Forefront, Inc.
Filing Type: SB-2/A
Description: Amended Registration
Statement for Small Business Issuers
Filing Date:
Primary Exchange: Over the Counter
Bulletin Board
Ticker: FOFR
Page
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Number
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON August 15, 2001
REGISTRATION NO. 333-64570
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2
To
FORM SB-2
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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Forefront, Inc.
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(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)
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Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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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.[ ]
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 there after become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
2
CALCULATION OF REGISTRATION FEE
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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 $ .08 $ 6,992,736 $ 960
.001 par value Stock (2)
48,971,926
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_________________________________________
(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 Forefront's
Common Stock as of June 28, 2001. Forefront previously paid the sum of
$1,680 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 Systems, 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%.
(3) Includes 164,600 shares issued to certain selling security holders 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.
(4) Includes a total of 3,500,000 shares, issuable in connection with a
$250,000 Debenture loan to Forefront 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.
(5) Includes a total of 1,041,664 shares issuable under warrants held
by the May Davis Group, Inc., and a total of 1,142,857 shares of May Davis.
(6) Includes 787,402 shares issued to Mark D. Gray.
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3
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SUBJECT TO COMPLETION, DATED August 15,, 2001
P R O S P E C T U S
FOREFRONT, INC.
48,971,926 SHARES
Selling shareholders of Forefront are registering for resale
up to 48,971,926 shares of common stock which they will receive from us and
which underlie convertible notes and warrants that they hold. Our common stock
trades on the Over-the-Counter Bulletin Board under the symbol "FOFR." On August
15, 2001, the last reported sales price of the common stock was $.06. The
selling shareholders will sell the common stock at market prices and Forefront
will not receive any of the proceeds from those sales, except for the proceeds
from an equity line agreement with an investor and exercise prices for the
warrants.
Spinnert Financial Systems, Ltd. is an underwriter within the meaning of the
Securities Act of 1933.
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Investing in Forefront involves significant risks.
Investors need to read the "Risk Factors" beginning on page 5.
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Neither the Securities and Exchange Commission nor states securities
regulators have approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this Prospectus is August 15, 2001.
TABLE OF CONTENTS
SELLING SECURITY HOLDERS CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONSLEGAL MATTERS . . . . . . . . . . . . . . . . . . . 3
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PROSPECTUS SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SELLING SECURITY HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . 9
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
DIRECTOR, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS. . . . . . . 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. . . . . . 16
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 18
DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 19
PLAN OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . . . . . 26
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. . . . . . . . . 26
EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . 27
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . . . . . 27
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . F-1
PROSPECTUS SUMMARY
Forefront
Forefront is a Nevada Corporation that develops technologies for
Internet advertising. Graphic artists can use the technology to develop
commercials that would have video, music, and motion. This technology is called
Cyberspot. Other technology is still under development and is called Delivery
Verification Technology. Delivery Verification Technology will be used for
measuring the accuracy of the advertising. It enables the advertiser to measure
the responses of the viewer. The advertiser will have the ability to measure the
percentages of the viewers that viewed the commercial in full. Forefront, Inc.
has generated very minimal revenues below $50,000 in total. Forefront has some
signed contracts which are still under testing, and will not create revenues for
at least another 60 days Forefront has yet to be profitable.
The Offering
Common Stock outstanding 22,016,975
Securities Offered: Up to, 48,971,926 shares of common stock. The
Shares will be sold by the selling
stockholders named herein.
Use of Proceeds: We will not receive any proceeds from the
sale of the Shares by the selling security
holders, though we may receive, subject to
various conditions, a total of $10,822,914
under an equity line agreement with an
investor and if the warrants issued to our
investors are exercised. We will pay the cost
of registering the Shares under the
prospectus.
4
RISK FACTORS
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The securities offered herein involve a high degree of risk. Accordingly,
before deciding to purchase, investors should carefully consider the following
risk factors along with the other matters discussed herein. The words "we" or
"us" in this section and elsewhere in this document refer to Forefront, Inc.
We cannot be succesful if we are not able to satisfactory market our
technologies to customers or resellers
Our various technologies compete in highly competitive markets. Our prospects
for success will therefore depend upon our ability to successfully market our
technologies either directly to customers or through resellers who may be
inhibited from doing business with Forefront's technologies because of the
commitment to other technologies or for other reasons beyond our control. We
cannot be succesful without acceptance of our products in the market. We need
significant funds for our business plan.
Forefront cannot meet its needs for its business plans, working capital and
to pay outstanding debts that are owed to vendors, employees, and contractors.
If these obligations are not paid, Forefront may be forced to scale back or
cease operations.
Forefront needs 4 million dollars to execute our business plan and pay back
debts and develop our technologies for market penetration. A failure by
Forefront to generate or raise sufficient funds may require Forefront to
abandon some or all future expansion plans which may adversely affect our
financial condition, results of operations and cash flow.
We have a net worth deficit as of our latest balance sheet date. This deficit
indicates that we will be unable to meet our future obligations unless
additional funding sources are obtained. If we are unable to obtain funding, we
would be unable to continue in business. In addition, the report of our auditors
includes a going concern qualification which means that Forefront cannot
continue in operation unless funding is acquired. We believe that our efforts
will help us to raise capital, however, there are no guarantees. If we are
unable to secure funding, we may not be able to continue operations.
We have losses and anticipate further losses and so we need capital or we will
fail.
For the fiscal year ended June 30, 2000, we sustained a loss before other
Income, expenses of approximately $2,014,224 and for the fiscal year ended June
30, 1999, we sustained a loss before other income, expenses of $ 20,182. Future
losses are anticipated. We continue to have insufficient cash flow to grow
operations and we cannot assure you that we will be successful in reaching or
maintaining profitable operations. If we are unable to raise additional funds
when necessary, we may have to reduce planned expenditures, scale back our
product developments, sales or other operations, lay-off employees and enter
into financing arrangements on terms that we would not otherwise accept or be
forced into insolvency.
We have a limited product range and this could impact our future revenues
and success.
Our product range is limited in scope both today and for the foreseeable future.
For example, Cyberspot technology must be developed for future versions for
market penetration. We need capital to develop our products, including future
versions, for at least the next 24 months, perform internal and external tests,
and provide the technology to advertising companies or customers for their use.
If funds are not secured, we cannot complete our plansLack of further
developments would hamper our revenue expectations and keep us from becoming
successful. Due to lack of capital, we continue to delay the developments and
completion of our technologies. If funding is not secured shortly, we are
subject to the risk that competition may create similar technologies, and we
may lose to the competition. We may not be able to raise additional Capital, and
we may be forced to cease operations.
5
Forefront does mot have product liability insurance.
We have not acquired liability insurance with respect to provision of products
and services. Without insurance to cover potential damages resulting from
liability claims stemming from our products or services, we must shoulder any
final award of damages which could significantly affect our business operations
if the award is substantial. We may not be able to shoulder such damages, and
that could force Forefront to cease operations.
6
The potential of a substantial number of shares being issued under the equity
credit line may make it more difficult for Forefront to sell its stock and/or
may depress our stock price.
The sale of a substantial number of shares of our common stock under the Credit
Line , 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 given the fear that may be created that too many shares may become
trading and this may cause a downward pressure on our trading price,
unattractive aspects to potential future investors.
We may not experience all or a material part of the proceeds under the Credit
Line given our historical stock performance.
Our ability to recognize proceeds from the Credit Line is conditioned upon the
market price and volume of our stock, with poor performance decreasing our
expectation to proceeds. While Forefront expects to raise up to $10,000,000 over
a 30 months period, there is a risk that it will not happen. An analysis of the
12-month period ending July 31, 2001, presents an average volume of
approximately 148,316, and an average price of approximately $0.69, which could
mean, had the equity line been in place, proceeds of a total of approximately $
1,867,695f or the 12 months, or an average of $ 155,641 Per month. Projecting
the past 12 month average to 30 months per the equity line agreement could have
meant approximately $ 4,669,230 in total for 30 months, which is materially less
than the $10,000,000 expectation. Based on our analysis, there is a risk that
Forefront may not be able to raise $10,000,000 with consideration based on the
past trading volumes and prices, since the inception of Forefront in March of
2000, though the future market price and volume during the Credit Line period
will apply.
We may not experience all or a material part of the proceeds under the Credit
Line given the investor agreement not to exceed 9.9% ownership at any particular
time.
Our ability to recognize proceeds under the equity line is also reduced by the
fact that the investor has agreed not to exceed a 9.9% ownership interest in
Forefront at any particular time. This reduces the amount the investor could
otherwise pay at any particular time, in accordance with the agreement, given we
will not be able to provide shares in excess of 9.9% ownership in any one
transaction when considered with any shares the investor holds at that time.
7
USE OF PROCEEDS
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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 security holders. However, we may receive up to
$10,000,000 in proceeds under our agreement with May Davis and Spinnernet
Financial Systems and we may receive proceeds from the exercise of the
warrants. Such proceeds will be used to for develop the Cyberspot and
Delivery Verification Technology. The funds will be used to pay past due
accounts payable to employees, contractors, and vendors.
Forefront has developed marketing and advertising strategies that need to be
implemented to generate revenues and we need this capital to do so. 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.
8
SELLING SECURITY HOLDERS
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General
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 Systems, Ltd. , presented
by May Davis Group, Inc 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%.
164,600 shares were issued in the past to certain selling security holders, 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 3,500,000 shares issuable in connection with a $250,000 Debenture
loan to Forefront 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 May Davis and a
total of 1,142,860 shares issued to May Davis. 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 Forefront to him for payment of these
shares.
OWNERSHIP OF SHARES OWNERSHIP OF SHARES
OF COMMON STOCK OF COMMON STOCK
PRIOR TO OFFERING (1) AFTER OFFERING(2)
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SELLING SHAREHOLDER SHARES PERCENTAGE SHARES PERCENTAGE
- --------------------------------- ------- ---------- ------ ----------
Anthony Agentowicz 25,000 .1 0 0
1413 South Howard Ave. Suite 104
Tampa, Fl 33600
Spinneret Financial Systems, 0 0 0 0
Ltd.(2)(5) (6)
c/o McGuire Woods LLP
9 West 57th Street
Suite 1620
New York, NY 10019-2602
9
John Solleder 25,000 .1 0 0
1413 South Howard Ave. Suite 104
Tampa, Fl 33600
Bruce M. Goldfarb 25,000 .1 0 0
Trevor Michael 20,000 .1 0 0
1413 South Howard Ave. Suite 104
Tampa, Fl 33600
Rising Solutions, Inc.(5) 69,600 .2 0 0
1413 South Howard Ave. Suite 104
Tampa, Fl 33600
Rance Merkel (3) 0 0 0 0
497 Claude Simmons Road
Johnson City, TN 37602
Michael Woelfel (3) 0 0 0 0
111 Cabel County Courthouse
Huntington, WV 25701
Connie Benesch (3) 0 0 0 0
401 East 80th Street
Unit 14G
New York, NY 10021
Cynthia Wilson (3) 0 0 0 0
101 S. Jefferson Avenue
Cookeville, TN 38501
Gerald Holland(3) 0 0 0 0
22 Coult Lane
Old Lyme, CT 06732
Maryellen Misiak (3) 0 0 0 0
294 Long Hill Drive
Short Hills, NJ 07087
May Davis (4)(5) 1,142,860 4.88 0 0
One World Trade Center
87th Floor
New York, NY 10048
Bruce Goldfarb 25,000 .1 0 0
1413 S. Howard Ave. #101
Tampa, Fl 33606
Mark E. Gray 787,402 3.4 0 0
1413 S. Howard Ave. #101
Tampa, Fl 33606
MARK E. GRAY 787,402 SHARES
_________________________________________
(1) Includes such shares Forefront 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) Assumes the registration and sale of a total of 48,971,926 shares total.
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 can only estimate the number of shares and ownership
percentage following the Offering.
(3) These persons are subscribers of the $250,000 total of debentures and this
does not include shares which may be issued upon a conversion of the debentures.
(4) Does not include shares underlying warrants which may or may not be
exercised.
(5) The principals of the entities are as follows: Spinneret Financial Systems,
Ltd., is , Alfred Hahnfeldt Rising Solutions, Inc. are Ryan Reed Rohatgi and
Santu Rohatgi, our President, and May Davis are Owen May and Kevin Davis.
(6) A total of a maximum of 43,478,260 shares is anticipated to be issued to
Spinneret Financial Systems, Ltd. under the equity line. This is the number
included in this offering, though not currently owned by Spinneret. This figure
is subject to both market conditions and an agreement by Spinneret not to exceed
9.9% ownership; either or both conditions could result in less than this amount
being owned or sold by Spinneret. After the offering it is anticipated that
Spinneret may own and/or sell these shares, but Spinneret may own and/or sell
less than this amount. We cannot estimate how many shares Spinneret will have or
will sell.
10
May Davis transaction
Introduction
We have entered into, as of January 1, 2001, two Placement Agreements with the
May Davis Group, Inc.; 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 Forefront to
subscribers presented by May Davis, which already occurred. As to the first
agreement, pursuant to the July 2 , 2001, equity line of credit agreement with
Spinneret Financial Systems, Ltd. facilitated by May Davis Group, Inc. , we may,
at our discretion, periodically issue and sell to Spinneret Financial Systems,
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 Forefront requests an advance under the agreement, Spinneret Financial
Systems, Ltd. will purchase shares of common stock of Forefront 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 Systems, 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, Forefront granted to May Davis shares of common
stock and warrants to purchase shares.
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
Forefront's common stock at an exercise price of one hundred and ten percent
(110%) of the closing bid price of Forefront'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 (3.5%) of the
gross proceeds of each advance to Forefront pursuant to the Line of Credit.
Forefront is providing May Davis 1,142,860 restricted shares of Forefront's
common stock, and such stock shall also be subject to this registration.
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 Forefront received $250,000, less fees and expenses of the
transaction estimated of approximately $30,000.
Placement fee
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 holder of the
warrants may, under certain circumstances, exercise the warrants pursuant to a
cashless exercise.
Number of shares to be issued
Pursuant to the Line of Credit, we may periodically sell shares to Spinneret
Financial Systems, 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. 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.
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. In
addition, each individual advance is subject to a maximum advance amount based
on an average daily volume of our common stock. The maximum amount of
each advance is equal to 150% of the average daily volume of Forefront
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
Forefront 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 May Davis and the Investor registration rights. We are
also obligated to register the shares of common stock to be issued upon
exercise of the warrant. The registration statement accompanying this prospectus
will register such shares upon effectiveness. 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.
11
Debenture transaction
Forefront received $250,000 less certain fees and expenses in consideration of
the issuance of convertible debentures. The transaction was closed prior to this
date. Forefront 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
Forefront'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 Forefront'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.
12
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. The
common stock may be sold or distributed from time to time by the Selling
Security Holders, 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.
13
The selling shareholder Spinneret Financial Systems, 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 Security Holders 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. Forefront 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 Forefront , 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 Security Holders 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.
Purchasers of shares may suffer substantial dilution.
The purchase under the equity credit line agreement of a significant shares of
common stock may result in substantial dilution to the ownership interests of
purchasers of Shares under this Offering, even though, 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%.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
------------------------------------------------------------
The following table sets forth the Directors and executive officers of Forefront
, their ages, and all offices and positions with Forefront. 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 52 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. 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 forefront:
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 .
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 Forefront, 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 Technology and Dispute Resolution Consulting,
Inc., one of the largest intellectual property consulting companies in the
nation. At Technology and Dispute Resolution Consulting, Inc., 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 Technology and
Dispute Resolution Consulting, Inc., 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.
14
No Director or executive officer of Forefront has any family relationship with
any other director or executive officer of Forefront.
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 Forefront, Wyly
Wade and Mark Gray for the fiscal year ended June 30, 2000. No other executive
officers received more than $100,000 in the fiscal year ended June 30, 2000.
Forefront does not currently have a long term compensation plan and does not
grant any long term compensation to its executive officers or employees. The
table does not reflect certain personal benefits, which in the aggregate are
less than ten percent of each Named Executive Officer's salary and bonus. No
other compensation was granted for this fiscal year ended June 30, 2000.
SUMMARY COMPENSATION TABLE
Annual Compensation
----------------------------------
Other
Name Annual
And Compen- All Other
Principal sation Compen-
Position Year Salary ($) 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
- ----------- -------- ----------- ----------- -----------
15
(1) Bonus figures included in the schedule above include payments under the
Success By Objective Bonus and, in the case of Mark Gray, merit bonuses for his
efforts in putting together the merger of Web Partners, Inc., now Forefront
Technologies, Inc. and Anyox Resources, Inc., now Forefront, Inc. The 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 Forfront vehicles is covered by the individual assigned Forefront
vehicle.
Compensation Of Directors
Our 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 Forefront
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth information regarding beneficial ownership of our
common stock as of June 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
<FN>
16
- ----------------------------
(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.
17
DESCRIPTION OF SECURITIES
-------------------------
General
The transfer agent and registrar for Forefront 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
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
18
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.
DESCRIPTION OF PROPERTY
-----------------------
Forefront 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. Forefront 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.
DESCRIPTON OF BUSINESS
----------------------
Forefront history
Forefront, Inc., and including its operating subsidiary, unless the context
otherwise requires, 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 Partners, Inc.
, a Florida corporation formed in September, 1998, and two of Web Partners,
Inc.'s primary shareholders, Wyly Wade and Mark Gray. The Agreement allowed
Anyox Resources to acquire Web Partners, Inc.. As a result of the Agreement, the
management of Web Partners, Inc. effectively took control of Anyox Resources,
and the two Web Partners, Inc. principals, Mr. Wade and Mr. Gray, became major
shareholders of Forefront. 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. Forefront also provides creative production
services in connection with developing online 30-second commercial spot
advertisements.
19
The description of Forefront, 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 often rely on advertising as their
primary, if not only, source of Internet-generated revenue. 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.
20
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.
Products and services
Our technology product fills the needs of both Internet companies and
advertisers. Forefront'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 Forefront's
Instant On User Interface technology. Delivery Verification Technology 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. Forefront'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.
Instant On User Interface is a Web-based software technology developed by
Forefront. Version 1.1 of the technology has been developed to support popular
browsers with video, motion, and sound commercials.
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 of 28.8 and above. One of the proprietary
applications of the Instant On User Interface technology is the CyberSpot.
Instant On User Interface technology is a unique combination of existing Web
technologies requiring no specialized hardware, browser or player software.
Deployment of content utilizing Instant On User Interface 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 Website containing a link to a CyberSpot server.
The CyberSpot technology empowers the advertiser 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.
21
Delivery Verification Technology.
Developed by Forefront, DELIVERY VERTIFACTION TECHNOLOGY 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 DELIVERY VERTIFACTION
TECHNOLOGY 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.
DELIVERY VERTIFACTION TECHNOLOGY provides advertisers with reliable, real-time
confirmation of audience reach and spot delivery. The CyberSpot DELIVERY
VERTIFACTION TECHNOLOGY allows multiple measurement points at the commencement,
completion and key measurement points throughout the CyberSpot commercial. In
essence, the CyberSpot DELIVERY VERTIFACTION TECHNOLOGY allows audience
monitoring of spot commercials on a scaleable level of detail. The CyberSpot
DELIVERY VERIFICATION TECHNOLOGY 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 Forefront include advertising
agencies, advertising measurement companies, Internet portals, e-commerce
companies and consumer product companies with a desire to optimize their
Internet presence. Forefront plans to market its technologies through
licensing agreements with companies that have existing sales and service
infrastructure. Forefront does not plan to sell online advertising directly to
end-users or compete directly with its distribution channels.
Internet advertising
Forefront 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.
Forefronts DELIVERY VERTIFACTION TECHNOLOGY is a client-based tracking system.
Forefront believes it provides a more reliable standard for audience measurement
than the current server-based systems. DELIVERY VERTIFACTION TECHNOLOGY
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 DELIVERY VERTIFACTION TECHNOLOGY
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 Forefront
the costs and time needed to bill its clients.
DELIVERY VERTIFACTION TECHNOLOGY also has potential commercial applications
outside measuring the delivery of advertisements to consumers. For example,
DELIVERY VERTIFACTION TECHNOLOGY 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 DELIVERY VERTIFACTION TECHNOLOGY involves fraud
detection and prevention. DELIVERY VERTIFACTION TECHNOLOGY 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. DELIVERY
VERTIFACTION TECHNOLOGY can also be used to determine if multiple copies of the
same licensed software are running at the same time. Finally, DELIVERY
VERTIFACTION TECHNOLOGY may also be used to verify copyright and content usage.
For example, DELIVERY VERTIFACTION TECHNOLOGY can measure how many times a
licensed article has been loaded on a licensed site.
22
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. Forefront's research
and development team has made improvements and advances that will be integrated
into future releases of both CyberSpot and DELIVERY VERTIFACTION TECHNOLOGY.
Forefront believes that these improvements further the overall goals of higher
quality and smaller file size that Forefront has achieved with the release of
CyberSpot and DELIVERY VERTIFACTION TECHNOLOGY 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, Forefront
seeks to generate awareness of its products through selective advertising in
industry publications. Forefront is developing a reseller program. Forefront
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, Forefront will use
aggressive public relations and publicity campaigns to expand awareness of
Forefront, CyberSpot and to compliment the expanded advertising effort. As
Forefront develops contracts and business relationships with e-commerce
companies, Forefront will continue to refine sales and marketing models as
needed to meet client needs.
Potential revenue-drivers
Forefront 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. Forefront plans to produce and distribute CyberSpot
production software that will enable global production of CyberSpots by
advertisers, agencies and web development firms. Forefront intends to license
its family of technologies within the U.S., Asia and Europe.
Forefront'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) DELIVERY VERTIFACTION TECHNOLOGY
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 Forefront'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 Forefront'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. Forefront intends to distribute this product
without charge primarily through the Internet and to license each user.
Forefront also intends to charge the licensee on a per play model. CyberSpots
produced by licensees will be hosted by Forefront or its strategic ad delivery
partner. Forefront also intends to provide product training and technical
support to licensees. Forefront does not currently plan to sell the toolkit
through retail channels.
23
DELIVERY VERTIFACTION TECHNOLOGY/ industry licensing
DELIVERY VERTIFACTION TECHNOLOGY has begun to develop into a stand-alone
product. Forefront 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 the
advertisers need, we intend to license the DELIVERY VERTIFACTION TECHNOLOGY to
one or two major measurement companies such as Nielsen Media Research, Arbitron
or Media Metrix. Combining DELIVERY VERTIFACTION TECHNOLOGY with these type
organizations and their extensive measurement backgrounds and infrastructure
could position DELIVERY VERTIFACTION TECHNOLOGY as the standard for online
advertising measurement.
We anticipate that the DELIVERY VERTIFACTION TECHNOLOGY 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. Forefront's projections currently do not include any revenue from
potential DELIVERY VERTIFACTION TECHNOLOGY Licensing.
Competition
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
Forefront has filed for U.S. patent protection for a family of technologies
that include its Instant On User Interface, CyberSpots, and DELIVERY
VERTIFACTION technology. Forefront relies on acombination of copyright and
trademark laws, trade secrets, software security measures, license agreements
and nondisclosure agreements to protect its proprietary rights. Much of
Forefront's proprietary information may not be secured by means of patent,
copyright, domain registration, or trade or service mark. Our 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, Forefront 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. Forefront 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 Forefront
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 June 30, 2001, Forefront had four 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, Forefront 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, Forefront will operate with a
limited staff of fewer than ten full-time employees.
PLAN OF OPERATION
-----------------
The following discussion and analysis should be read in conjunction with
the financial statements in this registration statement.
Forefront remains a development stage company with immaterial revenues
and substantial general and administrative expenses, including expenses related
to its clinical studies programs. Forefront's cash has been provided from its
fund-raising activities, all of which have been conducted on a private basis to
accredited investors. Forefront believes potential private placements, the
agreement with May Davis, and an eventual registered public offering, if
successful, will assist Forefront 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. Forefront 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.
Forefront 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 Systems, Ltd. Presented by May Davis Group,
Inc., to sell $10 million of Forefront's common stock. 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) DELIVERY VERTIFACTION TECHNOLOGY
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. DELIVERY VERTIFACTION
TECHNOLOGY variable costs are also comprised entirely of human resources. The
DELIVERY VERTIFACTION TECHNOLOGY team will be responsible for marketing the
DELIVERY VERTIFACTION 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.
24
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, Forefront expended approximately
$4,500,000 compared to spending of $20,000 for the period July 13, 1998 since
the inception through June 30, 1999. During both periods the expenses were
administrative in nature. On an ongoing basis, Forefront expects to incur
expenses typical to an OTC Bulletin Board entity, including accounting fees,
legal fees, filing fees and transfer agent fees. Forefront has five full time
employees, with the subsidiary Forefront Tech absorbing all personnel and
indirect costs.
Forefront and subsidiary Forefront Tech 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.
Forefront'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 Forefront may not generate cash
from operations for a number of quarters, if at all. Forefront has experienced
severe cash flow deficiencies starting in June 2000.
As discussed in more detail under "Risk Factors", Forefront 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, Forefront is continually searching for
sources of additional financing and pursuing venture capital investors. Although
the competition for funding is strong, Forefront 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 Forefront 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.
25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The following transactions are believed by Management to be on terms as fair to
Forefront as those Forefront could have obtained from unrelated third
parties and arms-length negotiations.
David Kennedy, a Director, is an owner of a company named Technology & Dispute
Resolution Consulting, Inc. . On October 20, 1999, Forefront entered into an
agreement with Technology Dispute Resolution, Inc., for it to provide us
professional services for marketing and business plan expenses. During the
fiscal year ended June 30, 2000, 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, and owned by him and our President, is the primary
lessee of the current offices sub leased by Forefront. The primary lease is
personally guaranteed by Mr. Santu Rohatgi. Rising Solutions, Inc., is a selling
shareholder hereunder.
We have 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 Forefront. 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
Forefront'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.
Forefront has entered into an agreement with CyberQuest Group, Inc., a related
party, for certain professional services related to the development of
Forefront'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, Forefront has accounts receivable from
CyberQuest Group, Inc. of $55,826. This agreement was terminated on December 12,
1999 by both parties.
Forefront 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.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Our common stock initially began trading on the Over-the-Counter Bulletin Board)
under the symbol "ANYX" on February 24, 2000. Forefront's name change from
Anyox Resources to Forefront, Inc. was effective May 30, 2000, and Forefront's
common stock began trading under its new symbol "FFNT" on June 6, 2000. In
January, 2001, Forefront 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 Forefront'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
26
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 Forefront is unable to
determine a bid price on a quarterly date, the prices below are determined on
the closest date available to Forefront:
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
4/1/01 - 4/30/01 $.14 $.05
5/1/01 - 5/31/01 $.26 $.07
6/1/01 - 6/30/01 $.16 $.06
7/1/01 - 7/31/01 $.03 $.04
On May 30, 2001, Forefront'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.
Forefront 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
Forefront's pattern of growth, profitability, financial condition, and such
other factors as the Board of Directors may deem relevant.
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.
------------------
27
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, Forefront 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, Forefront 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. during March 2000, and the remaining 43% in
May 2000. WEB PARTNERS, INC., 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,
Web Partners Inc. was dissolved into Forefront Technologies, Inc. and a new
Nevada corporation was simultaneously formed and carries on in place of Web
Partners, Inc 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 WEB
PARTNERS, INCIn 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 WEB PARTNERS, INCIn 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 Forefront
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, Forefront 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. Forefront 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., 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 Forefront'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 Forefront experienced
during the past several months.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
Forefront and Web Partners , now Forefront Technologies, recognize income and
expenses based on the accrual method of accounting. Forefront Tech - Web
Partners Inc. 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, Forefront 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. Forefront has fully reserved the tax benefit of
these losses. As part of the acquisition of 57% of the outstanding stock of WEB
PARTNERS, INC. 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 WEB PARTNERS, INC. 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 Forefront as
a going concern is dependent upon obtaining additional working capital.
Management of Forefront 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 Forefront 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. Forefront 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 Forefront 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. Forefront 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. , was formerly named Anyox Resources, Inc. . 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. , a Florida
corporation. The remaining 43% minority interest was subsequently acquired in
May 2000. At that time, WEB PARTNERS, INC. was merged into a subsidiary of
Anyox; Forefront Technologies, Inc. which took on the assets, liabilities and
business of WEB PARTNERS, INC. 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 Web Partners, Inc. 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 . CyberSpots are Web-based interactive multi-media
commercial spots , which use Forefront Tech's Instant On User Interface
technology , which enables the spot to reach the audience quickly and with
minimal disruptions. DELIVERY VERTIFACTION Technology 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. WEB PARTNERS,
INC. 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) Delivery Verifaction Technology 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. DELIVERY
VERTIFACTION TECHNOLOGY variable costs are also comprised entirely of human
resources. The DELIVERY VERTIFACTION TECHNOLOGY team will be responsible for
marketing the DELIVERY VERTIFACTION TECHNOLOGY 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, Forefront 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 Web Partners, Inc., now Forefront Technologies, Inc. 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, Forefront 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/WEB PARTNERS, INCThe selling, general and
administrative expenses were $358,542.
Liquidity and Capital Resources
Forefront and WEB PARTNERS, INC. individually financed their operations to date
with a series of Regulation D offerings of their respective shares of capital
stock, generally for cash. Forefront'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,
WEB PARTNERS, INC. raised $500,000 in the form of bridge financing from a
shareholder group. Forefront and the shareholder group have agreed that this
bridge loan, having no stated interest rate, will be paid back upon Forefront
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 Forefront 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 Forefront'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)
Forefront's estimated monthly cash requirements approximate $125,000. However,
like most other development stage companies, Forefront Tech has generated minor
revenues and Forefront may not generate enough revenues from operations for a
number of quarters to fund its operations. Forefront 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. Forefront has no cash to run
its operation. Each week it continues to build up additional past due payroll
and vendor liabilities. In short, Forefront 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, Forefront may be forced into Chapter 7, in
which case shareholders may lose their investment completely.
In recognition of this issue, Forefront 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
From time to time we have issued shares in private transactions or private
placements intending to meet the requirements of one or more exemptions from
registration. In addition to any noted exemption below, we relied upon Section
4(2) of the Securitiies Act of 1933, as amended ("Act"), given the transactions
did not involve public solicitation or advertising, and the securities issued
bore a restricted legend thereon as "restricted securities."
As to the Section 4(2) transactions, Forefront relied upon Section 4(2) of the
Securities Act of 1933, as amended. The investors were not solicited through any
form of general solicitation or advertising, the transactions being non-public
offerings, and the sales were conducted in private transactions where the
investor identified an investment intent as to the transaction without a view to
an immediate resale of the securities; the shares were "restricted securities"
in that they were both legended with reference to Rule 144 as such and stop
transfer orders were placed with the transfer agent, and the investors
identified they were sophisticated as to the investment decision and in most
cases Forefront reasonably believed the investors were "accredited investors" as
such term is defined under Regulation D. Forefront made this belief based upon
statements and information supplied to it in writing and verbally in connection
with the transactions.
In March 2000, Forefront 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. and two of its primary shareholders, Messrs, Gray and Wade. The
Agreement provided for the Company to acquire WEB PARTNERS, INC. Under the
Agreement, Messrs. Gray and Wade each exchanged 1,000,000 shares of their WEB
PARTNERS, INC. stock for 2,000,000 shares of restricted common stock of
Forefront, 4,000,000 total shares.
In May 2000, as part of the Share Exchange Agreement and Agreement and Plan of
Merger between Forefront and WEB PARTNERS, INC., Forefront exchanged its Common
Stock for the remaining Common Stock of WEB PARTNERS, INC. Each share of WEB
PARTNERS, INC. was exchanged for two shares of Forefront. Forefront issued a
total of 6,947,254 shares of common stock to former shareholders of Web
Partners, Inc., including Messrs, Gray and Wade.
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.
Since last year, in May and June, 2001, we sold a total of 3,933,384 shares for
a total of $133,261, of which a total of 3,933,384 was sold to First National
V.C.Group, 631 U.S. Hwy 1, Suite 405, Palm Beach Gardens, FL 33408 for $
133,261 and a total of 787,402 shares were sold to Mark Gray for $100,000 debt
cancellation, both purchasers being unrelated to the Company.
In addition investors were supplied with an offering document in the form of a
minimum of a detailed business summary, and later, after the offerings were
conducted under Forefront the publicly reporting company, access to SEC filings
available from Forefront. Further, in most cases, subscription agreements and
offering questionnaires were completed and signed and provided to Forefront by
investors.
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 Forefront
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 Systems,
Ltd.
10.7 Registration Rights Agreement with Spinneret Financial Systems, 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.
10.11 Placement Agreement with May Davis Group as to Equity Line of Credit
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 Forefront on a Form 8-K, filed March 30,
2000, and incorporated herein by this reference.
** Filed as an Exhibit to a report by Forefront on a Form 8-K, filed June 8,
2000, and incorporated herein by this reference.
*** Filed as an Appendix to Forefront's Definitive Proxy Statement, filed
April 25, 2000, and incorporated herein by this reference.
**** Filed as an Exhibit to a report by Forefront on a Form 8-K, filed March
21, 2000, and incorporated herein by this reference.
***** Filed as an Exhibit to a report by Forefront 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 August 15, 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, August 15, 2001
- ------------------- Treasurer and Director
Santu Rohatgi Principal Executive Officer, Principal
Financial and Accounting Officer,
and Director
/S/ Bruce Benson Director August 15, 2001
- ------------------- Director
Bruce Benson
/S/ David Kennedy Director August 15, 2001
- ------------------- Director
David Kennedy
34