications for the technology. Development of the toolkit is the largest
expense item included in the operating expenses. Executive and operational team
salaries and benefits, CyberSpot licensee technical support, legal fees and
advertising also account for a significant portion of the operating expenses.
Results of Operations:
Revenue
The Company was involved in the exploration and development of mineral
properties. Since inception the property has
14
FOREFRONT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2001
(Unaudited - Prepared by Management)
generated no revenue and the property was never developed because of the lack of
financing. The Company's future revenue stream is based on its 100% owned
subsidiary Forefront Tech. Forefront Technologies has begun producing revenue
however, revenues are still not sufficient to cover operating expenses.
Forefront Tech has contracts and orders from customers. In addition, Forefront
Tech is presently producing commercial spot advertisements that may generate
future revenue. The Email Advertising Channel looks promising as a revenue
source for CyberSpot. Recently published research indicates that email is the
most effective Internet advertising vehicle. CyberSpot is particularly well
suited for email advertising because CyberSpot opens automatically in many email
clients and requires no player, unlike other rich media products. Revenue
recognition in 2001 and beyond will depend upon the status of the projects at
that time and the applicable revenue recognition accounting standards.
Expenses
For the three months ended March 31, 2001, the Company and Forefront Tech have
recognized expenses of approximately $1,053,453 compared to spending of $3,894
for the period three months ended March 31, 2000. The company and its
subsidiary have four full time employees, with Forefront Tech absorbing all
personnel and indirect costs.
Although WPI (now Forefront Tech) was organized in 1998, it did not start
meaningful operations until July 1999. Personnel and personnel related costs
were $172,079 in 2001 and $446,723 in 2000. Although cash flow shortfalls
caused the Company to curtail operations during this quarter, it continued to
accrue payroll and payroll related expenses for employees who chose to continue
to work and accept payment at a later date.
15
FOREFRONT TECH, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2001
(Unaudited - Prepared by Management)
The employees worked at their own will while continuing to look for employment
elsewhere. Legal, accounting, and other professional consulting fees were
$161,619 in 2001 and $44,472 in 2000. In addition, the Company recognized
approximately $694,911 of depreciation and amortization in 2001, and $708,088 in
2000. The $694,911 consists principally of the amortization of goodwill related
to the acquisition of Forefront Tech/WPI. The selling, general and
administrative expenses were $358,542.
Liquidity and Capital Resources
The Company and WPI individually financed their operations to date with a series
of Regulation D offerings of their respective shares of capital stock, generally
for cash. The Company's March 2000 private placement was for 2,250,000 at $0.85
per share with proceeds of $1,912,500. Prior to the merger, WPI raised $500,000
in the form of bridge financing from a shareholder group. The Company and the
shareholder group have agreed that this bridge loan, having no stated interest
rate, will be paid back upon the company raising $3.1 million in capital. The
Company has raised a total of $270,000 by issuing convertible corporate
debentures with stock warrants from the May Davis Group. The May Davis Group has
also committed to fund the company via an equity financing agreement a total
amount of $10 million within a 30 month period following the approval of the
SB-2 filed with the Securities and Exchange commission.
16
FOREFRONT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2001
(Unaudited - Prepared by Management)
The combined operations had a net working capital deficit of $2,891,517 at March
31, 2001. The current liabilities of $3,012,658 at March 31, 2001 include
$500,000 of past due bridge financing from a shareholder group, $190,000 of
bridge financing from two company founders, $30,000 of bridge financing from a
director and a business associate of a director. It also includes $355,743
payable to a Forefront Tech consulting firm founded by this same director. This
consulting has been in the areas typical to a development stage company and has
included assistance with business plan development, pricing models, and
intellectual property. These services were contracted for in the ordinary
course of business, prior to the director being appointed to the Company's board
of directors, and management believes the pricing and terms were as favorable as
that which could have been obtained from an independent third party.
Also included in other liabilities at March 31, 2001 was $891,920 of payroll
related liabilities. The Company has been unable to fund employee payrolls
since early July, 2000, but continues to accrue payroll for those employees
continuing to work and for employees with contractual obligations.
17
FOREFRONT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 2001
(Unaudited - Prepared by Management)
The Company's estimated monthly cash requirements approximate $125,000. However,
like most other development stage companies, Forefront Tech has generated minor
revenues and the company may not generate enough revenues from operations for a
number of quarters to fund its operations. The company experienced severe cash
flow deficiencies starting in June 2000 and effectively ran out of money during
the summer of 2000.
The Company is in immediate need of capital due to significant cash flow
deficiency and may not continue as a going concern. The company has no cash to
run its operation. Each week it continues to build up additional past due
payroll and vendor liabilities. In short, the Company requires an immediate
cash infusion or may have to suspend operations, with one alternative being to
seek protection under the appropriate Federal Bankruptcy procedures. In the
company goes into Chapter 11, existing shareholder investments may be diluted
substantially or be completely lost through satisfaction of creditor claims. If
a Chapter 11 reorganization is not successful, the company may be forced into
Chapter 7, in which case shareholders may lose their investment completely.
In recognition of this issue, the company is continually searching for sources
of additional financing and pursuing venture capital investors. Although the
competition for funding is strong, the Company believes it has unique,
protectable technology. It also believes its public status will be appealing
for potential venture capital investors to execute their respective exit
strategies. Should the Company be unable to continue as a going concern, the
assets and liabilities listed in the accompanying financial statements would
require restatement on a liquidation basis which would differ materially from
the values as a going concern.
18
PART II-OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits Index - FORM 10-QSB.
None.
b. Reports on Form 8-K.
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FOREFRONT, INC.
(Registrant)
Date: 5/16/01 By: /s/ Santu Rohatgi
--------------------------------
Santu Rohatgi, President
(Principal Executive Officer)
19