##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | ----------------------------------------------------------------------------------------

For the Quarterly Period Ended March 31, 2007



| ̈ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | -----------------------------------------------------------------------------------------

For the transition period from  to

Commission File No.: 000-29707



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FOREFRONT
HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 65-0910697                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

835 Bill Jones Industrial Drive, Springfield, Tennessee 37172

(Address of principal executive offices)

(615) 384-1286

(Issuers Telephone Number, Including Area Code)



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Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.    Yes ̈No  x

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

The number of shares of common stock and preferred stock outstanding on November 13, 2007 was 7,416,989 and 7,500,000, respectively. Unless otherwise specified herein, all common share, warrant and option amounts give
effect to a one-for-two reverse stock split effective as of December 5, 2005.



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##### Table of Contents

FOREFRONT HOLDINGS, INC.

INDEX



|                               |  |          |  |                                                                                                                         |  |      
|------------------------------ |  | -------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | -----
|                               |  |          |  |                                                                                                                         |  | Page 
|PART I - Financial Information
|                               |  |          | 
|                               |  | Item 1.  |  | Financial statements                                                                                                    |  |      
|                               |  |          | 
|                               |  |          |  | Condensed Consolidated Balance Sheets at March 31, 2007 (Unaudited) and December 31, 2006                               |  | 3    
|                               |  |          | 
|                               |  |          |  | Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and April 1, 2006 (Unaudited) |  | 4    
|                               |  |          | 
|                               |  |          |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and April 1, 2006 (Unaudited) |  | 5    
|                               |  |          | 
|                               |  |          |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                        |  | 6-15 
|                               |  |          | 
|                               |  | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                   |  | 16-25
|                               |  |          | 
|                               |  | Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                              |  | 26   
|                               |  |          | 
|                               |  | Item 4.  |  | Controls and Procedures                                                                                                 |  | 26   
|                              
|PART II - Other Information   
|                               |  |          | 
|                               |  | Item 1.  |  | Legal Proceedings                                                                                                       |  | 27   
|                               |  |          | 
|                               |  | Item 1a. |  | Risk Factors                                                                                                            |  | 27   
|                               |  |          | 
|                               |  | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                             |  | 27   
|                               |  |          | 
|                               |  | Item 3.  |  | Defaults Upon Senior Securities                                                                                         |  | 27   
|                               |  |          | 
|                               |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                                     |  | 27   
|                               |  |          | 
|                               |  | Item 5.  |  | Other Information                                                                                                       |  | 27   
|                               |  |          | 
|                               |  | Item 6.  |  | Exhibits                                                                                                                |  | 27   
|                               |  |          | 
|                               |  |          |  | Signatures                                                                                                              |  | 28   



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##### Table of Contents

PART IFinancial Information

FOREFRONT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                |  |                |             |   |                   |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                                                |  | March 31, 2007 |             |   | December 31, 2006 |  
|                                                                                                                                                                |  | (Unaudited)    |             |   |                   |  
|ASSETS                                                                                                                                                          |  |                |             |   |                   |   |             |  
|Current assets:                                                                                                                                                 |  |                |             |   |                   |   |             |  
|Cash                                                                                                                                                            |  | $              | 145,892     |   |                   | $ | 736,851     |  
|Accounts receivable, net                                                                                                                                        |  |                | 7,934,579   |   |                   |   | 6,471,582   |  
|Inventories, net                                                                                                                                                |  |                | 9,868,410   |   |                   |   | 9,730,785   |  
|Prepaid expenses                                                                                                                                                |  |                | 610,207     |   |                   |   | 519,969     |  
|Other receivables                                                                                                                                               |  |                | 39,711      |   |                   |   | 41,298      |  
|                                                                                                                                                                |  |                |             |   |                   |   |             |  
|Total current assets                                                                                                                                            |  |                | 18,598,799  |   |                   |   | 17,500,485  |  
|Property and equipment, net                                                                                                                                     |  |                | 2,136,190   |   |                   |   | 2,190,870   |  
|Intangibles, net                                                                                                                                                |  |                | 6,238,822   |   |                   |   | 6,655,573   |  
|Goodwill                                                                                                                                                        |  |                | 547,657     |   |                   |   | 547,657     |  
|Other assets                                                                                                                                                    |  |                | 69,498      |   |                   |   | 10,759      |  
|                                                                                                                                                                |  |                |             |   |                   |   |             |  
|Total assets                                                                                                                                                    |  | $              | 27,590,966  |   |                   | $ | 26,905,344  |  
|                                                                                                                                                                |  |                |             |   |                   |   |             |  
|                                                                                                                                                                |  |               
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                            |  |                |             |   |                   |   |             |  
|Current liabilities:                                                                                                                                            |  |                |             |   |                   |   |             |  
|Revolving credit facility                                                                                                                                       |  | $              | 8,733,768   |   |                   | $ | 7,101,324   |  
|Accounts payable and accrued liabilities                                                                                                                        |  |                | 6,545,611   |   |                   |   | 6,366,767   |  
|Interest payable and accrued liabilities to related parties                                                                                                     |  |                | 527,868     |   |                   |   | 741,703     |  
|Current portion of notes payable to related parties                                                                                                             |  |                | 3,800,000   |   |                   |   | 3,800,000   |  
|Current portion of capital lease obligation                                                                                                                     |  |                | 40,290      |   |                   |   | 49,508      |  
|                                                                                                                                                                |  |                |             |   |                   |   |             |  
|Total current liabilities                                                                                                                                       |  |                | 19,647,537  |   |                   |   | 18,059,302  |  
|                                                                                                                                                                |  |                |             |   |                   |   |             |  
|Notes payable to related parties, less current portion                                                                                                          |  |                | 550,000     |   |                   |   | 550,000     |  
|Guarantees under purchase consideration to related parties                                                                                                      |  |                | 1,485,000   |   |                   |   | 1,485,000   |  
|Capital lease obligation, less current portion                                                                                                                  |  |                | 83,882      |   |                   |   | 91,888      |  
|Accrued pension liability, less current portion                                                                                                                 |  |                | 420,985     |   |                   |   | 424,660     |  
|Other liabilities                                                                                                                                               |  |                |            |   |                   |   | 20,722      |  
|                                                                                                                                                                |  |                |             |   |                   |   |             |  
|Total liabilities                                                                                                                                               |  |                | 22,187,404  |   |                   |   | 20,631,572  |  
|                                                                                                                                                                |  |                |             |   |                   |   |             |  
|                                                                                                                                                                |  |               
|Shareholders equity:                                                                                                                                           |  |                |             |   |                   |   |             |  
|Series A Convertible Preferred stock, $.001 par value; 1,000,000 shares authorized; 1,000,000 shares issued and outstanding (Liquidation
preference $2,000,000) |  |                | 1,000       |   |                   |   | 1,000       |  
|Series B Convertible Preferred stock, $.001 par value; 4,500,000 shares authorized; 4,500,000 shares issued and outstanding (Liquidation
preference $9,000,000) |  |                | 4,500       |   |                   |   | 4,500       |  
|Series C Convertible Preferred stock, $.001 par value; 2,000,000 shares authorized; 2,000,000 shares issued and outstanding (Liquidation
preference $8,000,000) |  |                | 2,000       |   |                   |   | 1,518       |  
|Common stock, $.001 par value; authorized 500,000,000 shares; 9,016,989 shares issued and outstanding                                                           |  |                | 9,017       |   |                   |   | 7,798       |  
|Additional paid-in capital                                                                                                                                      |  |                | 27,872,554  |   |                   |   | 25,852,285  |  
|Accumulated deficit                                                                                                                                             |  |                | (22,485,509 | ) |                   |   | (19,593,329 | )
|                                                                                                                                                                |  |                |             |   |                   |   |             |  
|Total shareholders equity                                                                                                                                      |  |                | 5,403,562   |   |                   |   | 6,273,772   |  
|                                                                                                                                                                |  |                |             |   |                   |   |             |  
|Total liabilities and shareholders equity                                                                                                                      |  | $              | 27,590,966  |   |                   | $ | 26,905,344  |  
|                                                                                                                                                                |  |                |             |   |                   |   |             |  

See the accompanying Notes to Condensed Consolidated Financial Statements.



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##### Table of Contents

FOREFRONT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                                  |  |                            |            |   |               |   |            |  
|------------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ------------- | - | ---------- | -
|                                                                                                  |  | For the three months ended |           
|                                                                                                  |  | March 31, 2007             |            |   | April 1, 2006 |  
|Net sales                                                                                         |  | $                          | 10,136,407 |   |               | $ | 6,787,899  |  
|                                                                                                  |  |                           
|Cost of sales                                                                                     |  |                            | 7,815,683  |   |               |   | 5,150,325  |  
|                                                                                                  |  |                            |            |   |               |   |            |  
|Gross margin                                                                                      |  |                            | 2,320,724  |   |               |   | 1,637,574  |  
|                                                                                                  |  |                            |            |   |               |   |            |  
|Operating expenses                                                                                |  |                            |            |   |               |   |            |  
|Sales and marketing                                                                               |  |                            | 2,617,988  |   |               |   | 1,957,008  |  
|General and administrative                                                                        |  |                            | 2,329,273  |   |               |   | 1,396,685  |  
|                                                                                                  |  |                            |            |   |               |   |            |  
|Total operating expenses                                                                          |  |                            | 4,947,261  |   |               |   | 3,353,693  |  
|                                                                                                  |  |                            |            |   |               |   |            |  
|Loss from operations                                                                              |  |                            | (2,626,537 | ) |               |   | (1,716,119 | )
|                                                                                                  |  |                            |            |   |               |   |            |  
|Other income (expense)                                                                            |  |                            |            |   |               |   |            |  
|Interest expense (includes $80,681 and $82,958 to related parties in 2007 and 2006, respectively) |  |                            | (305,678   | ) |               |   | (224,830   | )
|Minority interest                                                                                 |  |                            | 41,590     |   |               |   | 27,973     |  
|Other expense, net                                                                                |  |                            | (1,556     | ) |               |   | (2,196     | )
|                                                                                                  |  |                            |            |   |               |   |            |  
|Net other expense                                                                                 |  |                            | (265,644   | ) |               |   | (199,053   | )
|                                                                                                  |  |                            |            |   |               |   |            |  
|Net loss                                                                                          |  | $                          | (2,892,181 | ) |               | $ | (1,915,172 | )
|                                                                                                  |  |                            |            |   |               |   |            |  
|Basic and diluted net loss per common share                                                       |  | $                          | (0.34      | ) |               | $ | (0.30      | )
|                                                                                                  |  |                            |            |   |               |   |            |  
|Basic and diluted weighted average common shares outstanding                                      |  |                            | 8,613,421  |   |               |   | 6,404,072  |  
|                                                                                                  |  |                            |            |   |               |   |            |  

See the accompanying Notes to Condensed Consolidated Financial Statements.



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##### Table of Contents

FOREFRONT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                            |  |                            |            |   |               |   |            |  
|--------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ------------- | - | ---------- | -
|                                                                            |  | For the three months ended |           
|                                                                            |  | March 31, 2007             |            |   | April 1, 2006 |  
|Cash flows from operating activities:                                       |  |                            |            |   |               |   |            |  
|Net loss                                                                    |  | $                          | (2,892,181 | ) |               | $ | (1,915,172 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                            |            |   |               |   |            |  
|Depreciation and amortization                                               |  |                            | 546,626    |   |               |   | 238,635    |  
|Amortization of loan fees                                                   |  |                            |           |   |               |   | 12,501     |  
|Minority interest in subsidiary                                             |  |                            | (39,461    | ) |               |   | (27,759    | )
|Common stock issued for services                                            |  |                            | 37,500     |   |               |   |           |  
|Stock based compensation                                                    |  |                            | 54,269     |   |               |   | 33,206     |  
|Bad debt expense (recovery)                                                 |  |                            | 84,981     |   |               |   | (35,000    | )
|Changes in assets and liabilities:                                          |  |                            |            |   |               |   |            |  
|Accounts receivable                                                         |  |                            | (1,547,978 | ) |               |   | (506,793   | )
|Inventories                                                                 |  |                            | (137,625   | ) |               |   | (309,455   | )
|Prepaid expenses                                                            |  |                            | (90,238    | ) |               |   | 108,713    |  
|Other receivables                                                           |  |                            | 1,587      |   |               |   | 4,990      |  
|Other assets                                                                |  |                            | (40,000    | ) |               |   | (14,740    | )
|Accounts payable and accrued liabilities                                    |  |                            | 175,171    |   |               |   | (97,271    | )
|Interest payable and accrued liabilities to related parties                 |  |                            | (213,835   | ) |               |   | (95,421    | )
|                                                                            |  |                            |            |   |               |   |            |  
|Net cash used in operating activities                                       |  |                            | (4,061,184 | ) |               |   | (2,603,566 | )
|                                                                            |  |                            |            |   |               |   |            |  
|Cash flows from investing activities:                                       |  |                            |            |   |               |   |            |  
|Purchases of property and equipment                                         |  |                            | (81,100    | ) |               |   | (188,679   | )
|Change in contingent acquisition payment owed to related party              |  |                            | 5,905      |   |               |   | (20,213    | )
|                                                                            |  |                            |            |   |               |   |            |  
|Net cash used in investing activities                                       |  |                            | (75,195    | ) |               |   | (208,892   | )
|                                                                            |  |                            |            |   |               |   |            |  
|Cash flows from financing activities:                                       |  |                            |            |   |               |   |            |  
|Net borrowings under revolving credit facility                              |  |                            | 1,632,444  |   |               |   | 1,208,288  |  
|Payments under capital lease obligations                                    |  |                            | (17,224    | ) |               |   | (9,581     | )
|Proceeds from exercise of warrants  related party                          |  |                            | 1,200      |   |               |   | 210        |  
|Proceeds from sale of preferred stock  related party                       |  |                            | 1,929,000  |   |               |   | 1,400,000  |  
|                                                                            |  |                            |            |   |               |   |            |  
|Net cash provided by financing activities                                   |  |                            | 3,545,420  |   |               |   | 2,598,917  |  
|                                                                            |  |                            |            |   |               |   |            |  
|Net decrease in cash                                                        |  |                            | (590,959   | ) |               |   | (213,541   | )
|Cash, beginning of period                                                   |  |                            | 736,851    |   |               |   | 1,135,389  |  
|                                                                            |  |                            |            |   |               |   |            |  
|Cash, end of period                                                         |  | $                          | 145,892    |   |               | $ | 921,848    |  
|                                                                            |  |                            |            |   |               |   |            |  
|Supplemental disclosures of cash flow information:                          |  |                            |            |   |               |   |            |  
|Interest paid                                                               |  | $                          | 314,098    |   |               | $ | 332,368    |  
|Income taxes paid                                                           |  | $                          | 8,994      |   |               | $ | 22,940     |  
|                                                                            |  |                            |            |   |               |   |            |  
|Supplemental disclosures of non-cash investing and financing activities:    |  |                            |            |   |               |   |            |  
|Purchases of property and equipment under capital lease obligations         |  | $                          |           |   |               | $ | 94,276     |  
|                                                                            |  |                            |            |   |               |   |            |  

See the accompanying Notes to Condensed Consolidated Financial Statements.



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##### Table of Contents

FOREFRONT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Nature of
Business and Significant Accounting Policies

ForeFront Holdings, Inc. (ForeFront Holdings or the Company) through both its
direct and indirect wholly-owned subsidiaries ForeFront Group Inc. (ForeFront), Miller Golf Company (Miller), ForeFront Burton, Inc. (ForeFront Burton), ForeFront Devant, Inc. (ForeFront Devant),
ForeFront Multimedia, LLC, (Multimedia), and a 50% ownership interest in ForeFront Crellin LLC (ForeFront Crellin) which was dissolved on June 30, 2007 (see below and Note 13), each a Florida corporation, designs,
manufactures, decorates, markets and distributes golf bags and golf accessories for sale to on-course golf pro shops and off-course golf specialty stores, sporting goods stores, mass merchandisers, corporate customers, original equipment
manufacturers, international distributors and golf event sponsoring organizations mainly in the United States and Canada. The Company is based in Springfield, Tennessee, and conducts a substantial portion of its operations in Springfield, Tennessee,
and Monroe, North Carolina.

On January 26, 2006, the Company acquired a 50% ownership in ForeFront Crellin, a limited liability company established
to operate the business and hold the assets of a venture between the Company and Chatham Plastic Ventures, Inc. (Chatco). Chatco is the Companys largest provider of plastic bag tags and accessories. The Company has made an
aggregate investment in ForeFront Crellin through March 31, 2007 of $280,000, which is part of a $500,000 financing commitment to ForeFront Crellin. The operations of ForeFront Crellin are consolidated with the Company since the date of
acquisition. ForeFront Crellin was dissolved on June 30, 2007 (see Note 13).

ForeFront Holdings is the successor to Greenhold Group, Inc.,
(GGI), which was originally incorporated in the State of Florida on March 22, 1999. On October 15, 2004, ForeFront Holdings entered into a merger transaction with Golf Acquisition, Inc. (GAI) whereby GAI was merged
with and into ForeFront Holdings. At the time of such merger, GAI simultaneously acquired substantially all of the operating assets and liabilities of the predecessor Miller Golf Company, LLC (MGC) and most of the assets of the
predecessor Datrek Professional Bags, Inc (DPB). Stanford Venture Capital Holdings Inc. (SVCH), prior to this transaction, was the 95% owner of MGC. In connection with the merger, SVCH agreed to purchase 2,250,000 shares of
the Companys common stock for an aggregate cash investment of $4,500,000, funded between October 2004 and January 2005. As a result of these transactions, SVCH became the principal shareholder of the Company.

Since the completion of the transactions described above, SVCH has transferred a portion of its interests in ForeFront Holdings to Stanford International Bank Ltd.
(Stanford). Stanford has entered into several securities purchase agreements with ForeFront Holdings whereby it has invested an aggregate of $23,500,000, and owns 72.1% of the Companys issued and outstanding common stock (assuming
conversion of all preferred stock) at March 31, 2007 (see Note 13).

On September 12, 2006, the Company, through ForeFront Burton, executed the
Burton Purchase Agreement with Burton Golf, Inc. (Burton). Under the Burton Purchase Agreement, which was effective as of September 3, 2006, the Company acquired substantially all of the assets and assumed certain liabilities of
Burton for an aggregate purchase price of $4,376,947. The purchase price consisted of $1,975,000 in cash, $1,225,000 in promissory notes, 250,000 shares of the Companys common stock, representing a guaranteed value of $1,000,000 at a future
measurement date (see Note 8), and $176,947 of acquisition costs.

On December 20, 2006, the Company, through ForeFront Devant, executed the Devant
Purchase Agreement with Devant, Ltd. (Devant). Under the Devant Purchase Agreement, which was effective as of December 3, 2006, the Company acquired substantially all of the assets and assumed certain liabilities of Devant for an
aggregate purchase price of $4,665,387. The purchase price consisted of $2,993,000 in cash, $400,000 in promissory notes, 250,000 shares of the Companys common stock, representing a guaranteed value of $1,250,000 at a future measurement date
(see Note 8), and $22,387 of acquisition costs.

The Company purchased the net assets of Burton to further expand its market share of the golf bag market.
The acquisition of the net assets of Devant allowed the Company to significantly increase its market share of the golf towel market.

Liquidity and
Capital Resources

The Company incurred net losses of $2.9 million and $1.9 million for the three months ended March 31, 2007 and April 1,
2006, respectively. On March 13, 2006, the Company and First Capital Corporation, LLC (FCC) amended the loan agreement (as set forth in a Waiver and Sixth Amendment). In connection with the amendment of the loan agreement, the term
was extended for an additional three-year period through October 2009, and the maximum credit limit was increased from $7.5 million to $10.5 million.



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



The interest rate decreased from prime (8.25% at March 31, 2007) plus 2.5% to prime plus 1.5%, payable monthly. The facility was further amended to
provide for an annual administration fee of $75,000 payable on the anniversary date and the facility continues to carry a monthly maintenance fee of $2,000. Borrowings under the credit facility are limited to 85% of eligible accounts receivable (as
defined in the agreement) and 50% of eligible inventory (as defined in the agreement), subject to a loan cap of $5.5 million for eligible inventory. The facility is secured by a primary security interest in accounts receivable, inventories, and
other of the Companys assets. After October 2009, the facility will renew for succeeding one-year periods unless either party provides notice to the other of its intention to terminate the facility. At March 31, 2007, the balance of the
line of credit was $8.7 million. The revolving credit facility from FCC continues to require the Company to comply with certain covenants. The Company was in compliance with all covenants at March 31, 2007. There can be no assurance that the
Company will be in compliance with the above-mentioned covenants in the future and there can be no assurance that FCC will provide waivers if it is not in compliance. However, management believes that, if necessary, the Company will be able to
secure any such waivers. In addition, management believes cash balances on hand and cash generated from operations and the Companys credit facility with SVCH (see Note 13) will be sufficient to fund the business requirements during the next
twelve months. Historically, the Company has been, and currently continues to be, dependent on the funding it has received from Stanford. There can be no assurance that Stanford will continue this funding in the future. If necessary, the Company may
be required to restructure its existing debt and/or raise capital through the future issuance of its securities.

Significant accounting policies are as
follows:

Net Loss Per Common Share

Basic and diluted
net loss per share is computed using the weighted average number of shares of outstanding common stock. For all periods presented, diluted net loss per share was the same as basic net loss per share since the inclusion of common stock equivalents
would have been anti-dilutive. Common stock equivalents include shares issuable upon the exercise of stock options, shares issuable upon the exercise of warrants and shares issuable upon the conversion of preferred stock. Total outstanding common
stock equivalents related to stock options, warrants and preferred stock were 5,429,500 at March 31, 2007 and 2,047,750 at April 1, 2006, respectively.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the
accounts of ForeFront Holdings and both its direct and indirect wholly-owned subsidiaries, ForeFront, Miller, ForeFront Burton, ForeFront Devant and Multimedia, as well as ForeFront Crellin, in which the Company owned a 50% interest. The results of
operations of ForeFront Burton have been included since September 3, 2006, the effective date of the acquisition. The results of operations of ForeFront Devant have been included since December 3, 2006, the effective date of the
acquisition. All significant intercompany balances and transactions have been eliminated. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted for interim financial
information and the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion
of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The results of operations for the
three-month period ended March 31, 2007 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2007.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes
included in the Companys 2006 Annual Report on Form 10-KSB filed with the U.S. Securities and Exchange Commission on November 29, 2007.

The Company
reports its financial results on the basis of thirteen week quarters, each ending on the nearest Saturday to the calendar quarter end, with the exception of the first quarter, which begins on January 1, and the fourth quarter, which ends on
December 31. The first quarter of 2007 and 2006 ended on March 31 and April 1, respectively.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Recently Issued Accounting Standards

Effective January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the
benefit recognized and measured pursuant to the interpretation are referred to as unrecognized benefits. A liability is recognized (or amount of net operating loss carryforward or amount of tax refundable is reduced) for an unrecognized
tax benefit because it represents an enterprises potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of FIN 48.

In accordance with FIN 48, interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as Interest
expense, net in the consolidated statements of operations. Penalties would be recognized as a component of General and administrative expenses.

In many cases, the Companys uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities. The Company files tax returns in the United States (federal) and in various state and local
jurisdictions. In most instances, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2003.

The adoption of the provisions of FIN 48 did not have a material impact on the Companys consolidated financial position and results of operations. As of June 30, 2007, no liability for unrecognized tax benefits was required to be
recorded.

The Company recognized a net deferred tax asset of approximately $7,700,000 as of March 31, 2007, primarily relating to net operating loss
carryforwards of approximately $19,500,000 as of March 31, 2007, available to offset future taxable income through 2026.

The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this
assessment. At present, the Company does not have a sufficient history of income to conclude that it is more likely than not that the Company will be able to recognize all of its tax benefits in the near future and therefore a valuation allowance
was established in the full value of the deferred tax asset.

A valuation allowance will be maintained until sufficient positive evidence exists to support
the reversal of any portion or all of the valuation allowance net of appropriate reserves. Should the Company become profitable in future periods with supportable trends, the valuation allowance will be reversed accordingly.

In December 2006, the FASB issued FASB Staff Position EITF 00-19-2 Accounting for Registration Payment Arrangements, which specifies that the contingent
obligation to make future payments or otherwise transfer consideration under a registration payment arrangement should be separately recognized and measured in accordance with SFAS No. 5, Accounting for Contingencies. Adoption of
EITF 00-19-02 is required for fiscal years beginning after December 15, 2006. The adoption of EITF 00-19-2 did not have a material effect on the Companys consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159
provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is in the process of evaluating the impact of the adoption of this statement on the Companys
results of operations and financial condition.

Reclassifications

Certain 2006 amounts have been reclassified to conform to the 2007 presentation.

Note 2. Acquisitions and Pro Forma
Information

On September 12, 2006, the Company, through ForeFront Burton, executed the Burton Purchase Agreement with Burton. Under the Burton
Purchase Agreement, which was effective as of September 3, 2006, the Company acquired substantially all of the assets and assumed certain liabilities of Burton for an aggregate purchase price of $4,376,947. The purchase price consisted of
$1,975,000 in cash, $1,225,000 in promissory notes, 250,000 shares of the Companys common stock, representing a guaranteed value of $1,000,000 at a future measurement date, and $176,947 of acquisition costs.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



On December 20, 2006, the Company, through ForeFront Devant, executed the Devant Purchase Agreement with Devant.
Under the Devant Purchase Agreement, which was effective as of December 3, 2006, the Company acquired substantially all of the assets and assumed certain liabilities of Devant for an aggregate purchase price of $4,665,387. The purchase price
consisted of $2,993,000 in cash, $400,000 in promissory notes, 250,000 shares of the Companys common stock, representing a guaranteed value of $1,250,000 at a future measurement date, and $22,387 of acquisition costs.

The following table presents the unaudited pro forma consolidated results of operations of the Company, assuming the transactions discussed above had been consummated at
January 1, 2006. The results have been adjusted to account for the amortization of acquired intangibles, as well as other pro forma adjustments. The pro forma information presented below does not purport to represent what actual results would
have been if the acquisition occurred at January 1, 2006, nor does the information project results for any future period.

The unaudited pro forma
consolidated financial information for the three month period ended April 1, 2006, is as follows:



|                                                             |  |   |            |  
|------------------------------------------------------------ |  | - | ---------- | -
|Net sales                                                    |  | $ | 10,800,713 |  
|Net loss                                                     |  | $ | (2,523,386 | )
|Basic and diluted net loss per common share                  |  | $ | (0.37      | )
|Basic and diluted weighted average common shares outstanding |  |   | 6,904,072  |  

Note 3. Inventories, net

Inventories at March 31, 2007 and December 31, 2006 are summarized as follows:



|                                                 |  |                |            |   |                   |   |            |  
|------------------------------------------------ |  | -------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                 |  | March 31, 2007 |            |   | December 31, 2006 |  
|Raw materials                                    |  | $              | 1,487,413  |   |                   | $ | 1,505,626  |  
|Work in progress                                 |  |                | 58,653     |   |                   |   | 74,006     |  
|Finished goods                                   |  |                | 9,258,412  |   |                   |   | 9,106,293  |  
|                                                 |  |                |            |   |                   |   |            |  
|                                                 |  |                | 10,804,478 |   |                   |   | 10,685,925 |  
|Reserve for slow-moving and obsolete inventories |  |                | (936,068   | ) |                   |   | (955,140   | )
|                                                 |  |                |            |   |                   |   |            |  
|                                                 |  | $              | 9,868,410  |   |                   | $ | 9,730,785  |  
|                                                 |  |                |            |   |                   |   |            |  

Note 4. Property and Equipment, net

Property and equipment at March 31, 2007 and December 31, 2006 is summarized as follows:



|                                                            |  |                |           |   |                   |   |           |  
|----------------------------------------------------------- |  | -------------- | --------- | - | ----------------- | - | --------- | -
|                                                            |  | March 31, 2007 |           |   | December 31, 2006 |  
|Machinery and equipment                                     |  | $              | 1,408,074 |   |                   | $ | 1,430,092 |  
|Furniture and fixtures                                      |  |                | 1,203,993 |   |                   |   | 1,205,605 |  
|Leasehold improvements                                      |  |                | 254,591   |   |                   |   | 251,791   |  
|Product prototypes                                          |  |                | 172,397   |   |                   |   | 160,847   |  
|                                                            |  |                |           |   |                   |   |           |  
|                                                            |  |                | 3,039,055 |   |                   |   | 3,048,335 |  
|Less: Accumulated depreciation                              |  |                | (996,022  | ) |                   |   | (860,242  | )
|                                                            |  |                |           |   |                   |   |           |  
|                                                            |  |                | 2,043,033 |   |                   |   | 2,188,093 |  
|Construction in progress of fixtures and product prototypes |  |                | 93,157    |   |                   |   | 2,777     |  
|                                                            |  |                |           |   |                   |   |           |  
|                                                            |  | $              | 2,136,190 |   |                   | $ | 2,190,870 |  
|                                                            |  |                |           |   |                   |   |           |  

Depreciation expense totaled $135,780 and $92,136 for the three month periods ended March 31, 2007 and
April 1, 2006, respectively. Amortization of capital leases is included in depreciation expense.

Note 5. Management and Director Equity Incentive
and Compensation Plan

On June 22, 2005 the Companys Board of Directors approved the adoption of the Companys 2005 Management and
Director Equity Incentive and Compensation Plan (the Plan). As amended, the Plan authorizes the issuance of options to purchase up to 1,000,000 shares of the Companys common stock to directors, officers and certain other employees
of the Company. The Plan allows the Company to issue both non-qualified stock options and incentive stock options to qualified directors, officers and employees. The Plan also authorizes the grant of performance shares and restricted stock to
eligible participants.



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Effective January 1, 2006, the Company adopted SFAS 123R Share Based Payment: An Amendment of FASB
Statements 123 and 95 (SFAS 123R) which replaces SFAS 123, Accounting for Stock-Based Compensation (SFAS 123). SFAS 123R requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair values. SFAS 123R supersedes the Companys previous accounting under Accounting Principles Board Opinion No. 25 Accounting for Stock Issues to Employees
(APB 25). In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulleting No. 107 (SAB 107) relating to SFAS 123R. The Company has applied the provisions of SAB 107 in its adoption of SFAS 123R.

The Company has selected the Black-Scholes method of valuation for share-based compensation and has adopted the modified prospective transition method
under SFAS 123R, which requires that compensation cost be recorded, as earned, for all unvested stock options outstanding as the beginning of the first quarter of adoption of SFAS 123R. As permitted by SFAS 123R, prior periods have not been
restated. The charge is generally recognized on a straight-line basis over the remaining service period after the adoption date based on the options original estimate of fair values.

SFAS 123R requires companies to estimate the fair value of share-based payment awards on the date of grant. The value of stock options granted to employees and directors
is estimated using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods. Prior to the adoption of SFAS 123R, the Company applied the
intrinsic-value-based method of accounting prescribed by APB 25 and related interpretations, to account for its stock options to employees. Under this method, compensation cost was recorded only if the market price of the underlying stock on the
date of grant exceeded the exercise price. As permitted by SFAS 123, the Company elected to continue to apply the intrinsic-value-based method of accounting described above, and adopted only the disclosure requirements of SFAS 123. The
fair-value-based method used to determine historical pro forma amounts under SFAS 123 was similar in most respects to the method used to determine stock-based compensation expense under SFAS 123R. The impact of the adoption of SFAS 123R on the
condensed consolidated financial statements was de minimus.

Stock-based compensation expense recognized in the Companys condensed
consolidated statements of operations for the three-month periods ended March 31, 2007 and April 1, 2006, respectively, includes compensation expense for all share-based payment awards granted prior to, but not yet vested as of
January 1, 2006, based upon the grant date fair value estimated in accordance with the pro forma provision of SFAS 123, and compensation expense for the share-based payment awards granted subsequent to January 1, 2006, based upon the grant
date fair value estimated in accordance with the provisions of SFAS 123R. The Company recognizes compensation expense for stock option awards on a straight-line basis over the requisite service period of the award. As stock-based compensation
expense recognized in the three-month periods ended March 31, 2007 and April 1, 2006 is based upon awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The compensation expense for the three-month periods ended March 31, 2007 and April 1, 2006 was $54,269 and $33,206,
respectively. At March 31, 2007, there was $394,082 of total unrecognized compensation cost (at fair value) related to unvested share-based compensation arrangements granted under the Plan that is being recognized as an expense between April
2007 through June 2009.

No options were issued during the three months ended March 31, 2007. Options to purchase 145,000 shares, with lives of ten
years, vesting ratably over a three-year period, were issued during the three months ended April 1, 2006 to a group of eligible recipients under terms of the Plan. These options have an exercise price of $2.20. The weighted average fair value
per share of these options was estimated to be $0.83 per share at the date of grant using the Black-Scholes option pricing model. Compensation expense generally must be recorded based on the fair value of the stock options over the vesting period.

Option activity was as follows for the three-month period ended March 31, 2007.



|                                 |  |         |   |  |                                |      |                         |  
|-------------------------------- |  | ------- | - |  | ------------------------------ | ---- | ----------------------- | -
|                                 |  | Shares  |   |  | Weighted-AverageExercise price |      | AggregateIntrinsicValue
|Outstanding at beginning of year |  | 682,250 |   |  | $                              | 1.96 |                         |  
|Granted                          |  |        |   |  |                                |     |                         |  
|Forfeited/Cancelled              |  | (2,750  | ) |  |                                | 2.20 |                         |  
|                                 |  |         |   |  |                                |      |                         |  
|Outstanding at 3/31/07           |  | 679,500 |   |  | $                              | 1.96 |                         | 
|                                 |  |         |   |  |                                |      |                         |  
|Exercisable at 3/31/07           |  | 135,833 |   |  | $                              | 2.20 |                         | 
|                                 |  |         |   |  |                                |      |                         |  



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



A further summary of options outstanding at March 31, 2007, is as follows:



|               |  |                    |  |                                                     
|-------------- |  | ------------------ |  | ----------------------------------------------------
|Exercise Price |  | Number Outstanding |  | Weighted-Average Remaining Contractual Life
in Years
|$2.20          |  | 407,500            |  | 8.5                                                 
|$1.50          |  | 222,000            |  | 9.2                                                 
|$2.05          |  | 50,000             |  | 9.5                                                 
|               |  |                    |  |                                                     
|               |  | 679,500            |  |                                                     
|               |  |                    |  |                                                     

Shares available for issuance under the Plan were 320,500 at March 31, 2007.

The fair value of each option grant was estimated at the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. Because the Companys stock options have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the fair value estimate, in managements opinion, the existing models do not necessarily provide a reliable single measure of the fair value estimate of its stock
options.

The fair value of each option award is estimated on the date of grant utilizing certain assumptions as noted in the table below. Expected
volatilities are based on historical volatility of the Companys common stock. The Company uses historical data to estimate option exercise and employee termination with the evaluation model. The expected terms of options granted represents the
period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

In calculating the fair values of the stock options, the following assumptions were used:



|                                         |  |                    |  |               |  
|---------------------------------------- |  | ------------------ |  | ------------- | -
|                                         |  | Three Months Ended | 
|                                         |  | March 31, 2007     |  | April 1, 2006 |  
|Dividend yield                           |  |                   |  | 0             | %
|Weighted average expected life           |  |                   |  | 5.0 years     |  
|Weighted average risk-free interest rate |  |                   |  | 4.44          | %
|Expected volatility                      |  |                   |  | 73.31         | %

Note 6. Intangibles, net and Goodwill

On October 15, 2004, the Company acquired DPB and recorded intangibles including a customer list and a registered tradename. The total consideration paid for DPBs net assets was $6,471,000 and included
$2,632,000 of intangible assets. The customer list is being amortized over three years. The tradename is being amortized over its legal life, which expires in April 2011. Additionally, Ryan Holdings, Inc. (Ryan Holdings) is to receive
payments of up to $1,000,000 as contingent consideration (Contingent Payment) based on sales of certain products under service agreements with terms ranging from three to five years. The Company is capitalizing as an intangible the
Contingent Payment in the period in which the Contingent Payment is incurred and is amortizing the Contingent Payment over the remaining terms of the service agreements (see Note 13).

On September 12, 2006 the Company acquired substantially all of the net assets of Burton and recorded intangibles including a customer list, a registered tradename and a customer logo database. The total
consideration paid for Burtons net assets was $4,376,947 and included $2,149,453 of intangible assets. The customer list and customer logo database are being amortized over three years. The Company considers the tradename to have an indefinite
life. As such, in accordance with SFAS 142, Goodwill and Other Intangible Assets, the tradename, which has been valued at $979,000, will not be amortized and will be reviewed for impairment at least annually.

On December 20, 2006 the Company acquired substantially all of the net assets of Devant and recorded intangibles including a customer list and two tradenames. The
total consideration paid for Devants net assets was $4,665,387 and included $3,249,493 of intangible assets. The customer list is being amortized over three years. The Company considers the tradenames to have an indefinite life. As such, in
accordance with SFAS 142, the tradenames, which have been valued at $1,165,835, will not be amortized and will be reviewed for impairment at least annually.



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The following is a summary of intangibles at March 31, 2007:



|                          |  |      |           |                          |           |           |                |                                         |               |  |   |         |  |   |        
|------------------------- |  | ---- | --------- | ------------------------ | --------- | --------- | -------------- | --------------------------------------- | ------------- |  | - | ------- |  | - | -------
|                          |  |      |           | Accumulated Amortization |           |           |                | Amortization for the Three Months Ended
|Description               |  | Cost |           |                          | Net Asset |           | March 31, 2007 |                                         | April 1, 2006
|Customer Lists            |  | $    | 3,958,657 |                          | $         | 1,108,853 |                | $                                       | 2,849,804     |  | $ | 325,884 |  | $ | 68,250 
|Amortized Trade Name      |  |      | 1,813,000 |                          |           | 664,399   |                |                                         | 1,148,601     |  |   | 67,566  |  |   | 67,566 
|Customer Logo Database    |  |      | 120,742   |                          |           | 29,413    |                |                                         | 91,329        |  |   | 17,396  |  |   |       
|Contingent Payment        |  |      | 21,550    |                          |           | 12,201    |                |                                         | 9,349         |  |   | 8,094   |  |   | 10,683 
|                          |  |      |           |                          |           |           |                |                                         |               |  |   |         |  |   |        
|Amortized Intangibles     |  |      | 5,913,949 |                          |           | 1,814,866 |                |                                         | 4,099,083     |  |   | 418,940 |  |   | 146,499
|Non-Amortized Trade Names |  |      | 2,139,739 |                          |           |          |                |                                         | 2,139,739     |  |   |        |  |   |       
|                          |  |      |           |                          |           |           |                |                                         |               |  |   |         |  |   |        
|Total                     |  | $    | 8,053,688 |                          | $         | 1,814,866 |                | $                                       | 6,238,822     |  | $ | 418,940 |  | $ | 146,499
|                          |  |      |           |                          |           |           |                |                                         |               |  |   |         |  |   |        

On October 15, 2004, the Company recorded goodwill for its purchase of DPB in the amount of $361,503, and on
September 12, 2006 the Company recorded goodwill for its purchase of ForeFront Burton in the amount of $186,154. Such amounts are not amortized but are reviewed annually for possible impairment. The Company has determined that there has been no
impairment as of March 31, 2007.

Note 7. Revolving Credit Facility

On October 18, 2004, the Company obtained a revolving credit facility from FCC for a two-year term. The facility was amended on March 13, 2006 (pursuant to a Waiver and Sixth Amendment) extending the term
for an additional three-year period, through October 2009, and increasing the maximum credit limit of $7.5 million to $10.5 million. In addition, the interest rate was decreased from prime (8.25% at March 31, 2007) plus 2.5%, to prime plus
1.5%, payable monthly. The facility was further amended to provide for an annual administration fee of $75,000 payable on the anniversary date of the facility and it continues to carry a monthly maintenance fee of $2,000. Borrowings under the credit
facility are limited to 85% of eligible accounts (as defined in the agreement) receivable and 50% of eligible inventory (as defined in the agreement), subject to a loan cap of $5.5 million for eligible inventory. The facility is secured by a primary
security interest in accounts receivable, inventories, and other of the Companys assets. After October 2009, the facility will renew for succeeding one-year periods unless either party provides notice to the other of its intention to terminate
the facility. At March 31, 2007, the balance of the line of credit was $8.7 million. The revolving credit facility from FCC continues to require the Company to comply with certain covenants. The Company was in compliance with all covenants at
March 31, 2007. There can be no assurance that the Company will be in compliance with the above-mentioned covenants in the future and there can be no assurance that FCC will provide waivers if the Company is not in compliance. However,
management believes that, if necessary, the Company will be able to secure any necessary waivers.

Note 8. Note Payables to Related Parties

At March 31, 2007, the Company had a long-term note payable to Ryan Holdings in the amount of $3,200,000, which bears interest at the rate of
8% per annum, payable quarterly. The principal is payable in two installments of $1,600,000 on June 30, 2007 and December 31, 2007 (see Note 13). The Company has provided a letter of credit issued by Stanford in the amount of
$3,200,000 to guarantee this note payable. The letter of credit expires in January 2008.

At March 31, 2007, the Company had an unsecured, long term
note payable to Burton in the amount of $750,000. This note bears interest at the rate of 8% per annum, payable quarterly, and the principal is payable in installments of $250,000 payable on September 12, 2007 and $500,000 payable on
September 12, 2008 (see Note 13).

At March 31, 2007, the Company had two unsecured, non interest bearing promissory notes to Devant. The first
is a short-term note in the principal amount of $250,000 and is payable in five quarterly installments of $50,000 each, commencing on March 31, 2007. An additional short-term note, in the principal amount of $150,000, is payable in three
monthly installments of $50,000 each, commencing on May 1, 2007.

Additionally, as described in Note 2, a portion of the purchase price for both
Burton and Devant was satisfied with the issuance to each of 250,000 shares of the Companys common stock, whereby the Company has guaranteed the value of such shares (see Note 13).

Regarding the shares issued to Burton, the Company may be required to provide for the issuance of additional
shares of common stock or the payment of cash contingent on the future market price of the shares issued. Unless the price of the security at least equals $4.00 per share on the 24th, 30thor 36thmonth anniversary of the closing, the Company will be required to issue additional



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



securities or pay cash sufficient to make the then current value of the total consideration equal to the guaranteed amount of $1,000,000. The Company issued
a promissory note for the full guaranteed value of the shares of $1,000,000. The shares of common stock issued unconditionally at the purchase date were recorded at the then fair market value of $512,500 ($2.05 per share). The Company also recorded
a liability for the guarantee under the purchase consideration in the amount of $487,500.

Regarding the shares issued to Devant, the Company may be
required to provide for the payment of cash contingent on the future market price of the shares issued. Unless the price of the security at least equals $5.00 per share on April 15, 2009, the Company will be required to pay cash sufficient to
make the then current value of the total consideration equal to the guaranteed amount of $1,250,000. The Company issued a promissory note for the full guaranteed value of the shares of $1,250,000. The shares of common stock issued unconditionally at
the purchase date were recorded at the then fair market value of $252,500 ($1.01 per share). The Company also recorded a liability for the guarantee under the purchase consideration in the amount of $997,500.

Any additional securities issued or additional cash paid to either Burton or Devant, upon the resolution of such contingencies based on the security price, shall not
affect the cost of the acquired entities regardless of whether the security price is maintained or a higher price is achieved. When the contingencies are resolved, the fair value of the securities originally issued will be adjusted accordingly.

Note 9. Debt and Equity with Stanford

On
July 18, 2005, the Company entered into a Securities Purchase Agreement in which Stanford agreed to make an aggregate investment of $2,000,000, in the form of an 8% Subordinated Convertible Debenture (the Debenture). Under the terms
of the Securities Purchase Agreement, the Company agreed to authorize a class of Series A preferred stock, into which Stanford could convert the Debenture at a ratio of $2.00 per share. Each share of preferred stock is convertible into one-half
share of the Companys common stock and has a liquidation preference of $2.00 per preferred share. Holders of the preferred stock are entitled to vote with the holders of our common stock on all matters. The Company also issued to Stanford
five-year warrants (exercisable at $.001 par value per share) to purchase 300,000 shares of the Companys common stock. The warrants to purchase 300,000 shares of the Companys common stock were exercised on November 30, 2005. The
Company allocated $1,337,987 of the proceeds of the $2,000,000 investment to the Debenture and $662,013 of the proceeds to the warrants. The fair value of the warrants was recorded as a debt discount to the Debenture. The Company also recorded a
debt discount of $312,013 representing a beneficial conversion feature of the Debenture instrument. On November 30, 2005, Stanford exchanged the Debenture for 1,000,000 shares of Series A preferred stock. The total debt discounts of $974,026
were amortized through November 2005 with the balance charged to interest expense upon conversion of the Debenture into preferred stock in November 2005.

On November 30, 2005, the Company entered into a Preferred Stock Purchase Agreement (the Purchase Agreement) with Stanford. The Purchase Agreement provided for purchases at any time within two years from the date of the
Purchase Agreement of up to an aggregate of 4,500,000 shares of the Companys Series B Convertible Preferred Stock (the Series B Preferred Stock) at a purchase price of $2.00 per share of Series B Preferred Stock, or $9,000,000, and
issuance of five-year warrants to purchase up to 1,350,000 shares of the Companys common stock at an exercise price of $0.001 per share (the Series B Warrants) in various installments, in order to provide the Company with funds for
acquisitions and working capital, subject to Stanfords final approval of each installment requested.

Under the Purchase Agreement, two shares of
Series B Preferred Stock are convertible into one share of the Companys common stock and are entitled to one vote per preferred share. Stanford has acquired (in various tranches) all of the authorized Series B Preferred Stock shares and all of
the Series B Warrants. All Series B Warrants were exercised between November 2005 and October 2006.

On December 20, 2006, the Company entered into an
Amendment to the Purchase Agreement (the Amendment) with Stanford. The Amendment provided for purchases of up to an aggregate of 2,000,000 shares of the Companys Series C Convertible Preferred Stock (the Series C Preferred
Stock) at a purchase price of $4.00 per share of Series C Preferred Stock, or $8,000,000, and issuance of five-year warrants to purchase up to 1,200,000 shares of the Companys common stock at an exercise price of $0.001 per share (the
Series C Warrants) in various installments, in order to provide the Company with funds for acquisitions and working capital, subject to Stanfords final approval of each installment requested.

Under the Amendment each share of Series C Preferred Stock is convertible into one share of the Companys common stock and is entitled to one vote per share.
Stanford has acquired (in various tranches) all of the authorized Series C Preferred Stock shares and all of the Series C Warrants. All Series C Warrants were exercised between January 2007 and March 2007.

In connection with the July 18, 2005 Securities Purchase Agreement, the Company was required to file a registration statement associated with the Series A Preferred
Stock and the Warrants pursuant to a registration rights agreement. The required registration statement was filed on April 18, 2006. The Company is obligated to register the shares of common stock underlying the Series B Preferred Stock and the
Warrants pursuant to a registration rights agreement within 90 days after the date of demand by the security holders. To date, no such demands have been made. The Company is obligated to register the shares of common stock underlying the Series C
Preferred Stock and the Warrants pursuant to a registration rights agreement no later than June 30, 2007 (see Note 13).

If the Company does not file the
registration statements on a timely basis or maintain an effective registration statement once it is declared effective, it must issue upon default and each month thereafter that the registration statement is not filed or maintained effective,
warrants to purchase a number of shares of common stock equal to the number of shares of preferred stock held by the investors, including Stanford, as liquidating damages. The registration statement does not provide for any cash settlement
alternative and the default may only be cured or settled by delivering a fixed number of warrants or shares of the Companys common stock to these shareholders. The shares issuable as liquidated damages are applicable until such time as the
shares to be registered may be sold under Rule 144.

The financial instruments discussed above were accounted for in accordance with Emerging Issues Task
Force (EITF) Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF 00-27 Application of Issue No. 98-5 to Certain
Convertible Instruments. The preferred stock is considered



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##### Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



permanent equity. The warrants and conversion option are also components of equity and were not determined to be a derivative liability in accordance with
the provisions of FASB Statement No. 133 or EITF 00-19 Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock.

Stanford is the owner of 72.1% of the Companys issued and outstanding common stock (assuming conversion of all preferred stock) at March 31, 2007. Stanford is
the owner of all of the Companys issued and outstanding preferred stock.

See Note 13 below for further discussion of the Companys debt with
Stanford.

Note 10. Litigation

Incident to the
Companys business activities, it may at times be a party to legal proceedings, lawsuits and claims. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Management believes at this time there are no
ongoing matters which will have a material adverse effect upon the Companys consolidated financial position or results of operations.

Note 11.
Product Information

The Companys operations consist of one business segment, the golf industry segment. However, the Company evaluates the
performance of its business based on revenues for certain business units. Revenues for these units are as follows:



|                     |  |                            |            |               |   |          
|-------------------- |  | -------------------------- | ---------- | ------------- | - | ---------
|                     |  | For the Three Months Ended
|                     |  | March 31, 2007             |            | April 1, 2006
|Off Course           |  | $                          | 3,228,122  |               | $ | 4,353,522
|On Course            |  |                            | 1,799,376  |               |   | 1,112,334
|Premium-OEM-Internet |  |                            | 2,207,059  |               |   | 750,950  
|International        |  |                            | 1,082,248  |               |   | 571,093  
|Sport Towels         |  |                            | 1,819,602  |               |   |         
|                     |  |                            |            |               |   |          
|                     |  | $                          | 10,136,407 |               | $ | 6,787,899
|                     |  |                            |            |               |   |          

Note 12. Departure of Principal Officers

On April 13, 2006, Deborah Ryan, Executive Vice President of ForeFront, separated from the Company. In addition, Dennis Ryan, President of the Off-Course division, separated from the Company with an effective
date of May 26, 2006. Under the terms of her employment agreement, Deborah Ryan is entitled to continue to receive her base salary for a period of twelve months along with certain other benefits. Under the terms of his employment agreement,
Dennis Ryan is entitled to continue to receive his base salary for a period of twelve months along with certain other benefits. During 2006, the Company recorded an expense of $350,000 in relation to these agreements. At March 31, 2007, $36,344
remains unpaid and is reflected as an accrued liability to related parties in the accompanying condensed consolidated balance sheet.

Note 13.
Subsequent Events

On April 19, 2007, ForeFront entered into an employment agreement with Richard Allen Oleksyk. Mr. Oleksyk serves as the
President and Chief Operating Officer of ForeFront. As amended, the employment agreement provides for an annual base salary of $225,000 and has an initial term of four years. The employment agreement also provides for annual bonuses as determined by
our Board of Directors and options to purchase 500,000 shares of ForeFronts common stock.

On May 21, 2007, due to the Companys delinquent
filing of its Form 10-KSB for the year ended December 31, 2006, the Companys common stock was removed from quotation from the OTC Bulletin Board (OTCBB) and began trading on the Pink Sheets, LLC (Pink Sheets).
Pink Sheets is a centralized quotation service that collects and publishes market maker quotes for over the counter securities in real-time. Our listing status on the Pink Sheets is dependent on market makers willingness to provide the service
of accepting trades to buyers and sellers of the stock. As the Company is now current on its filings with the Securities and Exchange Commission, the Companys shares are again eligible for quotation on the OTCBB.

On June 25, 2007, Michael S. Hedge, the Companys Chief Executive Officer and a member of the Companys Board of Directors, separated from the Company. In
addition, J. Max Waits, the Companys Executive Vice President and Chief Operating Officer, separated from the Company on July 20, 2007. In connection with Mr. Hedges and Mr. Waits separations from the Company, the
Company agreed to provide each of the former executives their base salary for a period of twelve months along with certain other benefits. During the second and third quarters of 2007, the Company recorded an expense of $444,214 in relation to these
agreements.

At March 31, 2007, the Company had a remaining financing commitment to ForeFront Crellin in the amount of $220,000. The Company fulfilled
that commitment in the second quarter of 2007. In addition, on June 30, 2007, ForeFront Crellin was dissolved. As of that date, the Company had invested an aggregate of $500,000 in ForeFront Crellin and had recognized $153,560 of normal
operating losses. The remaining investment of $346,440 was written off in the second quarter of 2007.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



In July 2007, the Company vacated the Ft. Walton Beach, Florida facility that had been leased from Burton since
September 2006. The Company consolidated the operations of its Ft. Walton Beach, Florida location into its Springfield, Tennessee facility in order to eliminate the redundancy of functions in both locations. As part of this consolidation, the
Company recognized $715,647 of expense in the second quarter of 2007. This amount included the impairment of fixed assets that were no longer going to be used of $261,100, inventory shrink of $199,753, the impairment of inventory that was considered
excess and obsolete of $172,947 and severance costs of $81,847.

During the period from April 5, 2007 through November 21, 2007, SVCH advanced
the Company an aggregate of $13,480,000. Of this amount, $5,030,000 was borrowed to fund the Ryan Holdings transaction discussed below. The remaining $8,450,000 was borrowed for working capital purposes.

On November 21, 2007, the Company obtained a credit facility from SVCH. The facility, which is evidenced by a credit agreement and subordinated promissory note,
provides for a maximum credit limit of $32,500,000, and an interest rate of 8% per annum. This facility is subordinate to the line of credit facility with FCC, as well as all other outstanding debt. Principal and interest are due on the later
of (a) cash payment of all outstanding amounts to FCC and the termination of the FCC facility, or (b) May 21, 2009. As of November 21, 2007, borrowings under the SVCH facility totaled $13,480,000, which represents the refinancing of the
aforementioned borrowings from SVCH. Any additional borrowings under this facility are subject to the conditions as outlined in the credit agreement and require SVCH approval for each request. Borrowings under the facility may be used for capital
expenditures or general operating purposes. In connection with this transaction, the Companys obligation to register the shares of common stock underlying the Series C Preferred Stock and the Series C Warrants was deferred by Stanford
through June 30, 2008.

On September 21, 2007, the Company completed an agreement with Ryan Holdings. As part of this agreement, the Company paid the
full balance of the long-term note payable of $3,200,000 and the related interest discussed in Note 8. Further, the Company redeemed 1,100,000 shares of its common stock previously issued to Ryan Holdings. Also included in the agreement was an early
termination agreement related to the Companys lease of its executive offices and a distribution center, shortening the lease term from October 2011 to July 2008. In addition, the Company satisfied the remaining contingent consideration from
the $1,000,000 Contingent Payment discussed in Note 6. Further, the agreement includes an 18-month non-compete agreement for Deborah and Dennis Ryan, the owners of Ryan Holdings. Finally, Deborah Ryan resigned as a member of the Companys Board
of Directors. In consideration of the foregoing items, not including the payoff of the note, the Company made an aggregate payment of $1,830,000 to Ryan Holdings.

On September 21, 2007, the Company completed an agreement with Burton. As part of this agreement, Burton returned their 250,000 shares of the Companys common stock. In addition, the unsecured, long-term note payable issued by
ForeFront Holdings to Burton with a remaining principal balance of $500,000 and the promissory note issued by ForeFront Holdings for the guaranteed value of the issued shares of $1,000,000 were cancelled. In exchange for the preceding, ForeFront
issued Burton an unsecured, long-term note payable in the amount of $1,500,000, bearing interest at 8% per annum, payable quarterly. The principal is payable in installments of $500,000 on September 12, 2008 and $1,000,000 on
September 12, 2009.

On September 21, 2007, the Company completed an agreement with Devant. As part of this agreement, Devant returned their
250,000 shares of the Companys common stock. In addition, the promissory note issued by ForeFront Holdings for the guaranteed value of the issued shares of $1,250,000 was cancelled. In exchange for the preceding, ForeFront issued Devant an
unsecured, long-term note in the amount of $890,000, bearing interest at 6% per annum, payable at maturity. The principal is due on April 15, 2009. In addition, the Company agreed to pay an additional $210,000 to certain ForeFront Devant
employees in April 2009.

On November 1, 2007, ForeFront entered into an employment agreement with J. Stan Harris. Mr. Harris serves as the Chief Executive
Officer of ForeFront. The employment agreement provides for an annual base salary of $318,600 and has an initial term of four years. The employment agreement also provides for annual bonuses as determined by our Board of Directors and options to
purchase 1,764,706 shares of ForeFronts common stock.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto appearing
elsewhere in this Form 10-Q.

The unaudited condensed consolidated financial statements herein have been prepared by us pursuant to the
rules and regulations of the Securities and Exchange Commission. The accompanying unaudited condensed consolidated financial statements have been prepared under the presumption that users of the unaudited condensed financial information have
either read or have access to the audited financial statements for the latest fiscal year ended December 31, 2006. Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the December 31, 2006
audited financial statements have been omitted from these unaudited condensed consolidated financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary
for a fair presentation. Although we believe that the disclosures are adequate to make the information presented not misleading, it is suggested that these interim consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in our latest Annual Report on Form 10-KSB.

Forward-Looking Statements

This document includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This
report contains both historical information and other information that you can use to infer future performance. Example of historical information include our annual financial statements and the commentary on past performance contained in our
MD&A. While we have specifically identified certain information as being forward-looking in the context of its presentation, we caution you that, with the exception of information that is historical, all the information contained in this report
should be considered to be forward-looking statements. Such forward-looking statements relate to, among other things, our financial condition, our results of operations, our growth strategy and the business of our company generally.
Without limiting the generality of the preceding sentence, any time we use the words estimate, project, intend, expect, believe, anticipate, continue and similar
expressions, we intend to clearly express that the information deals with possible future events and is forward-looking in nature. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our
actual results in future periods to differ materially from forecasted results. These risks and uncertainties are more fully described in Item 1, Risk Factors of our latest Annual Report on Form 10-KSB and other risks and
uncertainties are more fully described in our other filings with the SEC. We caution that the risk factors set forth in this report are not exclusive. We conduct our business in a highly competitive and rapidly changing environment. Accordingly, new
risk factors may arise. It is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of factors, may cause
results to differ materially from those contained in any forward-looking statement. We disclaim any obligation to revise or update any forward-looking statement that may be made from time to time by us or on our behalf.

Restructuring Transactions

As disclosed in our
Current Report on Form 8-K filed with the SEC on September 27, 2007, on September 21, 2007, we consummated the following transactions:

We entered into an agreement (the Ryan Amendment) amending that certain Asset Purchase Agreement dated as of October 14, 2004 by and among us, Ryan Holdings, Inc. and Dennis and Deborah Ryan (the Ryan Purchase
Agreement). Pursuant to the Ryan Amendment, the following transactions (collectively, the Ryan Transactions) were consummated: (a) we repaid in full all amounts of principal and interest due under a long-term promissory note
in the original principal amount of $3.2 million entered into in connection with the Ryan Purchase Agreement, (b) we redeemed 1,100,000 shares of our common stock that were previously issued to Ryan Holdings, Inc. pursuant to the Ryan Purchase
Agreement, (c) we entered into a lease modification agreement with Ryan Holdings, Inc., reducing the term of an existing lease with respect to the Springfield, Tennessee lease premises used by us in our operations, (d) we entered into a
new lease with Ryan Holdings, Inc. with respect to a portion of the Springfield premises, (e) we fully satisfied all of our remaining contingent payment obligations under the Ryan Purchase Agreement, and (f) certain other modifications to
the Ryan Purchase Agreement and related documents were effectuated. In consideration of the foregoing items (b)-(f), we made an aggregate payment of $1,830,000 to Ryan Holdings, Inc.

In addition, we entered into an agreement (the Burton Amendment) amending that certain Asset Purchase Agreement dated as of
September 16, 2006 by and between us, Burton Golf, Inc. (Burton) and its principal shareholders (the Burton Purchase Agreement). Pursuant to the Burton Amendment, the following transactions (collectively, the
Burton Transactions) were consummated: (a) we redeemed 250,000 shares of our common stock that were previously issued to Burton pursuant to the Burton Purchase Agreement, (b) outstanding promissory notes executed in connection
with the Burton Purchase Agreement were cancelled



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##### Table of Contents

and returned by Burton to us and a new promissory note in the amount of $1,500,000 was issued by us to Burton, (c) we paid to Burton all unpaid interest
on an existing promissory note accrued from July 1, 2007 through the date of the Burton Amendment, (d) a Guaranty Agreement dated September 16, 2007 made by us in favor of Burton was cancelled, and (e) certain other modifications
to the Burton Purchase Agreement were effectuated.

Finally, we entered into an agreement (the Devant Amendment) amending that
certain Asset Purchase Agreement dated as of December 20, 2006 by and between us, Devant Ltd. (Devant) and its principal shareholders (the Devant Purchase Agreement). Pursuant to the Devant Amendment, the following
transactions (collectively, the Devant Transactions) were consummated: (a) we redeemed 250,000 shares of our common stock that were previously issued to Devant pursuant to the Devant Purchase Agreement, (b) outstanding
promissory notes executed in connection with the Devant Purchase Agreement were cancelled and returned by Devant to us and a new promissory note in the amount of $890,000 was issued by us to Devant, (c) we agreed to make certain payments on
April 30, 2009 in the aggregate amount of $210,000 to certain ForeFront Devant employees, (d) a Guaranty Agreement dated December 20, 2006 made by us in favor of Devant was cancelled, and (e) certain other modifications to the
Devant Purchase Agreement were effectuated.

During the period from April 5, 2007 through November 21, 2007, SVCH advanced us an aggregate
of $13,480,000. Of this amount, $5,030,000 was borrowed to fund the Ryan Transactions discussed above. The remaining $8,450,000 was borrowed for working capital purposes.

On November 21, 2007, we obtained a credit facility from Stanford Venture Capital Holdings, Inc. (SVCH). The facility, which is evidenced by a credit agreement and subordinated promissory note, provides
for a maximum credit limit of $32,500,000, and an interest rate of 8% per annum. This facility is subordinate to the line of credit facility with First Capital Corporation, LLC (FCC), as well as all of our outstanding debt to Burton and
Devant. Principal and interest are due on the later of (a) cash payment of all outstanding amounts to FCC and the termination of the FCC facility, or (b) May 21, 2009. As of November 21, 2007, borrowings under the SVCH facility totaled $13,480,000,
which represents the refinancing of the aforementioned borrowings from SVCH. Any additional borrowings under this facility are subject to the conditions as outlined in the credit agreement and require SVCH approval for each request. Borrowings under
the facility may be used for capital expenditures or general operating purposes.

In connection with the SVCH credit facility, we entered
into a Tenth Amendment to Loan and Security Agreement with respect to the FCC facility. Pursuant to this Amendment, FCC consented to the SVCH credit facility and released ForeFront Holdings from the corporate guaranty previously executed in
connection with the FCC facility. In addition, certain provisions of the FCC loan agreement regarding eligible accounts receivable, permitted capital expenditures and permitted management salaries, among others, were amended.

We funded the Ryan Transactions, the Burton Transactions and the Devant Transactions with borrowings from SVCH.

Overview

ForeFront Holdings, Inc. (ForeFront
Holdings), through our principal subsidiaries (both direct and indirect), ForeFront Group, Inc. (ForeFront), Miller Golf Company (Miller), ForeFront Burton, Inc. (ForeFront Burton), and ForeFront Devant,
Inc. (ForeFront Devant), as well as our 50% interest in ForeFront Crellin, LLC (ForeFront Crellin) which was dissolved on June 30, 2007, is a supplier of accessory products to the golf industry. Our key product offerings
include high-quality golf bags and golf accessories.

We have taken efforts to become a leading supplier of golf bags and accessories in
each of the unique trade channels in the golf industry we serve. In 2006, we acquired the golf bag and accessory business of Burton Golf, Inc. (Burton) and the golf towel and accessory business of Devant Sports, Ltd.
(Devant).

We sell our products primarily to the following channels of distribution:



| |  |  | Off-Course: sporting goods chains, mass merchandisers, independent retail and golf specialty shops;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | On-Course: pro shops, municipal courses, private clubs, resorts and daily fee courses;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | Premium -OEM-Internet: Corporate ASI, Original Equipment Manufacturers (OEM) customers and E-Commerce retailers; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | International: pro shops, golf stores and sporting goods stores in international markets.
| | - |  | -----------------------------------------------------------------------------------------

We currently sell most of our golf bags under the Datrek and Burton brand names. Through the four key trade channels that we serve, we offer a broad
range of golf bags and accessories marketed under our brand names Datrek, Burton, Devant, Sir Christopher Hatton and Miller Golf, as well as licensed brands including NCAA, the Wilson/NFL team logos, the Ryder Cup, the PGA and the LPGA. We sell most
of our golf accessories under the Miller brand name and most of our towels under the Devant and Sir Christopher Hatton brand names.

Our
executive offices are located at 835 Bill Jones Industrial Drive, Springfield, Tennessee 37172. Our telephone number is (615) 384-1286. Our website is www.forefrontgolf.com.

Operational Risks and Challenges

During 2006 and through the first nine months of 2007, we witnessed
an increasing shift in the market as a result of big box specialty golf stores and sporting goods chains displacing the independent stores that historically purchased our products. Also, the national specialty golf and sporting goods
stores have developed proprietary branded golf bag and accessory products that they sell in preference to our products. In order to remain competitive inside the national stores, we must continue to be innovative in terms of product features and
licensing. We believe that the trend to national store chains will continue and that our share of the total addressable golf bag and accessories market will be constrained as a result.



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Key Performance Indicators

Our management monitors and analyzes several key performance indicators in order to manage our business and evaluate our financial and operating performance, including:

Revenue

Brand and trade channel revenue generally
constitutes the major portion of our revenue in any reporting period, and for the reasons discussed elsewhere in this report, is subject to significant variability from period to period. In the short-term, we closely review the status of product
shipments and deliveries in order to forecast revenue and cash receipts. In the long-term, we monitor the status of the pipeline of product sales opportunities and product development cycles. Revenue growth is the best indicator of whether we are
achieving our objective of increased market share in the markets we serve.

Gross margin

Our overall gross margin for the three months ended March 31, 2007 was 22.9%. To be successful, we need to increase product gross margin, which we
believe is best achieved through increased product differentiation and lower infrastructure costs. Our long-term objective is to achieve gross margin, as a percentage of revenue, of 35% or better.

Operating expenses

Our operating expenses are driven
largely by employee costs incurred from our marketing, sales, sales administration, executive and administrative functions. Other costs include travel expenses, participation in trade shows, advertising, royalty fees, professional costs and
amortization of intangibles. As a result of our growth, overall operating expenses significantly increased for the three months ended March 31, 2007 as compared to the same period in the prior year; however, our 2007 operating expenses, as a
percent of revenue were 48.8%, compared to 49.4% in the same period of 2006. As part of our ongoing efforts to control operating expenses, we continually review key functions and, with the benefit of anticipated synergy improvements from our
acquisitions, expect our operating expenses to continue to decrease as a percentage of sales. Our long-term objective is for operating expenses, as a percentage of revenue, to be in the range of 30% or better. Meeting this objective is dependent on
our ability to increase revenue in the future, control our costs, and achieve the anticipated synergies of our combined companies.

Liquidity and cash
flows

Due to the seasonality in product revenue, our cash position also varies from quarter to quarter and within a quarter. We closely
monitor our expected cash levels, particularly in light of potential increased inventory purchases and the risk of delays in product shipments and acceptances. Our December 2006 preferred stock offering and the credit facility obtained from SVCH in
fiscal 2007 are consistent with our goal to build our cash position to provide additional working capital and to improve our operational and strategic flexibility while at the same time lowering the business risk to shareholders. Sustained
profitability over annual periods is our primary objective, which should improve our cash position and shareholder value.

Days sales outstanding

We closely review days sales outstanding (DSO) to evaluate our efficiency in collection of accounts receivable. Timely
collection of receivables is critical to our liquidity. DSO was 71 days at March 31, 2007, compared with 64 days at December 31, 2006. This increase is seasonal in nature. Our standard terms of sale require customers to pay within 30 or 45
days from the date of the invoice. Several large customers are granted 60-day terms. During certain periods of the year, certain customers are offered extended dating terms as a competitive selling feature.

Inventory turns

We review inventory turns to measure
our efficiency in managing our inventory. Inventory turns, calculated based on an annualized rolling three months, were 3.0 times at March 31, 2007, as compared to 2.8 times at December 31, 2006. This improvement is somewhat seasonal, and
we are continuing our evaluation of our inventory levels in order to reduce the risk of building up older product in the future.



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##### Table of Contents

Results of Operations

The following table sets forth certain unaudited financial data, in thousands, for the periods indicated.



|                           |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|-------------------------- |  | ------------------ | ------ | - | ------------- | ----- | -- | ------ | - | ------ | ------------ |  | ----- | --
|                           |  | Three Months Ended |       
|                           |  | March 31, 2007     |        |   | April 1, 2006 |      
|                           |  | Amount             |        |   | % ofNetSales  |       |    | Amount |   |        | % ofNetSales | 
|Net Sales                  |  | $                  | 10,136 |   |               | 100.0 | %  |        | $ | 6,788  |              |  | 100.0 | % 
|Cost of sales              |  |                    | 7,816  |   |               | 77.1  |    |        |   | 5,150  |              |  | 75.9  |   
|                           |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|Gross margin               |  |                    | 2,320  |   |               | 22.9  |    |        |   | 1,638  |              |  | 24.1  |   
|                           |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|Operating expenses         |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|Sales and marketing        |  |                    | 2,618  |   |               | 25.8  |    |        |   | 1,957  |              |  | 28.8  |   
|General and administrative |  |                    | 2,329  |   |               | 23.0  |    |        |   | 1,397  |              |  | 20.6  |   
|                           |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|Total operating expenses   |  |                    | 4,947  |   |               | 48.8  |    |        |   | 3,354  |              |  | 49.4  |   
|                           |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|Loss from operations       |  |                    | (2,627 | ) |               | (25.9 | )  |        |   | (1,716 | )            |  | (25.3 | ) 
|                           |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|Other income (expense):    |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|Interest expense           |  |                    | (306   | ) |               | (3.0  | )  |        |   | (225   | )            |  | (3.3  | ) 
|Minority interest          |  |                    | 42     |   |               | 0.4   |    |        |   | 28     |              |  | 0.4   |   
|                           |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|Other expense, net         |  |                    | (1     | ) |               | (0.0  | )  |        |   | (2     | )            |  | (0.0  | ) 
|                           |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|Net other expense          |  |                    | (265   | ) |               | (2.6  | )  |        |   | (199   | )            |  | (2.9  | ) 
|                           |  |                    |        |   |               |       |    |        |   |        |              |  |       |   
|Net loss                   |  | $                  | (2,892 | ) |               | (28.5 | )% |        | $ | (1,915 | )            |  | (28.2 | )%
|                           |  |                    |        |   |               |       |    |        |   |        |              |  |       |   

In managing our operations and assessing our financial performance, management supplements the
information provided by financial statement measures with other operational and customerfocused performance metrics. The principal factors our management analyzes in evaluating our performance are changes in our sources of revenue and their
related gross margins. As shown in the liquidity discussion below, to further evaluate the effectiveness of our operations and the strength of our financial position, management reviews our days of sales outstanding and inventory turns for each
period. These performance measures are non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a companys financial performance or cash flows that (a) excludes amounts, or is subject to adjustments that have
the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the consolidated balance sheet, consolidated statements of operations,
or consolidated statements of cash flows, or (b) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.

Comparison of the Three Months Ended March 31, 2007 and April 1, 2006

Net sales increased $3.3 million for the three months ended March 31, 2007 to $10.1 million compared to $6.8 million during the same period in 2006. This increase is largely due to the addition of sales from
ForeFront Burton and ForeFront Devant of $2.3 million and $1.8 million, respectively, offset by decreases in the sales of Datrek and Miller products of $0.8 million.



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Sales information by product category for the periods indicated is summarized as follows:



|                                         |  |                    |            |         |               |   |        |   |           |  |       |  
|---------------------------------------- |  | ------------------ | ---------- | ------- | ------------- | - | ------ | - | --------- |  | ----- | -
|                                         |  | Three Months Ended |           
|                                         |  | March 31, 2007     |            |         | April 1, 2006 |  
|                                         |  | Amount             |            | Percent |               |   | Amount |   | Percent   | 
|Datrek golf bags and travel covers       |  | $                  | 2,659,896  |         | 26.2          | % |        | $ | 3,805,980 |  | 56.1  | %
|Burton golf bags and travel covers       |  |                    | 1,239,833  |         | 12.2          |   |        |   |          |  | 0.0   |  
|Miller and Burton accessories            |  |                    | 647,444    |         | 6.4           |   |        |   | 721,925   |  | 10.6  |  
|NCAA golf bags and accessories           |  |                    | 866,087    |         | 8.5           |   |        |   | 917,734   |  | 13.5  |  
|NFL golf bags and accessories            |  |                    | 173,361    |         | 1.7           |   |        |   | 61,255    |  | 0.9   |  
|Premium / OEM / Internet                 |  |                    | 1,682,449  |         | 16.6          |   |        |   | 596,093   |  | 8.8   |  
|Devant and Sir Christopher Hatton towels |  |                    | 1,819,601  |         | 18.0          |   |        |   |          |  | 0.0   |  
|GolfLogix                                |  |                    | 325,463    |         | 3.2           |   |        |   |          |  | 0.0   |  
|ForeFront Crellin                        |  |                    | 313,384    |         | 3.1           |   |        |   | 335,475   |  | 4.9   |  
|Freight invoiced to customers            |  |                    | 375,517    |         | 3.7           |   |        |   | 269,455   |  | 4.0   |  
|Other                                    |  |                    | 33,372     |         | 0.4           |   |        |   | 79,982    |  | 1.2   |  
|                                         |  |                    |            |         |               |   |        |   |           |  |       |  
|Total                                    |  | $                  | 10,136,407 |         | 100.0         | % |        | $ | 6,787,899 |  | 100.0 | %
|                                         |  |                    |            |         |               |   |        |   |           |  |       |  

Sales of Datrek golf bags and travel covers decreased $1.1 million, or 30.1%, for the three months
ended March 31, 2007 as compared to the similar period for 2006. This decrease is a result of several factors, including the reduction of our off-course sales to smaller, independent retail stores which have historically been our largest sales
outlet due to the contraction of the industry as discussed in our most recent Annual Report on Form 10-KSB. In addition, large golf specialty stores and sporting goods chains have substantially increased purchases of their own private label
golf bags and accessory products directly from overseas vendors. Our current year sales of Datrek products were also negatively impacted by new product offerings that were not widely embraced in the market. Sales of NCAA golf bags and accessories
decreased $0.1 million, or 5.6%, in the 2007 period. This decrease is principally attributable to the decrease in off-course sales discussed above. Sales in the Premium/OEM/Internet channel increased $1.1 million, or 182.2%, in 2007. This increase
was driven by OEM business we acquired as part of the Burton transaction. During the three months ended March 31, 2007, we had an exclusive worldwide distribution agreement to distribute the GolfLogix-Garmin GPS device, which provided $0.3
million in sales. This device measures distance to the hole or hazard on most golf courses in the U.S. and many others throughout the world utilizing GPS satellite technology. This exclusive distribution agreement expires in the fourth quarter of
2007. Freight invoiced to customers increased $0.1 million, or 39.4%, in 2007, correlating with the overall increase in sales. We will continue to pass through shipping costs to our customers as market conditions allow.

Cost of sales for the three months ended March 31, 2007 was $7.8 million, or 22.9% gross margin, as compared to $5.2 million, or 24.1% gross margin,
for the comparable period in the prior year. Included as part of our cost of sales are direct product costs comprised of material, labor, and production overhead. Other costs include import duties, inbound and outbound transportation costs, and
warranty expenses. The decrease in gross margin of 1.2% was primarily the result of sales discounting necessary due to the industry factors discussed above, as well as an overall company initiative to decrease inventory levels, primarily with
respect to older products.

Total operating expenses for the three months ended March 31, 2007 were $4.9 million, compared to $3.4
million for the three months ended April 1, 2006. Operating expenses were comprised of sales and marketing expenses and general and administrative expenses.

Sales and marketing expense totaled $2.6 million, or 25.8% of net sales, for the three months ended March 31, 2007, compared to $2.0 million, or 28.8% of net sales, for the three months ended April 1, 2006.
Included in our sales and marketing expense are the employee costs incurred from our marketing, sales, sales administration and sales support employees. Other costs include the travel expense for our sales force, attendance at trade shows,
advertising, telephone charges, product catalogs and royalty fees. The decrease in sales and marketing expense as a percentage of net sales of 3.0% is primarily attributable to certain efficiencies achieved by consolidating ForeFront Burton
functions into our existing infrastructure.

General and administrative expense was $2.3 million, or 23.0% of net sales, for the three
months ended March 31, 2007, as compared to $1.4 million, or 20.6% of net sales, for the comparable period in the prior year. Included in our general and administrative expense are salaries and related expenses for our executive officers and
administrative employees and corporate costs, including legal and accounting, bad debts, office supplies, equipment maintenance, bank charges and amortization of intangibles. The principal reason for the increase in administrative expense as a
percentage of net sales of 2.4% is additional amortization expense associated with the customer lists acquired in our purchases of Burton and Devant.



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Interest expense was $0.3 million and $0.2 million for the three-month periods ended March 31, 2007
and April 1, 2006, respectively. The increase of $0.1 million is attributable to increased borrowings under our revolving credit facility.

Liquidity and Capital Resources

We have incurred an accumulated deficit at March 31, 2007 of $22.5 million. We had
negative working capital at March 31, 2007 of $1.0 million. We incurred a net loss for the three months ended March 31, 2007 of $2.9 million.

To date, our principal sources of liquidity have included cash generated from our operations, drawings under our revolving credit facility with FCC and the sale of our capital stock and convertible debenture to
Stanford, our principal shareholder. In addition, as previously disclosed, we have recently entered into a debt financing transaction with SVCH. Management believes that cash balances on hand and generated from operations, availability of funds
under our FCC line of credit facility and borrowings from SVCH will be adequate to satisfy our projected operating cash requirements during the next 12 months. If necessary, we may seek to raise additional capital through the future issuance of
equity or debt. Our cash flow estimates are based upon achieving certain levels of sales and operating expenses. Should sales be less than forecasted, expenses be higher than forecasted or we fail to properly manage our growth, we may require
additional funding. Such additional funding may not be available through financings of debt and/or equity and we may not have adequate resources to fund operations.

Operating activities used $4.1 million of cash for the three months ended March 31, 2007, as compared to $2.6 million during the comparable period of 2006. The increase in cash used by operating activities is
primarily attributable to a higher net loss of $1.0 million and additional cash used for inventory of $1.0 million, partially offset by additional cash provided in the 2007 period from accounts payable and accrued liabilities of $0.3 million and
additional depreciation and amortization of $0.3 million.

Investing activities used $0.1 million for the three months ended March 31,
2007, whereas such activities used $0.2 million in the comparable period in 2006. Cash used in investing activities in 2007 is primarily attributable to purchases of property and equipment of $0.1 million.

Financing activities provided $3.5 million for the three months ended March 31, 2007, whereas such activities provided $2.6 million for the
comparable period in 2006. The principal source of cash provided by financing activities during 2007 was proceeds from the sale of $1.9 million of preferred stock to our principal shareholder, Stanford, and an increase in net borrowings under our
revolving credit facility with FCC of $1.6 million.

Cash at March 31, 2007 was $0.1 million compared with $0.7 million at
December 31, 2006. At March 31, 2007 we had shareholders equity of $5.4 million compared with $6.3 million at December 31, 2006.

On October 18, 2004, we obtained a revolving credit facility from FCC for a two-year term. The facility was amended on March 13, 2006 (pursuant to a Waiver and Sixth Amendment) extending the term for an
additional three-year period, through October 2009 and increasing the maximum credit limit of $7.5 million to $10.5 million. In addition, the interest rate was decreased from prime (8.25% at March 31, 2007) plus 2.5%, to prime plus 1.5%,
payable monthly. The facility was further amended to provide for an annual administration fee of $75,000 payable on the anniversary date of the facility, and it continues to carry a monthly maintenance fee of $2,000. Borrowings under the credit
facility are limited to 85% of eligible accounts receivable (as defined in the agreement) and 50% of eligible inventory (as defined in the agreement), subject to a loan cap of $5.5 million for eligible inventory. The facility is secured by a primary
security interest in accounts receivable, inventories, and other of our assets. After October 2009, the facility will renew for succeeding one-year periods unless either party provides notice to the other of its intention to terminate the facility.
At March 31, 2007, the balance of the line of credit was $8.7 million. The revolving credit facility from FCC continues to require us to comply with certain covenants. We were in compliance with all covenants at March 31, 2007. There can
be no assurance that we will be in compliance with the above-mentioned covenants in the future or that FCC will provide waivers if we are not in compliance. However, we believe that, if necessary, we will be able to secure any such waivers.

At March 31, 2007, we had a long-term note payable to Ryan Holdings, Inc. in the amount of $3,200,000, bearing interest at the rate
of 8% per annum, payable quarterly. As originally contemplated, the principal under this long-term note was payable in two installments of $1,600,000 on June 30, 2007 and December 31, 2007. The principal payment scheduled for
June 30, 2007 was deferred by Ryan Holdings until September 30, 2007. In connection with the Ryan Transactions, the full principal of $3,200,000 and related interest was paid on September 21, 2007.

At March 31, 2007, we had an unsecured, long-term note payable to Burton in the amount of $750,000, bearing interest at the rate of 8% per
annum, payable quarterly. As originally contemplated, the principal was payable in installments of $250,000 payable on September 12, 2007 and $500,000 payable on September 12, 2008. The principal payment scheduled for September 12,
2007 was timely paid. Additionally, a portion of the purchase price for the net assets of Burton was satisfied with the issuance of 250,000 shares of our common stock, whereby we guaranteed the value of such shares in the amount of $1,000,000. We
issued a promissory note for the full guaranteed value of the shares of $1,000,000. The shares of common stock issued unconditionally at the purchase date were



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recorded at the then fair market value of $512,500 ($2.05 per share). We also recorded a liability for the guarantee under the purchase consideration in the
amount of $487,500. In connection with the Burton Transactions, we redeemed the 250,000 shares of common stock issued to Burton in exchange for the cancellation of the outstanding promissory notes described above and an unsecured, long-term note in
the amount of $1,500,000, bearing interest at 8% per annum, payable quarterly. The principal is payable in installments of $500,000 payable on September 12, 2008 and $1,000,000 on September 12, 2009.

At March 31, 2007, we had two unsecured, non-interest bearing promissory notes to Devant. The first is a short-term note in the principal amount of
$250,000, payable in five quarterly installments of $50,000 each, commencing on March 31, 2007. An additional short-term note, in the principal amount of $150,000, is payable in three monthly installments of $50,000 each, commencing on
May 1, 2007. Additionally, a portion of the purchase price for the net assets of Devant was satisfied with the issuance of 250,000 shares of our common stock, whereby we guaranteed the value of such shares in the amount of $1,250,000. We issued
a promissory note for the full guaranteed value of the shares of $1,250,000. The shares of common stock issued unconditionally at the purchase date were recorded at the then fair market value of $252,500 ($1.01 per share). We also recorded a
liability for the guarantee under the purchase consideration in the amount of $997,500. In connection with the Devant Transactions, we redeemed the 250,000 shares of common stock issued to Devant in exchange for the cancellation of the outstanding
promissory notes discussed above and an unsecured, long-term note in the amount of $890,000, bearing interest at 6% per annum, payable at maturity. The principal is payable on April 15, 2009. In addition, we have agreed to pay an
additional $210,000 to certain employees of ForeFront Devant in April 2009.

Another source of liquidity has been the purchase by SVCH, and
subsequently Stanford, of our securities. Under a Securities Purchase Agreement, dated October 15, 2004, SVCH made an aggregate investment in our common stock, in several tranches, totaling $4,500,000. For its aggregate investment of
$4,500,000, SVCH received an aggregate of 2,250,000 shares of our common stock.

On July 18, 2005, we entered into a Securities
Purchase Agreement pursuant to which Stanford agreed to make an aggregate investment of $2,000,000, in the form of an 8% Subordinated Convertible Debenture (the Debenture). Under the terms of the Securities Purchase Agreement, we agreed
to authorize a class of Series A preferred stock, into which Stanford could convert the Debenture at a ratio of $2.00 per share. Each share of preferred stock is convertible into one-half share of our common stock and has a liquidation preference of
$2.00 per preferred share. Holders of the Series A preferred stock are entitled to vote with the holders of our common stock on all matters. We also issued to Stanford five-year warrants (exercisable at $.001 per share) to purchase 300,000 shares of
our common stock. The warrants to purchase 300,000 shares of our common stock were exercised on November 30, 2005. We allocated $1,337,987 of the proceeds of the $2,000,000 investment to the Debenture and $662,013 of the proceeds to the
warrants. The fair value of the warrants was recorded as a debt discount to the Debenture. We also recorded a debt discount of $312,013 representing a beneficial conversion feature of the Debenture instrument. On November 30, 2005, Stanford
exchanged the Debenture for 1,000,000 shares of Series A preferred stock. The total debt discounts of $974,026 were amortized through November 2005 with the balance charged to interest expense upon the conversion of the Debenture to Series A
preferred stock in November 2005.

On November 30, 2005, we entered into a Preferred Stock Purchase Agreement (the Purchase
Agreement) with Stanford. The Purchase Agreement provides for purchases at any time within two years from the date of the Purchase Agreement of up to an aggregate of 4,500,000 shares of our Series B Convertible Preferred Stock (the
Series B Preferred Stock) at a purchase price of $2.00 per share of Series B Preferred Stock, or $9,000,000, and the issuance of five-year warrants to purchase up to 1,350,000 shares of our common stock at an exercise price of
$0.001 per share (the Series B Warrants) in various installments, in order to provide us with funds for acquisitions and working capital, subject to Stanfords final approval of each installment requested.

Under the Purchase Agreement two shares of Series B Preferred Stock are convertible into one share of our common stock and are entitled to one vote
per share. Stanford has acquired (in various tranches) all of the authorized Series B Preferred Stock shares and all of the Series B Warrants. All Series B Warrants were exercised between November 2005 and October 2006.

On December 20, 2006, we entered into an Amendment to the Purchase Agreement (the Amendment) with Stanford. The Amendment provided for
purchases of up to an aggregate of 2,000,000 shares of our Series C Convertible Preferred Stock (the Series C Preferred Stock) at a purchase price of $4.00 per share of Series C Preferred Stock or $8,000,000 and the
issuance of five-year warrants to purchase up to 1,200,000 shares of our common stock at an exercise price of $0.001 per share (the Series C Warrants) in various installments, in order to provide us with funds for acquisitions and
working capital, subject to Stanfords final approval of each installment requested.

Under the Amendment each share of Series C
Preferred Stock is convertible into one share of our common stock and is entitled to one vote per share. Stanford has acquired (in various tranches) all of the authorized Series C Preferred Stock shares and all of the Series C Warrants.
All Series C Warrants were exercised between January 2007 and March 2007.



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The financial instruments discussed above were accounted for in accordance with Emerging Issues Task
Force (EITF) Issue No. 98-5 Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF 00-27 Application of Issue No. 98-5 to Certain
Convertible Instruments. The preferred stock is considered permanent equity. The warrants and conversion option are also components of equity and were not determined to be derivative liabilities in accordance with the provisions of Financial
Accounting Standards Board (FASB) Statement No. 133 Accounting for Derivative Instruments and Hedging Activities (SFAS 133) or EITF 00-19 Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock.

Stanford is the owner of 72.1% of our issued and outstanding common stock
(assuming conversion of all preferred stock) at March 31, 2007. Stanford is the owner of all of our issued and outstanding preferred stock.

During the period from April 5, 2007 through November 21, 2007, SVCH advanced us an aggregate of $13,480,000. Of this amount, $5,030,000 was borrowed to fund the Ryan Transactions discussed above. The remaining $8,450,000 was borrowed for
working capital purposes.

On November 21, 2007, we obtained a credit facility from SVCH. The facility, which is evidenced by a credit
agreement and subordinated promissory note, provides for a maximum credit limit of $32,500,000, and an interest rate of 8% per annum. This facility is subordinate to the line of credit facility with FCC, as well as all of our outstanding debt to
Burton and Devant. Principal and interest are due on the later of (a) cash payment of all outstanding amounts to FCC and the termination of the FCC facility, or (b) May 21, 2009. As of November 21, 2007, borrowings under the SVCH facility totaled
$13,480,000, which represents the refinancing of the aforementioned borrowings from SVCH. Any additional borrowings under this facility are subject to the conditions as outlined in the credit agreement and require SVCH approval for each request.
Borrowings under the facility may be used for capital expenditures or general operating purposes.

Accounts receivable at March 31,
2007, was $7.9 million, as compared to $6.5 million at December 31, 2006, reflecting an increase of 22.6%. DSO was 71 days at March 31, 2007, compared with 64 days at December 31, 2006. This increase is seasonal in nature. Our
standard terms of sale require customers to pay within 30 or 45 days from the date of the invoice. Several large customers are granted 60-day terms. During certain periods of the year, certain customers are offered extended dating terms as a
competitive selling feature.

Inventories at March 31, 2007 were $9.9 million, as compared to $9.7 million at December 31, 2006,
an increase of 1.4%. Inventory turns, calculated based on an annualized rolling three months, were 3.0 times at March 31, 2007, as compared to 2.8 times at December 31, 2006. This improvement is somewhat seasonal, and we are continuing our
evaluation of our inventory levels in order to reduce the risk of building up older product in the future.

Accounts payable and accrued
liabilities were $6.5 million and $6.4 million at March 31, 2007 and December 31, 2006, respectively. Interest payable and accrued liabilities to related parties were $0.5 million and $0.7 million at March 31, 2007 and December 31, 2006,
respectively.

We expended funds for capital expenditures of $0.1 million for property and equipment during the three months ended
March 31,2007.

Critical Accounting Policies

Use of Estimates

Our significant accounting policies are more fully described in our latest Annual Report on
Form 10-KSB. Certain of our accounting policies require the application of significant judgment by management in applying the requirements of certain accounting standards as well as selecting the appropriate assumptions for calculating
financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, observance of trends in the industry, information provided
by our customers, and information available from other outside sources, as appropriate. Different estimates could have been used in the current period, which could have a material impact on the presentation of our financial condition, changes in
financial condition or results of operations. We believe that the following financial estimates are important to the portrayal of our financial condition and results of operations and require subjective or complex judgments. Further, we believe that
the items discussed below are properly recorded in the financial statements for all periods presented. Management has discussed the development, selection, and disclosure of our most critical financial estimates with our auditors. The judgments
about these financial estimates are based on information available as of the date of the financial statements. These financial estimates include:

Revenue Recognition

We recognize sales when products are shipped to our customers or when services are rendered. Sales are
only recognized for arrangements with customers in which:



| |  |  | there is persuasive evidence of a contract or agreement which sets forth the terms of the arrangement;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | services have been rendered;
| | - |  | ----------------------------



| |  |  | our prices are fixed, determinable and agreed upon; and
| | - |  | -------------------------------------------------------



| |  |  | collectibility is reasonably assured.
| | - |  | -------------------------------------

Sales are
recognized when both title and risk of loss transfer to the customer. Sales are recorded net of an allowance for sales returns and sales programs. Sales returns are estimated based upon historical returns, current economic trends, changes in
customer demands and sell-through of products. We also record estimated reductions to revenue for sales programs such as incentive offerings. Sales program accruals are estimated based upon the attributes of the sales program, managements
forecast of future product demand, and historical customer participation in similar programs. If the actual costs of sales returns and sales programs exceed the recorded estimated allowance, our sales, gross profit and net income would be adversely
affected.



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Allowance for Doubtful Accounts

We maintain an allowance for estimated losses resulting from the failure of our customers to make required payments. An estimate of uncollectible amounts is made by management based upon historical bad debts, current
customer receivable balances, age of customer receivable balances, the customers financial condition and current economic trends. If the actual uncollected amounts exceed the estimated allowance, then our operating expenses and net income
would be adversely affected.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. The inventory balance, which includes material, labor and manufacturing overhead costs, is recorded net of an
estimated allowance for obsolete or unmarketable inventory. The estimated allowance for obsolete or unmarketable inventory is based upon managements understanding of market conditions and forecasts of future product demand. If the actual
amount of obsolete or unmarketable inventory exceeds the estimated allowance, our cost of sales, gross profit and net income would be adversely affected.

Accounting for Long-Lived Assets

We review property and equipment, intangible assets, and other long-lived assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors we consider important which could trigger an impairment review include the following:



| |  |  | significant underperformance relative to expected historical or projected future operating results;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | significant negative industry or economic trends;
| | - |  | -------------------------------------------------



| |  |  | significant decline in the our stock price for a sustained period; and
| | - |  | ----------------------------------------------------------------------



| |  |  | significant decline in our market capitalization relative to net book value.
| | - |  | ----------------------------------------------------------------------------

Recoverability is measured by comparison of the assets carrying amounts to their expected future undiscounted net cash flows. Intangible assets
primarily represent customer lists and trade names acquired in business combinations and are amortized on a straight-line basis over their estimated useful lives.

Goodwill

Goodwill represents the excess of the purchase price of an acquired enterprise or assets over the fair values of
the identifiable assets acquired and liabilities assumed. Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of
goodwill or the intangible asset may not be recoverable.

Warranty

Our policy is to accrue the estimated cost of satisfying future warranty claims at the time the sale is recorded. In estimating our future warranty obligations, we consider various relevant factors, including our
stated warranty policies and practices, the historical frequency of claims, and the cost to replace or repair our products under warranty. If the cost of satisfying warranty claims exceeds the estimated warranty reserve, our cost of sales, gross
profit and net income would be adversely affected.

Income Taxes

We account for income taxes under SFAS No. 109 Accounting for Income Taxes (SFAS 109). Under SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between their financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.



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Recent Accounting Pronouncements

Effective January 1, 2007, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the
benefit recognized and measured pursuant to the interpretation are referred to as unrecognized benefits. A liability is recognized (or amount of net operating loss carryforward or amount of tax refundable is reduced) for an unrecognized
tax benefit because it represents an enterprises potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of FIN 48.

In accordance with FIN 48, interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as
Interest expense, net in the consolidated statements of operations. Penalties would be recognized as a component of General and administrative expenses.

In many cases, our uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities. We file tax returns
in the United States (federal) and in various state and local jurisdictions. In most instances, we are no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2003.

The adoption of the provisions of FIN 48 did not have a material impact on our consolidated financial position and results of operations. As of
June 30, 2007, no liability for unrecognized tax benefits was required to be recorded.

We recognized a net deferred tax asset of
approximately $7,700,000 as of March 31, 2007, primarily relating to net operating loss carryforwards of approximately $19,500,000 as of March 31, 2007, available to offset future taxable income through 2026.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible. We consider projected future taxable income and tax planning strategies in making this assessment. At present, we do not have a sufficient history of income to conclude that it is more likely than not that we will be
able to recognize all of its tax benefits in the near future and therefore a valuation allowance was established in the full value of the deferred tax asset.

A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or all of the valuation allowance net of appropriate reserves. Should we become profitable in
future periods with supportable trends, the valuation allowance will be reversed accordingly.

In December 2006, the FASB issued FASB Staff
Position EITF 00-19-2 Accounting for Registration Payment Arrangements, which specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement should be
separately recognized and measured in accordance with SFAS No. 5, Accounting for Contingencies. Adoption of EITF 00-19-02 is required for fiscal years beginning after December 15, 2006. The adoption of EITF 00-19-2 did not have
a material effect on our consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS 159,
The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation
and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007.
We are in the process of evaluating the impact of the adoption of this statement on our results of operations and financial condition.



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|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of our Disclosure Controls
and Internal Controls

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with
the participation of our Interim Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), of the design and operation of our disclosure controls and procedures. Based on this evaluation, our CEO and CFO concluded
that our disclosure controls and procedures are effective for gathering, analyzing and disclosing the information that we are required to disclose in the reports we file under the Securities Exchange Act of 1934. Our CEO and CFO also concluded that
our disclosure controls and procedures are effective in timely alerting them to material information relating to our company required to be included in our periodic SEC filings.

Executive management has identified certain matters involving internal controls that were considered to be significant deficiencies.

There was a significant deficiency regarding the overall lack of formalized written policies and procedures in the financial accounting area. Currently,
unwritten accounting policies and procedures and multiple levels of review by accounting and financial managers provide compensating controls in this area. A project to establish formalized written policies and procedures for all key accounting and
financial functions has begun.

Specifically, in this area, there was a significant deficiency regarding the accounting policies and
procedures governing payments to employees in connection with the reimbursement of relocation expenses and certain of these payments which may be construed to constitute an unapproved personal loan from the Company to an executive officer in
violation of Section 402 of the Sarbanes-Oxley Act of 2002. The payment to the executive officer has subsequently been discharged. Also, as a result, the Company is in the process of establishing specific written accounting policies and procedures
that will assure that all relocation expenses will be recorded correctly. Additionally, new polices are being established that will require accounting and finance management personnel to inform the Chairman of the Board and the Chairman of the Audit
Committee of financial transactions affecting executive officers that could potentially be a violation of SEC rules.

There was also a
significant deficiency identified regarding the lack of certain formalized general and application controls in the Information Technology (IT) area that are needed to assure that financial information generated by the IT system is
materially accurate. This control deficiency is due in part to the small size of the staff in this area. Currently, multiple reviews by accounting and financial managers of the financial information produced by the IT system provide compensating
controls in this area. A project to establish formalized general and application controls in the IT area has begun.

Specifically, in this
area, there was a significant deficiency identified regarding the lack of a formalized disaster recovery plan in the IT area. Interim procedures have been established to protect against potential disasters and the preparation of a formalized
disaster recovery plan is currently in process.

In general, other internal control concerns resulted from the lack of segregation of
duties due primarily to the Companys small size. Wherever possible, compensating controls have been established.

Changes in Internal Controls

There were no changes made in our internal controls over financial reporting that occurred during our most recent fiscal quarter that
have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

Limitations on the
Effectiveness of Controls

We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance
that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all controls issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are
designed to provide a reasonable assurance of achieving their objectives and our CEO and CFO have concluded that the controls and procedures evaluated are effective.



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##### Table of Contents

Part IIOther Information



|Item 1. | Legal Proceedings
|------- | -----------------

Incident to our business
activities, we may at times be a party to legal proceedings, lawsuits and claims. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Management believes at this time there are no ongoing matters which
will have a material adverse effect upon our consolidated financial position or annual results of operations.



|Item 1a. | Risk Factors
|-------- | ------------

There have been no material changes
to the risk factors set forth in Part I, Item 1 of our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

During the three months ended March 31, 2007, under the terms of the Securities Purchase Agreement, Stanford acquired an additional 482,250 shares of Series C Preferred Stock and warrants to purchase 289,350 shares of our common stock
with an exercise price of $0.001 per share with five installments as illustrated in the table below. Each share of Series C Preferred Stock is convertible into one share of our common stock and is entitled to one vote per share.



|                 |  |                         |  |                  |  |                    |          
|---------------- |  | ----------------------- |  | ---------------- |  | ------------------ | ---------
|Date             |  | PreferredSharesAcquired |  | WarrantsAcquired |  | TotalConsideration
|January 5, 2007  |  | 82,250                  |  | 49,350           |  | $                  | 329,000  
|January 12, 2007 |  | 100,000                 |  | 60,000           |  |                    | 400,000  
|January 19, 2007 |  | 100,000                 |  | 60,000           |  |                    | 400,000  
|February 2, 2007 |  | 100,000                 |  | 60,000           |  |                    | 400,000  
|February 9, 2007 |  | 100,000                 |  | 60,000           |  |                    | 400,000  
|                 |  |                         |  |                  |  |                    |          
|                 |  | 482,250                 |  | 289,350          |  | $                  | 1,929,000
|                 |  |                         |  |                  |  |                    |          

All 289,350 Warrants were exercised in March 2007.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None



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

None



|Item 5. | Other Information
|------- | -----------------

None



|Item 6. | Exhibits
|------- | --------

Exhibits:

31.1 Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of C.F.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification Pursuant to
18 U.S.C. Section 1350, Section 906 of the Sarbanes-Oxley Act of 2002.



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##### Table of Contents

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 29, 2007



|                         |  |                                                          
|------------------------ |  | ---------------------------------------------------------
|FOREFRONT HOLDINGS, INC.
|                         | 
|By:                      |  | /s/ Richard M. Gozia                                     
|                         |  | Richard M. Gozia                                         
|                         |  | Chairman of the Board and Interim Chief Executive Officer
|                         | 
|By:                      |  | /s/ Randall J. Frapart                                   
|                         |  | Randall J. Frapart                                       
|                         |  | Executive Vice President and Chief Financial Officer     



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Exhibit Index



|            |  |                                                                                                 
|----------- |  | ------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                     
|31.1        |  | Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002               
|            | 
|31.2        |  | Certification of C.F.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002               
|            | 
|32.1        |  | Certification Pursuant to 18 U.S.C. Section 1350, Section 906 of the Sarbanes-Oxley Act of 2002.