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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K





(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2007

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission File No.: 000-29707





FOREFRONT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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

(Registrants Telephone Number, Including Area Code)





Securities registered pursuant to Section 12(b) of the Act:

Title of
each class: N/A Name of each exchange on which registered: N/A

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value

(Title of Class)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     ̈  Yes    x  No

Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     ̈  Yes    x  No

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 preceding 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  x    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

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

Large accelerated
filer   ̈    Accelerated filer   ̈    Non-accelerated filer   ̈    Smaller reporting company  x

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

The aggregate market value of common shares held by non-affiliates of the Registrant (2,180,611 shares), as of June 30, 2007, was $1,308,367.

The number of shares of common stock outstanding on March 18, 2008 was 12,166,989. 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.

Documents Incorporated By Reference: Not Applicable.









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FOREFRONT HOLDINGS, INC.

FORM 10-K

INDEX



|           |  |             |  |                                                                                                              |  |   
|---------- |  | ----------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|PART I     |  |             |  |                                                                                                             
|           |  |             | 
|           |  | Item 1.     |  | Business                                                                                                     |  | 2 
|           |  | Item 1A.    |  | Risk Factors                                                                                                 |  | 8 
|           |  | Item 1B.    |  | Unresolved Staff Comments                                                                                    |  | 19
|           |  | Item 2.     |  | Properties                                                                                                   |  | 19
|           |  | Item 3.     |  | Legal Proceedings                                                                                            |  | 20
|           |  | Item 4.     |  | Submission of Matters to a Vote of Security Holders                                                          |  | 20
|           |  |             | 
|PART II    |  |             |  |                                                                                                              |  |   
|           |  |             | 
|           |  | Item 5.     |  | Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |  | 20
|           |  | Item 7.     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 23
|           |  | Item 8.     |  | Financial Statements and Supplementary Data                                                                  |  | 37
|           |  | Item 9.     |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         |  | 37
|           |  | Item 9A(T). |  | Controls and Procedures                                                                                      |  | 37
|           |  | Item 9B.    |  | Other Information                                                                                            |  | 38
|           |  |             | 
|PART III   |  |             |  |                                                                                                              |  |   
|           |  |             | 
|           |  | Item 10.    |  | Directors, Executive Officers and Corporate Governance                                                       |  | 38
|           |  | Item 11.    |  | Executive Compensation                                                                                       |  | 41
|           |  | Item 12.    |  | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters               |  | 46
|           |  | Item 13.    |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 47
|           |  | Item 14.    |  | Principal Accounting Fees and Services                                                                       |  | 49
|           |  |             | 
|PART IV    |  |             |  |                                                                                                              |  |   
|           |  |             | 
|           |  | Item 15.    |  | Exhibits, Financial Statement Schedules                                                                      |  | 50
|           |  |            
|SIGNATURES |  |             |  | 54                                                                                                          

CAUTIONARY NOTE REGARDING FORWARD-LOOKING

STATEMENTS AND RISK FACTORS

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. Examples 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



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cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include those described in
Item 1A, Risk Factors in this report and other risks and uncertainties are more fully described in our other filings with the Securities and Exchange Commission (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.

When used in this annual report on Form
10-K, our company, we, our, and us refers to ForeFront Holdings, Inc. and our subsidiaries.

PART I



|Item 1. | Business
|------- | --------

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

Our goal is to become a leading supplier of golf bags and accessories in each of the distribution channels in the golf
industry we serve. In an effort to achieve this positioning, 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 through 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-Advertising Specialty Institute (ASI), Original Equipment Manufacturers (OEM) and E-Commerce retailers; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



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

During 2006 and 2007, we witnessed an increasing shift in the market as a result of national 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 chains 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 towards consolidation into the national store chains will continue and that
our share of the total Off-Course golf bag and accessory market will be constrained as a result.

On November 21, 2007, we obtained a
credit facility from Stanford Venture Capital Holdings, Inc. (SVCH). The facility 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 (FCC), as well as all debt to Burton and Devant. Principal and interest are due on the later of (a) cash payment of all outstanding amounts due to FCC and the termination of the FCC facility, or
(b) May 21, 2009. As of March 18, 2008, borrowings under the SVCH facility, including interest, totaled $21,391,629, which includes the refinancing of prior outstanding notes entered into during 2007, as well as advances received
prior to the final execution of the facility. Stanford International Bank, Ltd., (Stanford) an affiliate of SVCH, owns 81.6% of our outstanding common stock as of March 18, 2008.



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Recent Development  Plan of Reorganization

During 2006 and 2007, our management and SVCH, our principal investor, held numerous discussions regarding whether a public company was the appropriate
vehicle in which to operate our golf business. In particular, we observed a flattening of the market for golf-based products and services resulting from a decrease in golf playing activity as evidenced by the decrease in golf course openings and
increase in golf course closures. An analysis of this flattening of revenues against the costs inherent in maintaining a public company structure, which were estimated by our management to be approximately $1.0 million per year, emphasized the need
to either increase our operations, whether organically or through acquisitions, to cover such overhead costs or forego use of the public company vehicle.

In a Golf Industry Fall Report issued by Merriman, Curhan & Ford in December 2007, a survey of responses from approximately 45 golfing facilities in four different geographic regions of the United States
revealed that 64% of the respondents categorized merchandise sales to be either flat or down versus the prior year, and 68% of the same respondents indicated that their inventory levels were flat to up versus the prior year. The general consensus in
the industry is that the demand for golf is softening due to (a) economic downturns resulting in consumers electing to engage in less costly recreational activities and (b) consumers electing to devote their available time to other
activities, such as spending additional time with families. Under this backdrop, our board of directors has sought to examine other options on behalf of our shareholders.

In 2006, these discussions resulted in our management adopting an acquisition plan, under the terms of which we would identify potential targets, such as Burton and Devant, which management believed would be accretive
to earnings, improve our profitability and justify, from a financial perspective, continuation of the use of the public company vehicle. Throughout this period, our management continued to monitor the profitability of the enterprise and hold
discussions with SVCH as to whether there were better alternative structures for the golf business than the public company vehicle.

In
September 2007, SVCH presented to us the opportunity to divest the golf business of our public structure and instead use the public structure for an enterprise believed by SVCH to have a superior growth profile for our shareholders.

On December 26, 2007, our board of directors approved a series of agreements (the Reorganization Plan) under the terms of which we will
reincorporate in the British Virgin Islands (the Reincorporation Transaction) and will reorganize our operations by divesting of our current operations and concurrently acquiring a broadband multimedia enterprise. This enterprise will
consist of a cable set-top box and optical transceiver business, from Hisense Co. Ltd. (Hisense), a Chinese electronics manufacturer.

In order to accomplish the Reincorporation Transaction, we have contributed substantially all of our assets and liabilities to our newly-formed wholly-owned subsidiary, ForeFront (BVI) a British Virgin Islands corporation, at
December 31, 2007, and will merge with and into ForeFront (BVI) at the closing. Upon completion of the Reincorporation Transaction, ForeFront will cease to exist and all of the outstanding shares of ForeFront common stock will be converted into
the right to receive ordinary shares of ForeFront (BVI). Following the reincorporation, ForeFront (BVI) ordinary shares are expected to trade on the OTC Bulletin Board market. Immediately following or concurrently with the reincorporation of
ForeFront, ForeFront (BVI) will sell its golf accessory marketing and distribution business to SVCH. We refer to this sale as the Golf Sale Transaction.

Immediately following or concurrently with the reincorporation of ForeFront and the subsequent sale of its current operations, ForeFront (BVI) intends to complete the following acquisition transactions to acquire some
of the broadband multimedia business currently conducted by Hisense:



| |  |  | a merger of Ligent International, Inc. with and into ForeFront (BVI) in exchange for the issuance to certain affiliates of Hisense of 6,489,061 ordinary shares of
ForeFront (BVI);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a share exchange with Hisense and Qingdao Hisense Electronics Holding Ltd. under the terms of which they will transfer 100% of the ownership interest in Ligent
Photonics, Inc. in exchange for the issuance to these entities of an aggregate of 6,489,061 ordinary shares of ForeFront (BVI); and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the acquisition of contract rights, customer lists, intellectual property, employees and certain other property and intangibles necessary to allow ForeFront (BVI)
to acquire the cable set-top box distribution business (the Set-Top Box Division Business) of Qingdao Hisense Electric Co., in exchange for the issuance of 6,489,061 ordinary shares of ForeFront (BVI) and warrants to purchase 1,628,062
ordinary shares of ForeFront (BVI) at an exercise price equal to $4.93 per share.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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In addition to the above transactions, the acquisition transactions will also include a merger of
Broadband Multimedia Systems, Ltd., a British Virgin Islands corporation created by and receiving a $12.0 million capital infusion from Stanford, with and into ForeFront (BVI) in exchange for 1,400,000 ordinary shares of ForeFront (BVI), warrants to
purchase 1,033,398 ordinary shares at an exercise price equal to $0.01 per ordinary share and warrants to purchase 1,628,062 ordinary shares at an exercise price equal to $4.93 per ordinary share, thereby infusing ForeFront (BVI) with the portion of
the $12.0 million capital infusion remaining at the time of the merger.

Throughout this report, we refer to the above-described
transactions, collectively, as the Reorganization Plan. Ultimately, as a result of these transactions, our debt obligations to SVCH will be cancelled, our golf accessory marketing and distribution business will be sold, and ForeFront (BVI) will
acquire a business with no significant debt and the necessary contracts, intellectual property and other intangibles necessary to allow ForeFront (BVI) to continue the broadband multimedia business being acquired from Hisense.

Ultimately, upon conclusion of the Reincorporation Transaction, the Golf Sale Transaction and the transactions contemplated in the Acquisition Proposals,
the current shareholders of ForeFront, excluding Stanford, will hold 1.8% of the outstanding ordinary shares of ForeFront (BVI). The transferors of the new broadband multimedia business being acquired under the terms of the Acquisition Proposals
will receive 80.0% in the aggregate of the outstanding ordinary shares of ForeFront (BVI). Stanfords holdings in ForeFront (BVI) will ultimately comprise 18.2% of ForeFront (BVI)s outstanding ordinary shares, including warrants which are
exercisable at $0.01 per share into ordinary shares equal to 4.2% of the outstanding ordinary shares of ForeFront (BVI), one-half of which are anticipated to be transferred to certain employees of an affiliate of Stanford.

We anticipate that shareholders of ForeFront, including Stanford, which hold, in the aggregate, approximately 95% of the outstanding voting securities of
ForeFront, will execute a written consent approving the reincorporation and each of the above described transactions. As a result, no further action on the part of the shareholders of ForeFront will be required for the reincorporation or any of the
above transactions to occur. This approval will become effective twenty days after we mail an information statement describing the action taken to our remaining shareholders.

In formulating its decision to pursue the Hisense business and sell the golf business, our board of directors reviewed the characteristics of the
electronics industry and the golf equipment industry with respect to their key operating characteristics, competitive landscape, comparable transactions, and comparable companies. Based on this review, our board of directors made the following
observations:



| |  |  | the golf business has been experiencing recurring losses due to flattening industry-wide sales amounting to only approximately 1% annual industry growth;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ForeFronts acquisition plan has not managed to arrest its losses;
| | - |  | ------------------------------------------------------------------



| |  |  | ForeFronts public company structure would likely generate more value in an industry that has a higher growth profile;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | the Hisense businesses are currently profitable and have a growth profile that appears to provide for substantial profitability growth in both the short and long
term;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the scalability of the Hisense business positions the enterprise well to be opportunistic and take advantage of acquisition opportunities, contributing further to
its growth profile; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the net value of the golf business is less than the debt owed by ForeFront to SVCH, arguing in favor of exchanging the business for a cancellation of the debt if
the transaction resulted in the acquisition of an enterprise with no significant debt and a stronger growth profile.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In
addition, our board of directors felt that the remaining portion of the $12.0 million equity financing initially contributed to Broadband Media by Stanford and anticipated to be contributed to ForeFront (BVI) via the Broadband Media merger would
provide us with additional working capital for future growth and felt that having an independent source of liquidity from this capital infusion and from organic growth was far superior to the tight liquidity position of the golf business, which
required regular draws on a line of credit provided to ForeFront by SVCH. Finally, our board of directors also believed that the experience, skills and resources contributed by the Hisense principals who are anticipated to join ForeFronts
management and board of directors would offer significant benefits towards implementing this strategic alternative.

We expect the
transactions contemplated by the above agreements to be consummated in 2008. The closing of each of the above-referenced agreements is cross-conditioned on the substantially concurrent closing of each other agreement. The consummation of these
transactions is subject to, among other things, the approval of our shareholders and certain Chinese governmental approvals.



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On December 26, 2007, our board of directors also approved a one-for-five reverse stock split (the
Reverse Stock Split) of the outstanding shares of our common stock, par value $0.001 per share. The Reverse Stock Split was required in the agreements as a condition to the closing of the transactions described above and will be
effective prior to the closing date for these transactions.

General Development of Business

History

ForeFront and its subsidiaries design,
decorate, market and distribute golf bags and accessories to on-course pro shops, off-course golf specialty stores, sporting goods stores, mass merchandisers, corporate customers, original equipment manufacturers, international distributors and golf
event sponsoring organizations primarily in the United States and Canada. We are based in Springfield, Tennessee and conduct substantially all of our operations in Springfield, Tennessee and Monroe, North Carolina.

ForeFront 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 entered into a merger transaction with Golf Acquisition, Inc. (GAI) whereby GAI was merged with and into ForeFront. 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). 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 our 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 our controlling
shareholder.

On December 5, 2005, we effected a one-for-two reverse split of our common stock. All common share and per share amounts
presented in this Annual Report have been retroactively adjusted to reflect the reverse stock split.

Since the completion of the
transactions described above, SVCH has transferred its interests in ForeFront to Stanford. Stanford has entered into several securities purchase agreements with ForeFront whereby it has invested an aggregate of $23,500,000 and owns 81.6% of our
issued and outstanding common stock at March 18, 2008. In addition, as of March 18, 2008, we have borrowed an additional $21,391,629, including interest, from SVCH through a $32,500,000 credit facility.

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.

Brands / Products

We sell most of our golf bags under the Datrek and Burton brand names. 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.
Through the four key distribution 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 of America, the USGA and the LPGA.

We differentiate our golf bag brands as follows:



| |  |  | The Burton brand appeals to higher income, more brand conscious consumers by offering stylish yet traditional innovation and recognized quality at higher than
average price points. Burton is sold primarily to on-course retailers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Datrek brand is an upscale mass market product that emphasizes trendy, sporty styles appealing to a more active audience. Price points are above average and the
products are sold primarily to off-course retailers, where the Datrek brand enjoys the leading market share. It is also a leading brand in our corporate and premium channel.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | We invest in both golf bag brands to generate market-leading products via new designs, materials and technology. New technology includes a proprietary stand bag
system and carry system, along with hybrid (part stand/cart bag) bag technology.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, we have multiple licensing
agreements with the NCAA that include over 100 colleges and universities. These agreements are typically for one-year terms and are renewable each year at both parties discretion. We have generally been successful in securing these renewals.
During 2007, we paid an average royalty of 8.8% of sales from the sale of golf bags, shoe bags, towels, head covers and other golf accessories decorated with college logos and athletic team mascots. These products are primarily marketed at sporting
goods stores, mass merchandisers and golf pro shops located in close proximity to these colleges. For certain schools with a national following, these licensed products popularity extends beyond the colleges geographical location.

In October 2005, we entered into a three-year exclusive license agreement to distribute Wilson/NFL team logo golf bags through all of our
distribution channels. As part of this agreement, we pay Wilson/NFL a 30% premium on the material cost of the bags, which includes the royalty that Wilson/NFL is required to pay the NFL.

We believe that one of the important factors that differentiate us from our competitors offerings is our multiple brands of golf products that
include golf bags, tees, ball markers, bag tags, divot tools, towels, umbrellas, head covers, sport luggage, travel covers, tournament gifts and awards and other golf accessories. The availability of high quality branded and decorated products
enables us to position the company as a broad-based product and service supplier to the distribution channels that we serve. Our golf bag and accessory products are especially important in the On-Course channel, where partnering with a vendor that
offers a broad array of quality products is important to the golf professionals who manage golf course pro shops.

Our Devant Sport Towel
and Sir Christopher Hatton brands offer a wide array of high quality custom golf towels. Golf towels are used by most golfers for club and ball cleaning during play and are typically logoed. This product line enhances our golf accessory portfolio,
particularly for the On-Course and Premium distribution channels.

We also have several Premium and OEM programs. Under our Premium
program, we design, source and distribute golf bags and other golf accessories for various companies and decorate these products with the corporate logos of these companies. Under our OEM program, we source and distribute golf bags and other golf
accessories directly to companies that resell these products under their own brand names.

Customers

During 2007, we sold to an aggregate of approximately 6,600 customers. No one customer accounted for more than 10% of our sales in 2007 or 2006.

Suppliers

We obtain our golf bags
fully assembled from suppliers in the Asia Pacific region. Two of these suppliers, Mortex Sports Limited and Chenterlon, Inc., made up 18% and 17%, respectively, of our 2007 inventory purchases. Prior to the fourth quarter of 2006, we obtained most
of our golf bags unassembled and assembled them in the U.S. We distribute substantially all of our golf bags from our Springfield, Tennessee facility and our towels from our Monroe, North Carolina facility. We purchase our other golf accessories,
including head covers, towels, and travel covers from suppliers in the U.S. and abroad. We also have the capability to embroider golf bags, golf towels and other accessories in our two facilities. We denominate substantially all of our purchase
orders in U.S. dollars. Our suppliers generally ship goods on the basis of open credit terms or payment upon the acceptance of goods by us.

Competition

The golf bag and accessory markets in which we compete are highly competitive and are served by a number of well-established and
well-financed companies with recognized brand names, as well as new companies with popular products. Our major domestic competitors in the golf bag market are TaylorMade, Titleist, Ping, Callaway, Nike, Sun Mountain, Ogio and Bag Boy. These
competitors have established significant market shares in the golf bag business. We believe the golf accessory market to be highly fragmented, with no one supplier having a dominant market share.



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For golf bags and other golf accessories, we compete on the basis of product quality, features,
performance, innovation, customer service and responsiveness to consumer preferences and price.

A recent trend in the golf bag and
accessory market is a significant increase in the market share being captured by national, multi-location golf specialty retailers, such as Golfsmith and Golf Galaxy, and sporting goods chains, such as Dicks Sporting Goods and The Sports
Authority. This trend has resulted in a reduction of our off-course sales to smaller, independent retail stores which have historically been our principal sales channel in the off-course sales market. The large golf specialty stores and sporting
goods chains have greater financial resources and generally purchase golf bags and accessory products in bulk from overseas vendors that can supply products at discounted prices. In addition, we also face increased competition from these sporting
goods chains that compete directly with us in numerous markets with their own private label products. In addition, these large golf specialty stores and sporting goods chains have begun reintroducing formerly independent brands as their own house
brands. This trend toward an increase of retailers offering a limited assortment of private label products is a significant trend in our industry.

Intellectual Property / Licenses

We own various trademark and patent rights including the proprietary rights in the Datrek,
Miller Golf, Burton, Devant and Sir Christopher Hatton trade names. We also hold various patents including a divided golf bag top and various golf bag designs.

We have multiple licensing agreements with the NCAA that include over 100 colleges and universities. These agreements are typically for one-year terms and are renewable each year at both parties discretion. We
have generally been successful in securing these renewals. Our NCAA line includes golf bags, shoe bags, towels, head covers and other golf accessories decorated with college logos and athletic team mascots. During 2007, we paid an average of 8.8% of
sales from the sale of products governed by the NCAA agreements.

In October 2005, we entered into a three-year exclusive license agreement
to distribute Wilson/NFL team logo golf bags. As part of this agreement, we pay Wilson/NFL a 30% premium on the material cost of the bags, which includes the royalty that Wilson/NFL is required to pay the NFL.

Facilities

Our principal executive offices and our
primary warehousing and distribution center are located at 835 Bill Jones Industrial Drive, Springfield, Tennessee 37172. This facility, which includes approximately 14.06 acres, is pursuant to a lease through July 31, 2008, entered into with
Ryan Holdings, Inc., the owner of the property. The lease provides for current monthly rent payments in the amount of $54,646. We have an additional lease agreement for the executive offices, pursuant to a lease with a term from August 1, 2008
through October 31, 2008. This lease provides for monthly rent payments in the amount of $16,667. The shareholders of Ryan Holdings, Inc. are Dennis and Deborah Ryan, who are husband and wife. Through September 21, 2007, Deborah Ryan was a
member of our board of directors; Ms. Ryan was also Executive Vice President of Datrek Brand Management until her separation from us on April 13, 2006. Dennis Ryan was President of the Off-Course division until his separation from us on
May 26, 2006.

At the expiration of our current Springfield, Tennessee lease in July 2008, we will be relocating our production and
warehouse facility to Baldwyn, Mississippi and our executive offices to the Nashville, Tennessee market. We are currently negotiating the lease on the new Baldwyn distribution center. The developer of this center is an affiliate of SVCH. This
distribution center is expected to be fully operational by July 31, 2008. We are also reviewing several lease properties in the Nashville, Tennessee market for our new administrative, operations, finance and executive offices. We expect to
relocate to a new Nashville-area location no later than October 31, 2008.

We currently expect that the combined occupancy costs of
the new distribution center and the new executive office will not significantly exceed our current occupancy costs for our Springfield, Tennessee facility.

The ForeFront Devant facility, including a production, warehousing and distribution center, is located at 3011 Walkup Avenue, Monroe, North Carolina 28110. We lease this facility, which includes approximately 50,000
square feet, pursuant to a four-year lease agreement, beginning December 3, 2006, entered into with Jimini, a real estate holding partnership. The lease provides for current monthly rent payments in the amount of $16,750, plus taxes and
insurance. A former principal officer of ForeFront Devant is the principal shareholder of Jimini.



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The ForeFront Burton facility, including assembly, warehousing and a distribution center, is located at
654 Anchors Street, Fort Walton Beach, Florida 32548. We temporarily leased an approximate 30,000 square foot portion of this facility, pursuant to a lease agreement through June 30, 2007, entered into with Burton. The lease provided for
monthly rent payments in the amount of $14,000, plus taxes and insurance. We vacated this facility during July 2007. A senior vice president of ForeFront Group is also a shareholder of Burton.

Employees

At December 31, 2007, we had 147
employees, including 29 in sales, 89 in operations and customer service, and 29 in administrative and finance positions. None of our employees are represented by a labor union, nor governed by any collective bargaining agreements. We consider
relations with our employees as satisfactory.

Available Information

We are subject to the reporting requirements of the Securities Exchange Act of 1934 (the Exchange Act). As a result, we are filing annual reports, quarterly reports, proxy statements and other documents
with the SEC under the Exchange Act. The public may read and copy any materials that we file with the SEC at the SECs Public Reference Room at 100 F. Street, N.E., Room 1580, Washington, D.C. 20549 on official business days between the hours
of 10 a.m. to 3 p.m. Eastern time. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains a website that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov.



|Item 1A. | Risk Factors
|-------- | ------------

The financial statements contained in
this report and the related discussion describe and analyze our financial performance and condition for the historical periods indicated. However, our prior results are not necessarily indicative of our future performance or financial condition. We
have also included certain forward-looking statements concerning our future performance or financial condition. These forward-looking statements are based upon current information and expectations and actual results could differ materially.
Therefore, we have included the following discussion of certain factors, many of which are beyond our control, that could cause our future performance or financial condition to differ materially from our prior performance or financial condition or
from managements expectations or estimates of our future performance or financial condition. These factors, among others, should be considered in assessing our future prospects and prior to making an investment decision with respect to our
stock. Any of these risks and uncertainties could have a significant adverse impact on our business, prospects, financial condition or results of operations or in the price of our common stock.

Risks Related to the Reorganization Plan

The Reorganization
Plan is subject to certain conditions to completion that could result in the Reorganization Plan not being consummated or being delayed, either of which could negatively impact the market price of our common stock and ForeFronts future
business and operating results.

Consummation of each of the agreements entered into as part of the Reorganization Plan
transactions is subject to a number of customary conditions that must be satisfied before the transactions contemplated by that agreement will be completed, including receipt of certain approvals of the Acquisition Agreements by the Chinese
government. Because each of the Reorganization Plan transactions are cross-conditioned on the substantial concurrent closing of all of the transactions, the failure to satisfy any of the conditions in any of these agreements could cause the
Reorganization Plan to be terminated. As a result, we cannot assure you that we will be able to complete the Reorganization Plan. If we fail to complete the Reorganization Plan or delay in effecting such completion, the resulting negative perception
could negatively impact the market price of our common stock as well as confidence in our business, which could negatively impact our operating results.



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If the Reorganization Plan is not completed, the announcement and pendency of the Reorganization Plan could impact
or cause disruptions in our business, which could have an adverse effect on our business and operating results.

The announcement
and pendency of the Reorganization Plan could have an adverse effect on our business and operating results, which could adversely affect shareholder value if we fail to complete the Reorganization Plan. Among other things:



| |  |  | our employees may experience uncertainty about their future roles, which may adversely affect our ability to retain and motivate key personnel and other employees;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the distraction of our management and employees from day-to-day operations, because matters related to the Reorganization Plan and transaction-related
considerations may require substantial commitments of time and resources, which could otherwise have been devoted to other opportunities that could have been beneficial to us;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | distributors, vendors, suppliers and customers may seek to modify or terminate their business relationships with us; or
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | the current market price of our common stock may reflect a market assumption that the merger will occur, and a failure to complete the Reorganization Plan could
result in a negative perception by the stock market of us generally and a resulting decline in the market price of our common stock;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In
addition, we would not realize any of the expected benefits of having completed the Reorganization Plan. If the Reorganization Plan is not completed, these risks may materialize and materially adversely affect our business, financial results,
financial condition and stock price.

We have incurred and will continue to incur significant transaction costs in connection with the Reorganization
Plan, most of which will be required to be paid even if the Reorganization Plan is not completed.

We and ForeFront (BVI) have
incurred and will continue to incur significant transaction costs in connection with the Reorganization Plan. These costs are primarily associated with the fees of accountants, attorneys and advisors. Almost all of these costs will be paid by the
party incurring the cost even if the Reorganization Plan is not completed. The payment of these costs without the completion of the Reorganization Plan is likely to have a material and adverse effect on our operating results and financial condition.

After the Reorganization Plan is completed, Hisense and its affiliates will control ForeFront (BVI) and ForeFront shareholders will be unable to
influence management.

After the Reorganization Plan is completed, Hisense and its affiliates will control 80% of the outstanding
ForeFront (BVI) ordinary shares. Consequently, current ForeFront shareholders will have no meaningful influence over the management and policies of ForeFront (BVI). Hisense and its affiliates will be able to influence the outcome of shareholder
votes, including votes concerning amendments to our articles of association, bylaws and other organizational documents, as well as the approval of significant corporate transactions like a merger or sale of our assets. In addition, Hisense and its
affiliates will control the election of our board of directors. This controlling influence could have the effect of delaying or preventing a change in control or other corporate action, even if our other shareholders believe such action is in their
best interests.

The ordinary shares of ForeFront (BVI) to be received by our shareholders as a result of the Reincorporation Transactions will have
different rights from the shares of our common stock.

Our shareholders will become ForeFront (BVI) shareholders, and their rights
as shareholders will be governed by the British Virgin Islands Business Companies Act (the BVI Act), the Memorandum of Association and the Articles of Association of ForeFront (BVI). The rights of ForeFront (BVI) shareholders to take
action against the directors, actions by minority shareholders and the fiduciary responsibility of the directors under British Virgin Islands law are governed by the BVI Act and the common law of the British Virgin Islands. The common law of the
British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands, as well as from English common law, which has persuasive, but not binding, authority on a court in the British Virgin Islands. The
rights of shareholders and the fiduciary responsibilities of directors under British Virgin Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular,
the British Virgin Islands has a less developed body of securities laws as compared to the United States, and some states have more fully developed and judicially interpreted bodies of corporate law.



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British Virgin Islands companies may not be able to initiate shareholder derivative actions, thereby depriving
shareholders of the ability to protect their interests.

British Virgin Islands companies may not have standing to initiate a
shareholder derivative action in a federal court of the United States. The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may result in the rights of
shareholders of a British Virgin Islands company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate
wrongdoing has occurred. The British Virgin Islands courts are also unlikely to recognize or enforce against us judgments of courts in the United States based on certain liability provisions of U.S. securities law; and to impose liabilities against
us, in original actions brought in the British Virgin Islands, based on certain liability provisions of U.S. securities laws that are penal in nature.

The laws of the British Virgin Islands provide little protection for minority shareholders, so minority shareholders will have little or no recourse if these shareholders are dissatisfied with the conduct of our affairs.

Under the laws of the British Virgin Islands, there is some statutory law for the protection of minority shareholders under the
Act. The principal protection under statutory law is that shareholders may bring an action to enforce ForeFront (BVI)s Memorandum of Association and the Articles of Association. The BVI Act sets forth the procedure to bring such a claim.
Shareholders are entitled to have the affairs of the company conducted in accordance with the general law and the Memorandum of Association and the Articles of Association. Companies are not obligated to appoint an independent auditor and
shareholders are not entitled under the BVI Act to receive the audited financial statements.

Risks Related to Our Business

We have a history of losses and we are uncertain as to its effect on future profitability of our company.

We incurred operating losses of approximately $13.4 million and $8.2 million for the years ended December 31, 2007 and 2006, respectively. As of
December 31, 2007, our accumulated deficit was approximately $35.1 million. We may continue to incur operating losses and such losses may be substantial. Our ability to generate and sustain significant additional revenues or achieve
profitability will depend, in part, upon the factors discussed elsewhere in this Risk Factors section.

We expect that cash on
hand together with funds available to us through our credit facility agreement with FCC and our credit facility with SVCH will permit us to fund our operations for the next twelve months. Unexpected increases in negative cash flow from operations or
the unavailability of funds under our credit facilities would cause us to require additional external financing before that time. Under those circumstances, if we are unable to secure additional external financing on a timely basis, we will not have
sufficient cash to fund our working capital and capital expenditure requirements and we may be forced to cease operations. In such event, the shares of our common stock may cease to have any value.

If we are unable to obtain sufficient funds, and incur a cash flow deficit, our business strategies could suffer.

We have historically financed all of our operations through private equity financings, line of credit borrowings and cash flow from operations. Although
recent cash flow from operations and the funds raised through our recent bank borrowings, our recent borrowings under our credit facility with SVCH and sales of our capital stock to Stanford have been sufficient for our immediate needs, we may be
required to raise additional capital in order to grow our business. We may have difficulty obtaining additional funds as and when needed, and we may have to accept terms that would adversely affect our shareholders. We may not be able to locate
additional funding sources at all or on acceptable terms. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to develop or enhance our products to customers, grow our business or respond to competitive pressures or
unanticipated requirements, which could seriously harm our business.

We have a substantial amount of debt, our future cash flows may not be
sufficient to meet our obligations and we might have difficulty obtaining more financing.

We are a highly leveraged company. As of
December 31, 2007, the aggregate amount of our outstanding indebtedness, including capital leases, was approximately $23.0 million and our total shareholders equity was negative $8.2 million. Our leveraged financial position means:



| |  |  | a substantial portion of our cash flow will be required to service and pay down our indebtedness;
| | - |  | -------------------------------------------------------------------------------------------------



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| |  |  | our ability to obtain financing in the future for working capital, capital expenditures and general corporate purposes might be impeded;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we are more vulnerable to economic downturns and our ability to withstand competitive pressures is limited; and
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | we are more vulnerable to increases in interest rates, which would affect our interest expense and negatively impact our operating results.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

If we are unable to secure additional external financing on a timely basis, we may not have sufficient cash to fund our working capital
and capital expenditure requirements. Additionally, we may be required to delay or forego expansion opportunities. In such event, the shares of our common stock may cease to have any value.

The terms of our line of credit with FCC impose operating and financial restrictions on us, which may impair our ability to respond to changing business and
economic conditions.

The terms of our line of credit with FCC impose operating and financial restrictions on us, including, among
other things, restrictions on our ability to incur additional indebtedness, create or allow liens, pay dividends, engage in mergers, acquisitions or reorganizations or make specified capital expenditures. As a result, our ability to respond to
changing business and economic conditions and to secure additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions that might otherwise benefit us without obtaining consent from our
lender. In addition, this line of credit is secured by a first priority security interest in substantially all of our assets. In the event of our insolvency, liquidation, dissolution or reorganization, our lender would be entitled to payment in full
from our assets before distributions, if any, were made to our shareholders.

If we lose key management or are unable to attract and retain the
talent required for our business, our operating results could suffer.

Our future success depends to a significant degree on the
skills, experience and efforts of existing key management and sales and marketing personnel who may not be obligated to stay with us. The loss of the services of any of these individuals could harm our business and operations. Competition for
qualified employees could require us to pay higher wages and benefits to attract a sufficient number of employees. Increases in wages or other employee benefits costs could increase our operating expenses. If we are unable to attract and retain
personnel as needed in the future, our net sales growth and operating results may suffer. We do not maintain key man life insurance with respect to any of these key individuals. Also, with the exception of J. Stan Harris and Richard A. Oleksyk, the
Chief Executive Officer and President and Chief Operating Officer, respectively, of ForeFront Group, we do not have employment agreements with any of these key individuals.

If the reorganization of our sales teams is not successful, our sales and operating results could suffer.

In August 2007, we consolidated our Off-Course and On-Course sales groups into one sales team, comprised of company-employed territory managers and independent sales representatives. Previously, these groups
functioned exclusively in either the Off-Course or On-Course channel. In addition, in January 2008, we combined this new sales team with some members of the sales team from ForeFront Devant. Previously, the ForeFront Devant sales team only serviced
ForeFront Devant products. We believe that these combinations will allow us to create efficiencies in our sales efforts. If we are unable to capitalize on these efficiencies, or if our customers are negatively impacted by this change, our sales and
operating results could suffer.

Our dependence on third-party suppliers and materials could adversely affect our business.

We had two suppliers who accounted for approximately 35% of our product supply for the year ended December 31, 2007. The loss or disruption of the
supply from these suppliers could result in significant delays in delivering products to our customers and materially affect our business. Suppliers may become insolvent and unable to fulfill their obligations to us. In addition, a significant
portion of the products that we purchase are manufactured abroad. A supplier could discontinue selling products to us at any time for reasons that may or may not be in our control. We believe that suitable materials for our products could be
obtained from other



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manufacturers in the event our regular suppliers (because of financial difficulties or otherwise) are unable or fail to provide suitable components. However,
there could be a significant production delay or disruption caused by the inability of current suppliers to deliver or the transition to other suppliers, which in turn could have a material adverse impact on our results of operations. Given the long
lead times on much of our overseas supply of products, if we did experience any such delays or interruptions, there is no assurance that we would be able to obtain adequate alternative supply on favorable terms or without significant disruption to
our business. Difficulties or delays in obtaining an adequate supply of products on favorable terms could impair our ability to fulfill orders from our customers on a timely basis and have a material adverse affect on our sales and our results of
operations.

Any delay in the timely payment of our trade payables may result in disruption of our operations and may adversely affect our results of
operations.

Our inability to remain current in our payment obligations to our primary vendors could disrupt our supply of
products, lead to the loss of favorable payment terms with our principal suppliers and harm our ongoing relations with other vendors or our ability to serve our customers. Our ability to timely provide products to our end customers and to
accommodate their changing needs may be negatively impacted by disruptions in our supply of goods. In addition, prolonged delays in paying accounts payable may lead to disputes with our vendors, which may lead to costly litigation.

We rely significantly on two distribution centers. Any disruption or other operational difficulties at these distribution centers could reduce our net sales or
increase our operating costs.

We rely principally on two distribution centers to service our business. Any natural disaster or
other serious disruption to these distribution centers due to any cause could damage a significant portion of our inventory and could materially impair both our ability to adequately supply our customers and our net sales. In the event that we are
unable to achieve anticipated operational benefits or efficiencies from these distribution facilities, our operations could suffer and our financial results could be negatively impacted.

We are exposed to certain inventory risks.

Our business is subject to the risk that the
value of our inventory will be affected adversely by product changes affecting the usefulness or desirability of the products comprising the inventory. We take various actions, including monitoring our inventory levels and controlling the timing of
purchases to reduce our inventory risk. In addition, suppliers may become insolvent and unable to fulfill their obligations to us. We are subject to the risk that our inventory may decline in value. Inventory management remains an area of focus as
we balance the need to maintain strategic inventory levels to ensure competitive lead times and the risk of inventory obsolescence.

In
addition, the cancellation of existing orders, or the failure of anticipated orders to materialize, could result in our holding a significant amount of unsold inventories. We may be required to offer sales discounts or other incentives to our
customers in order to sell such inventories or to write down the carrying value of inventories we are unable to sell. Any such sales discounts or customer incentives or inventory write-downs could have an adverse affect on our sales and our results
of operations. Conversely, if we underestimate demand for our products or if the manufacturers or others on whom we rely fail to supply sufficient quantities of products to us in a timely manner, we may experience inventory shortages. In such a
case, we may be unable to fulfill orders from our customers on a timely basis, which could negatively impact customer relationships, diminish brand loyalty and result in lost revenues, any of which could harm our business.

Our inability to properly manage our supply chain may adversely affect our business.

We plan our supply chain needs based upon the forecasted demand for our products. We base our estimates of demand on a number of factors, primarily our
expectations of consumer demand. However, actual demand for such products may exceed or be less than forecasted demand. If we are unable to produce sufficient quantities of new products in time to fulfill actual demand, especially during our
traditional busy season, it could limit our sales and adversely affect our financial performance. In addition, we invest in various supply chain inputs for varying periods of time, which can limit our ability to quickly react if actual demand is
less than forecasted demand. This could result in less than optimum capacity usage and/or excess inventories and related obsolescence charges that could adversely affect our financial performance. In addition, if we were to experience delays,
difficulties or increased costs in our distribution of golf bags or golf accessories, including procuring new products needed to replace current products, our future golf bag or golf accessory sales could be adversely affected.



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Our systems may be subject to disruptions that could adversely affect our business and reputation.

Our business is highly dependent on our ability to process, on a daily basis, a large number of transactions. We rely heavily on
our payroll, financial, accounting and other data processing systems. If any of these systems fail to operate properly or become disabled even for a brief period of time, we could suffer financial loss, a disruption of our business, liability to
customers, regulatory intervention or damage to our reputation. We do not currently have a formalized disaster recovery plan in place. Interim procedures have been established to protect against potential disasters and the preparation of a
formalized disaster recovery plan is currently in process. This formalized disaster recovery plan is expected to be fully implemented by July 2008. In the event of a catastrophic occurrence, our disaster recovery plan or procedures may not be
successful in preventing the loss of customer data, service interruptions, disruptions to our operations, or damage to our facilities.

We have
international sales and are exposed to currency exchange rate fluctuations.

Approximately 5% of our sales are conducted in
Canadian dollars. Conducting business in such currency exposes us to fluctuations in foreign currency exchange rates relative to the U.S. dollar.

Our financial results are reported in U.S. dollars. As a result, transactions conducted in foreign currencies must be translated into U.S. dollars for reporting purposes based upon the applicable foreign currency exchange rates.
Fluctuations in these foreign currency exchange rates, therefore, may positively or negatively affect our reported financial results.

Foreign currency fluctuations can also affect the prices at which products are sold in our international markets. Therefore, we adjust our pricing based in part upon fluctuations in foreign currency exchange rates. Significant unanticipated
changes in foreign currency exchange rates may make it more difficult for us to manage pricing in our international markets. If we are unable to adjust our pricing in a timely manner to counteract the effects of foreign currency fluctuations, our
pricing may not be competitive in the marketplace and our financial results in international markets could be adversely affected.

We acquire a
substantial portion of our products from international markets and are indirectly exposed to currency exchange rate fluctuations.

We purchase substantially all of our golf bags from overseas vendors, primarily in Southeast Asia. While we conduct this business in U.S. dollars, we are indirectly exposed to fluctuations in foreign currency exchange rates relative to the
U.S. dollar. Recent adverse changes in the exchange rate for U.S. dollars and/or significant unanticipated changes in foreign currency exchange rates may make it more difficult for us to purchase these products at prices that will allow us to
achieve desirable gross margins and our financial results could be negatively impacted.

We cannot provide assurance as to the level of protection
trademarks on specific brands or protective patents on specific designs and processes will afford us with respect to some brands and products, and if we fail to enjoy adequate protection, our business could be materially adversely affected.

We cannot provide assurance as to the breadth or degree of protection which existing or future trademarks and patents, if any, may afford
us, that the parties from whom we have licensed or otherwise acquired trademark and/or patent rights, proprietary rights and technology have full rights to those brands, patent rights and technology, or that our trade secrets and proprietary
know-how will not otherwise become known to or independently developed by competitors.

We must devote resources to developing competitive new
products, which adversely impacts our cash flows and provides no guarantee of success.

We cannot provide assurance that we will be
successful in developing competitive new products and/or improving existing products so that our products remain competitive and avoid obsolescence. In addition, whether or not successful, these efforts place stress on our cash flows which could
have a material adverse effect on our business.



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Difficulties presented by international economic, political, legal, accounting and business conditions could harm
our business in international markets.

For the year ended December 31, 2007, approximately 9.1% of our total revenue was
generated in countries outside of the United States, primarily in Canada. Some risks inherent in conducting business internationally include:



| |  |  | unexpected changes in regulatory, tax and political environments;
| | - |  | -----------------------------------------------------------------



| |  |  | longer payment cycles and problems collecting accounts receivable;
| | - |  | ------------------------------------------------------------------



| |  |  | fluctuations in currency exchange rates;
| | - |  | ----------------------------------------



| |  |  | our ability to secure and maintain the necessary physical infrastructure; and
| | - |  | -----------------------------------------------------------------------------



| |  |  | challenges in staffing and managing foreign operations.
| | - |  | -------------------------------------------------------

Any one or more of these factors could materially and adversely affect our business.

Acquisitions may result in disruptions to our business
or distractions of our management due to difficulties in integrating acquired personnel and operations, and these integrations may not proceed as planned.

In 2006, we acquired Burton and Devant. We may continue to expand our business through the acquisition of companies, technologies, products and services. Acquisitions involve a number of special problems and risks,
including:



| |  |  | difficulty integrating acquired technologies, products, services, operations and personnel with the existing businesses;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | difficulty maintaining relationships with important third parties, including those relating to marketing alliances and providing preferred partner status and
favorable pricing;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | diversion of managements attention in connection with both negotiating the acquisitions and integrating the businesses;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | strain on managerial and operational resources as management tries to oversee larger operations;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | inability to retain and motivate management and other key personnel of the acquired businesses;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | exposure to unforeseen liabilities of acquired companies;
| | - |  | ---------------------------------------------------------



| |  |  | potential costly and time-consuming litigation, including shareholder lawsuits;
| | - |  | -------------------------------------------------------------------------------



| |  |  | potential issuance of securities to equity holders of the company being acquired with rights that are superior to the rights of holders of our common stock, or
which may have a dilutive effect on our common shareholders;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the need to incur additional debt or use cash; and
| | - |  | --------------------------------------------------



| |  |  | the requirement to record potentially significant additional future operating costs for the amortization of intangible assets.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------

As a result of these or other problems and risks, businesses we acquire may not produce the revenues, earnings or business synergies that we anticipated,
and acquired products, services or technologies might not perform as we expected. As a result, we may incur higher costs and realize lower revenues than we had anticipated. We may not be able to successfully address these problems and we cannot
assure you that the acquisitions will be successfully identified and completed or that, if acquisitions are completed, the acquired businesses, products, services or technologies will generate sufficient revenue to offset the associated costs or
other harmful effects on our business.

Any of these risks can be greater if an acquisition is large relative to the size of our company.
Failure to effectively manage our growth through acquisitions could adversely affect our growth prospects, business, results of operations and financial condition.

Compliance with securities laws and regulations is likely to increase our costs.

The Sarbanes-Oxley Act of 2002
(the Act) that became law in July 2002, as well as new rules and regulations subsequently implemented by the SEC, have required changes in some of our corporate governance practices. These new rules and regulations have increased our
legal and financial compliance costs and made some activities more difficult, time consuming and/or costly. These new rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors
and qualified executive officers.



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Risks Related to Our Industry

Competition in the golf and sporting goods industry is intense and could limit our growth and reduce our profitability.

The premium golf bag business is highly competitive and is served by a number of well-established and well-financed companies with recognized brand names, as well as new companies with popular products. There are a number of
well-established and well-financed competitors, including TaylorMade, Titleist, Ping, Callaway, Nike, Sun Mountain, Ogio and Bag Boy. New product introductions, price reductions, extended payment terms and close-outs (including
close-outs of products that were recently commercially successful) by competitors continue to generate increased market competition. While we believe that our products and our marketing efforts continue to be competitive, there can be no assurance
that successful marketing activities, discounted pricing, extended payment terms or new product introductions by competitors will not negatively impact our future sales.

The distribution and sales channels for golf products and accessories are highly fragmented and intensely competitive. In addition, many of our distribution channels, including traditional sporting goods stores and
chains; mass merchandisers, discount and department stores, such as Wal-Mart, Kmart and Target; golf specialty shops, such as Golfsmith and Golf Galaxy; sporting goods superstores, such as Dicks Sporting Goods and The Sports Authority, have
introduced and continue to significantly grow their own private label lines of golf bags and accessories. This trend has resulted in a reduction of our off-course sales to smaller, independent retail stores which have historically been our largest
sales channel in the off-course sales market. The large golf specialty stores and sporting goods chains have greater financial resources and generally purchase their own private label golf bag and accessory products in large quantities from overseas
vendors. In addition, these large golf specialty stores and sporting goods chains have begun reintroducing formerly independent brands as their own house brands. Further, catalog and Internet-based retailers, such as Golfsmith.com and Nike.com,
increase the competitiveness within the market.

Many of our competitors have greater financial, distribution, marketing and other
resources than we have. If our competitors reduce their prices, it may be difficult for us to reach our net sales goals without reducing our prices. We believe our success depends in large part on our ability to continuously develop, market and
deliver innovative and high-quality products at a pace and price competitive with other brands. If we face increased competition in the future, or if we are unable to successfully develop and introduce new products that enable us to compete
effectively, our sales and results of operations may be adversely affected.

Our success depends on our ability to anticipate and respond to changing
consumer preferences.

The markets for our golf bags and accessories are characterized by constant product innovation and changing
consumer preferences. We believe that our success depends in large part on our ability to anticipate, gauge and respond to changing consumer demands in a timely manner and to continually appeal to consumers of the ForeFront brands and like-minded
individuals. We must develop new products, and update our core products, to meet these changing consumer preferences. Any failure by us to offer products that respond to changing consumer preferences, or a shift in consumer preferences away from our
products, could adversely affect retail and consumer acceptance of our products and have an adverse affect on our sales and our results of operations. In addition, because we often make commitments to purchase products from our suppliers several
months in advance of the proposed delivery, if we misjudge the market for our merchandise, we may over-stock slow-moving products and be forced to take inventory write-downs that could have a negative impact on our profitability.

Adverse economic conditions could affect consumer purchases of discretionary items, which could adversely affect our business.

We sell golf bags and accessories. These products are recreational in nature and are, therefore, discretionary purchases for consumers. Consumers are
generally more willing to make discretionary purchases of golf products during favorable economic conditions and when consumers are feeling confident and prosperous. Adverse economic conditions in the United States or a decrease in disposable income
among consumers, or even a decrease in consumer confidence as a result of perceived unfavorable economic conditions, could cause consumers to forgo or to postpone purchasing new golf products and may reduce the number of rounds of play. Such forgone
or postponed purchases could have a material adverse effect upon us. In addition, the impact of potentially weak conditions in the leisure travel industry may adversely effect our operations.



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A reduction in the number of rounds of golf played or in the number of golf participants could adversely affect our
sales.

We generate all of our sales from the sale of golf-related products, including golf bags and accessories. The demand for
golf products is directly related to the number of golf participants and the number of rounds of golf being played by these participants. If golf participation or the number of rounds of golf played decreases, sales of our products may be adversely
affected. In the future, the overall dollar volume of the market for golf-related products may not grow or may decline.

Seasonality and adverse
weather conditions could adversely affect our business.

In addition to the effects of product cycles described above, our business
is also subject to the effects of seasonal fluctuations. Our first and second quarter sales generally represent our sell-in of our products for the new golf season. Our third quarter sales represent re-order business of the bag and accessory
products and the beginning of the collegiate sales season. Sales during the third quarter therefore are significantly affected not only by the sell-through of our products that were sold into the channel during the first and second quarters but also
by the sell-through of the products of our competitors. Our sales during the fourth quarter, and in the third quarter to a lesser degree, of bags and accessories are generally significantly less than the other quarters because, generally, in certain
markets fewer people are playing golf during that time of year due to cold weather. If we miscalculate the demand for our products generally or for our product mix during our peak periods, our net sales could decline, resulting in excess inventory,
which could harm our financial performance.

Our business can be significantly adversely affected by unusual or severe weather conditions.
Unfavorable weather conditions generally result in less golf rounds played, which generally results in less demand for golf bags and accessories. Consequently, sustained adverse weather conditions, especially during the warm weather months, could
materially affect our sales.

Credit risks among our customers could adversely affect our business.

We primarily sell our products to golf shops and retailers directly. We perform ongoing credit evaluations of our customers financial condition and
generally require no collateral from these customers. Historically, our bad debt expense has been low. However, a downturn in the golf market could result in increased delinquent or uncollectible accounts for some of our significant customers. A
failure by our customers to pay a significant portion of outstanding accounts receivable balances would adversely impact our performance and financial condition.

We may have difficulty collecting our receivables and that may result in the unanticipated need for external financing in order to continue our operations.

The collection of our accounts receivable is affected by several factors, including our credit granting policies, our customers ability to pay, and
industry and economic conditions. Adverse changes in any of these factors, some of which we cannot control, could create delays in collecting or an inability to collect our receivables. If we are not able to collect our receivables within the time
anticipated, we would need to seek external financing in order to continue our operations as planned.

Our industry is experiencing a flattening in
activity which could result in a reduction in our revenues and have a material adverse impact on our results of operations.

During
2006 and 2007, our management has observed a flattening of the market for golf-based products and services resulting from a decrease in golf playing activity as evidenced by the decrease in golf course openings and increase in golf course closures.
Specifically, in a Golf Industry Fall Report issued by Merriman, Curhan & Ford in December 2007, a survey of responses from approximately 45 golfing facilities in four different geographic regions of the United States revealed that 64% of
the respondents categorized merchandise sales to be either flat or down versus the prior year, and 68% of the same respondents indicated that their inventory levels were flat to up versus the prior year. The general consensus in the industry is that
the demand for golf is softening due to (a) economic downturns resulting in consumers electing to engage in less costly recreational activities and (b) consumers electing to devote their available time to other activities such as spending
additional time with families. This trend could have a material adverse impact on our ability to generate revenues and, accordingly, have a material adverse impact on our results of operations.



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Terrorism and the uncertainty of war may harm our operating results.

Terrorist attacks or acts of war may cause damage or disruption to us and our employees, facilities, information systems, vendors and customers, which
could significantly impact our net sales, costs and expenses and financial condition. The threat of terrorist attacks since September 11, 2001 continues to create many economic and political uncertainties. The potential for future terrorist
attacks, the national and international responses to terrorist attacks and other acts of war or hostility may cause greater uncertainty and cause our business to suffer in ways that we currently cannot predict. Military action taken by the United
States could have a short or long-term negative economic impact upon the financial markets and our business in general.

Risks Related to Investing in
Our Common Stock

Our quarterly sales and operating results fluctuate substantially, which may adversely affect the market price of our common
stock.

Our net sales and results of operations have fluctuated in the past and will likely vary from quarter to quarter in the
future. These fluctuations may adversely affect our financial condition and the market price of our common stock. The market price at which our common stock trades may be influenced by many factors, including:



| |  |  | our operating and financial performance and prospects;
| | - |  | ------------------------------------------------------



| |  |  | the depth and liquidity of the market for our common stock;
| | - |  | -----------------------------------------------------------



| |  |  | investor perception of us and the industry in which we operate;
| | - |  | ---------------------------------------------------------------



| |  |  | the level of research coverage of our common stock;
| | - |  | ---------------------------------------------------



| |  |  | changes in earnings estimates or buy/sell recommendations of securities analysts; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | general financial and other market conditions.
| | - |  | ----------------------------------------------

In
the past, securities class action litigation has often been brought against a company following periods of great volatility in the market price of its securities. In the event that we experience volatility or sudden declines in the price of our
common stock, we may be the target of securities litigation in the future. Any such securities litigation could result in substantial costs and divert managements attention and resources.

Our shares of common stock currently have a limited trading market.

As of the date of this filing, our shares of common stock are traded on the Pink Sheets, LLC (the 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. Therefore, our shares of common
stock currently have only a limited trading market. As a result, you may find it difficult to dispose of shares of our common stock and you may suffer a loss of all or a substantial portion of your investment in our common stock.

Our shares of common stock are covered by the SECs penny stock rules.

Our common stock is covered by an SEC rule that imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited
investors, which are generally institutions with assets in excess of $5,000,000, or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. For transactions covered by the
rule, the broker-dealer must make a special suitability determination for the purchaser and transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities, and also may affect the ability of
purchasers of our stock to sell their shares in the secondary market. It may also cause fewer broker-dealers to be willing to make a market in our common stock.



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The interests of our controlling shareholder could conflict with those of our other shareholders, resulting in the
approval of corporate actions which may not be necessarily in the best interests of our other shareholders.

At March 18,
2008, Stanford owns approximately 82% of our voting securities. Therefore, Stanford is able to determine the outcome of shareholder votes, including votes concerning the election of directors, amendments to our articles of incorporation and bylaws,
and the approval of significant corporate transactions like a merger or sale of our assets. Although none of our directors or officers are affiliated with Stanford or has any relationships with Stanford, Stanford is able to control the election of
the board of directors. This controlling influence could have the effect of delaying or preventing a change in control, even if many of our other shareholders believe it is in their best interest.

We may issue additional shares of preferred or common stock that could defer a change of control or dilute the interests of our common shareholders and our charter
documents could defer a takeover effort, which could inhibit your ability to receive an acquisition premium for your shares or your ability to sell your shares of common stock.

Our articles of incorporation permit our board of directors to issue up to 7,500,000 shares of preferred stock. At December 31, 2007, none of these
shares were issued and outstanding. Additional shares of preferred stock, if issued, could contain dividend, liquidation, conversion, voting or other rights which could adversely affect the rights of our common shareholders and which could also be
utilized, under some circumstances, as a method of discouraging, delaying or preventing a change in control. Provisions of our articles of incorporation, bylaws and Florida law could make it more difficult for a third party to acquire us, even if
many of our shareholders believe it is in their best interest. These provisions may decrease your ability to sell your shares of our common stock.

In addition, the Reorganization Plan contemplates the issuance of a significant amount of our capital stock and significant dilution to our existing shareholders. Ultimately, upon conclusion of the Reincorporation Transaction, the Golf Sale
Transaction and the transactions contemplated in the Acquisition Proposals, the current shareholders of ForeFront, excluding Stanford, will hold 1.8% of the outstanding ordinary shares of ForeFront (BVI). The transferors of the new broadband
multimedia business being acquired in the Acquisition Proposals will receive 80.0% in the aggregate of the anticipated outstanding ordinary shares of ForeFront (BVI). Stanfords holdings in ForeFront (BVI) will ultimately comprise 18.2% of
ForeFront (BVI)s outstanding ordinary shares, including common stock equivalents equal to 4.2% of the outstanding ordinary shares of ForeFront (BVI), one-half of which are anticipated to be transferred to certain employees of an affiliate of
Stanford.

We do not expect to pay dividends on our common stock, and investors will be able to receive cash in respect of the shares of common stock
only upon the sale of the shares.

We have no intention in the foreseeable future to pay any cash dividends on our common stock.
Furthermore, in accordance with the terms of our debt, we may not pay cash or stock dividends without the written consent of SVCH. Therefore, an investor in our common stock will obtain an economic benefit from the common stock only after an
increase in its trading price and only by selling the common stock.

Delinquent filings could prohibit timely information from being reported.

During 2007, we were delinquent in filing our required documents with the SEC. While our management evaluated the ramifications of
these delinquencies and concluded that the underlying reasons were necessary, timely information regarding our company was not publicly available. This lack of public information could decrease the market value of our common stock. In addition, this
delinquency in our filing requirements with the SEC resulted in our common stock being removed from quotation from the OTC Bulletin Board and subjects us to a more comprehensive disclosure regimen to the extent we file a registration statement with
the SEC.

Our financial reporting systems and our internal and disclosure controls may not be sufficient to meet our management and reporting needs.
We have identified significant deficiencies in our internal controls over financial reporting. If we do not remediate these significant deficiencies, we may have difficulty obtaining financing and investors may lose confidence in our securities.

We rely on a variety of financial reporting systems and internal and disclosure controls to provide management with accurate and
timely information about our business and operations. This information is important to enable management to identify unfavorable developments and risks at an early stage. We also rely on, among other things, these financial reporting systems and
internal and disclosure controls to enable us to prepare accurate and timely financial information for our investors. Our current



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financial reporting systems and internal and disclosure controls may not be sufficient to enable us to effectively manage our business, identify unfavorable
developments and risks at an early stage and produce financial information in an accurate and timely manner.

In addition, we have
identified significant deficiencies in our internal controls. There is 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; however, policies and procedures must be formalized in order to ensure accurate and timely information for our investors.

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; however, policies and procedures must be formalized in order to ensure accurate and timely
information for our investors.

Each of the significant deficiencies noted above are in the process of being addressed with formalized
policies and procedures. However, the current lack of these formalized policies and procedures could impair our ability to prepare accurate and timely financial information and may have a material adverse effect on our business, results of
operations and financial condition. We expect that we will have to continue to devote significant resources to compensate for these internal control deficiencies.



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

None.



|Item 2. | Properties
|------- | ----------

Our principal executive offices and our
primary warehousing and distribution center are located at 835 Bill Jones Industrial Drive, Springfield, Tennessee 37172. This facility, which includes approximately 14.06 acres, is pursuant to a lease through July 31, 2008, entered into with
Ryan Holdings, Inc., the owner of the property. The lease provides for current monthly rent payments in the amount of $54,646. We have an additional lease agreement for the executive offices, pursuant to a lease with a term from August 1, 2008
through October 31, 2008. This lease provides for monthly rent payments in the amount of $16,667. The shareholders of Ryan Holdings, Inc. are Dennis and Deborah Ryan, who are husband and wife. Through September 21, 2007, Deborah Ryan was a
member of our board of directors; Ms. Ryan was also Executive Vice President of Datrek Brand Management until her separation from us on April 13, 2006. Dennis Ryan was President of the Off-Course division until his separation from us on
May 26, 2006.

At the expiration of our current Springfield, Tennessee lease in July 2008, we will be relocating our production and
warehouse facility to Baldwyn, Mississippi and our executive offices to the Nashville, Tennessee market. We are currently negotiating the lease on the new Baldwyn distribution center. The developer of this center is an affiliate of SVCH. This
distribution center is expected to be fully operational by July 31, 2008. We are also reviewing several lease properties in the Nashville, Tennessee market for our new administrative, operations, finance and executive offices. We expect to
relocate to a new Nashville-area location no later than October 31, 2008.

We currently expect that the combined occupancy costs of
the new distribution center and the new executive office will not significantly exceed our current occupancy costs for our Springfield, Tennessee facility.

The ForeFront Devant facility, including a production, warehousing and distribution center, is located at 3011 Walkup Avenue, Monroe, North Carolina 28110. We lease this facility, which includes approximately 50,000
square feet, pursuant to a four-year lease agreement, beginning December 3, 2006, entered into with Jimini, a real estate holding partnership. The lease provides for current monthly rent payments in the amount of $16,750, plus taxes and
insurance. A former principal officer of ForeFront Devant is the principal shareholder of Jimini.



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The ForeFront Burton facility, including assembly, warehousing and a distribution center, is located at
654 Anchors Street, Fort Walton Beach, Florida 32548. We temporarily leased an approximate 30,000 square foot portion of this facility, pursuant to a lease agreement through June 30, 2007, entered into with Burton. The lease provided for
monthly rent payments in the amount of $14,000, plus taxes and insurance. We vacated this facility during July 2007. A senior vice president of ForeFront Group is also a shareholder of Burton.

In the opinion of management, the properties described above are adequately covered by insurance.



|Item 3. | 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. We vigorously defend all matters in which we are named defendants and,
for insurable losses, maintain significant levels of insurance to protect against adverse judgments, claims or assessments. Although the adequacy of existing insurance coverage or the outcome of any legal proceedings cannot be predicted with
certainty, based on the current information available, we do not believe the ultimate liability associated with any claims or litigation will have a material impact to our financial condition or results of operations.



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

None.

PART II



|Item 5. | Market for Registrants Common Equity, Related Shareholder Matters and Issuers Purchases of Equity Securities
|------- | -------------------------------------------------------------------------------------------------------------

Market Information

As of the date of this filing, our
shares of common stock are traded on the Pink Sheets under the symbol FOFH. Prior to November 12, 2001, we were not aware of any established trading market for our securities. From November 12, 2001 through May 21, 2007,
our common stock was listed for quotation on the OTC Bulletin Board (OTCBB). Due to our previous delinquent status with respect to our periodic filings with the SEC, our common stock was removed from quotation from the OTCBB on
May 21, 2007. On May 22, 2007, our common stock began trading on the Pink Sheets. The prices set forth below reflect the range of high and low bid prices per share in each of the quarters of fiscal 2007 and 2006 as reported by the OTCBB
and the Pink Sheets for the applicable time periods and reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.*



|               |  |      |      |      |   |      |  |     |      |  |   |     
|-------------- |  | ---- | ---- | ---- | - | ---- |  | --- | ---- |  | - | ----
|               |  | 2007 |      | 2006
|               |  | High |      | Low  |   | High |  | Low
|First Quarter  |  | $    | 1.05 |      | $ | 0.60 |  | $   | 4.00 |  | $ | 0.51
|Second Quarter |  | $    | 0.80 |      | $ | 0.60 |  | $   | 3.00 |  | $ | 1.50
|Third Quarter  |  | $    | 0.70 |      | $ | 0.60 |  | $   | 2.50 |  | $ | 1.50
|Fourth Quarter |  | $    | 0.70 |      | $ | 0.51 |  | $   | 2.00 |  | $ | 0.51



|* | We effectuated a one-for-two reverse stock split effective as of December 5, 2005. The prices set forth above reflect this reverse stock split.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------

Holders

As of March 18, 2008, there were 56
holders of record of our common stock. The closing sales price for our common stock on March 18, 2008, the last reported trade date on the Pink Sheets, was $0.55.



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Dividend Policy

We have never paid cash dividends on our common stock. We presently intend to retain future earnings, if any, to finance the expansion of our business and do not anticipate that any cash dividends on our common stock
will be paid in the foreseeable future. Our future dividend policy will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors. In addition, our credit line agreement with FCC restricts our
ability to pay dividends.

Securities Authorized for Issuance under Equity Compensation Plans

Equity Compensation Plan Information as of December 31, 2007



|                                                            |  |                                                                                              |  |                                                                              |      |                                                                                                                                           |        
|----------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- | ---- | ----------------------------------------------------------------------------------------------------------------------------------------- | -------
|Plan category                                               |  | Number of securities tobe issued upon exerciseof outstanding options,warrants and rights
(a) |  | Weighted-averageexercise price
ofoutstanding options,warrants and rights (b) |      | Number of securitiesremaining available forfuture issuance underequity compensationplans
(excludingsecurities reflected incolumn (a)) (c)
|Equity compensation plans approved by security holders:     |  | 241,500                                                                                      |  | $                                                                            | 1.92 |                                                                                                                                           | 758,500
|Equity compensation plans not approved by security holders: |  | 0                                                                                            |  | $                                                                            | 0.00 |                                                                                                                                           | 0      
|                                                            |  |                                                                                              |  |                                                                              |      |                                                                                                                                           |        
|Total                                                       |  | 241,500                                                                                      |  | $                                                                            | 1.92 |                                                                                                                                           | 758,500

Sales of Unregistered Securities

On July 18, 2005, we 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, 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 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, 150,000 shares of which were subsequently assigned. 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 converted 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 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 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 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.



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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. Under the terms of the Amendment, through December 31, 2006, Stanford acquired (in various tranches)
all of the Series C Preferred Stock shares and all of the Series C Warrants. These Warrants were exercised between January 2007 and March 2007.

On December 21, 2007, Stanford converted all of its Series A, Series B and Series C Preferred Stock shares into 4,750,000 shares of our common stock.

In connection with the July 18, 2005 Securities Purchase Agreement, we were 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. We are obligated to register the shares of common stock underlying the Series B Preferred Stock and the Series B 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. We were obligated to register the shares of common stock underlying the Series C Preferred Stock and the Series C Warrants, pursuant
to a registration rights agreement no later than June 30, 2007. In connection with the 2007 SVCH credit facility transaction described herein, this registration requirement was deferred by Stanford through June 30, 2008.

If we do not file the registration statements on a timely basis or maintain an effective registration statement once it is declared effective, we 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 SVCH, 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 our 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 offer and sale of our securities was exempt from the registration requirements of the Securities Act, as the securities were sold to accredited investors pursuant to Regulation D and to non-United States persons in offshore
transactions pursuant to Regulation S.

Issuer Purchases of Equity Securities

The following table contains information regarding purchases of our common stock made during the year ended December 31, 2007 by or on behalf of the
Company or any affiliated purchaser, as defined by Rule 10b-18(a)(3) of the Exchange Act:



|                     |  |                                 |  |                             |      |                                                                               |   |                                                                                      |  
|-------------------- |  | ------------------------------- |  | --------------------------- | ---- | ----------------------------------------------------------------------------- | - | ------------------------------------------------------------------------------------ | -
|Period               |  | Total Numberof Shares Purchased |  | Average PricePaid Per Share |      | Total Number of SharesPurchased as Part ofPublicly Announced Plansor Programs |   | Approximate DollarValue of Shares thatMay Yet Be PurchasedUnder the Plans
orPrograms
|9/1/2007-9/30/2007   |  | 1,100,000                       |  | $                           | 0.30 |                                                                               |  |                                                                                      | 
|10/1/2007-10/31/2007 |  |                                |  |                             |     |                                                                               |  |                                                                                      | 
|11/1/2007-11/30/2007 |  |                                |  |                             |     |                                                                               |  |                                                                                      | 
|12/1/2007-12/31/2007 |  |                                |  |                             |     |                                                                               |  |                                                                                      | 



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In addition, as discussed further in Item 7. below, on September 21, 2007, as part of two settlement
transactions, we redeemed 500,000 shares of our common stock that were previously issued as partial consideration in our acquisitions of the net assets of Burton and Devant.



|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Introduction

The following discussion and analysis of our financial condition and results of
operations for our fiscal years ending December 31, 2007 and 2006 should be read in conjunction with the consolidated financial statements and related notes thereto appearing elsewhere in this Form 10-K. Some of the information contained in
this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategies for our business, includes forward-looking statements that involve risk and uncertainties. You should review the
Forward-Looking Statements and Risk Factors set forth elsewhere in this report for a discussion of important factors that could cause actual results in future periods to differ materially from the results contemplated by the
forward-looking statements contained herein.

Overview

ForeFront and its subsidiaries design, decorate, market and distribute golf bags and accessories to on-course pro shops and off-course golf specialty stores, sporting goods stores, mass merchandisers, corporate
premium customers and golf event sponsoring organizations, primarily in the United States and Canada. We believe we have developed a reputation with our consumers for delivering consistent value on quality products. We conduct substantially all of
our operations in Springfield, Tennessee and Monroe, North Carolina.

Summary of 2007 Results

Net sales increased by $10.1 million or 33.7% in 2007 from 2006 due to increases in sales from the acquisitions of Devant and Burton products of $6.8
million and $5.6 million, respectively, partially offset by decreases primarily in sales of Datrek and Miller products of $2.3 million. Excluding the sales of Devant and Burton products attributable to a full year of consolidation of $6.7 million
and $5.4 million, respectively, net sales decreased by $2.0 million. As previously discussed, the golf bag and accessories market appears to be experiencing a period of flattening demand. We anticipate that this trend will continue into 2008
resulting in a continuation of flattened or decreasing sales activity and associated revenues. Loss from operations increased to a loss of $13.4 million in 2007 from a loss of $8.2 million in 2006. The increased loss was primarily due to a $3.7
million increase in operating expenses and a $1.4 million decrease in gross margin. The increase in operating expenses was driven by $2.6 million in increased expense attributed to ForeFront Devant and higher amortization expense of $0.9 million
associated with the customer lists acquired in our purchases of the net assets of Burton and Devant. As discussed further below, the decrease in gross margin was driven by an impairment loss on older, slow-moving inventory of $2.9 million. Net cash
used in operations in 2007 was $9.5 million compared to a use of cash of $8.6 million in 2006. Cash balances decreased $0.4 million during 2007. The decrease in cash balances principally resulted from the increased loss, offset by borrowings under
our credit facility with SVCH.

Recent Developments

Reorganization Transactions

On December 27, 2007, we organized a wholly-owned subsidiary formed under the laws
of the British Virgin Islands known as ForeFront (BVI). On December 31, 2007, we entered into a series of agreements providing for a reorganization of our operations pursuant to which we will sell to SVCH our current business of designing,
marketing and distributing golf accessories to the golf industry (the Golf Business) and acquire the optical transceiver business and the contract rights, customer lists, intellectual property, employees and certain other property and
intangibles necessary to allow ForeFront (BVI) to acquire the cable set-top box



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##### Table of Contents

and broadband multimedia business of Ligent International, Inc., Ligent Photonics, Inc. and Qingdao Hisense Electric Ltd., subsidiaries of Hisense Co. Ltd.,
a Chinese electronics manufacturer, and Ligent International, Inc. (the New Business). The New Business is anticipated to sell optical transceivers to equipment manufacturers in the U.S., China and elsewhere. Optical transceivers convert
fiber optic transmissions into electronic signals and are key components in fiber to home equipment. The broadband multimedia technology business designs, develops and sells set-top boxes and broadband communication products for the home. Its
customers are cable companies throughout China. We anticipate that the New Business will focus on the convergence of these broadband multimedia technologies to enable expanded high definition video service to the consumer at reduced costs. At the
closing, in connection with these transactions, we also intend to reincorporate in the British Virgin Islands by merging with and into ForeFront (BVI). For more information on this Reorganization Plan, see Business - Recent Developments - Plan
of Reorganization.

Settlement Transactions

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

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 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 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 and the Devant 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.

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 March 18, 2008, borrowings under the SVCH facility,
including interest, totaled $21,391,629. 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.



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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.

Acquisitions

On September 12, 2006, we
executed the Burton Purchase Agreement with Burton. Under the Burton Purchase Agreement, we 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 our common stock, representing a guaranteed value of $1,000,000 at a future measurement date, and $176,947 of acquisition costs.

The allocation of the purchase price is as follows:



|                                    |  |   |          
|----------------------------------- |  | - | ---------
|Assets acquired:                    |  |   |          
|Cash                                |  | $ | 4,143    
|Accounts and other receivables, net |  |   | 977,401  
|Inventories, net                    |  |   | 1,282,126
|Prepaid expenses                    |  |   | 107,648  
|Property and equipment, net         |  |   | 741,593  
|Identifiable intangible assets      |  |   | 2,149,453
|Goodwill                            |  |   | 186,154  
|                                    |  |   |          
|Total assets acquired               |  |   | 5,448,518
|                                    |  |   |          
|                                    | 
|Liabilities assumed:                |  |   |          
|Accounts payable                    |  |   | 712,808  
|Other accrued expenses              |  |   | 218,659  
|Capital lease payable               |  |   | 80,797   
|Note payable to bank                |  |   | 59,307   
|                                    |  |   |          
|Total liabilities assumed           |  |   | 1,071,571
|                                    |  |   |          
|Total consideration                 |  | $ | 4,376,947
|                                    |  |   |          

On December 20, 2006, we executed the Devant Purchase Agreement with Devant. Under the Devant
Purchase Agreement, we 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 our common stock, representing a guaranteed value of $1,250,000 at a future measurement date, and $22,387 of acquisition costs.

The
allocation of the purchase price is as follows:



|                                          |  |   |          
|----------------------------------------- |  | - | ---------
|Assets acquired:                          |  |   |          
|Accounts and other receivables, net       |  | $ | 740,013  
|Inventories, net                          |  |   | 962,612  
|Prepaid expenses and other current assets |  |   | 17,688   
|Property and equipment, net               |  |   | 256,356  
|Identifiable intangible assets            |  |   | 3,249,493
|                                          |  |   |          
|Total assets acquired                     |  |   | 5,226,162
|                                          |  |   |          
|                                          | 
|Liabilities assumed:                      |  |   |          
|Accounts payable                          |  |   | 453,896  
|Other accrued expenses                    |  |   | 106,879  
|                                          |  |   |          
|Total liabilities assumed                 |  |   | 560,775  
|                                          |  |   |          
|Total consideration                       |  | $ | 4,665,387
|                                          |  |   |          



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We purchased the net assets of Burton to increase our presence in the golf bag market. The acquisition of
the net assets of Devant has allowed us to materially increase our market share of the golf towel market. We intend to continue the operations of the acquired assets, including the use of the acquired assets in the distribution of golf bags and golf
towels, and the commercialization of the Burton and Devant brands, patents and trademarks. We expect these acquisitions to strengthen our sales and distribution capabilities and complement our existing product offerings.

We funded the cash portion of the acquisitions of Burton and Devant with borrowings under our line of credit with FCC and the proceeds of the sale of our
preferred stock to Stanford.

Significant Trends, Developments and Uncertainties

During 2006 and 2007, we witnessed an increasing shift in the market as a result of national 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 chains 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 towards consolidation into the national store chains will continue and that
our share of the total Off-Course golf bag and accessory market will be constrained as a result.

Another trend in our industry has been
customer consolidation, as sporting goods stores and golf specialty stores have been acquired and consolidated into larger, well-capitalized organizations. This has led to a reduction in our core Off-Course customer base of smaller, independent golf
specialty retailers. In anticipation of this occurrence, we have restructured our Off-Course approach to reflect the needs of these larger buying organizations.

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 in 2007 was
15.8%. As discussed further below, in 2007, we incurred an impairment loss on inventory of $2.9 million on older, slow-moving inventory. Not including this impairment loss, our gross margin in 2007 was 23.0%. 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 in 2007 compared to 2006; however, our 2007 operating expenses, as a percent of revenue, were 49.1%, compared to 53.2% in 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 decrease as a percentage of sales. Our long-term



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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. The $32.5 million credit facility obtained from SVCH in fiscal 2007 is 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 were 62 days at December 31, 2007 compared with 64 days at December 31, 2006. 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 4.8 times and 2.8 times, at December 31, 2007 and 2006, respectively. Not including the impairment loss of 2.9 million discussed further below, inventory turns at December 31, 2007
would have been 3.3 times. This increase is a result of higher sales in the current year, while maintaining approximately the same inventory level as during the prior year. We are continuing our evaluation of our inventory levels in order to reduce
the risk of building up older product in the future.

Results of Operations - December 31, 2007 and 2006

The following table sets forth our consolidated results of operations and the percentage of net sales represented by each item for the periods indicated
(in thousands):



|                            |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   
|--------------------------- |  | ---------------------------- | ------- | - | ---------------------------- | ----- | -- | ------ | - | ------ | ---------------------- |  | ----- | --
|                            |  | Year Ended December 31, 2007 |         |   | Year Ended December 31, 2006 |      
|                            |  | Amount                       |         |   | Percentage ofNet Sales       |       |    | Amount |   |        | Percentage ofNet Sales | 
|Net sales                   |  | $                            | 40,119  |   |                              | 100.0 | %  |        | $ | 30,018 |                        |  | 100.0 | % 
|Cost of sales               |  |                              | 33,785  |   |                              | 84.2  |    |        |   | 22,256 |                        |  | 74.1  |   
|                            |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   
|Gross margin                |  |                              | 6,334   |   |                              | 15.8  |    |        |   | 7,762  |                        |  | 25.9  |   
|                            |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   
|Operating expenses          |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   
|Sales and marketing         |  |                              | 9,474   |   |                              | 23.6  |    |        |   | 8,471  |                        |  | 28.2  |   
|General and administrative  |  |                              | 10,217  |   |                              | 25.5  |    |        |   | 7,496  |                        |  | 25.0  |   
|                            |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   
|Total operating expenses    |  |                              | 19,691  |   |                              | 49.1  |    |        |   | 15,967 |                        |  | 53.2  |   
|                            |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   
|Loss from operations        |  |                              | (13,357 | ) |                              | (33.3 | )  |        |   | (8,205 | )                      |  | (27.3 | ) 
|                            |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   
|Other income (expense)      |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   
|Interest expense            |  |                              | (1,501  | ) |                              | (3.7  | )  |        |   | (995   | )                      |  | (3.3  | ) 
|Minority interest           |  |                              | 56      |   |                              | 0.1   |    |        |   | 103    |                        |  | 0.3   |   
|Other income (expense), net |  |                              | (681    | ) |                              | (1.7  | )  |        |   | 2      |                        |  | 0.0   |   
|                            |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   
|Net other expense           |  |                              | (2,126  | ) |                              | (5.3  | )  |        |   | (890   | )                      |  | (3.0  | ) 
|                            |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   
|Net loss                    |  | $                            | (15,483 | ) |                              | (38.6 | )% |        | $ | (9,095 | )                      |  | (30.3 | )%
|                            |  |                              |         |   |                              |       |    |        |   |        |                        |  |       |   



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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 DSO 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 Year Ended December 31, 2007 and December 31, 2006

Net sales increased $10.1 million for the year ended December 31, 2007 to $40.1 million compared to $30.0 million during 2006. The sales increase was driven by increases in sales of Devant and Burton products of
$6.8 million and $5.6 million, respectively, partially offset by other decreases, primarily in sales of Datrek and Miller products, of $2.3 million. Excluding the sales of Devant and Burton products attributable to a full year of consolidation of
$6.7 million and $5.4 million, respectively, net sales decreased by $2.0 million. As previously discussed, the golf bag and accessories market appears to be experiencing a period of flattening demand. We anticipate that this trend will continue into
2008 resulting in a continuation of flattened or decreasing sales activity and associated revenues.

Sales information by product category
for the years ended December 31, 2007 and 2006 is summarized as follows:



|                                         |  |        |            |         |       |   |        |   |            |  |       |  
|---------------------------------------- |  | ------ | ---------- | ------- | ----- | - | ------ | - | ---------- |  | ----- | -
|                                         |  | 2007   |            |         | 2006  |  
|                                         |  | Amount |            | Percent |       |   | Amount |   | Percent    | 
|Datrek golf bags and travel covers       |  | $      | 9,093,110  |         | 22.7  | % |        | $ | 13,162,418 |  | 43.8  | %
|Burton golf bags and travel covers       |  |        | 4,517,423  |         | 11.3  |   |        |   | 1,556,493  |  | 5.2   |  
|Miller and Burton accessories            |  |        | 3,397,378  |         | 8.5   |   |        |   | 3,363,625  |  | 11.2  |  
|NCAA golf bags and accessories           |  |        | 4,834,648  |         | 12.1  |   |        |   | 4,561,711  |  | 15.2  |  
|NFL golf bags                            |  |        | 1,352,880  |         | 3.4   |   |        |   | 901,858    |  | 3.0   |  
|Premium / OEM / Internet                 |  |        | 5,666,235  |         | 14.1  |   |        |   | 3,437,311  |  | 11.5  |  
|Devant and Sir Christopher Hatton towels |  |        | 7,241,194  |         | 18.0  |   |        |   | 411,606    |  | 1.4   |  
|GolfLogix                                |  |        | 1,719,803  |         | 4.3   |   |        |   |           |  | 0.0   |  
|ForeFront Crellin                        |  |        | 400,584    |         | 1.0   |   |        |   | 1,368,603  |  | 4.6   |  
|Freight invoiced to customers            |  |        | 1,720,404  |         | 4.3   |   |        |   | 1,137,086  |  | 3.8   |  
|Other                                    |  |        | 175,804    |         | 0.4   |   |        |   | 117,155    |  | 0.4   |  
|                                         |  |        |            |         |       |   |        |   |            |  |       |  
|Total                                    |  | $      | 40,119,463 |         | 100.0 | % |        | $ | 30,017,866 |  | 100.0 | %
|                                         |  |        |            |         |       |   |        |   |            |  |       |  

Burton sales are included as of the acquisition effective date of September 3, 2006. Devant and Sir
Christopher Hatton sales are as of the acquisition effective date of December 3, 2006. ForeFront Crellin sales are as of the acquisition effective date of January 26, 2006 and through the dissolution date of June 30, 2007.

Sales of Datrek golf bags and travel covers decreased $4.1 million, or 30.9%, in 2007 compared to 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 consolidation of the industry previously discussed. In addition, larger 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



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widely embraced in the market. Sales of NCAA golf bags and accessories and NFL golf bags increased $0.3 million, or 6.0%, and $0.5 million, or 50.0%,
respectively, for the 2007 fiscal year. Both of these increases are primarily attributable to the continued establishment of these products through our existing sales channels. Sales in Premium/OEM/Internet products increased $2.2 million, or 64.8%,
in 2007. This increase was driven by OEM business we acquired as part of the Burton acquisition. During 2007, we had an exclusive worldwide distribution agreement to distribute the GolfLogix-Garmin GPS device, which provided $1.7 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 expired in the fourth quarter of 2007. Freight
invoiced to customers increased $0.6 million, or 51.3%, 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 year ended December 31, 2007 increased by $11.5 million to $33.8 million, or 15.8% gross margin, as compared to $22.3 million,
or 25.9% gross margin, for the year ended December 31, 2006. 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. Included in cost of sales for 2007 is an impairment loss of $2.9 million on older, slow-moving inventory. Partially due to the industry factors discussed above, managements estimates of our ability
to efficiently and profitably sell through this older inventory, without impacting our newer product in existing sales channels, has changed. We are continuing our evaluation of our inventory levels in order to reduce the risk of building up older
product in the future. Not including this impairment loss, our 2007 gross margin would have been 23.0% of sales. The decrease in gross margin of 2.9% is the result of continued pressure on pricing, due to the industry factors discussed above, as
well as approximately $0.8 million of additional costs associated with the closure of the Fort Walton Beach, Florida facility.

Total
operating expenses for the year ended December 31, 2007 were $19.7 million, compared to $16.0 million for the year ended December 31, 2006. Operating expenses are comprised of sales and marketing expense and general and administrative
expense.

Sales and marketing expense includes the employee costs relating to 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. Sales and marketing expense totaled $9.5 million, or 23.6% of net sales, for the
year ended December 31, 2007, compared to $8.5 million, or 28.2% of net sales, for the year ended December 31, 2006. The decrease in sales and marketing expense as a percentage of net sales of 4.6% is primarily attributable to certain
efficiencies achieved by consolidating ForeFront Burton functions into our existing infrastructure, the restructuring of our sales group to combine our Off-Course and On-Course sales teams, and the prior year including $0.4 million of severance
costs related to two former officers that were not incurred in the current year.

General and administrative expense includes salaries and
related expenses for our executive officers and administrative employees. Also included in general and administrative expense are corporate costs including legal and accounting, bad debts, office supplies, equipment maintenance, bank charges and
amortization of intangibles. General and administrative expense was $10.2 million, or 25.5% of net sales, for the year ended December 31, 2007 and $7.5 million, or 25.0% of net sales, for the year ended December 31, 2006. The principal
reasons for this increase are the addition of expenses for ForeFront Devant of $1.1 million, higher amortization expense associated with the customer lists acquired in our purchases of the net assets of Burton and Devant of $0.9 million, severance
expense related to three executive officers of ForeFront and one executive officer of ForeFront Devant of $0.8 million, additional bad debt expense of $0.4 million partially attributable to ForeFront Burton customers acquired, and legal and
consulting costs of $0.3 million associated with the ForeFront (BVI) reorganization, as discussed elsewhere in this report. These increases are partially offset by certain efficiencies achieved by consolidating ForeFront Burton functions into our
existing infrastructure.

Interest expense was $1.5 million for the year ended December 31, 2007 and $1.0 million for the year ended
December 31, 2006. The principal reason for this increase was interest expense of $0.4 million on our credit facility with SVCH that was entered into in November 2007.

Other expense, net was $0.7 million for the year ended December 31, 2007. Included in this amount are the write-off of our investment in ForeFront
Crellin of $0.3 million, which was dissolved on June 30, 2007, and the impairment of fixed assets of $0.3 million relating to ForeFront Burton. These fixed assets were deemed impaired on June 30, 2007, as we determined that they would no
longer be used after we consolidated our Ft. Walton Beach, Florida facility into our Springfield, Tennessee facility in July 2007.



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Liquidity and Capital Resources

We have an accumulated deficit at December 31, 2007 of $35.1 million. We had working capital at December 31, 2007 of $2.6 million. We incurred a net loss for the year ended December 31, 2007 of $15.5
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 disclosed herein, we have recently entered into a debt financing transaction with SVCH. Management believes that
cash balances on hand and generated from operations, our $32.5 million credit facility with SVCH and our credit facility with FCC will be sufficient to fund the business 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 $9.5 million for the year ended December 31, 2007, as compared to $8.6 million during the same period of 2006. The
increase in cash used by operating activities is driven by the increase in the net loss of $6.4 million and additional cash used for accounts payable and accrued liabilities of $1.8 million, partially offset by additional cash provided in the 2007
period from inventory of $2.6 million, the impairment of older and slow-moving inventory discussed above of $2.9 million and additional depreciation and amortization of $1.2 million.

Investing activities used $1.9 million in 2007, whereas such activities used $5.6 million in 2006. Cash used in investing activities in 2007 consisted of
the settlement of a lease obligation discussed in the Ryan Transactions above of $1.0 million, the purchase of a non-compete agreement with two of our former executive officers of $0.5 million and purchases of property and equipment of $0.5 million.
Cash used in investing activities in 2006 is primarily attributable to payment for the net assets of Devant of $3.0 million, the payment for the net assets of Burton of $2.0 million and purchases of property and equipment of $0.6 million.

Financing activities provided $11.0 million in 2007, whereas such activities provided $13.8 million in 2006. The principal sources of cash
provided by financing activities during 2007 were borrowings under our credit facility with SVCH of $15.4 million and proceeds from the sale of $1.9 million of preferred stock to SVCH, partially offset by repayments of notes to related parties of
$3.8 million and net repayments under our credit facility with FCC of $2.2 million. The principal sources of cash provided by financing activities during 2006 were proceeds from the sale of $12.1 million of preferred stock to SVCH and net borrowings
under our revolving line of credit facility with FCC of $3.1 million, partially offset by repayments of notes to related parties of $1.2 million.

Cash at December 31, 2007 and 2006 was $0.4 million and $0.7 million, respectively. At December 31, 2007 we had negative shareholders equity of $8.2 million compared with shareholders equity of $6.3 million at
December 31, 2006.

On October 18, 2004, we obtained a line of credit facility with FCC for a two-year term. The facility was
amended in March 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 (7.25% at December 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 December 31, 2007, the balance of the line of credit was $4.9 million. The revolving credit facility from FCC continues to require us to comply with
certain covenants, including, without limitation, restrictions on our ability to engage in mergers, incur additional debt or liens, repurchase or otherwise redeem shares of our capital stock, declare or pay dividends on shares of our capital stock,
engage in transactions with affiliates, extend loans to third parties or increase the compensation paid to our officers and directors in excess of specified limits. We were in compliance with all covenants at December 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.



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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 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 December 31, 2007, borrowings under the SVCH facility,
including interest, totaled $15,829,839. As of March 18, 2008, borrowings under the SVCH facility, including interest, totaled $21,391,629. 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. The SVCH credit facility requires us to comply with certain covenants, including, without
limitation, restrictions on our ability to engage in mergers, incur additional debt or liens, repurchase or otherwise redeem shares of our capital stock, declare or pay dividends on shares of our capital stock, engage in transactions with
affiliates, extend loans to third parties or increase the compensation paid to our officers and directors in excess of specified limits. We were in compliance with all covenants at December 31, 2007.

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 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.

At December 31,
2007, we had an unsecured, long-term note payable to Burton in the amount of $1,500,000. This note bears interest at the rate of 8% per annum, payable quarterly, and the principal is payable in installments of $500,000 payable on
September 12, 2008 and $1,000,000 payable on September 12, 2009.

At December 31, 2007, we had an unsecured, short-term, non
interest bearing promissory note to Devant with a remaining principal balance of $50,000, payable on March 31, 2008.

At
December 31, 2007, we had an unsecured, long-term promissory note to Devant in the principal amount of $890,000. This note bears interest at the rate of 6% per annum, payable at maturity. The principal is due on April 15, 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 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, 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 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, 150,000 shares of which were subsequently assigned. 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 converted 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 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 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.



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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 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 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.

On December 21, 2007, Stanford converted all of its Series A, Series B
and Series C Preferred Stock shares into 4,750,000 shares of our common stock. Stanford is the owner of 81.6% of our issued and outstanding common stock at December 31, 2007.

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 Statement of Financial Accounting Standards (SFAS)
No. 133 or EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled In, a Companys Own Stock.

Management believes cash balances on hand and cash generated from operations, our $32.5 million credit facility with SVCH, and our credit facility with FCC 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. If necessary, we may be required to restructure our existing debt and/or raise capital through the
future issuance of our securities.

Accounts receivable at December 31, 2007 were $5.7 million, as compared to $6.5 million at
December 31, 2006, reflecting a decrease of 11.5%. DSO was 62 days at December 31, 2007 compared with 64 days at December 31, 2006. 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 December 31, 2007 were $6.4 million, as compared to $9.7 million at December 31, 2006, a decrease of 34.1%. This decrease is
primarily due to the impairment of older and slow-moving inventory of $2.9 million discussed above. Not including this impairment, inventory turns, calculated based on an annualized rolling three months, at December 31, 2007 and 2006 were 3.3
times and 2.8 times, respectively. This increase is a result of higher sales in the current year, while maintaining approximately the same inventory level as during the prior year. 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 $4.8 million at
December 31, 2007, as compared to $6.4 million at December 31, 2006, reflecting a decrease of 24.3%. This decrease is primarily attributable to the borrowing from SVCH being partially used to fund accounts payable. Interest payable and
accrued liabilities to related parties were $0.8 million at December 31, 2007, as compared to $0.7 million at December 31, 2006, reflecting an increase of 12.7%. This increase is primarily attributable to accrued interest related to our
credit facility with SVCH.



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Critical Accounting Policies and Estimates

Use of Estimates

Our significant accounting policies are more fully described in Note 1 to our
consolidated financial statements. 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.

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.



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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. Identifiable
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 and Intangible Assets

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 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.

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.



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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 or results of operations. As of
December 31, 2007, no liability for unrecognized tax benefits was required to be recorded.

In September 2006, the FASB issued SFAS
No. 157, Accounting for Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair
value measurements. SFAS 157 is effective for financial statements issued subsequent to November 15, 2007. We do not expect the new standard to have any material impact on our consolidated financial position or results of operations.

In February 2007, the FASB issued SFAS No. 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 do not expect the adoption of SFAS 159 to have a material impact on our
consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141R, Business
Combinations (SFAS 141R), which replaces SFAS No. 141, Business Combinations. SFAS 141R establishes principles and requirements for determining how an enterprise recognizes and measures the fair value of certain
assets and liabilities acquired in a business combination, including noncontrolling interests, contingent consideration, and certain acquired contingencies. SFAS 141R also requires acquisition-related transaction expenses and restructuring costs be
expensed as incurred rather than capitalized as a component of the business combination. SFAS 141R will be applicable prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. SFAS 141R would have an impact on accounting for any businesses acquired after the effective date of this pronouncement.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB
No. 51 (SFAS 160). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary (previously referred to as minority interests). SFAS No. 160 also requires that a retained
noncontrolling interest upon the deconsolidation of a subsidiary be initially measured at its fair value. Upon adoption of SFAS No. 160, we would be required to report any noncontrolling interests as a separate component of consolidated
shareholders equity. We would also be required to present any net income allocable to noncontrolling interests and net income attributable to our shareholders separately in our consolidated statements of operations. SFAS No. 160 is
effective for fiscal years, and interim periods within those fiscal years, beginning on or after January 1, 2009. SFAS No. 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests.
All other requirements of SFAS No. 160 shall be applied prospectively. SFAS No. 160 would have an impact on the presentation and disclosure of the noncontrolling interests of any non wholly-owned business acquired in the future.

Capital Expenditures

We expended
funds for capital expenditures of $0.5 million for property and equipment during the year ended December 31, 2007. The majority of these expenditures were related to information system infrastructure and a warehouse management system for the
distribution facility in Baldwyn, Mississippi. We expect to expend approximately $2.6 million for capital expenditures during fiscal 2008, with the majority of this amount related to the completion of the warehouse management system.



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##### Table of Contents

Contractual Obligations

The following table outlines payments due under our significant contractual obligations over the next four years and thereafter, exclusive of interest:



|                                   |  |                                         |            |      |   |           |  |      |            |                    |   |         |  |   |       
|---------------------------------- |  | --------------------------------------- | ---------- | ---- | - | --------- |  | ---- | ---------- | ------------------ | - | ------- |  | - | ------
|                                   |  | Payment due for year ended December 31,
|Contract Obligations               |  | Total                                   |            | 2008 |   | 2009      |  | 2010 |            | 2011 andthereafter
|Short-Term Debt                    |  | $                                       | 4,979,329  |      | $ | 4,979,329 |  | $    |           |                    | $ |        |  | $ |      
|Long-Term Debt                     |  |                                         | 17,832,000 |      |   | 500,000   |  |      | 17,332,000 |                    |   |        |  |   |      
|Capital Leases                     |  |                                         | 187,463    |      |   | 86,438    |  |      | 46,596     |                    |   | 40,630  |  |   | 13,799
|Operating Leases(1)                |  |                                         | 1,194,036  |      |   | 676,250   |  |      | 270,862    |                    |   | 245,538 |  |   | 1,386 
|Purchase Obligations(2)            |  |                                         | 3,418,610  |      |   | 3,418,610 |  |      |           |                    |   |        |  |   |      
|                                   |  |                                         |            |      |   |           |  |      |            |                    |   |         |  |   |       
|Total Contractual Cash Obligations |  | $                                       | 27,611,438 |      | $ | 9,660,627 |  | $    | 17,649,458 |                    | $ | 286,168 |  | $ | 15,185
|                                   |  |                                         |            |      |   |           |  |      |            |                    |   |         |  |   |       



|(1) | Operating lease obligations represent future minimum lease payments associated with our executive office, distribution
centers and various equipment. In addition to future minimum lease payments, our office and distribution center leases typically require us to pay additional costs, including real estate taxes and insurance.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Our purchase obligations at December 31, 2007 represent open purchase orders for inventory entered into in the
normal course of business.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

The above table outlines our obligations as of December 31, 2007 and does not reflect any changes in our
obligations that have occurred after that date.

Seasonality

Historically, our sales have been highest in the first and second fiscal quarters of the year, the period during which golf product purchases and usage are typically highest in the markets we serve. As a result, our
net sales and operating results are typically higher in the first and second quarters and lower in the third and fourth quarters, as fixed operating costs are spread over the differing levels of sales volume. In anticipation of seasonal increases in
demand, we typically build golf bag and accessories inventories in the fourth quarter when net sales have historically been lower. Although we expect to continue to experience this seasonal trend, changes in our product mix and the expansion of our
operations into different distribution channels may partially mitigate the impact of seasonality on our business.

Inflation

We do not believe inflation has had a material impact on our results of operations in the past. However, we cannot assure you that this will be the case
in the future.

Foreign Currency

Approximately 5% of our sales are conducted in Canadian dollars. Conducting business in such currency exposes us to fluctuations in foreign currency exchange rates relative to the U.S. dollar.

Our financial results are reported in U.S. dollars. As a result, transactions conducted in foreign currencies must be translated into U.S. dollars for
reporting purposes based upon the applicable foreign currency exchange rates. Fluctuations in these foreign currency exchange rates therefore may positively or negatively affect our reported financial results.

Off-Balance Sheet Arrangements

As of
December 31, 2007, the Company had off-balance sheet arrangements related to its operating lease obligations and was obligated under such lease arrangements for $1,194,036 through 2011.



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##### Table of Contents

|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

Our
consolidated financial statements and the related notes to the financial statements called for by this item appear under the caption Index to Consolidated Financial Statements beginning on Page F-1 (attached hereto) of this Annual Report
on Form 10-K.



|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None.



|Item 9A(T). | Controls and Procedures
|----------- | -----------------------

Evaluation of our Disclosure Controls

As of the end of the period covered by this Annual Report, we carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13-a-15(e) and 15d-15(e)). Based upon that evaluation, our Interim Chief Executive Officer (CEO) and Interim Chief Financial Officer (CFO)
concluded that as of the end of the period covered by this Annual Report on Form 10-K our disclosure controls and procedures were effective to enable us to record, process, summarize and report information required to be included in our periodic SEC
filings within the required time periods.

Officers Certifications

Appearing as exhibits to this Annual Report are Certifications of the CEO and the CFO. The Certifications are required pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This section of the Annual Report contains information concerning the Controls Evaluation referred to in the Section 302 Certifications and this
information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

Disclosure Controls

Disclosure Controls are procedures that are designed with the objective of ensuring that information
required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (Exchange Act), such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified in the SECs rules
and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO as appropriate, to allow timely decisions regarding required
disclosure. Internal Controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against
unauthorized or improper use, to permit the preparation of our financial statements in conformity with generally accepted accounting principles.

Managements Report on Internal Control Over Financial Reporting

Management is responsible for establishing and
maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



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For the period ended December 31, 2007, pursuant to Section 404 of the Sarbanes-Oxley Act of
2002, management (with the participation of our principal executive officer and principal financial officer) conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control
 Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that, as of December 31, 2007, our internal control over financial reporting was
effective. Notwithstanding this conclusion, 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 and is expected to be completed in July 2008.

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 and is expected to be completed in July 2008.

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 in process and is expected to be fully implemented by July 2008.

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

This annual report on Form 10-K does not include an attestation report of Marcum & Kliegman LLP, our registered public accounting firm, regarding internal control over financial reporting. Managements report was not subject
to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only managements report in this annual report.

Change in Internal Controls

There were no
significant changes in our internal controls over financial reporting that occurred during the quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.



|Item 9B. | Other Information
|-------- | -----------------

None.

PART III



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------

Officers
and Directors

Article VI of our Articles of Incorporation permits our board of directors to fix the number of directors at not less
than one nor more than seven. Directors serve for an annual term. Vacancies on the Board due to resignation or removal may be filled by the remaining director or directors, even though less than a quorum, for the unexpired term of such vacant
positions.



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|                       |  |     |  |                                                                                        
|---------------------- |  | --- |  | ---------------------------------------------------------------------------------------
|Name                   |  | Age |  | Position                                                                               
|Richard M. Gozia       |  | 63  |  | Chairman of the Board, Interim Chief Executive Officer, Interim Chief Financial Officer
|                       |  |    
|Osmo A. Hautanen       |  | 53  |  | Director                                                                               
|                       |  |    
|Christopher J. Holiday |  | 60  |  | Director                                                                               
|                       |  |    
|J. Stan Harris(1)      |  | 49  |  | Chief Executive Officer, ForeFront Group, Inc.                                         
|                       |  |    
|Richard A. Oleksyk(2)  |  | 45  |  | President and Chief Operating Officer, ForeFront Group, Inc.                           



|(1) | J. Stan Harris was appointed to serve as Chief Executive Officer of ForeFront Group, Inc. on November 1, 2007.
|--- | --------------------------------------------------------------------------------------------------------------

|(2) | Richard A. Oleksyk was appointed to serve as President of
ForeFront Group, Inc. on April 19, 2007 and as Chief Operating Officer effective October 31, 2007.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Business Experience

Richard M. Gozia has served on our board of directors since June 2005, became our Chairman effective October 1, 2006, began serving as
our Interim Chief Executive Officer in June 2007, and began serving as our Interim Chief Financial Officer in December 2007. Previously, from 2004 to 2006, Mr. Gozia served as President of the Board of a charitable organization dedicated to
serving indigent people in Mexico. From 2001 to 2004, he served as Chief Executive Officer of Fenix LLC, a holding company with interests in technology companies that developed software and managed data for the transportation and related industries.
From 1996 to 1999, Mr. Gozia served as President and Chief Operating Officer of CellStar Corporation, a global distributor of wireless telephone products. From 1994 to 1996, Mr. Gozia served as Executive Vice President and Chief Financial
Officer of SpectraVision, Inc., the nations largest in-room hotel movie provider. Prior to this, Mr. Gozia held senior management positions with a variety of companies in the media, wholesale baking and restaurant industries. From 1970 to
1978, Mr. Gozia served as an Audit Manager with the certified public accounting firm of Arthur Young & Company. Mr. Gozia received a B.S. in Accounting from the University of Missouri and is a certified public accountant.
Mr. Gozia serves on the public company boards of directors of DGSE Companies, Inc., a company that sells jewelry, rare coins and bullion products to wholesale and retail customers, and ChemRX Corporation, a company that provides pharmacy
services to long-term health care facilities.

Osmo A. Hautanen has been a member of our board of directors since June 2005. Since 1999,
Mr. Hautanen has done consulting work through his own company, Cosmos Consulting, Inc. In addition, he is currently the Chief Executive Officer of Magnolia Broadband, Inc., a semiconductor company and innovator of radio frequency solutions for
the cellular communications industry and has been involved with Magnolia since 2004. From 2000 to 2001, Mr. Hautanen served as the Chief Executive Officer of Fenix LLC, a holding company for Union Pacific Corporations technology assets,
based in Dallas, TX. From 1998 to 2000, Mr. Hautanen served as Chief Executive Officer of Formus Communications, Inc., a broadband access provider of voice, video, data communications and information technology services in European markets.
From 1996 to 1998, Mr. Hautanen held various senior management positions with Philips Electronics. Prior to this, Mr. Hautanen held various positions with Nokia from 1978 to 1996. Mr. Hautanen serves on the board of directors or board
of advisors of various telecommunications and technology companies. Mr. Hautanen earned an MBA in International Business from Georgia State University. Mr. Hautanen also holds a B.S. in Control Engineering from Technical College of Varkaus
(Finland). Mr. Hautanen serves as the chairman of the Governance, Compensation and Nominating committee and serves on the Audit Committee of our board of directors. Mr. Hautanen serves on the public company boards of directors of Callwave,
Inc., a telephony and speech application company, Elandia, Inc., a holding company with interests in telecommunications services, information technology solutions and software, and Axesstel, Inc., a company that provides wireless voice and broadband
data products for the worldwide telecommunications market.

Christopher J. Holiday has served on our board of directors since June 2005.
Mr. Holiday is currently the Vice President of Business Development for TaylorMade Performance Labs, which operates state of the art club fitting and teaching facilities around the world. From 2007 to 2007, he served as Executive Vice President
of Legendary Holdings, Inc., a cutting-edge headwear manufacturer for the golf industry. From 2005 to 2007, he was Business Development Manager and a registered representative for Putney Financial Group, a retirement planning company. From 2003 to
2004, Mr. Holiday served as General Manager and Senior Vice President of Sales for North America for TaylorMade-adidas Golf. Prior to that, Mr. Holiday served as President of Golfgear International. From 1990 to 2001, Mr. Holiday held
various sales and senior management positions with Callaway Golf, including



39



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Senior Vice President of U.S. Sales. From 1973 to 1990, Mr. Holiday owned and operated Supreme Golf of Colorado, a Lakewood, CO-based golf retailer.
Mr. Holiday served as a senior auditor with Arthur Anderson & Company from 1969 to 1972. Mr. Holiday earned a Bachelor of Science in Accounting from the University of Illinois and is a certified public accountant. Mr. Holiday
serves as the chairman of the Audit Committee and serves on the Governance, Compensation and Nominating committee of our board of directors.

J. Stan Harris became the Chief Executive Officer of ForeFront Group, Inc. in November 2007. From 1985 to 2007, Mr. Harris served in various positions, most recently President, of TJM Restaurant Management, LLC (formerly TJ
Moran & Associates, Inc.), a multi-unit operator and developer of multiple restaurant concepts that include high volume casual theme operations and white tablecloth restaurants. While there, Mr. Harris directed all disciplines of
business, including operations, finance, human resources, legal, advertising, marketing, risk management, information technology, real estate development, design and construction. Mr. Harris also served on the board of directors of Mustang
Software, Inc., a publicly traded software developer, from the companys IPO in 1995 until 1997. Mr. Harris received his B.S. in Arts and Sciences from Louisiana State University.

Richard A. Oleksyk became the President of ForeFront Group, Inc. in April 2007. He assumed the position of Chief Operating Officer in October 2007. From
1998 to 2007, Mr. Oleksyk served in various capacities with PrideSports, a leading manufacturer of golf tees and other equipment. Mr. Oleksyk served as President of PrideSports since 2003, and prior to that, he served as President of
Softspikes (acquired by PrideSports in January 2003), which manufactures plastic golf cleats, from 2001 until 2003. From 1998 until 2001, Mr. Oleksyk served as Director of Sales and Marketing and Vice President of Sales of Softspikes. Prior to
joining PrideSports, Mr. Oleksyk served in various management positions with Howmedica, a division of Pfizer, Inc., and Kimberly-Clark Corporation, a global wholesaler of personal health and hygiene consumer products. Mr. Oleksyk earned a
B.S. degree from the United States Military Academy at West Point before receiving his M.B.A. from the University of West Florida.

Committees of the
Board of Directors

Our board of directors has established standing committees in connection with the discharge of its responsibilities.
These committees include an Audit Committee and a Governance, Compensation and Nominating committee. The board of directors may also establish such other committees as it deems appropriate, in accordance with applicable laws and regulations, and our
Articles of Incorporation and bylaws.

Audit Committee

The Audit Committee, which currently consists of Osmo A. Hautanen and Christopher J. Holiday, reviews the professional services provided by our independent auditors, the independence of our auditors from our
management, our annual financial statements and our system of internal accounting controls. Mr. Holiday is considered by us to be a financial expert and serves as chairman of the committee. The Audit Committee also reviews other
matters with respect to our accounting, auditing and financial reporting practices and procedures as it may find appropriate or may be brought to its attention. Our board of directors has adopted a written charter of the Audit Committee.
Mr. Hautanen and Mr. Holiday are deemed independent, as defined in applicable SEC rules, as well as the National Association of Securities Dealers listing standards.

Governance, Compensation & Nominating Committee (GCN Committee)

The GCN
Committee consists of Osmo A. Hautanen and Chris J. Holiday. Mr. Hautanen and Mr. Holiday are deemed independent, as defined in the National Association of Securities Dealers listing standards. Mr. Hautanen serves as chairman of
the GCN Committee. The primary responsibilities of the GCN Committee are to:



| |  |  | make compensation recommendations to the board of directors regarding salaries and incentive compensation for our officers and key employees and administer our
employee benefit plans;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | recommend corporate governance guidelines to the board of directors;
| | - |  | --------------------------------------------------------------------



| |  |  | recommend and review director candidates to the board of directors;
| | - |  | -------------------------------------------------------------------



| |  |  | evaluate the performance of and make compensation decisions regarding the Chief Executive Officer;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | make compensation recommendations to the board of directors regarding the board of directors; and
| | - |  | -------------------------------------------------------------------------------------------------



40



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##### Table of Contents

| |  |  | issue reports on executive compensation for our financial reports and filings.
| | - |  | ------------------------------------------------------------------------------

Compliance with Section 16(a) of the Exchange Act

Based solely upon a review of Forms 3 and 4
and amendments thereto furnished to us under Rule 16a-3(d) of the Exchange Act, we are not aware of any person that failed to file on a timely basis, as disclosed in the aforementioned Forms, reports required by Section 16(a) of the Exchange
Act during the fiscal year ended December 31, 2007.

Code of Ethics

As of January 3, 2005, we adopted a Code of Ethics (the Code). The Code applies to our directors, officers and all employees. The Code
provides written standards that are designed to deter wrongdoing and promote:



| |  |  | honest and ethical conduct;
| | - |  | ---------------------------



| |  |  | full, fair, accurate, timely and understandable disclosure;
| | - |  | -----------------------------------------------------------



| |  |  | compliance with applicable laws and regulations;
| | - |  | ------------------------------------------------



| |  |  | prompt reporting of internal violations of the Code; and
| | - |  | --------------------------------------------------------



| |  |  | accountability for the adherence to the Code.
| | - |  | ---------------------------------------------

The Code is available on our website at www.forefrontgolf.com. We will provide any person, without charge, upon request, a copy of the Code. Please address such requests to us, in writing. Any substantive
amendments to the Code and any grant of waiver from a provision of the Code requiring disclosure under applicable SEC or NASDAQ rules will be disclosed in a Current Report on Form 8-K.



|Item 11. | Executive Compensation
|-------- | ----------------------

Summary Compensation Table

The following table summarizes the compensation paid to certain executive officers, or named executive officers, for services rendered
in all capacities to us during the years ended December 31, 2007 and 2006.



41



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|                                                                                    |      |      |   |         |         |       |   |             |   |                 |        |                                      |   |                                          |   |                          |   |        |         |   |         |        
|----------------------------------------------------------------------------------- | ---- | ---- | - | ------- | ------- | ----- | - | ----------- | - | --------------- | ------ | ------------------------------------ | - | ---------------------------------------- | - | ------------------------ | - | ------ | ------- | - | ------- | -------
|Name and Principal Position                                                         |      | Year |   | Salary  |         | Bonus |   | StockAwards |   | OptionAwards(1) |        | Non-EquityIncentive PlanCompensation |   | NonqualifiedDeferredCompensationEarnings |   | All OtherCompensation(2) |   | Total 
|Richard M. Gozia(3)Interim Chief Executive Officer, Interim Chief Financial Officer |      | 2007 |   | $       | 155,017 |       |  |             |  |                 |        |                                     |   |                                         |   |                         |   | $      | 32,106  |   | $       | 187,123
|                                                                                    | 2006 |      |   |        |         |      |   |            |   |                 |       |                                      |  |                                          |  |                          |   |       |         |   |       
|                                                                                    |      |      |   |         |         |       |   |             |  
|J. Stan Harris(4)Chief
Executive Officer, ForeFront Group, Inc.                     |      | 2007 |   | $       | 49,048  |       |  |             |  |                 |        |                                     |   |                                         |   |                         |   | $      | 3,225   |   | $       | 52,273 
|                                                                                    | 2006 |      |   |        |         |      |   |            |   |                 |       |                                      |  |                                          |  |                          |   |       |         |   |       
|                                                                                    |      |      |   |         |         |       |   |             |  
|Richard A. Oleksyk(5)President & Chief Operating Officer, ForeFront Group, Inc.     |      | 2007 |   | $       | 147,215 |       |  |             |  |                 |        |                                     |   |                                         |   |                         |   | $      | 44,640  |   | $       | 191,855
|                                                                                    | 2006 |      |   |        |         |      |   |            |   |                 |       |                                      |  |                                          |  |                          |   |       |         |   |       
|                                                                                    |      |      |   |         |         |       |   |             |  
|Michael S. Hedge(6)Former Chief Executive Officer                                   |      | 2007 |   | $       | 138,020 |       |  |             |  |                 | $      | 20,617                               |   |                                         |   |                         |   | $      | 267,390 |   | $       | 426,027
|                                                                                    | 2006 |      | $ | 225,000 |         |      |   |            |   | $               | 51,395 |                                      |  |                                          |  |                          | $ | 9,096  |         | $ | 285,491
|                                                                                    |      |      |   |         |         |       |   |             |  
|Randall J. Frapart(7)Former Executive Vice President & Chief Financial Officer      |      | 2007 |   | $       | 190,180 |       |  |             |  |                 | $      | 35,827                               |   |                                         |   |                         |   | $      | 211,118 |   | $       | 437,125
|                                                                                    | 2006 |      | $ | 180,000 |         |      |   |            |   | $               | 14,877 |                                      |  |                                          |  |                          | $ | 37,564 |         | $ | 232,441
|                                                                                    |      |      |   |         |         |       |   |             |  
|J. Max Waits(8)Former
Executive Vice President & Chief Operating Officer            |      | 2007 |   | $       | 119,409 |       |  |             |  |                 | $      | 23,026                               |   |                                         |   |                         |   | $      | 205,151 |   | $       | 347,586
|                                                                                    | 2006 |      | $ | 180,000 |         |      |   |            |   | $               | 34,263 |                                      |  |                                          |  |                          |   |       |         | $ | 214,263



|(1) | Represents the expense associated with all outstanding, non-qualified stock options for which we recognized compensation
expense during fiscal 2007 utilizing the provisions of SFAS No. 123R, rather than an amount paid to or realized by the named executive officer. See Note 5, Management and Director Equity Incentive and Compensation Plan, to the
Companys Audited Consolidated Financial Statements set forth in this Form 10-K for the assumptions made in determining SFAS 123R values. Each option represented the right to purchase upon vesting and for the exercise price one share of our
common stock.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes compensation for duties as a member of our board of
directors of $32,106 for Richard M. Gozia. Includes severance costs of $250,750, $197,870 and $197,193 for Michael S. Hedge, Randall J. Frapart and J. Max Waits, respectively. Includes 2007 relocation cost reimbursement of $3,225, $44,640, $12,092,
$13,248 and $7,958 for J. Stan Harris, Richard A. Oleksyk, Michael S. Hedge, Randall J. Frapart and J. Max Waits, respectively. Includes relocation cost reimbursement of $37,564 for Randall J. Frapart in 2006. Also represents an automobile allowance
of $758 per month in both 2007 and 2006, for Michael S. Hedge.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Appointed to serve as Interim Chief Executive Officer effective
June 25, 2007. Appointed to serve as Interim Chief Financial Officer effective December 5, 2007. Mr. Gozias annual base salary in 2007 was $300,000.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Appointed to serve as Chief Executive Officer of ForeFront
Group, Inc. effective November 1, 2007. Mr. Harris annual base salary in 2007 was $318,600.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(5) | Appointed to serve as President of ForeFront Group, Inc.
effective April 16, 2007 and as Chief Operating Officer effective October 31, 2007. Mr. Oleksyks annual base salary in 2007 was $225,000.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Mr. Hedge separated from us on June 25, 2007.
Mr. Hedges annual base salary in 2007 was $225,000.
|--- | --------------------------------------------------------------------------------------------------

|(7) | Mr. Frapart separated from us on December 5, 2007.
Appointed to serve as Chief Financial Officer effective January 9, 2006. Mr. Fraparts annual base salary in 2007 was $180,000.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Mr. Waits separated from us on July 20, 2007.
Appointed to serve as Interim Chief Financial Officer from September 30, 2005 to January 9, 2006. Appointed to serve as Executive Vice President and Chief Operating Officer effective January 9, 2006. Mr. Waits annual base
salary in 2007 was $180,000.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Employment Agreements with Named Executive Officers

Messrs. Harris and Oleksyk have entered into employment agreements with us pursuant to which they hold the positions of Chief Executive Officer of
ForeFront Group and President and Chief Operating Officer of ForeFront Group, respectively. Messrs. Hedge, Waits and Frapart previously entered into employment agreements with us pursuant to which they held the positions of Chief Executive Officer
of ForeFront, Executive Vice President & Chief Operating Officer of ForeFront, and Executive Vice President & Chief Financial Officer of ForeFront, respectively, until their separations from us on June 25,
2007, July 20, 2007 and December 5, 2007, respectively.

On October 15, 2004, we entered into an employment agreement
with Michael S. Hedge. Mr. Hedge served as our Chief Executive Officer. As amended, the employment agreement provided for an annual base salary of $225,000 and had an initial term of four years. The employment agreement also provided for annual
bonuses as determined by our board of directors and options to purchase 75,000 shares of our common stock. In connection with Mr. Hedges separation from us, we agreed that we would provide severance payments representing his base salary
and benefits for a period of one year.

On June 15, 2005, we entered into an employment agreement with J. Max Waits. Mr. Waits
served as our Executive Vice President and Chief Operating Officer. As amended, the employment agreement provided for an annual base salary of $180,000 and had an initial term of four years. The employment agreement also provided for annual bonuses
as determined by our board of directors and options to purchase 50,000 shares of our common stock. In connection with Mr. Waits separation from us, we agreed that we would provide severance payments representing his base salary and
benefits for a period of one year.

On January 9, 2006, we entered into an employment agreement with Randall J. Frapart.
Mr. Frapart served as Executive Vice President and Chief Financial Officer of ForeFront. The employment agreement provided for an annual base salary of $180,000 and had an initial term of four years. The employment agreement also provided for
annual bonuses as determined by our board of directors and options to purchase 50,000 shares of our common stock. In connection with Mr. Fraparts separation from us, we agreed that we would provide severance payments representing his base
salary and benefits for a period of one year.

On April 16, 2007, we entered into an employment agreement with Richard A. Oleksyk.
Mr. Oleksyk serves as President and Chief Operating Officer of ForeFront Group. 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 Group common stock under a stock option plan currently being established. The employment agreement also includes a change in control
provision. This provision provides that in the event that Mr. Oleksyk is terminated as a result of a change in control of ForeFront Group, we are obligated to continue paying Mr. Oleksyks base salary for a period of 12 months
following such termination. In addition, any unvested stock options would immediately vest upon such a termination. A change in control includes a reorganization, merger, consolidation or other form of corporate transaction or series of transactions
with respect to which persons who were ForeFront Group shareholders immediately prior to such transaction do not, immediately thereafter, own more than 50% of the combined voting power of ForeFront Group in substantially the same proportions as
their ownership immediately prior to such transaction. A change in control also includes our liquidation or dissolution or the sale of all or substantially all of ForeFront Groups assets. If we terminate the employment agreement without
cause (as defined in the employment agreement), Mr. Oleksyk is entitled to receive 12 months salary and benefits at the rate then in effect.



43



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On November 1, 2007, we entered into an employment agreement with J. Stan Harris. Mr. Harris
serves as Chief Executive Officer of ForeFront Group. 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 Group common stock under a stock option plan currently being established. The employment agreement also includes a change in control provision. This provision provides that in the
event of a change in control of ForeFront Group, Mr. Harris shall have the option to resign within three months of the date of the change in control. In such case, we are obligated to continue paying Mr. Harriss base salary for a
period of 12 months following such termination. In addition, any unvested stock options would immediately vest upon such a termination. A change in control includes a reorganization, merger, consolidation or other form of corporate transaction or
series of transactions with respect to which persons who were ForeFront Group shareholders immediately prior to such transaction do not, immediately thereafter, own more than 50% of the combined voting power of ForeFront Group in substantially the
same proportions as their ownership immediately prior to such transaction. A change in control also includes our liquidation or dissolution or the sale of all or substantially all of ForeFront Groups assets. If we terminate the employment
agreement without cause (as defined in the employment agreement), Mr. Harris is entitled to receive 12 months salary and benefits at the rate then in effect.

2005 Management and Director Equity Incentive and Compensation Plan

Our 2005 Management and Director
Equity Incentive and Compensation Plan provides for the issuance of up to 1,000,000 shares of our common stock. As of March 18, 2008, options to acquire 139,500 shares of our common stock were issued and outstanding under the plan.

Our 2005 Management and Director Equity Incentive and Compensation Plan authorizes the grant of stock options, performance shares and restricted
stock. The GCN Committee of our board of directors administers the plan. The committee makes recommendations to the board of directors, consistent with the provisions of the plan, to determine which eligible participants will receive awards, the
form of the awards and the number of shares of our common stock covered by each award. The committee may impose terms, limits, restrictions and conditions upon awards, and may modify, amend, extend or renew awards, accelerate or change the exercise
time of awards or waive any restrictions or conditions to an award.

The board of directors can grant a variety of awards under the plan.
We can grant options to purchase shares of our common stock that either are intended to qualify as incentive stock options under the Internal Revenue Code or that do not qualify as incentive options. The GCN Committee can determine the option
exercise price, the term of each option, the time when each option may be exercised and, the period of time, if any, after retirement, death, disability or termination of employment during which options may be exercised.

The board of directors also can grant performance awards to participants entitling the participants to receive shares of restricted stock, subject to
terms and conditions determined by the GCN Committee.



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##### Table of Contents

Aggregated Option Exercises and Fiscal Year-End Option Value Table.

The following table sets forth, for each of our named executive officers, information concerning unexercised options, stock that has not vested, and
equity incentive plan awards outstanding as of December 31, 2007.



|                      |  |                                                 |  |                                                 |  |                     |      |                      |           
|--------------------- |  | ----------------------------------------------- |  | ----------------------------------------------- |  | ------------------- | ---- | -------------------- | ----------
|                      |  | Option Awards                                  
|                      |  | Number ofSecuritiesUnderlyingUnexercisedOptions |  | Number ofSecuritiesUnderlyingUnexercisedOptions |  | OptionExercisePrice |      | OptionExpirationDate
|Name                  |  | Exercisable                                     |  | Unexercisable                                   |  |                    
|Richard M. Gozia      |  |                                                |  |                                                |  |                     |     |                      |          
|                      |  |                                                 |  |                                                
|J. Stan Harris(1)     |  |                                                |  |                                                |  |                     |     |                      |          
|                      |  |                                                 |  |                                                
|Richard A. Oleksyk(2) |  |                                                |  |                                                |  |                     |     |                      |          
|                      |  |                                                 |  |                                                
|Michael S. Hedge      |  |                                                |  |                                                |  |                     |     |                      |          
|                      |  |                                                 |  |                                                
|Randall J. Frapart(3) |  | 16,666                                          |  | 33,334                                          |  | $                   | 2.20 |                      | 03/04/2008
|                      |  | 16,666                                          |  | 33,334                                          |  | $                   | 1.50 |                      | 03/04/2008
|                      |  |                                                 |  |                                                
|J. Max Waits          |  |                                                |  |                                                |  |                     |     |                      |          



|(1) | Mr. Harris employment agreement provides for options
to purchase 1,764,706 shares of ForeFront Group common stock under a stock option plan currently being established.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Mr. Oleksyks employment agreement provides for
options to purchase 500,000 shares of ForeFront Group common stock under a stock option plan currently being established.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | An initial grant of options to purchase 50,000 shares of our
common stock was approved on January 25, 2006; the options vest 1/3each year commencing January 25, 2007 (16,666
shares) and 16,667 shares each succeeding year thereafter. A second grant of options to purchase 50,000 shares of common stock was approved on July 7, 2006; the options vest 1/3each year commencing July 7, 2007 (16,666 shares) and 16,667 shares each succeeding year thereafter. Mr. Frapart separated from us on December 5, 2007 and his options expired on
March 4, 2008.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Director Compensation Table

The following table sets forth information for the fiscal year ended December 31, 2007 regarding compensation of our Directors:



|                       |  |                            |        |              |   |               |   |                                      |   |                                                                   |   |                          |   |        |  |   |       
|---------------------- |  | -------------------------- | ------ | ------------ | - | ------------- | - | ------------------------------------ | - | ----------------------------------------------------------------- | - | ------------------------ | - | ------ |  | - | ------
|Name                   |  | Fees Earned orPaid in Cash |        | Stock Awards |   | Option Awards |   | Non-EquityIncentive PlanCompensation |   | Changein PensionValue andNonqualifiedDeferredCompensationEarnings |   | All OtherCompensation(5) |   | Total 
|Osmo Hautanen(2)       |  | $                          | 33,750 |              |  |               |  |                                      |  |                                                                   |  |                          | $ | 12,500 |  | $ | 46,250
|                       |  |                            |        |              |   |               |  
|Christopher Holiday(3) |  | $                          | 35,625 |              |  |               |  |                                      |  |                                                                   |  |                          | $ | 12,500 |  | $ | 48,125
|                       |  |                            |        |              |   |               |  
|Deborah Ryan(4)        |  |                            |       |              |  |               |  |                                      |  |                                                                   |  |                          |   |       |  |   |      



|(1) | Mr. Gozia is the Chairman of the Board. Effective
June 26, 2007, Mr. Gozia was appointed as our Interim Chief Executive Officer; as of such date, Mr. Gozia is not receiving any compensation for his service as a director or a member of any committee of our board of directors.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Mr. Hautanen is the chairman of the Governance,
Compensation and Nominating Committee and a member of the Audit Committee.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(3) | Mr. Holiday is the chairman of the Audit Committee and a
member of the Governance, Compensation and Nominating Committee.
|--- | -------------------------------------------------------------------------------------------------------------------------

|(4) | Ms. Ryan resigned as a Director on September 21, 2007.
|--- | ------------------------------------------------------

|(5) | Represents cash payment in lieu of shares of our common stock
authorized to be issued as discussed below.
|--- | ---------------------------------------------------------------------------------------------------------

In November 2005, the Board adopted a Director Compensation Plan. In
accordance with that plan, for the fiscal year ended December 31, 2007, our independent directors each received an annual cash retainer of $25,000 for services rendered in their capacity as Board members. In addition, the Audit Committee
chairperson and the Governance, Compensation and Nominating Committee chairperson received annual cash compensation of $15,000 and $5,000, respectively. Members of the Audit Committee and the Governance, Compensation and Nominating Committee, other
than the Chairperson, received additional annual compensation of $3,750 and $1,250, respectively. In addition, an independent director serving as Chairman of the Board received an annual cash retainer of $25,000. All cash compensation is paid
proportionately throughout the year on a quarterly basis. In addition, each independent director is entitled to receive $12,500 of our common stock each year. Such stock awards are made pursuant to our 2005 Management and Director Equity Incentive
and Compensation Plan. For 2007, in lieu of these shares, a cash payment in the amount of $12,500 was made to each of our independent directors. Aggregate cash compensation paid to Board members in 2007 was $126,481, which includes $32,106 paid to
Richard M. Gozia, as reflected in the Summary Compensation Table above.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
|-------- | ----------------------------------------------------------------------------------------------

The following table sets forth information regarding the beneficial ownership of our common stock as of March 18, 2008, with respect to:



| |  |  | each person known by us to be the beneficial owner of more than 5% of our common stock;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | each of our executive officers and directors; and
| | - |  | -------------------------------------------------



| |  |  | all of our directors, executive officers and designated shareholders as a group.
| | - |  | --------------------------------------------------------------------------------

Beneficial ownership includes any securities that a person has a right to acquire within 60 days from options, warrants, conversion or similar obligations. The total amount of common stock issued and outstanding is
12,166,989 on March 18, 2008. Unless otherwise indicated, the business address of each person listed is 835 Bill Jones Industrial Drive, Springfield, TN 37172.



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|                                                                                      |  |                          |  |                                  |  
|------------------------------------------------------------------------------------- |  | ------------------------ |  | -------------------------------- | -
|Name                                                                                  |  | SharesBeneficially Owned |  | Percent ofShares Outstanding (1) |  
|Stanford International Bank Ltd. (2)                                                  |  | 9,925,000                |  | 81.1                             | %
|                                                                                      |  |                         
|Richard M. Gozia (3)                                                                  |  | 19,126                   |  | *                                |  
|                                                                                      |  |                         
|J. Stan Harris (4)                                                                    |  |                         |  | *                                |  
|                                                                                      |  |                         
|Richard A. Oleksyk (5)                                                                |  |                         |  | *                                |  
|                                                                                      |  |                         
|Osmo A. Hautanen (6)                                                                  |  | 18,626                   |  | *                                |  
|                                                                                      |  |                         
|Christopher J. Holiday (7)                                                            |  | 18,626                   |  | *                                |  
|                                                                                      |  |                         
|Michael S. Hedge (8)                                                                  |  | 3,500                    |  | *                                |  
|                                                                                      |  |                         
|Randall J. Frapart (9)                                                                |  | 1,500                    |  | *                                |  
|                                                                                      |  |                         
|J. Max Waits (10)                                                                     |  |                         |  | *                                |  
|                                                                                      |  |                         
|Deborah Ryan (11)                                                                     |  |                         |  | *                                |  
|                                                                                      |  |                         
|All executive officers, directors and designated shareholders as a group (10 persons) |  | 9,986,378                |  | 81.6                             | %



|* | Less than 1%.
|- | -------------

|(1) | Based on 12,244,626 shares of our issued and outstanding common stock (assuming exercise of all vested stock options) at March 18, 2008.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(2) | Beneficial stockholder is R. Allen Stanford. Business address is 5050 Westheimer Road, Houston, Texas 77056.
|--- | ------------------------------------------------------------------------------------------------------------

|(3) | Includes 12,376 and 6,250 shares of common stock granted as partial compensation for Mr. Gozias services as an independent director on the Companys board of
directors for fiscal 2005 and fiscal 2006, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Appointed as Chief Executive Officer of ForeFront Group effective November 1, 2007.
|--- | -----------------------------------------------------------------------------------

|(5) | Appointed as President of ForeFront Group effective April 16, 2007 and Chief Operating Officer effective October 31, 2007.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(6) | Includes 12,376 and 6,250 shares of common stock granted as partial compensation for Mr. Hautanens services as an independent director on the Companys board of
directors for fiscal 2005 and fiscal 2006, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes 12,376 and 6,250 shares of common stock granted as partial compensation for Mr. Holidays services as an independent director on the Companys board of
directors for fiscal 2005 and fiscal 2006, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Mr. Hedge separated from us on June 25, 2007. Business address is 119 Stonewall Drive, Hendersonville, TN 37075.
|--- | ----------------------------------------------------------------------------------------------------------------

|(9) | Mr. Frapart separated from us on December 5, 2007. Business address is 5311 Curlybark Place, Brentwood, TN 37027.
|--- | -----------------------------------------------------------------------------------------------------------------

|(10) | Mr. Waits separated from us on July 20, 2007. Business address is 320 Old Hickory Boulevard, Nashville, TN 37221.
|---- | -----------------------------------------------------------------------------------------------------------------

|(11) | Ms. Ryan resigned as a Director on September 21, 2007. Business address is 78 St. Mellion, Nashville, TN 37215.
|---- | ---------------------------------------------------------------------------------------------------------------



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------

Stanford acquired 482,250 shares of Series C Preferred Stock and Series C Warrants to purchase 289,350 shares of our common stock for $1,929,000 during January and February 2007. These Series C Warrants were exercised
in March 2007.



47



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##### Table of Contents

On December 21, 2007, Stanford converted all of its Series A, Series B and Series C Preferred Shares
into 4,750,000 shares of our common 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 used to fund the Ryan Transactions discussed above. The remaining $8,450,000 was used 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 March 18, 2008, borrowings under the SVCH facility, including interest,
totaled $21,391,629, which includes the refinancing of the aforementioned borrowings from SVCH.

On September 21, 2007, we entered
into the Burton Amendment amending the Burton Purchase Agreement. Pursuant to the Burton Amendment, the following 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 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.

Additionally, on
September 21, 2007, we entered into the Devant Amendment amending the Devant Purchase Agreement. Pursuant to the Devant Amendment, the following 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.

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

Our principal executive
offices and our primary warehousing and distribution center are located at 835 Bill Jones Industrial Drive, Springfield, Tennessee 37172. This facility, which includes approximately 14.06 acres, is pursuant to a lease through July 31, 2008,
entered into with Ryan Holdings, Inc., the owner of the property. The lease provides for current monthly rent payments in the amount of $54,646. We have an additional lease agreement for the executive offices, pursuant to a lease with a term from
August 1, 2008 through October 31, 2008. This lease provides for monthly rent payments in the amount of $16,667. The shareholders of Ryan Holdings, Inc. are Dennis and Deborah Ryan, who are husband and wife. Through September 21,
2007, Deborah Ryan was a member of our board of directors; Ms. Ryan was also Executive Vice President of Datrek Brand Management until her separation from us on April 13, 2006. Dennis Ryan was President of the Off-Course division until his
separation from us on May 26, 2006.

At the expiration of our current Springfield, Tennessee lease in July 2008, we will be relocating
our production and warehouse facility to Baldwyn, Mississippi and our executive offices to the Nashville, Tennessee market. We are currently negotiating the lease on the new Baldwyn distribution center. The developer of this center is an affiliate
of SVCH. This distribution center is expected to be fully operational by July 31, 2008. We are also reviewing several lease properties in the Nashville, Tennessee market for our new administrative, operations, finance and executive offices. We
expect to relocate to a new Nashville-area location no later than October 31, 2008.

We currently expect that the combined occupancy
costs of the new distribution center and the new executive office will not significantly exceed our current occupancy costs for our Springfield, Tennessee facility.



48



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##### Table of Contents

The ForeFront Devant facility, including a production, warehousing and distribution center, is located at
3011 Walkup Avenue, Monroe, North Carolina 28110. We lease this facility, which includes approximately 50,000 square feet, pursuant to a four-year lease agreement, beginning December 3, 2006, entered into with Jimini, a real estate holding
partnership. The lease provides for current monthly rent payments in the amount of $16,750, plus taxes and insurance. A former principal officer of ForeFront Devant is the principal shareholder of Jimini.

The ForeFront Burton facility, including assembly, warehousing and a distribution center, is located at 654 Anchors Street, Fort Walton Beach, Florida
32548. We temporarily leased an approximate 30,000 square foot portion of this facility, pursuant to a lease agreement through June 30, 2007, entered into with Burton. The lease provided for monthly rent payments in the amount of $14,000, plus
taxes and insurance. We vacated this facility during July 2007. A senior vice president of ForeFront Group is also a shareholder of Burton.

On December 31, 2007, we entered into a series of agreements governing the Reorganization Plan, to which Stanford and SVCH are principal parties. For more information, see Business  Recent Developments  Plan of
Reorganization.

Review and Approval of Related Person Transactions

The Companys Audit Committee conducts an appropriate review of and oversees all related party transactions on a continuing basis and review
potential conflict of interest situations where appropriate. The Audit Committee has not adopted formal standards to apply when it reviews, approves or ratifies any related party transaction. However, traditionally, as reflected in the minutes of
its meetings, the Audit Committee has followed the following standards: (i) all related party transactions must be fair and reasonable to the Company and on terms comparable to those reasonably expected to be agreed to with independent third
parties for the same goods and/or services at the time they are authorized by the Audit Committee and (ii) all related party transactions must be authorized, approved or ratified by the affirmative vote of a majority of the members of the Audit
Committee who have no interest, either directly or indirectly, in any such related party transaction.

Director Independence

Three members of our board of directors were independent Directors pursuant to the standards applicable to Regulation S-B. Mr. Gozia,
Mr. Hautanen and Mr. Holiday were the independent Board members. As of June 25, 2007, Mr. Gozia is not considered independent pursuant to the standards applicable to Regulation S-B while he serves as Interim Chief Executive
Officer and Interim Chief Financial Officer.



|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------

Fees to Auditors.

Years ended December 31, 2007 and 2006:



|                       |  |                            |         |                            |   |        
|---------------------- |  | -------------------------- | ------- | -------------------------- | - | -------
|Service                |  | 2007 Aggregate Fees Billed |         | 2006 Aggregate Fees Billed
|Audit Fees (1)         |  | $                          | 318,625 |                            | $ | 275,400
|Audit Related Fees (2) |  | $                          | 0       |                            | $ | 29,700 
|All Other Fees (3)     |  | $                          | 0       |                            | $ | 14,000 



|(1) | Includes the aggregate fees, including expenses, from our principal accountant in connection with the audit of our consolidated financial statements and for the review of our
financial information included in our Annual Report on Form 10-K, and our quarterly reports on Form 10-Q.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The aggregate fees, including expenses, billed by our principal accountant for services related to our Form 8-K filings for the acquisitions the net assets of Burton and Devant.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The aggregate fees, including expenses, billed by our principal accountant for services related to our Form SB-2 filing.
|--- | ------------------------------------------------------------------------------------------------------------------------

All audit-related services, tax services and other services performed by the principal accountants were pre-approved by the Audit Committee, which
concluded that the provision of such services were compatible with the maintenance of the firms independence in the conduct of their auditing functions. The Audit Committees charter provides the Audit Committee has authority to pre-approve all
audit and allowable non-audit services to be provided to the Company by its principal accountants.



49



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##### Table of Contents

In its performance of these responsibilities, prior approval of some non-audit services is not required
if:



| | (i) | these services involve no more than 5% of the revenues paid by the Company to the principal accountants during the fiscal year;
| | --- | -------------------------------------------------------------------------------------------------------------------------------



| | (ii) | these services were not recognized by the Company to be non-audit services at the time of the audit engagement; and
| | ---- | -------------------------------------------------------------------------------------------------------------------



| | (iii) | these services are promptly brought to the attention of the Audit Committee and are approved by the Audit Committee prior to completion of the audit for that fiscal year.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Audit Committee is permitted to delegate the responsibility to pre-approve audit and non-audit services to one or more
members of the Audit Committee so long as any decision made by that member or members is presented to the full Audit Committee at its next regularly scheduled meeting.

The Audit Committee has considered the compatibility of the provision of services covered by the preceding paragraphs with the maintenance of the principal accountants independence from us and has determined
that the provision of these services is not incompatible with the maintenance of the requisite independence.

The Audit Committee annually
reviews the performance of the principal accountants and the fees charged for their services.

PART IV



|Item 15. | Exhibits, Financial Statement Schedules.
|-------- | ----------------------------------------



|     |  |                                                                                                                                   
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------
|(a)  |  | Documents filed as part of this Form 10-K.                                                                                        
|     | 
|2.1  |  | Agreement and Plan of Merger dated as of October 15, 2004 among our Company, the principal shareholder of our Company and GAI. (1)
|     | 
|3.1  |  | Amendment to the Bylaws of the Company dated as of December 26, 2007. (12)                                                        
|     | 
|4.1  |  | 8% Subordinated Convertible Debenture, dated July 18, 2005, issued by our Company in the name of Stanford. (2)                    
|     | 
|4.2  |  | Warrants, dated July 18, 2005, to purchase 600,000 shares of common stock of our Company issued in the name of Stanford. (2)      
|     | 
|10.1 |  | Securities Purchase Agreement dated as of October 15, 2004, between Datrek and SVCH. (1)                                          
|     | 
|10.2 |  | Lock-Up Agreement dated as of October 15, 2004, among Datrek, DPB and SVCH. (1)                                                   
|     | 
|10.3 |  | Shareholders Agreement dated as of October 15, 2004, among Datrek, DPB and SVCH. (1)                                             
|     | 
|10.4 |  | Asset Purchase Agreement dated as of October 15, 2004, among Datrek, DPB and Dennis and Deborah Ryan.(1)                          
|     | 
|10.5 |  | Asset Purchase Agreement dated as of October 15, 2004, between Miller and MGC. (1)                                                
|     | 
|10.6 |  | Lease Agreement dated as of October 15, 2004, between Datrek and DPB. (1)                                                         
|     | 
|10.7 |  | Stock Purchase Agreement dated as of October 15, 2004, between our Company and Croft Investments Limited Partnership. (1)         
|     | 
|10.8 |  | Stock Purchase Agreement dated as of October 15, 2004, between our Company and Andora Investments Limited Partnership. (1)        
|     | 
|10.9 |  | Stock Purchase Agreement dated as of October 15, 2004, between our Company and Nahara Group, Inc. (1)                             



50



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##### Table of Contents

|      |  |                                                                                                                                                                              
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10 |  | Stock Purchase Agreement dated as of October 15, 2004, between John D. Harris and our Company. (1)                                                                           
|      | 
|10.11 |  | Loan and Security Agreement dated as of October 15, 2004, among FCC, LLC d/b/a First Capital, Datrek and Miller. (1)                                                         
|      | 
|10.12 |  | Guaranty of our Company dated as of October 15, 2004. (1)                                                                                                                    
|      | 
|10.16 |  | First Amendment to Loan Agreement dated as of March 22, 2005, among FCC, LLC, d/b/a First Capital, Datrek and Miller. (4)                                                    
|      | 
|10.17 |  | Waiver and Second Amendment to Loan Agreement dated as of April 14, 2005, among FCC, LLC, d/b/a First Capital, Datrek and Miller. (4)                                        
|      | 
|10.18 |  | Third Amendment to Loan Documents, dated June 2, 2005, by and between our Company and FCC, LLC. (5)                                                                          
|      | 
|10.20 |  | Waiver Agreement, dated August 12, 2005, by and among FCC, LLC, Datrek Professional Bags, Inc. and Miller Golf Company. (5)                                                  
|      | 
|10.22 |  | Warrant Assignment Agreement dated as of November 30, 2005, by and among Stanford, Daniel Bogar, Ronald Stein, William Fusselmann, Osvaldo Pi, and Charles Weiser. (6)       
|      | 
|10.23 |  | Registration Rights Agreement dated as of November 30, 2005, by and among DMI, Stanford, Daniel Bogar, Ronald Stein, Osvaldo Pi, William Fusselmann, and Charles Weiser. (6) 
|      | 
|10.25 |  | Registration Rights Agreement, dated as of July 18, 2005, between our Company and Stanford. (2)                                                                              
|      | 
|10.26 |  | Warrant Assignment Agreement, dated as of July 18, 2005, among Stanford, Daniel T. Bogar, Ronald M. Stein, William M. Fusselmann and Osvaldo Pi. (2)                         
|      | 
|10.28 |  | Waiver and Sixth Amendment to Loan and Security Agreement dated March 13, 2006, by and among FCC, LLC, Datrek Professional Bags, Inc. and Miller Golf Company. (8)           
|      | 
|10.29 |  | Waivers of Stanford International Bank Ltd. (8)                                                                                                                              
|      | 
|10.30 |  | Agreement, dated September 21, 2007, by and among our Company, ForeFront Group, Ryan Holdings, Inc., and Dennis and Deborah Ryan. (10)                                       
|      | 
|10.31 |  | Agreement, dated September 21, 2007, by and among our Company, ForeFront Group, ForeFront Devant, Devant, Ltd. and the principal shareholders of Devant, Ltd. (10)           
|      | 
|10.32 |  | Agreement, dated September 21, 2007, by and among our Company, ForeFront Group, ForeFront Burton, Burton Golf, Inc., and the principal shareholders of Burton Golf, Inc. (10)
|      | 
|10.33 |  | Employment Agreement dated as of April 16, 2007, between Richard Allen Oleksyk and ForeFront Group. (9)                                                                      
|      | 
|10.34 |  | Restated Employment Agreement dated as of October 31, 2007 between Richard Allen Oleksyk and ForeFront Group. (11)                                                           
|      | 
|10.35 |  | Employment Agreement dated as of November 1, 2007, between J. Stan Harris and ForeFront Group. (11)                                                                          
|      | 
|10.36 |  | Credit Agreement dated as of November 21, 2007, between our Company and SVCH.                                                                                                
|      | 
|10.37 |  | Subordinated Promissory Note dated as of November 21, 2007 between our Company and SVCH.                                                                                     
|      | 
|10.38 |  | Unsecured Promissory Note dated as of November 21, 2007 between ForeFront Group and our Company.                                                                             



51



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##### Table of Contents

|      |  |                                                                                                                                                                                                                                                                                                                                                                            
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.39 |  | Waiver Agreement dated as of November 21, 2007 between Stanford and our Company.                                                                                                                                                                                                                                                                                           
|      | 
|10.40 |  | Form of Indemnification Agreement dated as of December 26, 2007. (12)                                                                                                                                                                                                                                                                                                      
|      | 
|10.41 |  | Contribution Agreement dated as of December 28, 2007, between our Company and ForeFront (BVI). (13)                                                                                                                                                                                                                                                                        
|      | 
|10.42 |  | Stock Purchase Agreement dated as of December 31, 2007, by and among our Company, SVCH, Stanford, ForeFront (BVI), ForeFront Group, Multimedia and Miller. (13)                                                                                                                                                                                                            
|      | 
|10.43 |  | Share Exchange Agreement dated as of December 31, 2007, by and among our Company, ForeFront (BVI), Hisense Company Ltd., Qingdao Hisense Electronic Holding Ltd., and Ligent Photonics, Inc. (13)                                                                                                                                                                          
|      | 
|10.44 |  | Agreement and Plan of Merger dated as of December 31, 2007, by and among our Company, ForeFront (BVI), and Ligent International, Inc. (13)                                                                                                                                                                                                                                 
|      | 
|10.45 |  | Framework Agreement dated as of December 31, 2007, by and among our Company, ForeFront (BVI) and Qingdao Hisense Electric Ltd. (13)                                                                                                                                                                                                                                        
|      | 
|10.46 |  | Stock Purchase Agreement dated as of December 31, 2007, between Broadband Multimedia Systems Ltd. and Stanford. (13)                                                                                                                                                                                                                                                       
|      | 
|10.47 |  | Agreement and Plan of Merger dated as of December 31, 2007, by and among Broadband Multimedia Systems Ltd., ForeFront (BVI), and Stanford. (13)                                                                                                                                                                                                                            
|      | 
|10.48 |  | Articles and Plan of Merger dated as of December 31, 2007, between our Company and ForeFront (BVI). (13)                                                                                                                                                                                                                                                                   
|      | 
|10.49 |  | Indemnification Agreement dated as of December 31, 2007, between Stanford and ForeFront (BVI). (13)                                                                                                                                                                                                                                                                        
|      | 
|10.50 |  | Letter Agreement dated as of December 31, 2007, by and among our Company, SVCH, Stanford, ForeFront Group, ForeFront (BVI), Multimedia, Miller, Broadband Multimedia Systems Ltd., Ligent
International Ltd., Ligent Photonics Ltd., Hisense Ltd., Qingdao Hisense Electronic Holding Ltd., Qingdao Hisense Electric Ltd., and Hisense Optoelectronic Technologies Co. (13)
|      | 
|10.51 |  | Warrants, dated December 31, 2007, to purchase shares of common stock of Broadband Multimedia Systems, Ltd. (13)                                                                                                                                                                                                                                                           
|      | 
|14.0  |  | Code of Ethics (4)                                                                                                                                                                                                                                                                                                                                                         
|      | 
|16.1  |  | Letter from Earl M. Cohen C.P.A., P.A. (former independent accountant). (3)                                                                                                                                                                                                                                                                                                
|      | 
|21    |  | Subsidiaries of Registrant.                                                                                                                                                                                                                                                                                                                                                
|      | 
|31.1  |  | Certification of interim C.E.O. and interim 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.                                                                                                                                                                                                                                                                           



|(1) | Previously filed on Form 8-K Current Report with the Securities and Exchange Commission on October 21, 2004.
|--- | ------------------------------------------------------------------------------------------------------------

|(2) | Previously filed on Form 8-K Current Report with the Securities and Exchange Commission on July 21, 2005.
|--- | ---------------------------------------------------------------------------------------------------------



52



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##### Table of Contents

|(3) | Previously filed on Form 8-K Current Report with the Securities and Exchange Commission on December 3, 2004.
|--- | ------------------------------------------------------------------------------------------------------------

|(4) | Previously filed on Form 10-KSB Annual Report with the Securities and Exchange Commission on April 27, 2005.
|--- | ------------------------------------------------------------------------------------------------------------

|(5) | Previously filed on Form 10-QSB Quarterly Report with the Securities and Exchange Commission on August 15, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------

|(6) | Previously filed on Form 8-K Current Report with the Securities and Exchange Commission on December 6, 2005.
|--- | ------------------------------------------------------------------------------------------------------------

|(7) | Previously filed on Form 8-K Current Report with the Securities and Exchange Commission on January 9, 2006.
|--- | -----------------------------------------------------------------------------------------------------------

|(8) | Previously filed on Form 10-KSB Annual Report with the Securities and Exchange Commission on March 31, 2006.
|--- | ------------------------------------------------------------------------------------------------------------

|(9) | Previously filed on Form 8-K Current Report with the Securities and Exchange Commission on April 20, 2007.
|--- | ----------------------------------------------------------------------------------------------------------

|(10) | Previously filed on Form 8-K Current Report with the Securities and Exchange Commission on September 27, 2007.
|---- | --------------------------------------------------------------------------------------------------------------

|(11) | Previously filed on Form 8-K Current Report with the Securities and Exchange Commission on November 9, 2007.
|---- | ------------------------------------------------------------------------------------------------------------

|(12) | Previously filed on Form 8-K Current Report with the Securities and Exchange Commission on December 26, 2007.
|---- | -------------------------------------------------------------------------------------------------------------

|(13) | Previously filed on Form 8-K Current Report with the Securities and Exchange Commission on January 4, 2008.
|---- | -----------------------------------------------------------------------------------------------------------



53



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 31, 2008



FOREFRONT HOLDINGS, INC.By:

/s/ Richard M. GoziaRichard M. GoziaChairman of the BoardInterim Chief Executive OfficerInterim Chief Financial Officer(Principal Executive, Financial and Accounting Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on March 31, 2008.



|                          |  |                                                        
|------------------------- |  | -------------------------------------------------------
|SIGNATURE                 |  | TITLE                                                  
|                          | 
|/s/ Richard M Gozia       |  | Director, Chairman of the Board                        
|Richard M. Gozia          |  | Interim Chief Executive Officer                        
|                          |  | Interim Chief Financial Officer                        
|                          |  | (Principal Executive, Financial and Accounting Officer)
|                          | 
|/s/ Osmo A. Hautanen      |  | Director                                               
|Osmo A. Hautanen          |  |                                                        
|                          | 
|/s/Christopher J. Holiday |  | Director                                               
|Christopher J. Holiday    |  |                                                        



54



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##### Table of Contents

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

ForeFront Holdings, Inc. and Subsidiaries

December 31, 2007



|                                                                                                            |  |             
|----------------------------------------------------------------------------------------------------------- |  | ------------
|                                                                                                            |  | Page(s)     
|Report of Independent Registered Public Accounting Firm                                                     |  | F-2         
|Consolidated Financial Statements:                                                                          |  |             
|Consolidated Balance Sheets as of December 31, 2007 and December 31, 2006                                   |  | F-3         
|Consolidated Statements of Operations for the Years Ended December 31, 2007 and 2006                        |  | F-4         
|Consolidated Statements of Shareholders (Deficiency) Equity for the Years Ended December 31, 2007 and 2006 |  | F-5         
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2007 and 2006                        |  | F-6 - F-7   
|                                                                                                            | 
|Notes to Consolidated Financial Statements                                                                  |  | F-8 - F - 27



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

ForeFront Holdings, Inc.

We have audited the accompanying consolidated
balance sheet of ForeFront Holdings, Inc and Subsidiaries (the Company) as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders (deficiency) equity, and cash flows for the years
ended December 31, 2007 and 2006. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ForeFront
Holdings, Inc. and Subsidiaries as of December 31, 2007 and 2006, and the consolidated results of their operations and their cash flows for the years ended December 31, 2007 and 2006 in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 2 to the financial statements, on December 26, 2007, the Companys board of directors
approved a plan of reorganization which could substantially impact its current operations.



|                         
|-------------------------
|/s/ Marcum & Kliegman LLP

New York, New York

March 31, 2008



F-2



---

##### Table of Contents

ForeFront Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets



|                                                                                                                                                                                    |  |              |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                                                                    |  | December 31, |            
|                                                                                                                                                                                    |  | 2007         |             |   | 2006 |  
|ASSETS                                                                                                                                                                              |  |              |             |   |      |   |             |  
|                                                                                                                                                                                    |  |             
|Current assets:                                                                                                                                                                     |  |              |             |   |      |   |             |  
|Cash                                                                                                                                                                                |  | $            | 350,567     |   |      | $ | 736,851     |  
|Accounts receivable, net                                                                                                                                                            |  |              | 5,727,451   |   |      |   | 6,471,582   |  
|Inventories, net                                                                                                                                                                    |  |              | 6,408,669   |   |      |   | 9,730,785   |  
|Prepaid expenses and other current assets                                                                                                                                           |  |              | 1,290,923   |   |      |   | 561,267     |  
|                                                                                                                                                                                    |  |              |             |   |      |   |             |  
|Total current assets                                                                                                                                                                |  |              | 13,777,610  |   |      |   | 17,500,485  |  
|                                                                                                                                                                                    |  |             
|Property and equipment, net                                                                                                                                                         |  |              | 1,480,974   |   |      |   | 2,190,870   |  
|Intangibles, net                                                                                                                                                                    |  |              | 5,281,232   |   |      |   | 6,655,573   |  
|Goodwill                                                                                                                                                                            |  |              | 547,657     |   |      |   | 547,657     |  
|Other assets                                                                                                                                                                        |  |              | 2,612       |   |      |   | 10,759      |  
|                                                                                                                                                                                    |  |              |             |   |      |   |             |  
|Total assets                                                                                                                                                                        |  | $            | 21,090,085  |   |      | $ | 26,905,344  |  
|                                                                                                                                                                                    |  |              |             |   |      |   |             |  
|                                                                                                                                                                                    |  |             
|LIABILITIES AND SHAREHOLDERS (DEFICIENCY) EQUITY                                                                                                                                   |  |              |             |   |      |   |             |  
|                                                                                                                                                                                    |  |             
|Current liabilities:                                                                                                                                                                |  |              |             |   |      |   |             |  
|Revolving credit facility                                                                                                                                                           |  | $            | 4,929,329   |   |      | $ | 7,101,324   |  
|Accounts payable and accrued liabilities                                                                                                                                            |  |              | 4,817,249   |   |      |   | 6,366,767   |  
|Interest payable and accrued liabilities to related parties                                                                                                                         |  |              | 835,858     |   |      |   | 741,703     |  
|Current portion of notes payable to related parties                                                                                                                                 |  |              | 550,000     |   |      |   | 3,800,000   |  
|Current portion of capital lease obligation                                                                                                                                         |  |              | 86,438      |   |      |   | 49,508      |  
|                                                                                                                                                                                    |  |              |             |   |      |   |             |  
|Total current liabilities                                                                                                                                                           |  |              | 11,218,874  |   |      |   | 18,059,302  |  
|                                                                                                                                                                                    |  |              |             |   |      |   |             |  
|Credit facility with related party                                                                                                                                                  |  |              | 15,442,000  |   |      |   |            |  
|Notes payable to related parties, less current portion                                                                                                                              |  |              | 1,890,000   |   |      |   | 550,000     |  
|Guarantees under purchase consideration to related parties                                                                                                                          |  |              |            |   |      |   | 1,485,000   |  
|Capital lease obligation, less current portion                                                                                                                                      |  |              | 101,025     |   |      |   | 91,888      |  
|Accrued pension liability, less current portion                                                                                                                                     |  |              | 409,646     |   |      |   | 424,660     |  
|Other liabilities to related parties                                                                                                                                                |  |              | 210,000     |   |      |   | 20,722      |  
|                                                                                                                                                                                    |  |              |             |   |      |   |             |  
|Total liabilities                                                                                                                                                                   |  |              | 29,271,545  |   |      |   | 20,631,572  |  
|                                                                                                                                                                                    |  |              |             |   |      |   |             |  
|Commitments and contingencies                                                                                                                                                       |  |              |             |   |      |   |             |  
|                                                                                                                                                                                    |  |             
|Shareholders (deficiency) equity:                                                                                                                                                  |  |              |             |   |      |   |             |  
|Series A Convertible Preferred stock, $.001 par value; authorized 1,000,000 shares; 0 (2007) and 1,000,000 (2006) shares issued and
outstanding (Liquidation preference $2,000,000) |  |              |            |   |      |   | 1,000       |  
|Series B Convertible Preferred stock, $.001 par value; authorized 4,500,000 shares; 0 (2007) and 4,500,000 (2006) shares issued and
outstanding (Liquidation preference $9,000,000) |  |              |            |   |      |   | 4,500       |  
|Series C Convertible Preferred stock, $.001 par value; authorized 2,000,000 shares; 0 (2007) and 1,517,750 (2006) shares issued and
outstanding (Liquidation preference $6,071,000) |  |              |            |   |      |   | 1,518       |  
|Common stock, $.001 par value; authorized 500,000,000 shares; 12,166,989 (2007) and 7,798,239 (2006) shares issued and outstanding                                                  |  |              | 12,167      |   |      |   | 7,798       |  
|Additional paid-in capital                                                                                                                                                          |  |              | 26,883,165  |   |      |   | 25,852,285  |  
|Accumulated deficit                                                                                                                                                                 |  |              | (35,076,792 | ) |      |   | (19,593,329 | )
|                                                                                                                                                                                    |  |              |             |   |      |   |             |  
|Total shareholders (deficiency) equity                                                                                                                                             |  |              | (8,181,460  | ) |      |   | 6,273,772   |  
|                                                                                                                                                                                    |  |              |             |   |      |   |             |  
|Total liabilities and shareholders (deficiency) equity                                                                                                                             |  | $            | 21,090,085  |   |      | $ | 26,905,344  |  
|                                                                                                                                                                                    |  |              |             |   |      |   |             |  

See accompanying Notes to Consolidated Financial Statements.



F-3



---

##### Table of Contents

ForeFront Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations



|                                                                                                                                  |  |                                 |             |   |      |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                                                                                  |  | For the years endedDecember 31, |            
|                                                                                                                                  |  | 2007                            |             |   | 2006 |  
|Net sales                                                                                                                         |  | $                               | 40,119,463  |   |      | $ | 30,017,866 |  
|Cost of sales                                                                                                                     |  |                                 | 33,785,162  |   |      |   | 22,255,973 |  
|                                                                                                                                  |  |                                 |             |   |      |   |            |  
|Gross margin                                                                                                                      |  |                                 | 6,334,301   |   |      |   | 7,761,893  |  
|                                                                                                                                  |  |                                 |             |   |      |   |            |  
|Operating expenses                                                                                                                |  |                                 |             |   |      |   |            |  
|Sales and marketing                                                                                                               |  |                                 | 9,474,668   |   |      |   | 8,471,507  |  
|General and administrative                                                                                                        |  |                                 | 10,216,757  |   |      |   | 7,495,811  |  
|                                                                                                                                  |  |                                 |             |   |      |   |            |  
|Total operating expenses                                                                                                          |  |                                 | 19,691,425  |   |      |   | 15,967,318 |  
|                                                                                                                                  |  |                                 |             |   |      |   |            |  
|Loss from operations                                                                                                              |  |                                 | (13,357,124 | ) |      |   | (8,205,425 | )
|                                                                                                                                  |  |                                 |             |   |      |   |            |  
|Other income (expense)                                                                                                            |  |                                 |             |   |      |   |            |  
|Interest expense (includes $667,323 and $312,276 to related parties for the years ended December 31, 2007 and 2006,
respectively) |  |                                 | (1,500,958  | ) |      |   | (994,315   | )
|Other income (expense), net                                                                                                       |  |                                 | (625,381    | ) |      |   | 104,608    |  
|                                                                                                                                  |  |                                 |             |   |      |   |            |  
|Net other expense                                                                                                                 |  |                                 | (2,126,339  | ) |      |   | (889,707   | )
|                                                                                                                                  |  |                                 |             |   |      |   |            |  
|Net loss                                                                                                                          |  | $                               | (15,483,463 | ) |      | $ | (9,095,132 | )
|                                                                                                                                  |  |                                 |             |   |      |   |            |  
|Basic and diluted net loss per share                                                                                              |  | $                               | (1.80       | ) |      | $ | (1.33      | )
|                                                                                                                                  |  |                                 |             |   |      |   |            |  
|Basic and diluted weighted-average common shares outstanding                                                                      |  |                                 | 8,604,876   |   |      |   | 6,832,066  |  
|                                                                                                                                  |  |                                 |             |   |      |   |            |  

See accompanying Notes to Consolidated Financial Statements.



F-4



---

##### Table of Contents

ForeFront Holdings, Inc. and Subsidiaries

Consolidated Statements of Shareholders (Deficiency) Equity

Years Ended December 31, 2007 and 2006



|                                                                                                |  |                             |   |  |                            |        |   |             |            |   |             |   |        |                          |  |   |                    |   |  |       |             |   |  |   |             |  
|----------------------------------------------------------------------------------------------- |  | --------------------------- | - |  | -------------------------- | ------ | - | ----------- | ---------- | - | ----------- | - | ------ | ------------------------ |  | - | ------------------ | - |  | ----- | ----------- | - |  | - | ----------- | -
|                                                                                                |  | Series A,B& CPreferredStock |   |  | SeriesA,B& CPreferredStock |        |   | CommonStock |            |   | CommonStock |   |        | AdditionalPaid-InCapital |  |   | AccumulatedDeficit |   |  | Total |            
|                                                                                                |  | Shares                      |   |  | Amount                     |        |   | Shares      |            |   | Amount      |   |        |                          | 
|Balance at January 1, 2006                                                                      |  | 2,500,000                   |   |  | $                          | 2,500  |   |             | 6,398,239  |   |             | $ | 6,398  |                          |  | $ | 12,733,214         |   |  | $     | (10,498,197 | ) |  | $ | 2,243,915   |  
|Common shares issued for services                                                               |  |                            |   |  |                            |       |   |             | 40,000     |   |             |   | 40     |                          |  |   | 59,960             |   |  |       |            |   |  |   | 60,000      |  
|Return of shares previously issued for services                                                 |  |                            |   |  |                            |       |   |             | (40,000    | ) |             |   | (40    | )                        |  |   | 40                 |   |  |       |            |   |  |   |            |  
|Common stock issued as partial consideration for acquisitions                                   |  |                            |   |  |                            |       |   |             | 500,000    |   |             |   | 500    |                          |  |   | 764,500            |   |  |       |            |   |  |   | 765,000     |  
|Exercise of warrants                                                                            |  |                            |   |  |                            |       |   |             | 900,000    |   |             |   | 900    |                          |  |   |                   |   |  |       |            |   |  |   | 900         |  
|Sale of Series B Preferred-Stanford                                                             |  | 3,000,000                   |   |  |                            | 3,000  |   |             |           |   |             |   |       |                          |  |   | 5,997,000          |   |  |       |            |   |  |   | 6,000,000   |  
|Sale of Series C Preferred- Stanford                                                            |  | 1,517,750                   |   |  |                            | 1,518  |   |             |           |   |             |   |       |                          |  |   | 6,069,482          |   |  |       |            |   |  |   | 6,071,000   |  
|Stock option compensation                                                                       |  |                            |   |  |                            |       |   |             |           |   |             |   |       |                          |  |   | 228,089            |   |  |       |            |   |  |   | 228,089     |  
|Net loss                                                                                        |  |                            |   |  |                            |       |   |             |           |   |             |   |       |                          |  |   |                   |   |  |       | (9,095,132  | ) |  |   | (9,095,132  | )
|                                                                                                |  |                             |   |  |                            |        |   |             |            |   |             |   |        |                          |  |   |                    |   |  |       |             |   |  |   |             |  
|Balance at December 31, 2006                                                                    |  | 7,017,750                   |   |  |                            | 7,018  |   |             | 7,798,239  |   |             |   | 7,798  |                          |  |   | 25,852,285         |   |  |       | (19,593,329 | ) |  |   | 6,273,772   |  
|Common shares issued for services                                                               |  |                            |   |  |                            |       |   |             | 18,750     |   |             |   | 19     |                          |  |   | 37,481             |   |  |       |            |   |  |   | 37,500      |  
|Repurchase of common shares for retirement                                                      |  |                            |   |  |                            |       |   |             | (1,100,000 | ) |             |   | (1,100 | )                        |  |   | (328,900           | ) |  |       |            |   |  |   | (330,000    | )
|Return of common stock issued as partial consideration for acquisitions for retirement (Note 4) |  |                            |   |  |                            |       |   |             | (500,000   | ) |             |   | (500   | )                        |  |   | (764,500           | ) |  |       |            |   |  |   | (765,000    | )
|Exercise of warrants                                                                            |  |                            |   |  |                            |       |   |             | 1,200,000  |   |             |   | 1,200  |                          |  |   |                   |   |  |       |            |   |  |   | 1,200       |  
|Sale of Series C Preferred- Stanford                                                            |  | 482,250                     |   |  |                            | 482    |   |             |           |   |             |   |       |                          |  |   | 1,928,518          |   |  |       |            |   |  |   | 1,929,000   |  
|Conversion of Series A Preferred Shares to Common Shares-Stanford                               |  | (1,000,000                  | ) |  |                            | (1,000 | ) |             | 500,000    |   |             |   | 500    |                          |  |   | 500                |   |  |       |            |   |  |   |            |  
|Conversion of Series B Preferred Shares to Common Shares-Stanford                               |  | (4,500,000                  | ) |  |                            | (4,500 | ) |             | 2,250,000  |   |             |   | 2,250  |                          |  |   | 2,250              |   |  |       |            |   |  |   |            |  
|Conversion of Series C Preferred Shares to Common Shares-Stanford                               |  | (2,000,000                  | ) |  |                            | (2,000 | ) |             | 2,000,000  |   |             |   | 2,000  |                          |  |   |                   |   |  |       |            |   |  |   |            |  
|Stock option compensation                                                                       |  |                            |   |  |                            |       |   |             |           |   |             |   |       |                          |  |   | 155,531            |   |  |       |            |   |  |   | 155,531     |  
|Net loss                                                                                        |  |                            |   |  |                            |       |   |             |           |   |             |   |       |                          |  |   |                   |   |  |       | (15,483,463 | ) |  |   | (15,483,463 | )
|                                                                                                |  |                             |   |  |                            |        |   |             |            |   |             |   |        |                          |  |   |                    |   |  |       |             |   |  |   |             |  
|Balance at December 31, 2007                                                                    |  |                            |   |  | $                          |       |   |             | 12,166,989 |   |             | $ | 12,167 |                          |  | $ | 26,883,165         |   |  | $     | (35,076,792 | ) |  | $ | (8,181,460  | )
|                                                                                                |  |                             |   |  |                            |        |   |             |            |   |             |   |        |                          |  |   |                    |   |  |       |             |   |  |   |             |  

See accompanying Notes to Consolidated Financial Statements.



F-5



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##### Table of Contents

ForeFront Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows



|                                                                            |  |                                  |             |   |      |   |            |  
|--------------------------------------------------------------------------- |  | -------------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                            |  | For the years ended December 31, |            
|                                                                            |  | 2007                             |             |   | 2006 |  
|Cash flows from operating activities:                                       |  |                                  |             |   |      |   |            |  
|Net loss                                                                    |  | $                                | (15,483,463 | ) |      | $ | (9,095,132 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                  |             |   |      |   |            |  
|Depreciation and amortization                                               |  |                                  | 2,333,707   |   |      |   | 1,406,671  |  
|Amortization of loan fees                                                   |  |                                  |            |   |      |   | 35,417     |  
|Amortization of lease modification                                          |  |                                  | 330,000     |   |      |   |           |  
|Impairment loss on excess inventory                                         |  |                                  | 2,911,675   |   |      |   | 211,526    |  
|Loss on dissolution of minority interest                                    |  |                                  | 346,440     |   |      |   |           |  
|Minority interest in subsidiary                                             |  |                                  | (109,840    | ) |      |   | (100,528   | )
|Common stock issued for services                                            |  |                                  | 37,500      |   |      |   | 60,000     |  
|Stock based compensation                                                    |  |                                  | 155,531     |   |      |   | 228,089    |  
|Loss on disposal of fixed assets                                            |  |                                  | 417,216     |   |      |   | 1,459      |  
|Bad debt expense                                                            |  |                                  | 534,675     |   |      |   | 141,757    |  
|Changes in assets and liabilities:                                          |  |                                  |             |   |      |   |            |  
|Accounts receivable                                                         |  |                                  | 128,283     |   |      |   | (17,863    | )
|Inventories                                                                 |  |                                  | 209,502     |   |      |   | (2,586,156 | )
|Prepaid expenses and other current assets                                   |  |                                  | (35,014     | ) |      |   | 118,168    |  
|Other assets                                                                |  |                                  |            |   |      |   | (8,345     | )
|Accounts payable and accrued liabilities                                    |  |                                  | (1,345,330  | ) |      |   | 500,428    |  
|Interest payable and accrued liabilities to related parties                 |  |                                  | 94,155      |   |      |   | 477,717    |  
|                                                                            |  |                                  |             |   |      |   |            |  
|Net cash used in operating activities                                       |  |                                  | (9,474,963  | ) |      |   | (8,626,792 | )
|                                                                            |  |                                  |             |   |      |   |            |  
|Cash flows from investing activities:                                       |  |                                  |             |   |      |   |            |  
|Purchases of property and equipment                                         |  |                                  | (522,523    | ) |      |   | (565,029   | )
|Proceeds from sale of fixed assets                                          |  |                                  | 55,128      |   |      |   |           |  
|Contingent acquisition settlement to related party                          |  |                                  | 15,254      |   |      |   | (89,560    | )
|Payment for non-compete agreement                                           |  |                                  | (450,000    | ) |      |   |           |  
|Payment for the net assets of Burton, net of cash acquired of $4,143        |  |                                  |            |   |      |   | (1,970,857 | )
|Payment for the net assets of Devant                                        |  |                                  |            |   |      |   | (2,993,000 | )
|Settlement of lease  related party                                         |  |                                  | (1,030,000  | ) |      |   |           |  
|                                                                            |  |                                  |             |   |      |   |            |  
|Net cash used in investing activities                                       |  |                                  | (1,932,141  | ) |      |   | (5,618,446 | )
|                                                                            |  |                                  |             |   |      |   |            |  
|Cash flows from financing activities:                                       |  |                                  |             |   |      |   |            |  
|Borrowings under credit facility  related party                            |  |                                  | 15,442,000  |   |      |   |           |  
|Net borrowings (repayments) under credit facility                           |  |                                  | (2,171,995  | ) |      |   | 3,083,203  |  
|Payments under capital lease obligations                                    |  |                                  | (49,385     | ) |      |   | (24,096    | )
|Payment of note to bank                                                     |  |                                  |            |   |      |   | (59,307    | )
|Repayment of notes to related parties                                       |  |                                  | (3,800,000  | ) |      |   | (1,225,000 | )
|Repurchase of common stock                                                  |  |                                  | (330,000    | ) |      |   |           |  
|Proceeds from exercise of warrants  related party                          |  |                                  | 1,200       |   |      |   | 900        |  
|Proceeds from sale of preferred stock  related party                       |  |                                  | 1,929,000   |   |      |   | 12,071,000 |  
|                                                                            |  |                                  |             |   |      |   |            |  
|Net cash provided by financing activities                                   |  |                                  | 11,020,820  |   |      |   | 13,846,700 |  
|                                                                            |  |                                  |             |   |      |   |            |  
|Net decrease in cash                                                        |  |                                  | (386,284    | ) |      |   | (398,538   | )
|Cash, beginning of year                                                     |  |                                  | 736,851     |   |      |   | 1,135,389  |  
|                                                                            |  |                                  |             |   |      |   |            |  
|Cash, end of year                                                           |  | $                                | 350,567     |   |      | $ | 736,851    |  
|                                                                            |  |                                  |             |   |      |   |            |  

See accompanying Notes to Consolidated Financial Statements.



F-6



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##### Table of Contents

ForeFront Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows



|                                                                                     |  |                                  |            |   |      |   |            |  
|------------------------------------------------------------------------------------ |  | -------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                     |  | For the years ended December 31, |           
|                                                                                     |  | 2007                             |            |   | 2006 |  
|Supplemental disclosures of cash flow information:                                   |  |                                  |            |   |      |   |            |  
|Interest paid                                                                        |  | $                                | 1,174,688  |   |      | $ | 1,045,724  |  
|                                                                                     |  |                                  |            |   |      |   |            |  
|Income taxes paid                                                                    |  | $                                | 57,574     |   |      | $ | 32,132     |  
|                                                                                     |  |                                  |            |   |      |   |            |  
|Supplemental disclosures of non-cash investing and financing activities:             |  |                                  |            |   |      |   |            |  
|Purchases of property and equipment under capital lease obligations                  |  | $                                | 95,452     |   |      | $ | 84,695     |  
|Settlement of guarantees under purchase obligations:                                 |  |                                  |            |   |      |   |            |  
|Cancellation of long-term notes payable                                              |  | $                                | (1,485,000 | ) |      | $ |           |  
|Return and cancellation of common stock issued                                       |  |                                  | (765,000   | ) |      |   |           |  
|Issuance of new long-term notes payable                                              |  |                                  | 1,890,000  |   |      |   |           |  
|Other long-term liability incurred                                                   |  |                                  | 210,000    |   |      |   |           |  
|                                                                                     |  |                                  |            |   |      |   |            |  
|Change in purchase price                                                             |  | $                                | (150,000   | ) |      | $ |           |  
|                                                                                     |  |                                  |            |   |      |   |            |  
|Net assets acquired and liabilities assumed of Burton:                               |  |                                  |            |   |      |   |            |  
|Total purchase price                                                                 |  | $                                |           |   |      | $ | 4,376,947  |  
|Less: cash consideration paid                                                        |  |                                  |           |   |      |   | (1,975,000 | )
|                                                                                     |  |                                  |            |   |      |   |            |  
|Non-cash consideration                                                               |  | $                                |           |   |      | $ | 2,401,947  |  
|                                                                                     |  |                                  |            |   |      |   |            |  
|Notes Payable  Burton                                                               |  | $                                |           |   |      | $ | 1,225,000  |  
|Guarantee under purchase consideration                                               |  |                                  |           |   |      |   | 487,500    |  
|Common stock issued                                                                  |  |                                  |           |   |      |   | 512,500    |  
|Acquisition costs ($144,000 finders fee to Stanford and $32,947 for legal services) |  |                                  |           |   |      |   | 176,947    |  
|                                                                                     |  |                                  |            |   |      |   |            |  
|Allocation of non-cash consideration                                                 |  | $                                |           |   |      | $ | 2,401,947  |  
|                                                                                     |  |                                  |            |   |      |   |            |  
|Net assets acquired and liabilities assumed of Devant:                               |  |                                  |            |   |      |   |            |  
|Total purchase price                                                                 |  | $                                |           |   |      | $ | 4,665,387  |  
|Less: cash consideration paid                                                        |  |                                  |           |   |      |   | (2,993,000 | )
|                                                                                     |  |                                  |            |   |      |   |            |  
|Non-cash consideration                                                               |  | $                                |           |   |      | $ | 1,672,387  |  
|                                                                                     |  |                                  |            |   |      |   |            |  
|Notes Payable  Devant                                                               |  | $                                |           |   |      | $ | 400,000    |  
|Guarantee under purchase consideration                                               |  |                                  |           |   |      |   | 997,500    |  
|Common stock issued                                                                  |  |                                  |           |   |      |   | 252,500    |  
|Acquisition costs ($22,387 for legal services)                                       |  |                                  |           |   |      |   | 22,387     |  
|                                                                                     |  |                                  |            |   |      |   |            |  
|Allocation of non-cash consideration                                                 |  | $                                |           |   |      | $ | 1,672,387  |  
|                                                                                     |  |                                  |            |   |      |   |            |  

See accompanying Notes to Consolidated Financial Statements.



F-7



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##### Table of Contents

ForeFront Holdings, Inc.

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies

ForeFront Holdings, Inc. (ForeFront), through both its direct and indirect wholly-owned subsidiaries, ForeFront (BVI), Ltd. (ForeFront (BVI)), ForeFront Group, Inc. (ForeFront Group), Miller Golf Company
(Miller), ForeFront Burton, Inc. (ForeFront Burton), ForeFront Devant, Inc. (ForeFront Devant) and ForeFront Multimedia, LLC, (Multimedia), each a Florida corporation, designs, decorates, markets and
distributes golf bags and accessories to on-course 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 primarily in the United States and Canada. The Company is based in Springfield, Tennessee, and conducts substantially all 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 was the Companys largest provider of plastic bag tags and accessories. The Company made an aggregate investment in ForeFront Crellin of $500,000.
ForeFront Crellin was dissolved on June 30, 2007 (see Note 22). The operations of ForeFront Crellin were consolidated with the Company since the date of acquisition.

ForeFront 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 entered into a merger
transaction with Golf Acquisition, Inc. (GAI) whereby GAI was merged with and into ForeFront. 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 net 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
controlling shareholder of the Company.

Since the completion of the transactions described above, SVCH has transferred a portion of its interests in
ForeFront to Stanford International Bank, Ltd. (Stanford). Stanford has entered into several securities purchase agreements with ForeFront whereby it has invested an aggregate of $23,500,000 and owns 81.6% of the Companys issued
and outstanding common stock at December 31, 2007 (see Note 11).

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 3) 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 3), 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.

On December 26, 2007,
the Companys board of directors approved a series of agreements (the Reorganization Plan) under the terms of which the Company will reincorporate in the British Virgin Islands (the Reincorporation Transaction) and will
reorganize its operations by divesting of its current operations and concurrently acquiring a broadband multimedia enterprise. See Note 2 for a further discussion.

Liquidity and Capital Resources

The Company has incurred net losses of $15.5 million and $9.1 million for the years ended December 31,
2007 and 2006,



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



respectively. On March 13, 2006, the Company and First Capital Corporation, LLC (FCC) amended the Companys revolving credit facility
(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. The interest rate was decreased from prime (7.25% at December 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 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 December 31, 2007, the balance of the line of credit was $4.9 million. The revolving
credit facility from FCC continues to require the Company to comply with certain covenants, including, without limitation, restrictions on our ability to engage in mergers, incur additional debt or liens, repurchase or otherwise redeem shares of our
capital stock, declare or pay dividends on shares of our capital stock, engage in transactions with affiliates, extend loans to third parties or increase the compensation paid to our officers and directors in excess of specified limits. The Company
was in compliance with all covenants at December 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.

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 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. At December 31, 2007, borrowings under the SVCH facility totaled $15,442,000. 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. The SVCH credit facility requires the Company to comply with certain covenants, including, without limitation, restrictions on its
ability to engage in mergers, incur additional debt or liens, repurchase or otherwise redeem shares of our capital stock, declare or pay dividends on shares of its capital stock, engage in transactions with affiliates, extend loans to third parties
or increase the compensation paid to its officers and directors in excess of specified limits. The Company was in compliance with all covenants at December 31, 2007.

Management believes cash balances on hand and cash generated from operations, the Companys $32.5 million credit facility with SVCH, and the Companys credit facility with FCC will be sufficient to fund the
business requirements during the next 12 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.

As
discussed below in Note 2, on December 26, 2007, the Companys board of directors approved the Reorganization Plan under the terms of which the Company will reincorporate in the British Virgin Islands and will reorganize its operations by
divesting of its current operations and concurrently acquiring a broadband multimedia enterprise. If the Reorganization Plan is completed, there can be no assurance that the Company will be able to fund the new business requirements and 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:

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of ForeFront and both its direct and indirect wholly-owned subsidiaries ForeFront (BVI), ForeFront Group, Miller, ForeFront Burton, ForeFront Devant, Multimedia, as
well as ForeFront Crellin, in which the Company owned a 50% interest until June 30, 2007. 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.

Use of Estimates

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



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



Allowance for Doubtful Accounts Receivable

The Company maintains an allowance for estimated losses resulting from the failure of its 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 additional allowances could
be required. The allowance for doubtful accounts totaled $613,197 and $548,218 at December 31, 2007 and 2006, respectively.

Inventories

Inventories are stated at the lower of cost (as determined on the first-in, first-out method) or market. 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.

Property and Equipment

Property and equipment are reported at cost and include improvements that significantly add to utility or extend useful lives. Cost of maintenance and repairs that do not extend the economic useful life of the related
assets are charged to expense as incurred. Assets are depreciated using the straight-line method over their estimated useful lives as presented below by principal classifications:



|                        |  |                  
|----------------------- |  | -----------------
|Asset Class             |  | Depreciable Lives
|Computer equipment      |  | 3-5 years        
|Machinery and equipment |  | 10 years         
|Furniture and fixtures  |  | 7 years          
|Product prototypes      |  | 1-3 years        

Goodwill and Intangible Assets

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 may not be recoverable.

Accounting for Long-Lived Assets

The Company reviews property and equipment and intangible assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors the Company considers 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 the Companys use of the acquired assets or the strategy for the Companys overall business;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | significant decline in the Companys stock price for a sustained period; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | significant decline in the Companys 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. Identifiable 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 life.



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



Revenue Recognition

The Company recognizes sales when products are shipped to its 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;
| | - |  | ----------------------------



| |  |  | 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. The Company also records 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.

Shipping Costs

Net sales include amounts billed to customers for shipping charges which totaled $1,720,404 and $1,267,245 for the years ended December 31, 2007 and 2006,
respectively. The costs associated with shipping goods to customers are recorded as part of cost of sales.

Advertising Costs

The Company expenses all advertising costs as incurred. Advertising expense amounted to $385,414 and $280,003 for the years ended December 31, 2007 and 2006,
respectively. These costs are included in sales and marketing expense in the consolidated statements of operations.

Foreign Currency

Approximately 5% of the Companys sales are conducted in Canadian dollars. Conducting business in such currency exposes the Company to fluctuations in foreign
currency exchange rates relative to the U.S. dollar. Any gain or loss from conducting business with these customers is minimal and is reflected in Other income in the Companys consolidated statement of operations.

Fair Value of Financial Instruments

At December 31, 2007, the
carrying value of all financial instruments approximate their fair value due to the relatively short period of time between origination of the instruments and their expected realization, or, in the case of notes payable, because the notes are at
interest rates competitive with those that would be available to the Company in the current market environment.

Warranty Costs

The Company generally provides a warranty of one year on all products it sells to cover defects of workmanship and materials. The warranty provides for repair or
replacement at the Companys discretion. The Company estimates its warranty costs based on historical claim experience. Future costs for warranties applicable to sales recognized in the current period are charged to cost of sales. Adjustments
are made to the warranty reserve when the actual warranty claim experience differs from the estimates.

Concentrations of Credit Risk

In the normal course of business, the Company extends credit to its customers. The Companys policy is generally not to require collateral or other security from a
trade customer to offset potential credit risk. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Companys customer base and their dispersion across different
geographic areas. No one customer accounted for more than 10% of the Companys sales in 2007 or 2006.



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



The Company purchases a large percentage of its products from Asia Pacific vendors. Of these vendors, two vendors
represented approximately 18% and 17%, respectively, of 2007 consolidated purchases. Three vendors represented approximately 33%, 28%, and 14%, respectively, of 2006 consolidated purchases.

Cash balances at financial institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000 per insured entity. Balances of cash
at financial institutions may at times exceed the FDIC limit.

Income Taxes

The Company accounts for income taxes under Statement of Financial Accounting Standards (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.

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 2004.

The adoption of the provisions of FIN 48 did not have a material impact on the Companys consolidated financial position or results of operations. As of
December 31, 2007, no liability for unrecognized tax benefits was required to be recorded.

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 antidilutive. 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 241,500 and 5,860,650 for 2007 and 2006, respectively.

Stock-Based Compensation

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.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Accounting for Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes
a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair value measurements. SFAS 157 is effective for financial statements issued subsequent to November 15, 2007. The Company does not
expect the new standard to have any material impact on its consolidated financial position or results of operations.



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



In February 2007, the FASB issued SFAS No. 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 does not expect the adoption of SFAS 159 to have a
material impact on its consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141R, Business
Combinations (SFAS 141R), which replaces SFAS No. 141, Business Combinations. SFAS 141R establishes principles and requirements for determining how an enterprise recognizes and measures the fair value of certain
assets and liabilities acquired in a business combination, including noncontrolling interests, contingent consideration, and certain acquired contingencies. SFAS 141R also requires acquisition-related transaction expenses and restructuring costs be
expensed as incurred rather than capitalized as a component of the business combination. SFAS 141R will be applicable prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. SFAS 141R would have an impact on accounting for any businesses acquired after the effective date of this pronouncement.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes accounting
and reporting standards for the noncontrolling interest in a subsidiary (previously referred to as minority interests). SFAS No. 160 also requires that a retained noncontrolling interest upon the deconsolidation of a subsidiary be initially
measured at its fair value. Upon adoption of SFAS No. 160, the Company would be required to report any noncontrolling interests as a separate component of consolidated shareholders equity. The Company would also be required to present any
net income allocable to noncontrolling interests and net income attributable to its shareholders separately in our consolidated statements of operations. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after January 1, 2009. SFAS No. 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS No. 160 shall be applied prospectively.
SFAS No. 160 would have an impact on the presentation and disclosure of the noncontrolling interests of any non wholly-owned business acquired in the future.

Reclassifications

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

Note 2. Plan of Reorganization

On December 26, 2007, the
Companys board of directors approved the Reorganization Plan under the terms of which the Company will reincorporate in the British Virgin Islands and will reorganize its operations by divesting of its current operations and concurrently
acquiring a broadband multimedia enterprise. This enterprise will consist of a cable set-top box and optical transceiver business, from Hisense Co. Ltd. (Hisense), a Chinese electronics manufacturer.

In order to accomplish the reincorporation, the Company has contributed substantially all of its assets and liabilities to its newly-formed wholly-owned subsidiary,
ForeFront (BVI), a British Virgin Islands corporation, at December 31, 2007, and will merge with and into ForeFront (BVI) at the closing. Upon completion of the reincorporation, ForeFront will cease to exist and all of the outstanding shares of
ForeFront common stock will be converted into the right to receive ordinary shares of ForeFront (BVI). Following the reincorporation, ForeFront (BVI) ordinary shares are expected to trade on the OTC Bulletin Board market. Immediately following or
concurrently with the reincorporation of ForeFront, ForeFront (BVI) will sell its golf accessory marketing and distribution business to SVCH. This sale is referred to as the Golf Sale Transaction.

Immediately following, or concurrently with the reincorporation of ForeFront and the subsequent sale of its current operations, ForeFront (BVI) intends to complete the
following acquisition transactions to acquire some of the broadband multimedia business currently conducted by Hisense:



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



| |  |  | a merger of Ligent International, Inc. with and into ForeFront (BVI) in exchange for the issuance to certain affiliates of Hisense of 6,489,061 ordinary shares of
ForeFront (BVI);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a share exchange with Hisense and Qingdao Hisense Electronics Holding Ltd. under the terms of which they will transfer 100% of the ownership interest in Ligent
Photonics, Inc. in exchange for the issuance to these entities of an aggregate of 6,489,061 ordinary shares of ForeFront (BVI); and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the acquisition of contract rights, customer lists, intellectual property, employees and certain other property and intangibles necessary to allow ForeFront (BVI)
to acquire the cable set-top box distribution business (the Set-Top Box Division Business) of Qingdao Hisense Electric Co., in exchange for the issuance of 6,489,061 ordinary shares of ForeFront (BVI) and warrants to purchase 1,628,062
ordinary shares of ForeFront (BVI) at an exercise price equal to $4.93 per share.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the above transactions, the acquisition
transactions will also include a merger of Broadband Multimedia Systems, Ltd., a British Virgin Islands corporation created by and receiving a $12.0 million capital infusion from Stanford, with and into ForeFront (BVI) in exchange for 1,400,000
ordinary shares of ForeFront (BVI), warrants to purchase 1,033,398 ordinary shares at an exercise price equal to $0.01 per ordinary share and warrants to purchase 1,628,062 ordinary shares at an exercise price equal to $4.93 per ordinary share,
thereby infusing ForeFront (BVI) with the portion of the $12.0 million capital infusion remaining at the time of the merger.

Throughout this report the
Company refers to the above-described transactions, collectively, as the Reorganization Plan. Ultimately, as a result of these transactions, the Companys debt obligations to SVCH will be cancelled, its golf accessory marketing and distribution
business will be sold, and ForeFront (BVI) will acquire a business with no significant debt and the necessary contracts, intellectual property and other intangibles necessary to allow ForeFront (BVI) to continue the broadband multimedia business
being acquired from Hisense.

Ultimately, upon conclusion of the Reincorporation Transaction, the Golf Sale Transaction and the transactions contemplated
in the Acquisition Proposals, the current shareholders of ForeFront, excluding Stanford, will hold 1.8% of the outstanding ordinary shares of ForeFront (BVI). The transferors of the new broadband multimedia business being acquired under the terms of
the Acquisition Proposal will receive 80.0% in the aggregate of the outstanding ordinary shares of ForeFront (BVI). Stanfords holdings in ForeFront (BVI) will ultimately comprise 18.2% of ForeFront (BVI)s outstanding ordinary shares,
including warrants which are exercisable at $0.01 per share into ordinary shares equal to 4.2% of the outstanding ordinary shares of ForeFront (BVI), one-half of which are anticipated to be transferred to certain employees of an affiliate of
Stanford.

The Company anticipates that the shareholders of ForeFront, including Stanford, which hold, in the aggregate, approximately 95% of the
outstanding voting securities of ForeFront, will execute a written consent approving the reincorporation and each of the above described transactions. As a result, no further action on the part of the shareholders of ForeFront will be required for
the reincorporation or any of the above transactions to occur. This approval will become effective twenty days after the Company mails an information statement describing the action taken to its remaining shareholders.

The Company expects the transactions contemplated by the above agreements to be consummated in 2008. The closing of each of the above-referenced agreements is
cross-conditioned on the substantially concurrent closing of each other agreement. The consummation of these transactions is subject to, among other things, the approval of the Companys shareholders and certain Chinese governmental approvals.

On December 26, 2007, the Companys board of directors also approved a one-for-five reverse stock split (the Reverse Stock Split) of
the outstanding shares of the Companys common stock, par value $0.001 per share. The Reverse Stock Split was required in the agreements as a condition to the closing of the transactions described above and will be effective prior to the
closing date for these transactions. Thus, no common share or per share amounts presented have been adjusted to reflect the reverse stock split.

Note
3. 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 (see
Note 4).



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FOREFRONT HOLDINGS, INC.

NOTES TO 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 (see Note 4).

The following table presents the unaudited pro forma consolidated results of operations of the Company, assuming the transactions discussed above had been consummated
at the beginning of 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 acquisitions occurred at January 1, 2006, nor does the information project results for any future period.

The
unaudited pro forma consolidated financial information for the year ended December 31, 2006 is as follows:



|                                                             |  |   |             |  
|------------------------------------------------------------ |  | - | ----------- | -
|Net sales                                                    |  | $ | 42,329,236  |  
|Net loss                                                     |  | $ | (11,708,949 | )
|Basic and diluted net loss per common share                  |  | $ | (1.60       | )
|Basic and diluted weighted average common shares outstanding |  |   | 7,332,066   |  

Note 4. Settlement Transactions

On September 21, 2007, the Company completed an agreement with Ryan Holdings, Inc. (Ryan Holdings), the former owners of DPB. As part of this agreement, the Company paid the full balance of the
existing long-term note payable of $3,200,000 and the related interest. Further, for the purchase price of $330,000, the Company reacquired, and subsequently retired, 1,100,000 shares of its common stock previously issued to Ryan Holdings. Also as
part of the settlement, the Companys lease of its executive offices and a distribution center was modified and the life of the lease term was shortened from October 2011 to July 2008. This modification was valued at $1,030,000. Such amount is
being expensed over the remaining life of the lease. In addition, the agreement includes an 18-month non-compete agreement for Deborah and Dennis Ryan, the owners of Ryan Holdings. This agreement was valued at $450,000 and is included in intangibles
on the Companys consolidated balance sheet at December 31, 2007. The non-compete agreement will be amortized over the term of the agreement. Further, the Company satisfied its obligation under the $1,000,000 contingent consideration
arrangement for $20,000. Finally, Deborah Ryan resigned as a member of the Companys board of directors.

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, which the Company subsequently retired. In addition, the unsecured, long-term note payable issued by ForeFront to
Burton with a remaining principal balance of $500,000 and the promissory note issued by ForeFront for the guaranteed value of the issued shares of $1,000,000 were cancelled. In exchange for the preceding, ForeFront Group 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, which the Company subsequently retired. In addition, the promissory note issued by ForeFront for the guaranteed value of the issued shares of $1,250,000 was cancelled. In exchange for the preceding, ForeFront Group 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.



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



Note 5. Inventories, Net

Inventories are summarized as follows:



|               |  |              |           |      |   |          
|-------------- |  | ------------ | --------- | ---- | - | ---------
|               |  | December 31,
|               |  | 2007         |           | 2006
|Raw Materials  |  | $            | 507,362   |      | $ | 1,454,112
|Finished goods |  |              | 5,901,307 |      |   | 8,276,673
|               |  |              |           |      |   |          
|Total          |  | $            | 6,408,669 |      | $ | 9,730,785
|               |  |              |           |      |   |          

Note 6. Property and Equipment, net

Property and equipment is summarized as follows:



|                                                            |  |              |            |   |      |   |           |  
|----------------------------------------------------------- |  | ------------ | ---------- | - | ---- | - | --------- | -
|                                                            |  | December 31, |           
|                                                            |  | 2007         |            |   | 2006 |  
|Machinery and equipment                                     |  | $            | 824,685    |   |      | $ | 1,430,092 |  
|Furniture and fixtures                                      |  |              | 1,083,726  |   |      |   | 1,205,605 |  
|Leasehold improvements                                      |  |              | 235,380    |   |      |   | 251,791   |  
|Product prototypes                                          |  |              | 196,252    |   |      |   | 160,847   |  
|                                                            |  |              |            |   |      |   |           |  
|                                                            |  |              | 2,340,043  |   |      |   | 3,048,335 |  
|Less: Accumulated depreciation                              |  |              | (1,238,914 | ) |      |   | (860,242  | )
|                                                            |  |              |            |   |      |   |           |  
|                                                            |  |              | 1,101,129  |   |      |   | 2,188,093 |  
|Construction in progress of fixtures and product prototypes |  |              | 379,845    |   |      |   | 2,777     |  
|                                                            |  |              |            |   |      |   |           |  
|Total                                                       |  | $            | 1,480,974  |   |      | $ | 2,190,870 |  
|                                                            |  |              |            |   |      |   |           |  

Depreciation expense totaled $674,620 and $486,466 for the years ended December 31, 2007 and 2006,
respectively. Amortization of capital lease assets is included in depreciation expense.

Note 7. Management and Director Equity Incentive and
Compensation Plan

On June 22, 2005 the 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.

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



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



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.

Stock-based compensation expense recognized in the Companys consolidated
statements of operations for the year ended December 31, 2007 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 year ended December 31, 2007 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 years ended December 31, 2007 and 2006 was $155,531 and $228,089, respectively. At December 31, 2007, there was $80,535 of total unrecognized compensation cost (at fair value) related to unvested
share-based compensation arrangements granted under the Plan that will be recognized as an expense between January 2008 through June 2009.

Options to
purchase 417,000 shares, with lives of 10-years, vesting ratably over a three-year period, were issued during 2006 to a group of eligible employees under terms of the Plan. These options have exercise prices ranging from $1.50 to $2.20. The weighted
average fair value per share of these options was estimated to be $0.93 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. No options were issued during 2007.

Option activity was as follows for the years ended December 31, 2007 and December 31,
2006.



|                        |  |          |   |  |                               |      |                         |  
|----------------------- |  | -------- | - |  | ----------------------------- | ---- | ----------------------- | -
|                        |  | Shares   |   |  | Weighted-AverageExerciseprice |      | AggregateIntrinsicValue
|Outstanding at 1/1/06   |  | 302,250  |   |  | $                             | 2.22 |                         |  
|Granted                 |  | 417,000  |   |  |                               | 1.81 |                         |  
|Forfeited/Cancelled     |  | (37,000  | ) |  |                               | 2.35 |                         |  
|                        |  |          |   |  |                               |      |                         |  
|Outstanding at 12/31/06 |  | 682,250  |   |  | $                             | 2.20 |                         |  
|Granted                 |  |         |   |  |                               |     |                         |  
|Forfeited/Cancelled     |  | (440,750 | ) |  |                               | 1.92 |                         |  
|                        |  |          |   |  |                               |      |                         |  
|Outstanding at 12/31/07 |  | 241,500  |   |  | $                             | 1.92 |                         | 
|                        |  |          |   |  |                               |      |                         |  
|Exercisable at 12/31/07 |  | 105,667  |   |  | $                             | 1.83 |                         | 
|                        |  |          |   |  |                               |      |                         |  

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



|               |  |                   |  |                                                   
|-------------- |  | ----------------- |  | --------------------------------------------------
|Exercise Price |  | NumberOutstanding |  | Weighted-AverageRemaining ContractualLife in Years
|$ 2.20         |  | 145,500           |  | 7.8                                               
|$ 1.50         |  | 96,000            |  | 8.5                                               
|               |  |                   |  |                                                   
|               |  | 241,500           |  |                                                   
|               |  |                   |  |                                                   



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



At December 31, 2007, there were 758,500 shares available for issuance under the Plan.

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:



|                                         |  |                  |   |  |                  |  
|---------------------------------------- |  | ---------------- | - |  | ---------------- | -
|                                         |  | Years Ended      |  
|                                         |  | December 31,2007 |   |  | December 31,2006 |  
|Dividend yield                           |  |                 | % |  | 0                | %
|Weighted average expected life (years)   |  |                 |   |  | 5.0              |  
|Weighted average risk-free interest rate |  |                 | % |  | 4.82             | %
|Expected volatility                      |  |                 | % |  | 70.52            | %

Note 8. 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.

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. As
adjusted, the total consideration paid for Devants net assets was $4,515,387 and included $3,099,493 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 $1,110,190, will not be amortized and will be reviewed for impairment at least annually.

As discussed above in Note 4, on September 21, 2007, the Company secured a non-compete agreement with two of the Companys former executive officers. The agreement was valued at $450,000 and will be
amortized over the 18-month term of the agreement.



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



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



|                          |  |      |           |                         |   |                  |  |                                 |           |  |   |           |  |   |        
|------------------------- |  | ---- | --------- | ----------------------- | - | ---------------- |  | ------------------------------- | --------- |  | - | --------- |  | - | -------
|Description               |  | Cost |           | AccumulatedAmortization |   | Net Asset        |  | Amortization for the Year Ended
|                          |  |      |           | December 31,2007        |   | December 31,2006
|Customer Lists            |  | $    | 3,859,206 |                         | $ | 2,029,295        |  | $                               | 1,829,911 |  | $ | 1,246,326 |  | $ | 448,213
|Amortized Trade Name      |  |      | 1,813,000 |                         |   | 867,097          |  |                                 | 945,903   |  |   | 270,264   |  |   | 270,264
|Customer Logo Database    |  |      | 120,742   |                         |   | 68,382           |  |                                 | 52,360    |  |   | 56,365    |  |   | 16,023 
|Non-Compete Agreement     |  |      | 450,000   |                         |   | 86,132           |  |                                 | 363,868   |  |   | 86,132    |  |   |       
|                          |  |      |           |                         |   |                  |  |                                 |           |  |   |           |  |   |        
|Amortized Intangibles     |  |      | 6,242,948 |                         |   | 3,050,906        |  |                                 | 3,192,042 |  |   | 1,659,087 |  |   | 734,500
|Non-Amortized Trade Names |  |      | 2,089,190 |                         |   |                 |  |                                 | 2,089,190 |  |   |          |  |   |       
|                          |  |      |           |                         |   |                  |  |                                 |           |  |   |           |  |   |        
|Total                     |  | $    | 8,332,138 |                         | $ | 3,050,906        |  | $                               | 5,281,232 |  | $ | 1,659,087 |  | $ | 734,500
|                          |  |      |           |                         |   |                  |  |                                 |           |  |   |           |  |   |        

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 December 31, 2007.

Based on the carrying amount of the intangible assets as of December 31, 2007, the amortization expense for
the next five years is estimated as follows:



|           |  |        |          
|---------- |  | ------ | ---------
|Year Ended |  | Amount
|2008       |  | $      | 1,623,272
|2009       |  |        | 1,163,395
|2010       |  |        | 270,264  
|2011       |  |        | 135,111  
|           |  |        |          
|Total      |  | $      | 3,192,042
|           |  |        |          

Note 9. Revolving Credit Facility

On October 18, 2004, the Company obtained a line of credit facility with FCC for a two-year term. The facility was amended in March 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 (7.25% at December 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 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 December 31, 2007, the balance of the line of credit was $4.9 million. The revolving credit facility from FCC continues to require the Company to comply with certain covenants, including, without limitation, restrictions on our
ability to engage in mergers, incur additional debt or liens, repurchase or otherwise redeem shares of our capital stock, declare or pay dividends on shares of our capital stock, engage in transactions with affiliates, extend loans to third parties
or increase the compensation paid to our officers and directors in excess of specified limits. The Company was in compliance with all covenants at December 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, the Company believes that, if necessary, it will be able to secure any such waivers.

Note 10. Notes Payable to Related Parties

At December 31, 2007,
the Company had an unsecured, long-term note payable to Burton in the amount of $1,500,000. This note bears interest at the rate of 8% per annum, payable quarterly, and the principal is payable in installments of $500,000 payable on
September 12, 2008 and $1,000,000 payable on September 12, 2009.



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



At December 31, 2007, the Company had an unsecured, short-term, non interest bearing promissory note to Devant
with a remaining principal balance of $50,000, payable on March 31, 2008.

At December 31, 2007, the Company had an unsecured, long-term
promissory note to Devant in the principal amount of $890,000. This note bears interest at the rate of 6% per annum, payable at maturity. The principal is due on April 15, 2009.

Future minimum payments for the notes payable to related parties are as follows:



|           |  |        |          
|---------- |  | ------ | ---------
|Year Ended |  | Amount
|2008       |  | $      | 550,000  
|2009       |  |        | 1,890,000
|           |  |        |          
|Total      |  | $      | 2,440,000
|           |  |        |          

Interest expense on notes payable to related parties totaled $277,803 and $312,276 for the years ended
December 31, 2007 and 2006, respectively.

Note 11. 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 share. Holders of the Series A preferred stock are entitled to vote with the holders of Companys common stock on all
matters. The Company also issued to Stanford five-year warrants (exercisable at $.001 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 converted 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, 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
share. Stanford 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.



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



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 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.

On December 21, 2007, Stanford converted all of its Series A, Series B and Series C Preferred Stock shares into 4,750,000 shares of the
Companys common stock.

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 used to fund the transaction with Ryan Holdings discussed in Note 4 above. The remaining $8,450,000 was used 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 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 December 31, 2007, borrowings under the SVCH facility totaled $15,442,000, which included 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. The SVCH credit facility requires the Company to comply with certain covenants, including, without limitation, restrictions on its ability to engage in mergers, incur additional debt or liens, repurchase or otherwise redeem shares of its
capital stock, declare or pay dividends on shares of its capital stock, engage in transactions with affiliates, extend loans to third parties or increase the compensation paid to its officers and directors in excess of specified limits. The Company
was in compliance with all covenants at December 31, 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 was 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. In connection with the SVCH credit facility
transaction discussed above, 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 SVCH through June 30, 2008.

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
SVCH, 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 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 SFAS 133 or EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled In, a Companys Own Stock.

Note 12. Income Taxes

As of December 31, 2007, the Company had
federal net operating loss carryforwards of $26.1 million expiring in various years through 2027, portions of which may be used to offset future taxable income, if any. The Company has deferred tax assets arising from such operating losses for which
a full valuation allowance has been established due to the uncertainty as to their realizability in future periods.



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



The Companys deferred tax assets and deferred tax liabilities (using a federal corporate income rate of
approximately 34%) consisted of the following:



|                                                  |  |              |             |   |      |   |            |  
|------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ---------- | -
|                                                  |  | December 31, |            
|                                                  |  | 2007         |             |   | 2006 |  
|Deferred tax assets: Operating loss carryforwards |  | $            | 8,876,000   |   |      | $ | 6,628,000  |  
|Allowance for doubtful accounts                   |  |              | 194,000     |   |      |   | 171,000    |  
|Inventory                                         |  |              | 1,553,000   |   |      |   | 500,000    |  
|Intangible assets                                 |  |              | 668,000     |   |      |   | 388,000    |  
|Property and equipment                            |  |              | 10,000      |   |      |   |           |  
|Contributions                                     |  |              | 11,000      |   |      |   | 7,000      |  
|Warranty reserve                                  |  |              | 17,000      |   |      |   | 17,000     |  
|                                                  |  |              |             |   |      |   |            |  
|Total deferred tax assets                         |  |              | 11,329,000  |   |      |   | 7,711,000  |  
|Deferred tax liabilities:                         |  |              |             |   |      |   |            |  
|Property and equipment                            |  |              |            |   |      |   | (11,000    | )
|                                                  |  |              |             |   |      |   |            |  
|Subtotal                                          |  |              | 11,329,000  |   |      |   | 7,700,000  |  
|Valuation Allowance                               |  |              | (11,329,000 | ) |      |   | (7,700,000 | )
|                                                  |  |              |             |   |      |   |            |  
|Net deferred tax assets                           |  | $            |            |   |      | $ |           |  
|                                                  |  |              |             |   |      |   |            |  

As a result of the Companys significant operating loss carryforwards and the corresponding valuation
allowance, no income tax benefit has been recorded at December 31, 2007 and 2006. The provision for income taxes using the statutory federal tax rate as compared to the Companys effective tax rate is summarized as follows:



|                              |  |              |    |  |       |   
|----------------------------- |  | ------------ | -- |  | ----- | --
|                              |  | December 31, |   
|                              |  | 2007         |    |  | 2006  |   
|Tax benefit at statutory rate |  | (34.0        | )% |  | (34.0 | )%
|State income taxes            |  | (6.0         | )% |  | (6.0  | )%
|Valuation allowance           |  | 40.0         | %  |  | 40.0  | % 
|                              |  |              |    |  |       |   
|                              |  |             |    |  |      |   
|                              |  |              |    |  |       |   

The Company acquired $4.0 million of this net operating loss carryforward through the 2004 merger with GAI. Due to
the restrictions imposed by the Internal Revenue Code of 1986, as amended, regarding substantial changes in ownership of companies with loss carryforwards, the utilization of the Companys federal net operating loss carryforwards will likely be
limited as a result of cumulative changes in stock ownership. In addition, in connection with the Reorganization Plan discussed in Note 2, net operating loss carryforwards may be subject to substantial limitations created under Internal Revenue
Code Section 382.

Note 13. Shareholders Equity

At December 31, 2007, the Company has authorized 500,000,000 shares of par value $0.001 common stock, with 12,166,989 shares issued and outstanding. Additionally, the Company has authorized 7,500,000 shares of preferred stock, with no
shares of Series A, Series B or Series C convertible preferred stock issued and outstanding.

Common stock

The holders of common stock are entitled to one vote for each share held of record on all matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of directors. The holders of common stock are entitled to receive dividends when, as and if declared by the board of directors out of funds legally available therefrom. In the event of a liquidation, dissolution or



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



winding up of the Company, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment
of liabilities and after provision has been made for each class of stock, if any, having preference over the common stock. Holders of shares of common stock, as such, have no conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to common stock. All of the outstanding shares of common stock are duly authorized, validly issued, fully paid and nonaccessable.

Preferred Stock

Blank Check Preferred- The Company is authorized to issue shares of preferred stock with such designation, rights
and preferences as may be determined from time to time by the board of directors. Accordingly, the board of directors is authorized, without shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other
rights that could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing
a change in control.

Series A Preferred Stock- The Company has designated 1,000,000 shares of its preferred stock as Series A $2.00 convertible
preferred stock. At December 31, 2007, none of these shares of Series A preferred stock are issued and outstanding. Each share of Series A preferred stock is convertible into one half share of ForeFront common stock. The preferred shares are
convertible at the option of a preferred shareholder at any time. In addition, the preferred shares are automatically converted upon the earlier of: (1) the date specified by a vote or written consent of holders of at least two-thirds of the
then outstanding shares of the Series A preferred stock, or (2) upon the closing of an underwritten public offering of ForeFront common stock registered under the Act at a public offering price equal to or exceeding $6.00 per share, which
generates aggregate net proceeds to the Company equal to or exceeding $15,000,000.

Series B Preferred Stock- The Company has designated 4,500,000
shares of its preferred stock as Series B $2.00 convertible preferred stock. At December 31, 2007, none of these shares of Series B preferred stock are issued and outstanding. Each share of Series B preferred stock is convertible into one half
share of ForeFront common stock. The preferred shares are convertible at the option of a preferred shareholder at any time. In addition, the preferred shares are automatically converted upon the earlier of: (1) the date specified by a vote or
written consent of holders of at least two-thirds of the then outstanding shares of the Series B preferred stock, or (2) upon the closing of an underwritten public offering of the Company common stock registered under the Act at a public
offering price equal to or exceeding $6.00 per share, which generates aggregate net proceeds to the Company equal to or exceeding $15,000,000.

Series C
Preferred Stock- The Company has designated 2,000,000 shares of its preferred stock as Series C $4.00 convertible preferred stock. At December 31, 2007, none of these shares of Series C preferred stock are issued and outstanding. Each share
of Series C preferred stock is convertible into one share of ForeFront common stock. The preferred shares are convertible at the option of a preferred shareholder at any time. In addition, the preferred shares are automatically converted upon the
earlier of: (1) the date specified by a vote or written consent of holders of at least two-thirds of the then outstanding shares of the Series B preferred stock, or (2) upon the closing of an underwritten public offering of the Company
common stock registered under the Act at a public offering price equal to or exceeding $6.00 per share, which generates aggregate net proceeds to the Company equal to or exceeding $15,000,000.

The initial conversion price of the Companys Series A and B preferred shares is $2.00 per share, and the initial conversion price of the Companys Series C
preferred shares is $4.00 per share, subject to adjustment in the event of recapitalization, stock split, dividends or similar events. If at any time the Company shall (1) sell or otherwise issue shares of common stock at a purchase price per
share less than the conversion price in effect immediately prior to such issuance, or (2) sell or otherwise issue securities which are convertible into or exercisable for shares of the Companys common stock at a conversion or exercise
price per share less than the conversion price in effect immediately prior to such issuance, then immediately upon such issuance or sale, the conversion price of the Series B and Series C preferred shares shall be adjusted to a price equal to the
purchase price of the shares of common stock or the conversion or exercise price per share of the securities sold or issued.

Except as otherwise required
under Florida law, the holders of the Series A, Series B and Series C preferred stock shall be entitled to vote at any meeting of the shareholders of the Company. Each share of Series A and B preferred stock shall be entitled to one half vote per
share and each share of Series C preferred stock shall be entitled to one vote per share.



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



In the event of liquidation, dissolution or winding up of the company, whether voluntary or involuntary, the holders
of the Series A, Series B and Series C preferred stock shall be entitled to receive, prior and before any distribution of the assets shall be made to the holders of any common stock, an amount equal to the stated value per share of Series A, Series
B and Series C preferred stock held by each holder.

Note 14. Equity Transactions

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. The Company also issued
to Stanford five-year warrants (exercisable at $.001 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. On
November 30, 2005, Stanford converted the Debenture for 1,000,000 shares of Series A preferred stock.

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.

Stanford acquired (in various tranches) 1,500,000 shares of Series B Preferred Stock for
$3,000,000 and was issued 450,000 of the Series B Warrants during the year ended December 31, 2005. Stanford acquired (in various tranches) 3,000,000 shares of Series B Preferred Stock for $6,000,000 and was issued 900,000 Series B Warrants
during the year ended December 31, 2006. 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.

Stanford acquired (in various tranches) 1,517,750 shares of Series C Preferred Stock for $6,071,000 and was issued 910,650 of the Series C Warrants during the year ended
December 31, 2006. Stanford acquired (in various tranches) 482,250 shares of Series C Preferred Stock for $1,929,000 and was issued 289,350 Series C Warrants during the year ended December 31, 2007. All Series C Warrants were exercised
between January 2007 and March 2007.

On December 21, 2007, Stanford converted all of its Series A, Series B and Series C Preferred Stock shares into
4,750,000 shares of the Companys common stock.

As discussed in Note 4, on September 21, 2007, the Company completed an agreement with Ryan
Holdings. As part of this agreement, for the purchase price of $330,000, the Company reacquired, and subsequently retired, 1,100,000 shares of its common stock previously issued to Ryan Holdings.

On September 12, 2006, in connection with the acquisition of the net assets of Burton, the Company issued 250,000 shares of its common stock to Burton, valued at
$512,500 ($2.05 per share), as part of the purchase price for the assets of Burton. As discussed in Note 4, 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, which the Company subsequently retired.

On December 20, 2006, in connection with the acquisition of the net
assets of Devant, the Company issued 250,000 shares of its common stock to Devant, valued at $252,500 ($1.01 per share), as part of the purchase price for the net assets of Devant. As discussed in Note 4, 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, which the Company subsequently retired.



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FOREFRONT HOLDINGS, INC.

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Note 15. Commitments and Contingencies

The Company leases its offices, storage/warehouse space and certain equipment under operating leases and a small amount of equipment under capital leases. Rent expense charged to operations totaled $1,467,853 for 2007
and $904,807 for 2006.

Concurrent with the DPB acquisition on October 18, 2004, the Company entered into a lease agreement with Ryan Holdings (a
related party) for the real estate occupied by the Companys production, distribution, and administration operations. The shareholders of Ryan Holdings are Dennis and Deborah Ryan, who are husband and wife. Through September 21, 2007,
Deborah Ryan was a member of the Companys board of directors and was the Executive Vice President of Datrek Brand Management until her separation from the Company on April 13, 2006. Dennis Ryan was President of the Off-Course division
until his separation from the Company on May 26, 2006. The Company leases this property and facility, which includes approximately 14.06 acres, pursuant to a lease through July 31, 2008. The lease provides for current monthly rent payments
in the amount of $54,646. The Company has an additional lease agreement for the executive offices, pursuant to a lease with a term from August 1, 2008 through October 31, 2008. This lease provides for monthly rent payments in the amount of
$16,667. The lease requires the Company to pay property taxes, insurance, maintenance, and utility expenses related to occupancy of the premises. Rent expense charged to operations related to this agreement totaled $968,191 for 2007, including
$330,000 amortization of a lease modification, and $623,447 for 2006.

Concurrent with the Burton acquisition on September 12, 2006, the Company
entered into a lease agreement with Burton for the ForeFront Burton facility, which included production and distribution operations. The lease term expired June 30, 2007 and provided for monthly rent payments of $14,000, plus taxes and
insurance. The Company vacated this facility during July 2007. A senior vice president of ForeFront Group is also a shareholder of Burton. Rent expense charged to operations related to this agreement totaled $133,398 for 2007 and $124,802 for 2006.

Concurrent with the Devant acquisition on December 20, 2006, the Company entered into a lease agreement with Jimini, a real estate holding
partnership, for the ForeFront Devant facility, which includes production, distribution and administrative operations. The lease has an initial term of four years and provides for monthly rent payments of $16,750, plus taxes and insurance. A former
ForeFront Devant officer is a principal shareholder in Jimini. Rent expense charged to operations related to this agreement totaled $201,000 for 2007 and $16,750 for 2006.

Minimum future rental payments under all non-cancelable operating and capital leases are summarized as follows:



|                                        |  |               |         |                 |   |          
|--------------------------------------- |  | ------------- | ------- | --------------- | - | ---------
|Year Ending December 31,                |  | CapitalLeases |         | OperatingLeases
|2008                                    |  | $             | 99,405  |                 | $ | 676,250  
|2009                                    |  |               | 52,904  |                 |   | 270,862  
|2010                                    |  |               | 43,522  |                 |   | 245,538  
|2011                                    |  |               | 14,344  |                 |   | 1,386    
|2012 and thereafter                     |  |               |        |                 |   |         
|                                        |  |               |         |                 |   |          
|Total minimum payments                  |  |               | 210,175 |                 | $ | 1,194,036
|                                        |  |               |         |                 |   |          
|Less: interest                          |  |               | 22,712  |                 |   |          
|                                        |  |               |         |                 |   |          
|Present value of minimum lease payments |  |               | 187,463 |                 |   |          
|Less: current portion                   |  |               | 86,438  |                 |   |          
|                                        |  |               |         |                 |   |          
|Long-term portion                       |  | $             | 101,025 |                 |   |          
|                                        |  |               |         |                 |   |          

The gross amount of property and equipment recorded under capital leases at December 31, 2007 was $235,309.

In March 2005, the Company received notice from the IUE-CWA Pension Fund notifying the Company that it is responsible for funding a pension plan liability
relating to Miller in the amount of $462,000, discounted at the annual interest rate of 5.65%. A provision for the full amount has been established and quarterly payments of approximately $9,674 are due through the first quarter of 2025.



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



On April 19, 2007, ForeFront Group entered into an employment agreement with Richard Allen Oleksyk.
Mr. Oleksyk serves as the President and Chief Operating Officer of ForeFront Group. 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 Groups common stock. None of these options were granted or issued during the year ended December 31, 2007.

On November 1, 2007, ForeFront Group entered into an employment agreement with J. Stan Harris. Mr. Harris serves as the Chief Executive Officer of ForeFront
Group. 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 Groups common stock. None of these options were granted or issued during the year ended December 31, 2007.

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.

Note 16. Defined Contribution Plan

The Company sponsors a combined 401(k) savings and profit sharing plan. As of December 31, 2007, this plan covers substantially all full-time, non-ForeFront Devant employees. The plan allows for the Company to make discretionary
matching contributions. In addition, the plan allows for the Company to make discretionary profit-sharing contributions. Employer discretionary matching contributions totaling $130,969 and $145,298 were charged to operations for the years ended
December 31, 2007 and 2006, respectively. There were no discretionary profit sharing contributions in 2007 or 2006.

Note 17. 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 annual results of
operations.

Note 18. Related Party Transactions

Under
the DPB Purchase Agreement, Ryan Holdings, the successor of DPB, was entitled to a contingent payment of up to $1.0 million based on the assembly and distribution of certain golf bags. Payments made under this contingent obligation were $40,668 and
$106,921 in 2007 and 2006, respectively. All obligations associated with this contingent obligation were satisfied as part of the transactions discussed in Note 4 above.

Note 19. 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 Year Ended
|                     |  | December 31, 2007  |            | December 31, 2006
|Off-Course           |  | $                  | 13,379,433 |                   | $ | 16,481,763
|On-Course            |  |                    | 7,535,930  |                   |   | 6,793,000 
|Premium-OEM-Internet |  |                    | 8,303,252  |                   |   | 4,161,413 
|International        |  |                    | 3,659,654  |                   |   | 2,170,084 
|Sport Towels         |  |                    | 7,241,194  |                   |   | 411,606   
|                     |  |                    |            |                   |   |           
|                     |  | $                  | 40,119,463 |                   | $ | 30,017,866
|                     |  |                    |            |                   |   |           



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FOREFRONT HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



Note 20. 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 was entitled to continue to receive her base salary for a period of 12 months along with certain other benefits. Under the terms of his employment agreement, Dennis
Ryan was entitled to continue to receive his base salary for a period of 12 months along with certain other benefits. During the year ended December 31, 2006, the Company recorded an expense of $350,000 in relation to these agreements. This
obligation was paid in full during the year ended December 31, 2007. At December 31, 2006, $115,649 remained unpaid and is reflected as an accrued liability to related parties in the accompanying consolidated balance sheet.

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
connection with Mr. Hedges separation from the Company, the Company agreed to provide severance payments representing his base salary for a period of twelve months along with certain other benefits. During the year ended December 31,
2007, the Company recorded an expense of $250,750 in relation to this agreement. At December 31, 2007, $122,977 remains unpaid and is reflected as an accrued liability in the accompanying consolidated balance sheet.

On July 20, 2007, J. Max Waits, the Companys Executive Vice President and Chief Operating Officer, separated from the Company. In connection with
Mr. Waits separation from the Company, the Company agreed to provide severance payments representing his base salary for a period of twelve months along with certain other benefits. During the year ended December 31, 2007, the
Company recorded an expense of $197,193 in relation to this agreement. At December 31, 2007, $111,747 remains unpaid and is reflected as an accrued liability in the accompanying consolidated balance sheet.

On December 5, 2007, Randall J. Frapart, the Companys Executive Vice President and Chief Financial Officer, separated from the Company. In connection with
Mr. Fraparts separation from the Company, the Company agreed to provide severance payments representing his base salary for a period of twelve months along with certain other benefits. During the year ended December 31, 2007, the
Company recorded an expense of $197,870 in relation to this agreement. At December 31, 2007, $192,366 remains unpaid and is reflected as an accrued liability in the accompanying consolidated balance sheet.

Note 21. Closure of Ft. Walton Beach Facility

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, the impairment of inventory that was considered excess and obsolete of $372,700 and severance costs of $81,847.

Note 22. Dissolution
of ForeFront Crellin

As discussed in Note 1, 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 Chatco. The Company made an aggregate investment in ForeFront Crellin of $500,000. ForeFront Crellin was dissolved on June 30, 2007. As of that
date, the Company had recognized $153,560 of operating losses. The remaining investment of $346,440 was written off and is reflected in other expense, net on the Companys Consolidated Statements of Operations for year ended December 31,
2007.



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