AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 2001.
REGISTRATION NO. 333-______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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Forefront, Inc.
---------------
(Name of small business issuer in its charter)
NEVADA 7373 98-0199128
- ---------------------------- ---------------- ----------------
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number)
1413 Howard Avenue, Suite 104
Tampa, FL 33606
(813)-253-2267
(Address and telephone number of principal executive offices)
1413 Howard Avenue, Suite 104
Tampa, FL 33606
(813)-253-2267
(Address and telephone number of principal place of business)
Santu Rohatgi, President
1413 Howard Avenue, Suite 104
Tampa, FL 33606
(813)-253-2267
(Name, address and telephone number of agent for service)
----------------
Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
- ------------------------ ------------------------ ---------------------------- --------------------------- -------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SHARES TO BE REGISTERED AMOUNT TO BE REGISTERED OFFERING PRICE PER SHARE(1) AGGREGATE OFFERING PRICE(1) REGISTRATION FEE(1)
- ------------------------ ------------------------ ---------------------------- --------------------------- -------------------
Common Stock, Shares of Common $ .14 $ 6,992,736 $ $1,680
.001 par value Stock (2)
48,971,926
- ------------------------ ------------------------ ---------------------------- ---------------------------- ------------------
_________________________________________
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) using the average of the closing bid price and the
closing ask price reported by the Nasdaq OTC Bulletin Board for the
Company's Common Stock as of May 28, 2001. The Company previously paid the
sum of $3,073 as a filing fee for a Registration Statement previously filed
and withdrawn and hereby applies the prior paid fee towards the filing fee
due hereunder.
(2) Includes an estimated 43,478,260 shares issuable in connection with a
$10,000,000 agreement with Spinneret Financial Services, Ltd., presented by
May Davis Group, Inc. As to the Credit Line, the parties agreed that at no
time shall shares be purchased or issued to the Investor if such shares
would, in consideration of any ownership of the Investor, cause the
Investor to obtain an ownership interest in excess of 9.9%. See "The May
Davis Transaction," and "Selling Shareholders."
(3) Includes 164,600 shares issued to certain selling shareholders in the past,
as follows: 25,000 shares each of Anthony Agentowicz, John Solleder, and
Bruce M. Goldfarb, and 20,000 shares of Trevor Michael, and 69,600 shares
of Rising Solutions, Inc. See "The May Davis Transaction," and "Selling
Shareholders."
(4) Includes a total of 3,500,000 shares, issuable in connection with a
$250,000 Debenture loan to the Company on or about this date, upon a
conversion of the Debenture, to Rance Merkel, Michael Woelfel, Connie
Benesch, Cynthia Wilson, Gerald Holland, and Maryellen Misiak. See "The May
Davis Transaction," and "Selling Shareholders."
(5) Includes a total a total of 1,041,664 shares issuable under warrants held
by certain of the selling shareholders, as follows: 8,333 shares each by
Robert Farrell, Joseph W. Donohue, Jr., Mark Angelo, and Hunter Singer, the
May Davis Group, Inc., and Trans-Global Capital Holdings, Ltd. and
166,666 shares of Trans-Global Capital Holdings, Ltd. ("Trans-Global"); and
a total of 1,142,857 shares issued to them, as follows: 187,810 shares to
each of Messrs. Farrell, Donohue, Angelo, Singer, and a Mr. Owen May, 4,000
shares of James Gonzales, 12,000 shares of Kenneth G. Merkel, III, and
187,810 shares of Trans-Global. See "The May Davis Transaction," and
"Selling Shareholders."
(6) Includes 787,402 shares issued to Mark D. Gray. See "Selling Shareholders."
-------------------------------------
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY CHANGE. A REGISTRATION
STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION
STATEMENT IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 30, 2001.
PROSPECTUS
FOREFRONT, INC.
SHARES OF COMMON STOCK
This prospectus relates to the offering, by certain persons who are shareholders
or may become shareholders, of a total of shares of common stock pursuant to
this prospectus, consisting of the following:
An estimated 43,478,260 shares is issuable in connection with a $10,000,000
equity credit line agreement with Spinneret Financial Services, Ltd.,
("Spinneret Financial Services, Ltd."), presented by May Davis Group, Inc. ("May
Davis"). The number of shares is an estimate and will fluctuate depending upon
our trading price applicable as to any purchase by Spinneret Financial Services,
Ltd. in the future. As to the Credit Line, the parties agreed that at no time
shall shares be purchased or issued to the Investor if such shares would, in
consideration of any ownership of the Investor, cause the Investor to obtain an
ownership interest in excess of 9.9%. At such time as Spinneret Financial
Services, Ltd. purchases $10,000,000 of our common stock, we, in our discretion,
may elect to enter into a second substantially identical $10,000,000 common
equity credit line agreement. Any shares as to a second common equity credit
line agreement are not included in this offering. 164,600 shares were issued in
the past to certain selling shareholders, who were given registration rights, as
follows: 25,000 shares each to Anthony Agentowicz, John Solleder, and Bruce M.
Goldfarb, and 20,000 shares to Trevor Michael, and 69,600 shares to Rising
Solutions, Inc. A total of shares issuable in connection with a $250,000
Debenture loan to the Company on or about this date are also included as shares
which may be sold by selling shareholders, upon conversion of the Debenture by
Rance Merkel, Michael Woelfel, Connie Benesch, Cynthia Wilson, Gerald Holland,
and Maryellen Misiak. A total of 1,041,664 shares issuable under warrants held
by certain of the selling shareholders, as follows: 8,333 shares each by Robert
Farrell, Joseph W. Donohue, Jr., Mark Angelo, Hunter Singer, and the May Davis
Group, and Trans-Global Capital Holdings, Ltd. ("Trans-Global"); 166,666 shares
each by Robert Farrell, Joseph W. Donohue, Jr., Mark Angelo, Hunter Singer, and
the May Davis Group, and Trans-Global Capital Holdings, Ltd. ("Trans-Global");
and a total of 1,142,860 shares issued to them, as follows: 187,810 shares to
each of Messrs. Farrell, Donohue, Angelo, Singer, and a Mr. Owen May, 4,000
shares of James Gonzales, 12,000 shares of Kenneth G. Merkel, III, and 187,810
shares of Trans-Global. The Company is providing a total of 787,402 shares to
Mark E. Gray. See "The May Davis Transaction," and "Selling Shareholders," and
"Certain Transactions."
We will not receive any proceeds from the sale of any of these shares. However,
we may receive approximately $10,822,914 in proceeds under our agreements and
warrants with May Davis and certain of the other selling shareholders, as in the
case of proceeds from the exercise of the warrants. Our common stock is quoted
on the Nasdaq Bulletin Board under the symbol "FOFR." On May 28 , 2001, the last
reported sales price of our common stock was $.14 per share. The selling
shareholders may sell their shares in one or more transactions on the Nasdaq
Bulletin Board or on any exchange on which our common stock may be listed. They
may also sell in privately negotiated transactions or otherwise, or a
combination of such methods of sale, at market prices prevailing at the time of
sale or prices related to such prevailing market prices or at negotiated prices.
The selling shareholders may sell the shares to or through broker-dealers, and
such broker-dealers may receive compensation from the selling shareholders
and/or purchasers of the shares for whom they may act as agent (which
compensation may be in excess of customary commissions). The selling
shareholders and any participating broker-dealers may be deemed to be
"underwriters" as defined in the Securities Act of 1933, as amended (the
"Securities Act"). May Davis is an "underwriter" within the meaning of the
Securities Act of 1933. We cannot estimate at the present time the amount of
commissions or discounts, if any, that will be paid by the selling shareholders
on account of their sales of the shares from time to time. We will indemnify the
selling shareholders against certain liabilities, including certain liabilities
under the Securities Act. See "Plan of Distribution."
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN
FACTORS YOU SHOULD CONSIDER IN CONNECTION WITH ANY DECISION TO PURCHASE SHARES
IN THIS OFFERING.
YOU SHOULD ONLY RELY ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN
THIS PROSPECTUS OR ANY SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE
YOU WITH DIFFERENT INFORMATION. THE COMMON STOCK IS NOT BEING OFFERED IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.
NEITHER THE U. S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ________, 2001.
TABLE OF CONTENTS
Page
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Number
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FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . .5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
PRICE RANGE OF OUR COMMON STOCK . . . . . . . . . . . . . . . . . . . . . 10
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
THE MAY DAVIS TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . 12
PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
PRINICIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 23
SELLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . .25
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .26
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 27
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . .28
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . . . . . 29
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . F-1
FORWARD LOOKING STATEMENTS
--------------------------
Some of the information in this prospectus contains forward-looking statements
within the meaning of the federal securities laws. These statements include,
among others, business development plans, strategies, expectations regarding
competition and market acceptance of our products and services. Forward-looking
statements typically are identified by use of terms like "may," "will,"
"expect," "anticipate," "estimate" and similar words, although some
forward-looking statements are expressed differently. You should be aware that
our actual results could differ materially from those contained in the
forward-looking statements due to a number of factors, including our substantial
operating losses, availability of capital resources, ability to compete
effectively, economic conditions, unanticipated difficulties in development of
products and services, ability to gain market acceptance and market share,
ability to manage growth, dependence on third party content providers and
dependence on our key personnel. You should also consider carefully the risks
described in this prospectus or detailed from time to time in our filings with
the Securities and Exchange Commission. See "Risk Factors."
RISK FACTORS
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An investment in our securities is considered speculative and risky. We can't
promise any outcome. You should purchase them only if you can afford to lose
your entire investment in us. You should carefully consider the following
paragraphs which explain risk factors, as well as the other information we have
in this prospectus. As used in this prospectus, the terms "we," "us," "our,"
"the Company" and "Forefront" mean Forefront, Inc., with consideration of the
business of our subsidiary (unless the context indicates a different meaning)
and the term "common stock" means Forefront, Inc.'s common stock, $.001 par
value per share.
WE HAVE ONLY A LIMITED OPERATING HISTORY WITH OUR CURRENT BUSINESS MODEL
Our company was formed in July, 1998, and is considered a development-stage
company. Our core business is focused on the research and development of new
Web-based technologies. We therefore have only a limited operating history under
our current business plan for you to evaluate our business. You must consider
the risks, expenses and uncertainties that a technology company with new
web-based concepts like ours faces. These risks include our ability to
successfully: enter the still new web-based market; recognize sales and
revenues, while currently there are no material revenues ; meet our working
capital needs; and otherwise become a profitable company. If we are unsuccessful
in addressing these risks, our business could be materially damaged.
WE HAVE A HISTORY OF OPERATING LOSSES, ACCUMULATED DEFICITS AND LIMITED FUNDS.
We have a history of operating losses and expect to continue to incur operating
losses for the foreseeable future as we continue to invest in our plans. Our
current financial resources are limited and will be utilized for execution and
expansion of our business plan. Our ability to execute our plans will depend on
our ability to obtain additional financing and achieve a profitable level of
operations. There is no assurance that such financing will be obtained. Nor can
we give any assurance that we will generate substantial revenues or that our
business operations will prove to be profitable. Our operations are subject to
all of the risks inherent in completion of new web-based concept and then
successful implementation of the concept to the market. We have limited
financial resources and are subject to the problems, expenses, difficulties,
complications and delays frequently encountered in connection with establishing
a new business including, without limitation, market acceptance of our products,
regulatory requirements, unanticipated expenses and competition. We don't know
if our business will be successful.
WE NEED ADDITIONAL FINANCING FOR GROWTH.
We may not be able to obtain additional capital or generate sufficient revenues
to fund our plans. The growth of our business will require investment on a
continuing basis to finance capital expenditures and related expenses for web
applications, technology development, labor, consultants, equipment, licenses
and related agreements, marketing and other expenses. Our future capital
requirements will depend upon a number of factors, many of which are not within
our control, including research costs, working capital costs, marketing
expenses, and competitive conditions. Although we have recently signed
agreements for additional capital, we regularly pursue additional financing
sources, but we may not be able to raise such capital or such capital may not be
sufficient.
5
GOVERNMENT REGULATION AFFECTS OUR BUSINESS.
The laws and regulations applicable to the Internet will directly impact us
because our products and services are heavily dependent on use of the Internet.
These laws and regulations are still evolving and unclear and have the potential
of damaging Forefront's business though we are not aware of any specific laws or
any that are pending that will have a negative impact. However, any laws
pertaining to the Internet, if enacted, could potentially have a negative impact
on the marketplace for Forefront's products and services due to either an impact
on the Internet audience or an impact on the clients who use Forefront's
products and services to convey their video images through the Internet to an
audience or otherwise.
WE MUST ESTABLISH AND MAINTAIN OUR TRADE NAME.
We must establish our name, primarily through successful marketing, as an
accepted company supplying at least one, and hopefully more, web-based products,
and maintain such trade name or brand awareness. For us to be successful in
establishing our brand, the Internet market, including consumers and Internet
service providers, must perceive us as offering quality, technologically
advanced, cost-effective products. Our business could be materially adversely
affected if our marketing efforts are not productive, or if we cannot create and
maintain our trade name or brand awareness.
OUR FINANCIAL RESULTS MAY FLUCTUATE SIGNIFICANTLY.
Our operating results, including on a quarterly basis, may fluctuate
significantly in the future as a result of a variety of factors, some of which
are outside our control. These factors include: the demand for our product and
services as currently contemplated and as developed or marketed in the future;
our expense for research, development and as we pursue our plans; the timing and
amount of advertising and license revenues; the amount and timing of capital
expenditures and other costs related to operations; the introduction of new
products by us or our competitors; pricing changes in the industry; new
government regulations that affect web-based internet companies; general
economic conditions; and possible seasonality, price and cost factors affecting
the promotion of our products. Due to all of these and possibly other factors,
our operating results may fall below market expectations. If this happens, the
trading price of our common stock would likely decline, perhaps significantly.
WE FACE INTENSE COMPETITION.
The Company is in direct competition with established companies in the same
market. The primary competitors are other Internet advertising technology
companies and other advertising mediums. Additionally, other companies not
presently in competition with the business of the Company may enter the market
targeted by the Company. The Company can anticipate competition in its efforts
to establish itself in targeted markets and to expand into new markets. There
can be no assurance that the Company will be able to compete successfully with
existing or new competitors, some of which may possess more financial resources
and name recognition than the surviving entity. Any pricing pressures,
reduced margins or inability to obtain market share or even loss of market share
resulting from our failure to compete effectively would materially adversely
affect our business, financial condition and operating results.
NO MATERIAL REVENUES AND REVENUES DERIVED FROM VENTURES MAY NOT GENERATE CASH
FLOWS.
We have no material revenues and we expect to derive a portion, aside from
sales, of our future revenues from potential strategic license agreements, and
joint venture or partnership or other agreements. These agreements, if any,
may not generate cash flow.
6
WE WILL SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN KEY PERSONNEL IN HIGH DEMAND.
We depend on the services of our senior management. Our success is largely
dependent on our ability to hire highly qualified managerial personnel both
knowledgeable about internet technology and the operations of a public company.
These individuals are in high demand and we may not be able to attract the staff
we need. In addition, the loss of the services of any of our senior management
could have a material adverse effect on our business, financial condition and
operating results.
OUR VENTURES MAY STRAIN OUR MANAGERIAL, OPERATIONAL AND FINANCIAL RESOURCES AND
MAY BE DISRUPTIVE TO OUR BUSINESS.
We are trying to establish ventures with complementary businesses for the
utilization of technologies, services and products and intend to continue these
efforts in the future; however, we may be unable to integrate or implement these
joint ventures or alliances effectively. Difficulties in this process could
disrupt our ongoing business, distract our management and employees, increase
our expenses and otherwise adversely affect our business.
FINANCING FOR VENTURES MAY NOT BE AVAILABLE.
We do not know if we will be able to identify any future joint or other
ventures, acquisitions or alliances or if we will be able to successfully
finance these transactions. To finance these transactions, it may be necessary
for us to raise additional funds through public or private financings, which may
not be available on acceptable terms, if at all. A failure to identify or
finance future transactions may impair our growth.
THE COMPANY DOES NOT HAVE PRODUCT LIABILITY INSURANCE.
The Company has not acquired liability insurance with respect to provision of
its products and services. Without insurance to cover damages resulting from
liability claims stemming from our products or services, the Company must
shoulder any award of damages against it which could significantly affect its
business operations if the award is substantial. Although we do not now
carry product liability insurance we do intend obtain such coverage once sales
commence. Once product liability insurance does come into effect, such coverage
may not cover all potential claims or may not be adequate to completely cover
costs incurred in defense of potential claims or to indemnify us for all
liability that may be imposed. Any costs or imposition of liability that is not
covered by insurance or in excess of insurance coverage could have a material
adverse effect on our business, financial condition and operating results.
WE DEPEND ON OTHERS BEYOND OUR CONTROL.
Like many businesses, we currently depend on others beyond our control, as well
as those we engage or contract with in the future. Consultants, research
testing organizations, distributors, and licensees, for example, may act or
fail to act in a way that directly or indirectly damages our business. Our
success depends significantly on our ability to create and maintain our
relationships. Some of our agreements may be short-term and non-exclusive.
These factors could be materially adverse to our business.
OUR STOCK PRICE IS SUBJECT TO MARKET VOLATILITY.
The stock market experiences volatility that affects the market prices of equity
securities of technology companies generally. This volatility includes rapid
and significant decreases or increases in the trading prices of certain
companies that do not bear any reasonable relationship to operating performance
of such companies. These fluctuations may materially affect the trading price
of our common stock. In the past, following periods of volatility in the market
price for a company's securities, shareholders have often instituted securities
class action litigation. Litigation could result with substantial costs and the
diversion of management's attention and resources, which could have a material
adverse effect on our business, financial condition and results of operations.
7
OUR STOCK PRICE IS HIGHLY VOLATILE AND COULD DROP UNEXPECTEDLY.
The average daily trading volume for our common stock fluctuates significantly
and as a result of this and other factors, the price at which our common stock
trades is highly volatile and may fluctuate substantially for the foreseeable
future. As a result, investors in our common stock may experience a decrease in
the value of their common stock regardless of our operating performance or
prospects.
OUR PRESENT MANAGEMENT HAS THE VOTING POWER TO CONTROL OUR AFFAIRS.
As of the date of this prospectus, our officers and directors own approximately
8% of our outstanding common stock. Consequently, these individuals may not be
in a position to influence the election of a majority of our Directors and to
exercise control over our affairs generally.
SPECIAL VOTING POWERS OF CLASS A PREFERRED STOCK OF THE COMPANY HELD BY
CERTAIN PERSONS DILUTE THE VOTING POWER OF OTHER STOCKHOLDERS OF THE COMPANY.
The Class A Preferred Stock issued to Wyly Wade and Mark Gray has special voting
powers that dilute the voting power of other stockholders of the Company. They
are able to determine the outcome of any vote in respect of all key decisions
affecting the Company, and they could exercise poor business judgment or put
their interests ahead of those of the shareholders generally.
CERTAIN PERSONS CONTROL THE ISSUANCE OF PREFERRED STOCK THEREBY PREVENTING A
CHANGE IN CONTROL OF THE COMPANY.
Preferred shares may be issued in series from time to time with such
designation, rights, preferences and limitations as the Board of Directors of
Forefront may determine by resolution. The Board of Directors of Forefront has
issued Class A Preferred Stock with dilutive or voting preferences to delay,
defer or prevent a change in control of the Surviving Corporation. In addition,
the concentration of control over Forefront's voting power and common shares in
Wyly Wade and Mark Gray could prevent any change in control of Forefront not
acceptable to Wyly Wade and Mark Gray. The Board of Directors may not authorize
the issuance of additional Preferred Stock without the consent of Wyly Wade and
Mark Gray. As a result of these provisions, Wyly Wade and Mark Gray will
control whether any change in control occurs, and in any contested change in
control, they may exercise poor business judgment or put their interests ahead
of those of the shareholders generally.
FUTURE SALES OF COMMON STOCK COULD DEPRESS THE PRICE OF OUR COMMON STOCK.
Future sales of substantial amounts of common stock pursuant to Rule 144 under
the Securities Act of 1933 or otherwise by certain shareholders could have a
material adverse impact on the market price for the common stock at the time.
There are presently approximately 17,229,686 outstanding shares of our common
stock held by Management and other shareholders which are deemed "restricted
securities" as defined by Rule 144 under the Securities Act. Under certain
circumstances, these shares may be sold without registration pursuant to the
provisions of rule 144. In general, under rule 144, a person (or persons whose
shares are aggregated) who has satisfied a one-year holding period may, under
certain circumstances, sell within any three-month period a number of restricted
securities which does not exceed the greater of one (1%) percent of the shares
outstanding or the average weekly trading volume during the four calendar weeks
preceding the notice of sale required by rule 144. In addition, rule 144
permits, under certain circumstances, the sale of restricted securities without
any quantity limitations by a person who is not an affiliate of ours and has
satisfied a two-year holding period. Any sales of shares by shareholders
pursuant to rule 144 may have a depressive effect on the price of our common
stock.
8
EVEN IF OUR STOCK PRICE DECREASES, WE MAY ELECT TO CAUSE PURCHASES OF OUR COMMON
STOCK TO BE MADE UNDER THE EQUITY CREDIT LINE AGREEMENT, CAUSING MORE SHARES TO
BE OUTSTANDING AND RESULTING IN SUBSTANTIAL DILUTION.
The purchase price for the common stock to be issued to the selling shareholder
under the equity credit line agreement will fluctuate based on the closing price
of our common stock. See "The May Davis Transaction" for a detailed description
of the purchase price and the relation of the purchase price to the percentage
of the outstanding shares of our common stock issuable pursuant to the equity
credit line agreement.
All shares registered in this offering will be freely tradable. We expect that
shares registered in this offering will be sold over a period of up to 25 months
from the date of this prospectus, subject to extension by the Company. The sale
of a substantial number of shares of our common stock under this offering, or
anticipation of such sales could make it more difficult for us to sell equity or
equity related securities in the future at a time and price we deem appropriate.
If Spinneret Financial Services, Ltd. purchased the full amount of shares
purchasable under the first tranche of the equity credit line agreement on the
date of this prospectus, the purchase price would have been $.23 per share and
Spinneret Financial Services, Ltd. would have been able to purchase 43,478,260
shares of our common stock. Assuming purchase under the agreement of a total of
43,478,260 shares of common stock on the date of this prospectus, these shares
if issued, without consideration of any other shares to be issued to or in
respect of May Davis and considering the outstanding shares of the Company,
would represent approximately 64% of our outstanding common stock. . This would
result in significant dilution to the ownership interests of other holders of
our common stock. Such dilution could be more significant if the future trading
price of our common stock is lower than the current trading price of our stock
at the time Spinneret Financial Services, Ltd. purchases shares of our common
stock under the equity credit line agreement, as a lower trading price would
cause more shares of our common stock to be issuable. . The purchase under the
common equity credit line agreement of a significant percentage of our
outstanding stock may result in substantial dilution to the ownership interests
of other holders of our common stock. As to the Credit Line, the parties agreed
that at no time shall shares be purchased or issued to the Investor if such
shares would, in consideration of any ownership of the Investor, cause the
Investor to obtain an ownership interest in excess of 9.9%.
WE COULD LOSE OUR THE COMMON EQUITY CREDIT LINE AGREEMENT OR IT COULD LEAD TO
DOWNWARD PRESSURE ON OUR STOCK PRICE.
Our equity credit line agreement with the investor is subject to conditions and
termination which we may or may not be able to control .Also, either actual
dilution caused by sales of our common stock to Spinneret Financial Services,
Ltd. or the perception of such dilution by holders of our common stock could
cause holders to elect to sell the shares of common stock held by them, which
could cause the trading price of our common stock to decrease. Furthermore, a
perception that sales of our common stock to Spinneret Financial Services, Ltd.
may lead to downward pressure on the trading price of our common stock could
provide an incentive for short-selling which could also adversely affect the
trading price of our common stock. As to the Credit Line, the parties agreed
that at no time shall shares be purchased or issued to the Investor if such
shares would, in consideration of any ownership of the Investor, cause the
Investor to obtain an ownership interest in excess of 9.9%.
WE ARE SUBJECT TO SUITS THAT MAY RESULT IN ADVERSE RULINGS TO THE COMPANY.
While we are not subject to any suit, nor anticipate any, without any guarantee,
we may experience one or more suits in the months ahead, often commonplace for
businesses, relating to investors, employees or subcontractors. In addition, an
investor which allegedly had registration rights to include 250,000 shares of
stock in this registration defaulted on the agreement, and it is our position,
without the benefit of any court order, that the investor no longer has any
rights. No guarantee exists we are correct. Any one or more suits could have
material adverse consequences to our business.
9
THE SALE OF THE SHARES REGISTERED IN THIS OFFERING COULD CAUSE OUR STOCK PRICE
TO DECLINE.
All shares registered in this offering will be freely tradable. It is
anticipated that shares registered in this offering will be sold over a period
of up to 25 months from the date of this prospectus, subject to an extension by
the Company. As we are required under law, we will need to file post-effective
amendments to the registration statement to which this prospectus is made a
part, to maintain a current prospectus. We may require Spinneret Financial
Services, Ltd. as the selling shareholder, to purchase a significant amount of
common stock. The sale of a significant amount of shares registered in this
offering at any given time could cause the trading price of our common stock to
decline.
OUR COMMON STOCK MAY BE DEEMED TO BE "PENNY STOCK."
Our common stock may be deemed to be "penny stock" as that term is defined
in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. Penny
stocks are stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the Nasdaq automated quotation system
(Nasdaq listed stock must still have a price of not less than $5.00
per share); or
o In issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$5.0 million (if in continuous operation for less than three years),
or with average revenues of less than $6.0 million for the last
three years.
Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is suitable investment for a prospective investor. These requirements may
reduce the potential market for our common stock by reducing the number of
potential investors. This may make it more difficult for investors in our common
stock to resell shares to third parties or to otherwise dispose of them. This
could cause our stock price to decline.
PRICE RANGE OF OUR COMMON STOCK
--------------------------------
Our common stock initially began trading on the Over-the-Counter Bulletin Board
(OTC-BB) under the symbol "ANYX" on February 24, 2000. The Company's name change
from Anyox Resources to Forefront, Inc. was effective May 30, 2000, and the
Company's common stock began trading under its new symbol "FFNT" on June 6,
2000. In January, 2001, the Company undertook a one for five reverse stock split
of its common stock, and in conjunction with the split, the symbol was changed,
to the current symbol FOFR. The first table sets forth the range of the high and
low bid prices for the first quarter, covering the period of February 24, 2000
through March 31, 2000, as quoted by the Nasdaq Trading and Market Services. The
second table sets forth the range of high and low sales prices of the Company's
common stock, as quoted by FinancialWeb.com for the second quarter, covering the
period of April 1, 2000 to June 30, 2000. The third table sets forth the range
of high and low bid prices for the quarters ended September 30, 2000, and
December 31, 2000 and March 31, 2001. All figures included in the tables
10
have been adjusted for presentation to reflect the one for five reverse stock
split in January, 2001. Quotations in tables 1 and 3 are believed to reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions. To the extent that the Company is unable to
determine a bid price on a quarterly date, the prices below are determined on
the closest date available to the Company:
TABLE 1:
- ---------
High Low
---------------------
2/24/00 - 3/31/00 $3.4625 $1.25
TABLE 2:
- ---------
High Low
---------------------
4/1/00 - 6/30/00 $ 2.850 $0.45
TABLE 3:
- ---------
High Low
---------------------
7/1/00 - 9/30/00 $3.99 $2.02
10/1/00 - 12/31/00 $3.71 $ .77
1/1/01 - 3/31/01 $.3177 $.125
On May 30, 2001, the Company's common stock was held by approximately 200
shareholders of record and by indeterminate number of investors through nominee
or street name accounts with brokers.
The Company has not paid dividends in prior years and has no plans to pay
dividends in the near future. Any payment of dividends would depend upon the
Company's pattern of growth, profitability, financial condition, and such other
factors as the Board of Directors may deem relevant.
USE OF PROCEEDS
---------------
We will not receive any proceeds from the sale of securities being offered by
this prospectus. We are registering the shares for sale to provide the selling
shareholders with freely tradable securities, but the registration of these
shares does not necessarily mean that any of these shares will be offered or
sold by the selling shareholders. However, we may receive up to $20,000,000 in
proceeds under our agreement with May Davis and Spinnernet Financial Services
and we may receive proceeds from the exercise of the warrants. Such proceeds
will be use for working capital and other corporate purposes. See, "The May
Davis Transaction," and "Selling Shareholders."
We have not declared any dividends on our common stock in the past two fiscal
years and do not contemplate paying cash dividends for the foreseeable
future, but instead will retain any earnings to fund our growth and research
and testing. Any decision to pay cash dividends on our common stock in the
future will depend on our ability to generate earnings, our need for
capital, our overall financial condition and such other factors as our
Board of Directors deems relevant.
11
THE MAY DAVIS TRANSACTION
-------------------------
GENERAL. We have entered into, as of January 1, 2001, two Placement Agreements
with the May Davis Group, Inc. ("May Davis"); in summary, one provides for a
placement of $10,000,000 of our common stock to a subscriber presented by May
Davis, and the other provides for the placement of $250,000 of convertible
debentures by our Company to subscribers presented by May Davis, which already
occurred. As to the first agreement, pursuant to the May , 2001, equity line of
credit agreement with Spinneret Financial Services, Ltd. ("Spinneret Financial
Services, Ltd.") facilitated by May Davis Group, Inc. ("May Davis") (sometimes
the "Line of Credit"), we may, at our discretion, periodically issue and sell to
Spinneret Financial Services, Ltd. shares for a total purchase price of $10
million in multiple closings. As to the Credit Line, the parties agreed that at
no time shall shares be purchased or issued to the Investor if such shares
would, in consideration of any ownership of the Investor, cause the Investor to
obtain an ownership interest in excess of 9.9%.
If our Company requests an advance under the agreement, Spinneret Financial
Services, Ltd. will purchase shares of common stock of our Company for 91% of
the lowest closing bid price reported on the Over-the-Counter Bulletin Board or
other principal market on which our common stock is traded for the 10 days
immediately following our request for an advance or put date and ending on the
trading day immediately before the closing of that transaction. Spinneret
Financial Services, Ltd. intends to resell any shares converted under the Line
of Credit at the market price.
Our debenture transaction is the placement of debentures as detailed below.
In connection with both placements, our Company granted to May Davis shares of
common stock and warrants to purchase shares. May Davis has decided that most of
the shares and warrants will be transferred to Mark Angelo, Hunter Singer,
Joseph Donahue and Robert Farrell. Mark Angelo, Hunter Singer, Joseph Donahue
and Robert Farrell are employees of May Davis.
As to the Line of Credit, we agreed to supply warrants to purchase eight hundred
and thirty three thousand and three hundred and thirty three (833,333) shares of
the Company's common stock at an exercise price of one hundred and ten percent
(110%) of the closing bid price of the Company's common stock on the day of
closing. The exercise price will be reset six (6) months from the closing date
to 110% of the then current closing bid price if the stock on that day is below
its price on the closing. May Davis or the holders shall be entitled to certain
demand registration rights with respect to the shares of common stock issuable
upon exercise of the warrants and the shares of common stock pursuant to a
registration rights agreement. Also, May Davis shall receive as cash
compensation an amount equal to three and three fifths percent (3.6%) of the
gross proceeds of each advance to the Company pursuant to the Line of Credit.
Upon Closing the Company shall issue to May Davis or its designated parties,
nine hundred and fifty five thousand and forty seven and one half (955,047.5)
restricted shares of the Company's common stock, and such stock shall also be
subject to this registration.
Apart from certain selling shareholders who received shares prior to the
transactions with May Davis, this prospectus primarily relates to the shares of
common stock issued in connection with the Line of Credit, issuaable under the
warrants, and to be issued upon conversion of the debentures. The effectiveness
of the Line of Credit is conditioned upon us registering the shares of common
stock underlying the agreement with the Securities and Exchange Commission. The
placement of the convertible debentures was effective upon the filing of a prior
registration statement, with the closing already completed prior to this date,
so that our Company received $250,000, less fees and expenses of the transaction
estimated of approximately $30,000.
ADVANCES. Pursuant to the Line of Credit, we may periodically sell shares to
Spinneret Financial Services, Ltd. to raise capital to fund our working capital
needs. The periodic sale of shares is known as an advance or put. There must be
a minimum of 11 trading days between puts.
MECHANICS. Under the Line of Credit, we may, at our discretion, request
advances by written notice, specifying the amount requested up to the
maximum advance amount. A closing will be held 11 days after such written notice
at which time we will deliver shares and the investor will pay the advance
amount. We have the ability to determine when and if we desire to draw an
advance if certain conditions are met.
COMMITMENT PERIOD. As part of the Line of Credit, we may request an advance at
any time during a 30 month commitment period, subject to termination for certain
events, including, breach of contract, and other events. The commitment period
begins on the date the Securities and Exchange Commission first declares the
accompanying registration statement effective.
MAXIMUM ADVANCE AMOUNT. We may not request advances in excess of a total of $10
million, though at such time as Spinneret Financial Services, Ltd. purchases
$10,000,000 of the Company's Common Stock, the Company, at its discretion, may
elect to enter into
12
an additional $10,000,000 common stock agreement with Spinneret Financial
Services, Ltd.. In addition, each individual advance is subject to a maximum
advance amount based on an average daily volume of our Company's common stock.
The maximum amount of each advance is equal to 150% of the average daily volume
of our Company's common stock for the 10 day trading period before each put or
advance closing multiplied by the purchase price.
CONVERSION PRICE. The advances under the Line of Credit are converted into
shares of common stock at a price of 91% of the lowest closing bid price on
the Over-the-Counter Bulletin Board or other principal trading market for the
10 days immediately following the notice of conversion. Note that the net
proceeds to be received by our company will be lower than the purchase price
due to our obligation to pay a placement agent fee of 3.6% of each advance to
May Davis.
REGISTRATION RIGHTS. We granted to the various May Davis parties registration
rights. We are also obligated to register the shares of common stock issue to be
issued upon exercise of the warrants. The registration statement accompanying
this prospectus will register such shares upon effectiveness. The May Davis
registration rights were subsequently transferred along with the warrants to
Mark Angelo, Hunter Singer, Joseph Donahue and Robert Farrell. The cost of this
registration will be borne by us.
NET PROCEEDS. We cannot predict the total amount of proceeds to be raised
in this transaction, in part, because we have not determined the total amount
of the advances we intend to draw. However, we expect to incur expenses of
approximately $150,000 consisting primarily of professional fees incurred in
connection with registering of the shares in this offering. In addition, we are
obligated to pay the May Davis a cash placement agent fee.
USE OF PROCEEDS. We intend to use the net proceeds received under the Line of
Credit and debenture transactions for general corporate purposes, such as
working capital, possible future acquisitions, and as otherwise determined by
Management.
PLACEMENT AGENT. We retained May Davis to act as our placement agent in
connection with the Line of Credit and debenture transactions. We will pay a
cash placement agent fee to the May Davis Group, Inc. equal to 4.5% of each
advance under the Line of Credit. Further, we granted to the May Davis Group,
Inc. warrants to purchase shares of common stock. The exercise price of the
warrants will be reduced in certain cases. All warrants are exercisable for five
years after the date of issuance. The holders of the warrants may, under certain
circumstances, exercise the warrants pursuant to a cashless exercise. May Davis
has decided to transfer the shares and warrants among certain persons, including
as to the debentures, and the following summarizes the shares and warrants
included herein relating to May Davis, as follows: a total of 3,500,000 shares
issuable in connection with a $250,000 debenture to the Company on or about this
date are also included as shares which may be sold by selling shareholders, upon
conversion of the debenture, by Rance Merkel, Michael Woelfel, Connie Benesch,
Cynthia Wilson, Gerald Holland, and Maryellen Misiak and shares issuable under
warrants held by certain of the selling shareholders, as follows: 8,333 shares
each by Robert Farrell, Joseph W. Donohue, Jr., Mark Angelo, and Hunter Singer;
and a total of 1,142,860 shares issued to them, as follows: 187,810 shares to
each of Messrs. Farrell, Donohue, Angelo, and Singer, and a Mr. Owen May, 4,000
shares of James Gonzales, and 12,000 shares of Kenneth G. Merkel, III.
NUMBER OF SHARES TO BE ISSUED. We cannot predict the actual number of shares of
common stock that will be issued pursuant to the Line of Credit or debentures,
in part, because the conversion price of the shares will fluctuate based on
prevailing market conditions and we have not determined the total amount of
advances we intend to draw. To assist our stockholders in evaluating the number
of shares of common stock that could be issued to Spinneret Financial Services,
Ltd. and the May Davis Group, Inc. at various prices, we have prepared the
following table. This table shows the number of shares of our common stock that
would be issued with and without the warrants at various prices.
13
DEBENTURE TRANSACTION
The Company received $250,000 less certain fees and expenses in consideration of
the issuance of convertible debentures. The transaction was closed prior to this
date. The Company promises to pay to the Holders of the $250,000 of debentures
in lawful money of the United States of America and in immediately available
funds the principal together with interest on the unpaid principal of this
Debenture at the rate of five percent (5%) per year (computed on the basis of a
365-day year and the actual days elapsed) from the date of this Debenture until
paid. At the Company's option, the entire principal amount and all accrued
interest shall be either (a) paid to the Holder on the five (5) year anniversary
from the date hereof or (b) converted. The Holder is entitled, at its option, to
convert at any time and from time to time after ninety (90) days from the
closing, until payment in full of the debenture, all or any part of the
principal amount of the Debenture, plus accrued interest, into shares of the
Company's common stock at the price per share equal to either (a) an amount
equal to 120% of the closing bid price on the closing of the common stock as
listed and as quoted by Bloomberg L.P., or (b) an amount equal to eighty percent
(80%) of the five (5) lowest closing bid price of the common stock for the
twenty (20) trading days immediately preceding the conversion.
PLAN OF OPERATION
-----------------
The following discussion and analysis should be read in conjunction with the
financial statements in this registration statement.
The Company remains a development stage company with immaterial revenues
and substantial general and administrative expenses, including expenses related
to its clinical studies programs. The Company's cash has been provided from
its fund-raising activities, all of which have been conducted on a private
basis (as to fund raising, we have received capital in private placements
of restricted stock to persons known by Management and believed to be accredited
investors.) The Company believes potential private placements, the agreement
with May Davis, and an eventual registered public offering, if successful,
will assist the Company in meeting its cash needs, but there is no guarantee.
These sporadic private placements are only to persons who are mostly, in
management's opinion, accredited investors, and willing to assume the risk of
loss of their entire investment, and management hopes that these subscriptions
will continue. The Company is seeking an underwriter to underwrite a public
offering of securities, and has sporadic discussions with interested parties in
New York, primarily, in the hope that one will be engaged.
The Company has not been able to substantially meet its cash needs during the
past 12 months. In May , 2001, we entered into a equity credit line agreement
with Spinneret Financial Services, Ltd. presented by May Davis Group, Inc., to
sell $10 million of the Company's common stock. The aggregate equity investment
committed to the Company by May Davis could reach $20 million. These funds will
be used to further develop our products, working capital, and for acquisitions,
alliances and other corporate opportunities. After the U.S. Securities &
Exchange Commission has declared effective a registration statement, each month
we anticipate recognizing proceeds from our agreement relating to May Davis.
Other terms and conditions apply.
We hope to generate revenue from licensing fees, creative production fees and a
technology license based on a cost-per-play model. We plan to produce and
distribute CyberSpot production software that will enable global production of
CyberSpots by advertisers, agencies and web development firms. Forefront plans
to license its family of technologies within the U.S., Asia and Europe.
Forefront 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; and (4) 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. DVT variable costs are also comprised entirely of human
resources. The DVT team will be responsible for marketing the DVT technology and
identifying additional applications for the technology. The CyberSpot per play
variable cost is comprised of the fee charged by the ad delivery strategic
partner. 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.
14
Forefront has recognized no revenue but has contracts, orders, and letters
of intent from customers. In addition, Forefront is presently producing
commercial spot advertisements that may generate future revenue. Revenue
recognition in the calendar year 2001 will depend upon the status of the
projects at that time and the applicable revenue recognition accounting
standards.
For the year ended June 30, 2000, the Company expended approximately $4,500,000
compared to spending of $20,000 for the period July 13, 1998 (inception) through
June 30, 1999. During both periods the expenses were administrative in nature.
On an ongoing basis, the Company expects to incur expenses typical to an OTC
Bulletin Board entity, including accounting fees, legal fees, filing fees and
transfer agent fees. The Company has five full time employees, with the
subsidiary Forefront Tech absorbing all personnel and indirect costs.
The Company and subsidiary Forefront Tech (formerly 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 combined operations
had net working capital deficit of $1,770,000 at June 30, 2000. The current
liabilities of $1,851,000 at June 30, 2000, include $500,000 of bridge financing
from a shareholder group, $106,000 of bridge financing from two company
founders, and accounts payable of $826,733.
The Company's estimated monthly cash requirements approximate $75,000. This
amount may decrease as revenue is generated. However, like most other
development stage companies, Forefront Tech and the Company may not generate
cash from operations for a number of quarters, if at all. The Company has
experienced severe cash flow deficiencies starting in June 2000.
As discussed in more detail under "Risk Factors", the Company is in immediate
need of capital due to significant cash flow deficiency and may not continue as
a going concern.
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.
BUSINESS
--------
THE COMPANY
Forefront, Inc. (including its operating subsidiary, unless the context
otherwise requires, the "Company" or "Forefront"), a Nevada corporation, was
formed in July, 1998, under the name Anyox Resources Inc. Anyox Resources, Inc.
was a development-stage company engaged in the exploration of minerals. On March
15, 2000, Anyox Resources, Inc. entered into a Share Exchange Agreement (the
"Agreement") with Web , Inc. ("WPI"), a Florida corporation formed in September,
1998, and two of WPI's primary shareholders, Wyly Wade and Mark Gray. The
Agreement allowed Anyox Resources to acquire WPI. As a result of the Agreement,
the management of WPI effectively took control of Anyox Resources, and the two
WPI principals, Mr. Wade and Mr. Gray, became major shareholders of the Company.
As a result of the merger, Anyox Resources changed its name to Forefront, Inc.
We are a development-stage company with our core business focused on the
research and development of new Web-based technologies primarily directed to
Internet advertising concerns. The Company also provides creative production
services in connection with developing online 30-second commercial spot
advertisements.
15
The description of our Company, the industry, competition, our plans and other
statements rely heavily upon our own creativity, research, opinions, forecasts,
estimations and other subjective criteria that may or may not prove accurate,
and is subject to the evolution of technologies, the Internet and our plans,
among other variables.
INDUSTRY BACKGROUND
Over the last several years, the marketplace has had high expectations for
business opportunities on the Internet. These expectations have been reflected
in the investments into the Internet made by traditional companies, and the
market capitalization of many new Web-based companies. The popularity of the
Internet has been well documented in recent years.
With an increasing number of users, the Internet is also gaining in importance
as a medium for advertising. Computer time is the leading activity that takes
people away from watching television, the currently preferred means used by
advertisers to reach an audience. Yet despite the rapidly growing Internet
audience, there are still barriers that have kept Internet advertising from
reaching its full potential. Marketers are still trying to gauge Internet
advertising's overall effectiveness, and to identify which techniques are most
effective.
While tools for tracking such information have improved, there is still no
universal standard for measuring an audience.
Companies with a presence on the Internet, but not engaged in e-commerce, rely
on advertising as their primary, if not only, source of Internet-generated
revenue. E-commerce companies also rely on advertising to supplement their
e-commerce sales. While on-line advertising has experienced tremendous growth
during the past several years, that growth has not translated into profits for
these companies. Many advertisers and agencies are not comfortable with current
methods for advertising via the Internet, nor available audience measurement
tools. Furthermore, results of the currently preferred method of advertising,
banner ads, have been inconclusive at best, and show major ineffectiveness at
worst. Advertisers are generally more comfortable with traditional means of
reaching their audience, especially through print, television and radio. Still,
Internet advertising is in its infancy, and is only beginning to find its true
potential.
INTERNET ADVERTISING TECHNOLOGIES / TECHNIQUES
Currently, there are a number of Internet advertising technologies or techniques
in use. The most prominent techniques are banner ads, sponsorship, interstitials
and emails. Banner ads are most prevalent. Emails to customers, while the least
employed technique, have been measured to be the most effective in eliciting a
response from the customers. The following are brief summaries of each
technology or technique:
BANNER ADS. Banner ads are typically inch-high "banners" that are found on the
top or bottom of a Web page. They can contain a company name, logos,
pictures and slogans. They can be static or animated with moving characters or
pictures. When a user clicks on the banner it takes the user to another
Web site. Although they are the most commonly employed form of Internet
advertising, they are the least likely to elicit a response.
SPONSORSHIPS. An advertiser may choose to "sponsor" a Web-site, helping the
online publisher by funding the site in exchange for advertising. This
typically requires an up-front payment by the advertiser, whether or not there
is a sale generated by the advertising. Sponsorships provide a valuable
association between brand and content.
INTERSTITIALS. Interstitials are advertisements that appear as Web users
switch between Web pages. Interstitials are the industries first answer to the
lack of audio and video in Internet advertising. However, interstitials have
grown out of favor with consumers as they may take as long as two minutes to
download. Current interstitials require substantial download time and therefore
may degrade a user's speed of receiving other Web content. Therefore, many
portals require such interstitial ads to be "click-based" where a user must
request the ad.
EMAIL. Email is one of the cheapest and most effective methods of Internet
advertising. Email provides for direct advertising to select customers. Yet,
emails only comprise a very small percentage of Internet advertising. This is
due to the intrusiveness of the email to consumers, and the resistance by
consumers to "spam" and clutter.
16
OTHERS. Other forms of Internet advertising include rich media expanding
banners and affiliations. Rich media banners include video and audio to bring
information to the consumer without leaving the current Web site. Affiliate
deals split an advertiser's revenues with a Web-site operator in exchange
for free advertising. Still, these forms of advertising are restricted by
there own disadvantages. Rich media banners require download time, cover
Web site content, and have been reported to cause Web sites to crash.
THE COMPANY'S PRODUCTS AND SERVICES
The Company's technology toolkit fills the needs of both Internet companies and
advertisers. The Company's array of technologies was designed to deliver a
complete online advertising platform. The system is comprised of a 30-second
commercial for major brand advertisers, and a system of audience measurement and
commercial delivery verification. This platform provides familiar media
advertising tools for major brand managers, coupled with the interactivity of
the Internet.
CYBERSPOTS are 30-second online, interactive-multimedia commercial spots, which
reach the audience quickly and with minimal interruptions using the Company's
Instant On User Interface technology. Delivery Verification Technology ("DVT")
allows for the most advanced feedback to measure the delivery of each
advertisement. By offering CyberSpots, Internet companies can provide effective
and measurable advertising to advertisers previously reluctant to participate in
Internet advertising. The Company's products and services help advertisers
reach Web users via a method more similar to traditional means of reaching the
audience, while being able to measure the results of the advertisement to a
degree not currently available by any other method.
INSTANT ON USER INTERFACE ("IOUI"). IOUi is a Web-based software technology
developed by the Company. Version 1.1 of the technology has been developed to
support popular browsers without the use of media players, plug-ins or software
attachments of any type, including the following platforms: HTML 3, HTML 4,
Perl, JAVA and JAVAScript. Management plans to develop Version 1.2 to support
popular browsers in concert with media players, including the following
platforms: Flash and SMIL. Version 1.3 is also in development and plans to
support XML, among other media enhancements.
The operating methodology allows a Web user to access specialized content in a
number of formats from a Web server with little or no delay across multiple
networks at most modem speeds (28.8 and above). One of the proprietary
applications of the IOUi technology is the CyberSpot.
IOUi technology is a unique combination of existing Web technologies requiring
no specialized hardware, browser or player software. Deployment of content
utilizing IOUi requires no modification of standard PC, Macintosh or WebTV
platforms in order to receive "instant on" content delivery. The technology
lives solely on a proprietary CyberSpot server.
CYBERSPOTS. CyberSpots are Web-based commercial spots, typically 30
seconds in duration, although shorter or longer formats may be supported.
CyberSpot creative treatments for advertisers and/or site operators are produced
in a proprietary methodology. The commercials may be displayed in an array of
sizes and resolutions ranging up to full screen. Additionally, CyberSpots have
the ability to playback many sub-components, which may include certain types of
audio tracks including music. The commercials may be automatically launched
in a number of applications, including when a user clicks on a banner ad, or
when a user enters a Web URL containing a link to a CyberSpot server.
Additionally, CyberSpot may be launched at any point when a user must wait
online, such as during an E-Commerce credit card authorization or while down
loading a file.
The CyberSpot technology empowers the advertiser (at the advertiser's option)
to take control of the user's browser for the duration of the commercial,
making play of the CyberSpot "uninterruptible". Should advertisers wish to
allow users to exit their CyberSpot commercial prior to completed play, the
advertiser may elect to enable a user exit button. Utilizing certain
technology, the Web-site is downloaded in the background during the playback
of a CyberSpot. This has the net effect of allowing full use of the commercial
playtime for site content download and / or site navigation. The end result is
the reduction of "world wide wait" delays online.
17
DELIVERY VERIFICATION TECHNOLOGY ("DVT"). Developed by the Company, DVT provides
the first online advertising measurement system that verifies audience reach and
spot delivery. Television advertisers rely on Nielsen / Arbitron audience
measurement systems that are estimated from electronically gathered survey
samples. Print advertisers rely on audited circulation distribution of
periodicals without confirmation of specific ad viewer ship. The CyberSpot DVT
rises to the level, in our opinion, of certified mail return receipt
confirmation. The technology operates via a return verification message that is
triggered from the online user's PC, Mac or WebTV once the CyberSpot has been
received and fully played.
DVT provides advertisers with reliable, real-time confirmation of audience reach
and spot delivery. The CyberSpot DVT allows multiple measurement points at the
commencement, completion and key measurement points throughout the CyberSpot
commercial. In essence, the CyberSpot DVT allows audience monitoring of spot
commercials on a scaleable level of detail. The CyberSpot DVT relies on
completed spot playback, not simply file receipt, to trigger its proprietary
return message system, giving advertisers complete audience measurement and
spot delivery verification.
TARGET MARKET AND DISTRIBUTION
Specific markets and client groups identified by the Company include advertising
agencies, advertising measurement companies, Internet portals, e-commerce
companies and consumer product companies with a desire to optimize their
Internet presence. The Company plans to market its technologies through
licensing agreements with companies that have existing sales and service
infrastructure. The Company does not plan to sell online advertising directly
to end-users or compete directly with its distribution channels.
INTERNET ADVERTISING
The Company has developed CyberSpot sponsorship formats, which provide the
least intrusive user experience. Market research studies have demonstrated
increased ad retention from program sponsorship spots to be greater than other
Internet adverting media. Furthermore, online sponsorship, as a promotional
tool, has increasingly grown in recent years. Advantages to online sponsorship
include the following: (1) a lower cost alternative for companies primarily
seeking branding / awareness; (2) they are fixed, which results in a higher
possibility of ad exposure for the advertiser; and (3) they offer the advertiser
exclusivity and the right of first refusal for future opportunities.
Traditional advertising agencies are currently in a rapid expansion of their
Internet advertising services. These companies are actively pursuing
opportunities to establish and grow their Internet advertising services in
order to provide their clients with an "integrated" advertising solution.
Internet advertising allows the agency to reach a mass-market while at the same
time providing a customizable pitch.
The Company's DVT is a client-based tracking system. The Company believes it
provides a more reliable standard for audience measurement than the current
server-based systems. DVT licensees will be able to offer their clients
confirmation that Web pages, banner ads and CyberSpots have been fully
downloaded and displayed on each unique user's terminal. Furthermore, the DVT
measures pages that did not load on the user's desktop, measures those pages
that are cached, and tracks user interactivity with loaded Web pages using an
active message back technology. These real-time verifications can be
incorporated into a company's billing and accounting system, saving the company
the costs and time needed to bill its clients.
DVT also has potential commercial applications outside measuring the delivery of
advertisements to consumers. For example, DVT can be used to notify email
senders that an email has been delivered to the recipient's email address. This
is particularly applicable to email delivery outside an organization or email
provider. Another potential application for DVT involves fraud detection and
prevention. DVT can be used to monitor the loading of software and report back
to the developer that the software has been loaded on a particular computer.
The developer can then determine whether the software was reloaded on other
computers. DVT can also be used to determine if multiple copies of the same
licensed software are running at the same time. Finally, DVT may also be used
to verify copyright and content usage. For example, DVT can measure how many
times a licensed article has been loaded on a licensed site.
18
RESEARCH AND DEVELOPMENT
We have spent $1,200,000 on research and development over the past fiscal year,
working on several research and development projects that it believes will
revolutionize the Rich Media and Audit/Reporting fields. The Company's research
and development team has made improvements and advances that will be integrated
into future releases of both CyberSpot and DVT. The Company believes that these
improvements further the overall goals of higher quality and smaller file size
that the Company has achieved with the release of CyberSpot and DVT 2.0.
BUSINESS DEVELOPMENT STRATEGY
We believe that favorable product reviews and word-of-mouth among creative,
sales, marketing, and Internet professionals are critical in creating greater
awareness and commercial acceptance of its products. In addition, the Company
seeks to generate awareness of its products through selective advertising in
industry publications. The Company is developing a reseller program. The Company
believes that the creation of a reseller program will allow for the expansion of
CyberSpot distribution while keeping sales, general and administrative cost low,
and be a compliment to the direct sales effort. In addition, the Company will
use aggressive public relations and publicity campaigns to expand awareness of
Forefront, CyberSpot and to compliment the expanded advertising effort. As the
Company develops contracts and business relationships with e-commerce companies,
the Company will continue to refine sales and marketing models as needed to meet
client needs.
POTENTIAL REVENUE-DRIVERS
The Company intends to generate revenue from licensing fees, creative /
production fees and a technology license-based on a cost-per-play model or
cost-per-action model. The Company plans to produce and distribute CyberSpot
production software that will enable global production of CyberSpots by
advertisers, agencies and web development firms. The Company intends to license
its family of technologies within the U.S., Asia and Europe.
The Company'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 and (4) DVT licensing. The following sections
provide more specific information on each revenue-driver.
AD DEVELOPMENT FEES / CREATIVE SERVICES. Clients are charged an hourly rate
plus materials to build CyberSpot ads. This is standard practice in the
advertising industry. The estimated cost to an advertiser for the development
of a CyberSpot ad ranges from $4000 to 30,000. With the development of the
Company's proprietary CyberSpot production software, advertising agencies and
development firms may bring production in-house.
CYBERSPOT DELIVERY. In addition to the development fee, advertisers are
responsible for a per-play license fee, or a cost-per-action license fee. The
per-play fee is volume sensitive.
CYBERSPOT LICENSING. One of the Company's strategies involves licensing its
technology toolkit to e-commerce groups, ad agencies, web developers,
portals, etc. These groups can use the technology to develop customized
CyberSpots regarding their sites, products and organizations. For example, an
automobile manufacturer can create a CyberSpot that allows a Web surfer to
instantly download and start playing video-like images, audio and text
information on a particular car. The CyberSpot can also be made interactive,
thus allowing the surfer to change colors, interiors and other options. The
Company intends to distribute this product without charge primarily through
the Internet and to license each user. The Company also intends to charge the
licensee on a per play model. CyberSpots produced by licensees will be hosted
by the Company or its strategic ad delivery partner. The Company also intends
to provide product training and technical support to licensees. The Company
does not currently plan to sell the toolkit through retail channels.
19
DVT INDUSTRY LICENSING. DVT has begun to develop into a stand-alone product. The
Company has received requests for information from several audience measurement
companies, including Nielsen Media Research, Arbitron and Media Metrix. However,
it is too early in the process to ascertain the eventual outcome of these
discussions. In order to provide the complete solution that the advertisers
need, the Company intends to license the DVT technology to one or two major
measurement companies such as Nielsen Media Research, Arbitron or Media Metrix.
Combining DVT with these type organizations and their extensive measurement
backgrounds and infrastructure could position DVT as the standard for online
advertising measurement.
The Company anticipates that the DVT license agreements will include a
technology transfer fee plus an ongoing royalty. The royalty will be based on
either a per measurement occurrence or a percentage of applicable revenues. The
Company's projections currently do not include any revenue from potential DVT
Licensing.
COMPETITION
The Company's competition in the online advertising industry comes from three
primary groups: (1) rich media companies, (2) advertisement delivery / sales
companies and (3) advertisement measurement companies. This is a young industry
with a majority of its players being formed within the last two to three years.
The growth of this industry has created opportunities for media and technology
companies. Some of these companies are developing and testing a number of new
banner advertising technologies, which are designed to make the traditional
banner ad more flexible, advanced and effective. Generally referred to as "rich
media," these ads incorporate an expanding array of animations, audio, pull down
menus, pop-up boxes and interactivity. While some companies are developing this
new banner technology, other companies are focusing on ad outsourcing and
placement services and still others are creating new technologies to better
track Internet advertisements.
The advertisement industry defines rich media as messages that contain more
sophisticated programming than the "plain-vanilla" banner ads. The most popular
form of rich media is Java applets, which can be read by browsers that are used
by more than 90% of the Web users. The greatest problems experienced with
rich media advertisements are that they are slow and unreliable, which
keeps many Web sites from running rich media advertisements.
INTELLECTUAL PROPERTY RIGHTS
The Company has filed for U.S. patent protection for a family of technologies
that include its IOUi, CyberSpots, and DVT technologies. The Company relies on a
combination of copyright and trademark laws, trade secrets, software security
measures, license agreements and nondisclosure agreements to protect its
proprietary rights. Much of the Company's proprietary information may not be
secured by means of patent, copyright, domain registration, or trade or service
mark. The Company's ability to enforce its rights will be critical to its
success once it has established an identity and reputation with advertisers and
Internet users. To date, the Company has not received notification that its
services or products infringe the proprietary rights of third parties. Third
parties, however, could make such claims of infringement in the future. The
Company cannot be certain that others will not develop substantially equivalent
or superseding proprietary technology, or that equivalent services will not be
marketed in competition with its services, thereby substantially reducing the
value of its proprietary rights. Furthermore, there can be no assurance that any
confidentiality agreements between the Company and its employees or any license
agreements with its customers will provide meaningful protection for its
proprietary information in the event of any unauthorized use or disclosure of
such proprietary information.
EMPLOYEES
As of May 30, 2001, the Company had five full time employees and various
independent contractors. Of these employees, one was classified as an executive
officer. None of the employees are subject to a collective bargaining agreement.
Subsequent to the fiscal year end, June 30, 2000, the Company has broadened its
marketing strategy from direct selling to include resellers. This change in
strategy, as well as cash flow issues, resulted in a reduction in support
personnel. Additionally, due to funding issues, several technical personnel have
voluntarily resigned. Until funding is secured, the Company will operate with a
limited staff of fewer than ten full-time employees.
20
DESCRIPTION OF PROPERTY
The Company leases, under a sub lease from a corporation operated by the son of
the President, its corporate headquarters located at 1413 South Howard Avenue,
Suite 104, Tampa, Florida, 33606. Square footage of the current location is
approximately 1,050 feet. The current lease payments are approximately $1,857
per month. The telephone number is (813) 253-2267. The lease commenced in
November 2000, and is scheduled to expire in November 2003. The Company believes
that the current facilities will not be suitable for the operation of its
business for the near future and is exploring new options. The location could be
replaced without significant disruption to business operations. Due to funding
issues, the facilities are not insured against perils commonly covered by
business insurance policies. See, "Certain Transactions."
MANAGEMENT
----------
The following table sets forth the Directors and executive officers of the
Company, their ages, and all offices and positions with the Company. Officers
and other employees serve at the will of the Board of Directors subject,
however, to any agreements.
Positions
Name of Director Age With Company
- ---------------- --- ------------
Santu Rohatgi 51 President, Chief Financial Officer, Secretary,
Treasurer and Director
Bruce Benson 46 Director
David Kennedy 42 Director
Santu Rohatgi was elected as a Director, effective March 15, 2000. Bruce Benson
and David Kennedy were elected as Directors, effective March 16, 2000. Mark
Burchill was elected a Director, effective March 22, 2000. Each Director will
serve until the next annual meeting of shareholders and their respective
successors are elected and qualified. Each officer serves, at the discretion
of the Board of Directors, and until his successor is elected at the
annual meeting of the board of directors and is qualified, subject to any
employment agreements.
EXECUTIVE OFFICERS, DIRECTORS AND OTHER SIGNIFICANT EMPLOYEES OF THE COMPANY:
SANTU ROHATGI has had ten years of management experience at AT&T, where he held
various management positions, including financial planning management of
start-up Internet Commerce Services; Manager of Support Operations; Director of
Operations, Northeast Division; and Director of Finance & Administration, New
England Region. He also ran a consulting services company for small and medium
size businesses in the area of information technology, business automation and
operations. He received an MA from Patna University in India, an MBA from
Eastern New Mexico University and a Masters Certificate in Project Management
from George Washington University. He is a Certified Project Management
Professional (PMP).
BRUCE BENSON oversees all aspects of iWeb, a privately held Internet startup
that provides enabling technologies and services for Web advertising that bring
Internet ad revenues to ISPs. Before joining iWeb, Benson was Executive Vice
President of Corporate Strategy and Technology of Young & Rubicam, where he was
responsible for Internet strategy and managed the global coordination of Y & R's
technological resources. Prior to joining Y & R, Mr. Benson was with Sony Music
as a Senior Vice President in several capacities, where he worked to develop
long-range strategies for the company, including early stage Internet plays.
Before his work at Sony, Benson was a partner at Price Waterhouse where he was
largely responsible for the launch of their thriving Entertainment and Media
Practice. He received a BS in mathematics from the University of Houston.
DAVID KENNEDY is a founder of TDRC Group, the largest intellectual property
consulting company in the nation. At TDRC, where his clients range from Fortune
100 companies to start-up ventures, he assists Internet and technology companies
formulate their strategic direction based upon maximizing the value of their
intellectual capital. Mr. Kennedy sits on the board of several Internet
related companies and is on the Advisory Board of an intellectual property
venture capital fund. Before founding TDRC, he was a senior partner in an
international consulting firm and was the partner in charge of the technology
transfer and patent licensing division. He received a BBA in accounting and is
a Certified Public Accountant in the state of Georgia.
21
No Director or executive officer of the Company has any family relationship with
any other director or executive officer of the Company.
Executive Compensation
The following table sets forth the compensation we have paid to Santu Rohatgi
(President and Chief Financial Officer) and to two affiliates of the Company,
Wyly Wade and Mark Gray for the fiscal year ended June 30, 2000. No other
executive officers received more than $100,000 in the fiscal year ended June 30,
2000. The Company does not currently have a long term compensation plan and
does not grant any long term compensation to its executive officers or
employees. The table does not reflect certain personal benefits, which in the
aggregate are less than ten percent of each Named Executive Officer's salary
and bonus. No other compensation was granted for this fiscal year ended
June 30, 2000.
SUMMARY COMPENSATION TABLE
Annual Compensation
----------------------------------
Other
Name Annual
And Compen- All Other
Principal sation Compen-
Position Year Salary ($) Bonus ($) sation ($)
(1) (2)
- ------------- ---- ----------- ------------ -------------
Santu 2000 $ 79,615.42 $ 20,571.92 $ 20,324.92
Rohatgi
(President/
CFO)
Mark Gray 2000 $ 79,615.42 $ 86,467.83 $ 18,117.03
(Business
Develop-
ment)
Wyly Wade 2000 $ 79,615.42 30,264.21 $ 14,770.43
(Director of
Tech-
nology)
- ------------- ---- ----------- ------------ -------------
22
(1) Bonus figures included in the schedule above include payments under the
Success By Objective Bonus (SBO) and, in the case of Mark Gray, merit bonuses
for his efforts in putting together the merger of WPI (now Forefront
Technologies, Inc.) and Anyox Resources, Inc. (now Forefront, Inc.). The SBO
bonuses are paid monthly with quarterly and annual goals and objectives set and
reviewed quarterly.
(2) Other compensation includes monies expended for health, life, and other
related benefits as well as company owned vehicles. Effective July 2000, cash
outlay for Company vehicles is covered by the individual assigned the
Company vehicle.
COMPENSATION OF DIRECTORS
Directors are not compensated for their service as directors. All directors are
reimbursed for any reasonable expenses incurred in the course of fulfilling
their duties as a director of the Company.
PRINCIPAL SHAREHOLDERS
----------------------
The following table sets forth information regarding beneficial ownership of our
common stock as of May 28, 2001 by all persons known by us to own beneficially
5% or more of the outstanding shares of our common stock, each director, and all
executive officers and Directors as a group:
Name and Address of Number of Shares Percentage
Beneficial Owner of Beneficially Owned (1) Ownership of Class(1)
- ---------------------------------------- ------------------------- ----------------------
Cede & Co. 2,196,308 10.5%
P.O. Box 20
Bowling Green Station
New York, NY 10004
Mark Gray 1,383,200 6.6%
1885 Bougainvillea
Sarasota, FL 34239
Wyly Wade 2,000,000 9.6%
540 West Tamiami Trail
Sarasota, FL 34238
Santu Rohatgi (2)(3)(4) 137,334 .6%
5403 Avenue Simone
Lutz, FL 33549
David Kennedy (2)(3)(4) 50,000 .2%
560 Hardage Farm Dr
Marietta, GA 30064
Bruce Benson (2)(3) 0 0
1413 South Howard Ave., Suite 104
Tampa, Fl 33600
All officers and directors as a group(2) 187,334 .9
23
- ----------------------------
(1) Calculated on the basis of 20,763,165 shares of Common Stock issued and
outstanding and percentages are rounded and so are approximates. Does not
consider shares issuable under options, warrants or debentures. Does not
include 1,500,000 options to Bruce Benson, 1,000,000 options to David
Kennedy, 100,000 options to Mark Burchill, 1,904,600 options to Santu
Rohatgi, and 363,636 options to employee Michael Tomlinson, 300,000 options
to Wyly Wade, and a total of 1,470, 196 miscellaneous options to employees,
and consultants with differing schedules and prices.
(2) Officer and/or Director, and does not consider any stock options rights the
person may have.
(3) The Director owns less than one percent.
(4) Includes, using reasonable efforts, an estimate, in accordance with Rule
13d-3, of shares an officer or Director may be deemed the beneficial owner
of. Does not consider, for Mr. Rohatgi and the total of all officers and
Directors, 69,600 shares of stock of Rising Solutions, Inc., a corporation
owned by his son. See, "Certain Transactions."
(5) It is the position of the Company that this shareholder is no longer
entitled to such shares and it is anticipated that the shareholder is in
the process of returning the shares for cancellation.
SELLING SHAREHOLDERS
--------------------
This prospectus relates to the offering, by certain persons who are shareholders
or may become shareholders, of a total of 48,971,926 shares of common stock
pursuant to this prospectus, consisting of the following:
An estimated 43,478,260 shares is issuable in connection with a $10,000,000
equity credit line agreement with Spinneret Financial Services, Ltd. ("Spinneret
Financial Services, Ltd. "), presented by May Davis Group, Inc. ("May Davis").
This number is an estimate and will change depending upon the trading price of
our stock in relation to each purchase. As to the Credit Line, the parties
agreed that at no time shall shares be purchased or issued to the Investor if
such shares would, in consideration of any ownership of the Investor, cause the
Investor to obtain an ownership interest in excess of 9.9%. At such time as
Spinneret Financial Services, Ltd. purchases $10,000,000 of our common stock,
we, in our discretion, may elect to enter into a second substantially identical
$10,000,000 common equity credit line agreement. Any shares as to a second
common equity credit line agreement are not included in this offering.
164,600 shares were issued in the past to certain selling shareholders, who were
given registration rights, as follows: 25,000 shares each to Anthony Agentowicz,
John Solleder, and Bruce M. Goldfarb, and 20,000 shares to Trevor Michael, and
69,600 shares to Rising Solutions, Inc. These shares were assigned by May Davis
to such persons.
A total of 3,500,000 shares issuable in connection with a $250,000 Debenture
loan to the Company on or about this date are also included as shares, which may
be sold by selling shareholders, upon conversion of the Debenture by Rance
Merkel, Michael Woelfel, Connie Benesch, Cynthia Wilson, Gerald Holland, and
Maryellen Misiak. The number of shares is an estimate and may change depending
upon our trading price in relation to the conversion of the loan into shares at
such time that such conversion occurs.
A total of 1,041,664 shares issuable under warrants held by certain of the
selling shareholders, as follows: 8,333 shares each by Robert Farrell, Joseph W.
Donohue, Jr., Mark Angelo, Hunter Singer, and May Davis Group and Trans-Global
Capital Holdings, Ltd. ("Trans-Global"); 166,666 shares each by Robert Farrell,
Joseph W. Donohue, Jr., Mark Angelo, Hunter Singer, and the May Davis Group, and
Trans-Global Capital Holdings, Ltd. ("Trans-Global"); and a total of 1,142,860
shares issued to them, as follows: 187,810 shares to each of Messrs. Farrell,
Donohue, Angelo, Singer, Owen May, 4000 shares of James Gonzales, 12,000 shares
of Kenneth G. Merkel, III, and 187,810 shares of Trans-Global. These securities
were assigned by May Davis to such persons and firms.
A total of 787,402 shares are also included in this registration relating to a
Mr. Mark E. Gray. He has converted a $100,000 payment due from our Company to
him for payment of these shares.
See "The May Davis Transaction," and "Certain Transactions."
OWNERSHIP OF SHARES OWNERSHIP OF SHARES
OF COMMON STOCK OF COMMON STOCK
PRIOR TO OFFERING (1) AFTER OFFERING(2)
--------------------- ------------------
SELLING SHAREHOLDER SHARES PERCENTAGE SHARES PERCENTAGE
- --------------------------------- ------- ---------- ------ ----------
Anthony Agentowicz 25,000 .1
1413 South Howard Ave. Suite 104
Tampa, Fl 33600
24
John Solleder 25,000 .1
1413 South Howard Ave. Suite 104
Tampa, Fl 33600
Bruce M. Goldfarb 25,000 .1
Trevor Michael 20,000 .1
1413 South Howard Ave. Suite 104
Tampa, Fl 33600
Rising Solutions, Inc. 69,600 .2
1413 South Howard Ave. Suite 104
Tampa, Fl 33600
Trans-Global Capital 187,810 .8
Holdings, Ltd.
622 Chardonnay Circle
Brandon, MS 39047
Rance Merkel (3) 0 0
497 Claude Simmons Road
Johnson City, TN 37602
Michael Woelfel (3) 0 0
111 Cabel County Courthouse
Huntington, WV 25701
Connie Benesch (3) 0 0
401 East 80th Street
Unit 14G
New York, NY 10021
Cynthia Wilson (3) 0 0
101 S. Jefferson Avenue
Cookeville, TN 38501
Gerald Holland(3) 0 0
22 Coult Lane
Old Lyme, CT 06732
Maryellen Misiak (3) 0 0
294 Long Hill Drive
Short Hills, NJ 07087
Robert Farrell (4) 187,000 .8
c/o May Davis
One World Trade Center
87th Floor
New York, NY 10048
Joseph W. Donohue, Jr. (4) 187,000 .8
c/o May Davis
One World Trade Center
87th Floor
New York, NY 10048
25
Mark Angelo (4) 187,000 .8
c/o May Davis
One World Trade Center
87th Floor
New York, NY 10048
Hunter Singer (4) 187,000 .8
c/o May Davis
One World Trade Center
87th Floor
New York, NY 10048
Owen May (4) 187,000 .8
c/o May Davis
One World Trade Center
87th Floor
New York, NY 10048
James Gonzales (4) 4,000 .01
c/o May Davis
One World Trade Center
87th Floor
New York, NY 10048
Kenneth G. Merkel, III (4) 12,000 .04
c/o May Davis
One World Trade Center
87th Floor
New York, NY 10048
_________________________________________
(1) Includes such shares the Company believes is owned by the person or firm,
but does not include shares issuable under warrants or otherwise unless
otherwise stated for the person or firm. The percentages are approximates and
are rounded for presentation.
(2) Given shares may or may not be issued under warrants and debentures, and
the shareholders may or may not sell their shares, and that the number of shares
that may be issued under the Line of Credit depends on various factors including
the then market price, we cannot readily estimate the number of shares and
ownership percentage following the offering. See, "May Davis Transaction."
(3) These persons are subscribers of the $250,000 total of debentures.
(4) Does not include shares underlying warrants which may or may not be
exercised. These are persons receiving shares and warrants as designated by May
Davis. See, "May Davis Transaction."
CERTAIN TRANSACTIONS
--------------------
The following transactions are believed by Management to be on terms as fair to
the Company as those the Company could have obtained from unrelated third
parties and arms-length negotiations.
26
David Kennedy, a Director, is an owner of a company named Technology & Dispute
Resolution Consulting, Inc. ("TDRCI"). On October 20, 1999, the Company entered
into an agreement with TDRCI whereby TDRCI is to provide professional services
for marketing and business plan expenses. During the fiscal year, the total
cost incurred under this agreement was $430,743.
Rising Solutions, Inc., operated by a son of Santu Rohatgi, and which was
co-founded by Santu Rohatgi, is the primary lessee of the current offices sub
leased by our Company. The primary lease is personally guaranteed by Mr. Santu
Rohatgi. Rising Solutions, Inc., is a selling shareholder hereunder. See,
"Description of Property," and Selling Shareholders."
The Company has loans from two shareholders for $50,000 and $56,000,
respectively, for a total of $106,000. All notes bear annual interest at 9.5%
per year and each note is due 12 months from the note agreement dates. At June
30, 2000, interest expense approximated $300. One portion of the accounts
payable, $318,243 at June 30, 2000, is payable to a Forefront Tech consulting
firm founded by a director of the Company. 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.
The Company has entered into an agreement with CyberQuest Group, Inc., a related
party, for certain professional services related to the development of the
Company's technologies. The companies are related through common ownership
and control. Costs incurred under this agreement at June 30, 2000 approximated
$781,349, and at the balance sheet date, the Company has accounts receivable
from CyberQuest Group, Inc. of $55,826. This agreement was terminated on
December 12, 1999 by both parties.
The Company also purchased certain fixed assets and rented other property from
CyberQuest during the fiscal year ended June 30, 2000 in the amount of $60,000
and $5,400, respectively. The Company engaged the professional services of a
firm owned by a member of the Board of Directors for marketing and business plan
expenses. Total costs incurred for the year ended June 30, 2000 were $430,743 of
which $318,243 is unpaid as of June 30, 2000.
DESCRIPTION OF SECURITIES
-------------------------
General
The transfer agent and registrar for our Company is: NEVADA AGENCY AND
TRUST COMPANY
50 WEST LIBERTY STREET,
SUITE 880 RENO, NV 89501
Common Stock
The issued and outstanding shares of common stock are fully paid and
non-assessable. Holders of common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders and may not
cumulate their votes for the election of directors. Shares of common stock are
not redeemable, do not have any conversion or preemptive rights and are not
subject to further calls or assessments once fully paid.
Holders of common stock will be entitled to share pro rata in such
dividends and other distributions as may be declared from time to time by the
Board of Directors out of funds legally available therefore. Upon our
liquidation or dissolution, holders of shares of common stock will be entitled
to share proportionally in all assets available for distribution to such
holders.
See, "Selling Shareholders."
Shares Eligible for Future Resale
- -------------------------------------
Future sales of substantial amounts of common stock pursuant to Rule 144 under
the Securities Act of 1933 or otherwise by certain shareholders could have a
material adverse impact on the market price for the common stock at the time.
There are presently approximately 5,247,118 outstanding shares of our common
stock held by Management and other shareholders, who are deemed "restricted
27
securities" as defined by Rule 144 under the Securities Act. Under certain
circumstances, these shares may be sold without registration pursuant to the
provisions of Rule 144. In general, under Rule 144, a person (or persons whose
shares are aggregated) who has satisfied a one-year holding period may, under
certain circumstances, sell within any three-month period a number of restricted
securities which does not exceed the greater of one (1%) percent of the shares
outstanding or the average weekly trading volume during the four calendar weeks
preceding the notice of sale required by Rule 144. In addition, Rule 144
permits, under certain circumstances, the sale of restricted securities without
any quantity limitations by a person who is not an affiliate of ours and has
satisfied a two-year holding period. Any sales of shares by shareholders
pursuant to Rule 144 may have a depressive effect on the price of our common
stock.
No prediction can be made as to the effect, if any, that sales of shares or the
availability of shares for sale as described above will have on the market
prices of the common stock prevailing from time to time. Nevertheless, the
possibility that substantial amounts of common stock may be sold in the public
market may adversely affect prevailing prices for the common stock and could
impair our ability to raise capital in the future through the sale of equity
securities. See "Risk Factors -- Future sales of common stock could depress the
price of our common stock."
PLAN OF DISTRIBUTION
--------------------
The common stock offered by this prospectus is being offered by the selling
shareholders and upon exercise of warrants and conversion of debentures. See
"Selling Shareholders." The common stock may be sold or distributed from time
to time by the selling shareholders, or by donees or transferees of, or other
successors in interests to, the selling shareholders, directly to one or more
purchasers or through brokers, dealers or underwriters who may act solely as
agents or may acquire such common stock as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be changed. The
sale of the common stock offered by this prospectus may be effected in one
or more of the following methods:
- - ordinary brokers' transactions;
- - transactions involving cross or block trades or otherwise on the
Nasdaq Bulletin Board;
- - purchases by brokers, dealers or underwriters as principal and resale
by such purchasers for their own accounts pursuant to this prospectus;
- "at the market" to or through market makers or into an existing
market for the common stock;
- in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through agents;
- in privately negotiated transactions; or
- any combination of the foregoing.
In order to comply with the securities laws of certain states, if applicable,
the shares may be sold only through registered or licensed brokers or dealers.
In addition, in certain states, the shares may not be sold unless they have been
registered or qualified for sale in such state or an exemption from such
registration or qualification requirement is available and complied with.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares as agents may receive compensation in the form of commissions,
discounts or concessions from the selling shareholder and/or purchasers of the
common stock for whom such broker-dealers may act as agent, or to whom they may
sell as principal, or both. The compensation paid to a particular broker-dealer
may be less than or in excess of customary commission.
28
The selling shareholder Spinneret Financial Services, Ltd. may be deemed an
"underwriter" within the meaning of the Securities Act of 1933, as amended, and
certain other selling shareholders, including upon exercise of warrants and
sales in connection with this offering, may also be deemed underwriters. Any
broker-dealers who act in connection with the sale of the shares hereunder may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions they receive and proceeds of any sale of the shares may be deemed to
be underwriting discounts and commissions under the Securities Act.
Neither we nor the selling shareholders can presently estimate the amount
of compensation that any agent will receive. We know of no existing arrangements
between any selling shareholder, any other shareholder, broker, dealer,
underwriter or agent relating to the sale or distribution of the shares. At a
time particular offer of shares is made, a prospectus supplement, if required,
will be distributed that will set forth the names of any agents, underwriters or
dealers and any compensation from the selling shareholder and any other required
information.
We will pay all of the expenses incident to the registration, offering and
sale of the shares to the public other than commissions or discounts of
underwriters, broker-dealers or agents. The Company has also agreed to indemnify
May Davis and related persons against specified liabilities, including
liabilities under the Securities Act. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and
controlling persons of the Company, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is therefore, unenforceable.
We have advised the selling shareholders that while they are engaged in a
distribution of the shares included in this prospectus it is required to comply
with Regulation M promulgated under the Securities Exchange Act of 1934, as
amended. With certain exceptions, Regulation M precludes the selling
shareholders, any affiliated purchasers, and any broker-dealer or other person
who participates in such distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is the
subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security. All of
the foregoing may affect the marketability of the shares offered hereby this
prospectus.
LEGAL MATTERS
-------------
Law Offices of Richard Rossi, P.A., will give an opinion for us regarding the
stock offered in this prospectus.
EXPERTS
-------
CHRISTOPHER, SMITH, LEONARD, BRISTOW, STANELL & WELLS, P.A. independent
certified public accountants, have audited our consolidated financial statements
at June 30, 2000 and for the year then ended as set forth in their included
report. The 1999 financial statements were audited by other auditors' whose
report dated September 27, 1999 expressed an unqualified opinion on those
statements. We have included our consolidated financial statements in the
registration statement , in reliance on their report given their authority as an
expert in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
-----------------------------------
We have filed a registration statement on Form SB-2 with the Securities and
Exchange Commission in connection with this offering. This prospectus does not
contain all of the information set forth in the registration statement, as
permitted by the Rules and Regulations of the Securities and Exchange
Commission. Whenever reference is made in this prospectus to any contract or
other document of ours, the reference may not be complete and you should refer
to the exhibits that are part of the registration statement for a copy of the
contract or document.
We also file annual, quarterly and current reports and other information with
the Securities and Exchange Commission. You may read and copy any report or
document we file, and the registration statement, including the exhibits, may be
inspected at the Securities and Exchange Commission's public reference room
located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Our Securities and Exchange Commission filings are
also available to the public from the SEC's website at: http://www.sec.gov.
------------------
29
TABLE OF CONTENTS
-----------------
PAGE
----
FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS F-1
CONSOLIDATED STATEMENTS OF OPERATIONS F-3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-7 - F-16
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
--------------- --------------
F - 1
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
=============== ==============
F - 2
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
=============== ===============
F - 3
(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.
F - 4
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
F - 5
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)
==================== ===================
F - 6
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,
F - 7
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
F - 8
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.
F - 9
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
F - 10
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
F - 11
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
F - 12
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.
F - 13
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.
F - 14
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.
F - 15
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.
F - 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The statutes, charter provisions, bylaws, contracts or other arrangements under
which controlling persons, directors or officers of the registrant are insured
or indemnified in any manner against any liability which they may incur in such
capacity are as follows:
(a) Section 78.7502 of the Nevada Business Corporation Act, as may be
amended or replaced, provides that each corporation shall have the following
powers:
1. A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner , which he reasonably believed to be in or not opposed to the best
interest of the corporation, and, with respect to any criminal action or
proceeding had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, or
itself create a presumption that the person did not act in good faith and in a
manner , which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or
is threatened to be made party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals there from, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction, determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, he must be indemnified by the corporation
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by
a court or advanced pursuant to subsection 5, must be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agents is proper in the
circumstances. The determination must be made:
30
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders, by independent legal
counsel, in a written opinion; or
(d) If a quorum consisting of two directors were not parties
to the act, suit or proceeding cannot be obtained, by independent legal counsel
in a written opinion.
5. The certificate or articles of incorporation, the bylaws or an
agreement made by the corporation may provide, as may be amended from time to
time, that the expenses of officers and directors incurred in defending a civil
or criminal action, suit or proceeding must be paid by the corporation as they
are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the certificate
or articles of incorporation or any bylaw, agreement, vote of stockholders of
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection 2 or for the
advancement of expenses made pursuant to subsection 5, may not be made to or on
behalf of any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director
officer, employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
7. The registrant's articles of incorporation limit liability of its
officers and directors to the full extent permitted by the Nevada Business
Corporation Act.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that its expenses in connection with this
Registration Statement will be as follows:
SEC registration fee . . . . . . . . . . . . $4,000
Legal fees and expenses . . . . . . . . . . $150,000
Accounting fees and expenses . . . . . . . . . $5,000
Miscellaneous . . . . . . . . . . . . . . . . $10,000
========
$169,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
31
In March 2000, the Company concluded a private placement offering of its Common
Stock. On completion of the offering, a total of 2,250,000 shares of its Common
Stock were issued at $0.85 per share for total proceeds of $1,912,500.00. The
investors are believed to be accredited investors who reside outside of
the United States.
In March 2000, the Company entered into a Share Exchange Agreement with Web
Partners, Inc. ("WPI") and two of its primary shareholders, (Messrs, Gray and
Wade). The Agreement provided for the Company to acquire WPI. Under the
Agreement, Messrs. Gray and Wade each exchanged 1,000,000 shares of their WPI
stock for 2,000,000 shares of restricted common stock of the Company (4,000,000
total shares).
In May 2000, as part of the Share Exchange Agreement and Agreement and Plan of
Merger between the Company and WPI, the Company exchanged its Common Stock for
the remaining Common Stock of WPI. Each share of WPI was exchanged for two
shares of the Company. The Company issued a total of 6,947,254 shares of common
stock to former shareholders of WPI (including Messrs. Gray and Wade). The
offer and issuance was exempt from registration under Rule 506 of Regulation D
of the Act.
In early 2000, we entered into an agreement involving the sale of 250,000 shares
of stock to Albany Partners, an overseas accredited investor, with certain
alleged registration rights, which would have required the shares to be included
in this registration but for a default by the investor.
The above transactions were undertaken with persons believed to be accredited
investors and under Section 4(2) of the Securities Act of 1933, as amended among
other possible exemptions.
ITEM 27. EXHIBITS
INDEX TO EXHIBITS
No. Description Page No.
- --------- ----------- --------
2.1* Share Exchange Agreement
2.2** Agreement and Plan of Merger
3.1*** Amended and Restated Articles of Incorporation
3.2***** Amended and Restated Bylaws
4.1***** Specimen Stock Certificate for Shares of Common Stock of the Company
4.2*** Class A Preferred Stock Designation of Rights and Preferences
5.1 Form of Opinion re: Legality of Law Offices of
Richard Rossi, P.A. (under Exhibit 23.1)
10.1***** Technology & Dispute Resolution Consulting, Inc. Agreement
10.2 Lease
10.3***** Employment Contract with Santu Rohatgi
10.4***** Employment Contract with Wyly Wade
10.5***** Employment Contract with Mark Gray
10.6 Equity Line of Credit Agreement with Spinneret Financial Services, Ltd.
10.7 Registration Rights Agreement with Spinneret Financial Services, Ltd.
32
10.8 Form of Debenture, $250,000 funding.
10.9 Registration Rights Agreement form as to $250,000 funding.
10.10 Form of Warrant by Company.
23.1 Consent of Experts and Counsel- Consent of Counsel
23.2 Consent of Experts and Counsel- Consent of Accountant
27.1 Financial Data Schedule
* Filed as an Exhibit to a report by the Company on a Form 8-K, filed March 30,
2000, and incorporated herein by this reference.
** Filed as an Exhibit to a report by the Company on a Form 8-K, filed June 8,
2000, and incorporated herein by this reference.
*** Filed as an Appendix to the Company's Definitive Proxy Statement, filed
April 25, 2000, and incorporated herein by this reference.
**** Filed as an Exhibit to a report by the Company on a Form 8-K, filed March
21, 2000, and incorporated herein by this reference.
***** Filed as an Exhibit to a report by the Company on Form 10-KSB for the year
ended June 30, 2000, and incorporated herein by reference.
ITEM 28. UNDERTAKINGS
RULE 415 OFFERING. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to: (i) include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information set forth in the Registration
Statement; and (iii) include any additional or changed material information in
the plan of distribution.
(2) For determining liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
Offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Act"), may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
33
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing this Registration Statement Form SB-2 and
authorizes this Registration Statement to be signed on its behalf by the
undersigned, in the City of Tampa, in the State of Florida on May 30, 2001.
FOREFRONT, INC.
By: /s/ Santu Rohatgi
-------------
Santu Rohatgi, President
(principal executive officer)
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
SIGNATURE TITLE DATE
(Capacity)
/S/Santu Rohatgi President, Chief Financial Officer, May 30, 2001
- ------------------- Treasurer and Director
Santu Rohatgi (Principal Executive Officer, Principal
Financial and Accounting Officer,
and Director)
/S/ Bruce Benson Director May 30, 2001
- -------------------
Bruce Benson (Director)
/S/ David Kennedy Director May 30, 2001
- -------------------
David Kennedy (Director)
34