<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT FILED PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of Earliest Event Reported): June 12, 1996
THE FOREFRONT GROUP, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-27438 76-0365256
- -------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1330 Post Oak Boulevard, Suite 1300, Houston, Texas 77056
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(713) 961-1101
-------------------------------------------------------
(Registrant's telephone number, including Area Code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 12, 1996, The ForeFront Group, Inc. (the "Company") acquired
substantially all the operating assets of BookMaker Corporation ("BookMaker"),
pursuant to the terms of an Asset Purchase Agreement ("Agreement") between the
Company, Martin Mazner, Hal Schectman, Chris Kirkpatrick and BookMaker. The
purchase price of the acquisition consisted of (i) 248,375 shares of the
Company's common stock, ninety percent (90%) of which were issued on June 12,
1996 and the remaining ten percent (10%) of which will be held in escrow
pursuant to the terms of the Agreement and (ii) up to 199,262 shares of the
Company's common stock deliverable upon earnout pursuant to the terms of the
Agreement. The purchase price was determined through negotiations between the
Company and representatives of BookMaker. In connection with this acquisition,
the Company entered into customary employment and non-competition agreements
with certain employees of BookMaker.
BookMaker Corporation is a manufacturer of software that allows the
user to print booklets from Internet information pages.
The Company is not aware of any pre-existing material relationships
between (i) BookMaker or its shareholders, on the one hand, and (ii) the
Company, any of the Company's affiliates, directors and officers or any
associate of such directors and officers on the other hand.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The required financial statements of BookMaker are attached hereto
on pages 3 through 11.
(b) Pro Forma Financial Information
Set forth on the pages 12 through 15 are the unaudited pro forma
financial statements which give effect to the acquisition of BookMaker.
(c) Exhibits
Exhibit
Number
------
2.1* Asset Purchase Agreement, dated as of June 12, 1996, between the
Company and BookMaker.
* Previously filed with Form 8-K dated June 12, 1996
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
BookMaker Corporation:
We have audited the accompanying balance sheet of BookMaker Corporation (a
California corporation) as of December 31, 1995, and the related statements of
operations, stockholders' equity and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BookMaker Corporation as of
December 31, 1995, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Houston, Texas
July 26, 1996
3
<PAGE>
BOOKMAKER CORPORATION
---------------------
BALANCE SHEET--DECEMBER 31, 1995
--------------------------------
ASSETS
------
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $124,719
Accounts receivable, net of allowance of $5,000 246,712
Prepaid expenses and other 54,540
--------
Total current assets 425,971
FURNITURE AND EQUIPMENT, net of accumulated depreciation of $15,567 26,263
OTHER ASSETS 1,500
--------
Total assets $453,734
========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 88,231
Accrued liabilities 47,735
Deferred revenues 22,000
--------
Total current liabilities 157,966
--------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series A preferred stock, no par value, 950,000 shares authorized, 916,250 shares
issued and outstanding 153,426
Series B preferred stock, no par value, 166,667 shares authorized, issued and
outstanding 120,755
Series C preferred stock, no par value, 185,000 shares authorized, issued and
outstanding 250,793
Common stock, no par value, 10,000,000 shares authorized, 532,000 shares issued and
outstanding 1,030
Accumulated deficit (230,236)
--------
Total stockholders' equity 295,768
--------
Total liabilities and stockholders' equity $453,734
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
BOOKMAKER CORPORATION
---------------------
STATEMENT OF OPERATIONS
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------
<TABLE>
<S> <C>
LICENSE REVENUES $1,700,771
COST OF SERVICES AND PRODUCT LICENSES 420,109
----------
Gross profit 1,280,662
OPERATING EXPENSES:
Research and development 242,647
Selling and marketing 680,383
General and administrative 411,785
----------
Operating loss (54,153)
OTHER, net 1,853
----------
Net loss $ (52,300)
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
BOOKMAKER CORPORATION
---------------------
STATEMENT OF STOCKHOLDERS' EQUITY
---------------------------------
<TABLE>
<CAPTION>
Series A Convertible Series B Convertible Series C Convertible
Preferred Stock Preferred Stock Preferred Stock
--------------------- --------------------- -----------------------
Shares Amount Shares Amount Shares Amount
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 916,250 $153,426 166,667 $120,755 185,000 $250,793
Net Loss - - - - - -
------- -------- ------- -------- ------- --------
BALANCE, December 31, 1995
916,250 $153,426 166,667 $120,755 185,000 $250,793
======= ======== ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
Common Stock
-------------------------- Accumulated
Shares Amount Deficit Total
---------- ----------- ------------- --------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 532,000 $1,030 $(177,936) $348,068
Net Loss - - (52,300) (52,300)
------- ------ --------- --------
BALANCE, December 31, 1995 532,000 $1,030 $(230,236) $295,768
======= ====== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
BOOKMAKER CORPORATION
---------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(52,300)
Adjustments to reconcile net loss to net cash provided by operating activities-
Depreciation and amortization 10,864
Changes in operating assets and liabilities-
Decrease in accounts receivable 122,832
Decrease in inventory 36,987
Decrease in prepaid expenses 1,288
Increase in accounts payable 3,952
Decrease in accrued liabilities (63,548)
Decrease in deferred revenues (2,000)
--------
Net cash provided by operating activities 58,075
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (14,588)
--------
Net cash used in investing activities (14,588)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from line of credit with bank 5,388
Repayments of line of credit to bank (5,388)
--------
Net cash provided by financing activities -
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS 43,487
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 81,232
--------
CASH AND CASH EQUIVALENTS AT END OF YEAR $124,719
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
BOOKMAKER CORPORATION
---------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. ORGANIZATION AND OPERATIONS:
----------------------------
BookMaker Corporation (BookMaker or the Company) is a California corporation
incorporated on July 30, 1992. The Company develops and markets computer
software products designed to improve printing from computers. The Company's
first product was ClickBook(TM), a Windows and Macintosh utility program that
turns virtually any laser or inkjet printer into a printing press, enabling
users to transform documents into professional-quality, double-sided booklets.
Surf N Print(TM), BookMaker's newest product, takes the ClickBook(TM) concept to
the Internet, enabling Internet users to instantly turn any Internet, on-line
service, CD-ROM or Windows program file into a convenient, double-sided booklet.
Commercial sales of ClickBook(TM) for Windows and Macintosh began in July 1993
and April 1994, respectively and in December 1995 for Surf N Print(TM). The
Company released an upgrade of ClickBook(TM) for Windows in November 1995.
The future success of the Company is dependent upon many factors, including the
successful completion of its product development activities, the development of
salable products, the identification and penetration of markets for these
products, and technological change and risk of obsolescence.
In June 1996, the Company sold substantially all of its assets to The ForeFront
Group, Inc. (ForeFront). The purchase price consisted of 248,375 shares of
ForeFront common stock initially with a possible earnout of an additional
199,262 of additional shares of ForeFront common stock which is contingent upon
ForeFront achieving certain revenues and net income before taxes in 1996 and
1997 with the assets acquired from BookMaker.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
--------------------------
Revenue
- -------
Product revenue is recognized upon shipment of the software. The majority of
units are sold through a software distributor. Software licensing revenue is
recognized upon delivery to the customer and the receipt and acceptance of a
signed contract or order if there are no significant postdelivery obligations.
Sales to the software distributor accounted for approximately 34 percent of the
Company's 1995 revenues.
The cost of revenues primarily includes direct labor and certain fixed costs as
they relate to maintenance and services support. At the initial license date,
the Company recognizes the liability for the estimated cost of warranties and
insignificant postdelivery obligations.
8
<PAGE>
Furniture and Equipment
- -----------------------
Furniture and equipment are carried at cost and depreciated on the straight-line
method using a three-year estimated useful life.
Research and Development
- ------------------------
Research and development costs are expensed as they are incurred. Statement of
Financial Accounting Standards (SFAS) No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased or Otherwise Marketed," requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the Company between completion of the
working model and the point at which the product is ready for general release
have been insignificant.
Statement of Cash Flows
- -----------------------
The Company considers highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents. Cash paid for interest amounted
to $266 in 1995.
Accrued Liabilities
- -------------------
Accrued liabilities as of December 31, 1995, consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Vacation $15,691
Rent 12,000
Other 20,044
-------
Total accrued liabilities 47,735
=======
</TABLE>
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company 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
affect the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from the Company's estimates.
3. FEDERAL INCOME TAXES:
---------------------
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been recognized differently in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement carrying amounts and tax bases of liabilities and assets
using enacted tax rates and laws in effect in the year in which the differences
are expected to reverse. Deferred tax assets are evaluated for realization on a
more-likely-than-not criteria in determining if a valuation should be provided.
9
<PAGE>
As of December 31, 1995, the Company has generated deferred tax assets of
approximately $100,000, primarily due to book expenses which are not currently
deductible for tax purposes. As the Company has had minimal income since
inception and there is no assurance of future taxable income, a valuation
allowance has been established to fully offset the deferred tax assets at
December 31, 1995. The Company increased its valuation allowance approximately
$26,000 during the year ended December 31, 1995, due to an increase in the items
deducted for books which are not currently deductible for tax purposes.
4. STOCKHOLDERS' EQUITY:
---------------------
Preferred Stock
- ---------------
In August 1992, the Company issued 916,250 shares of Series A preferred stock at
$0.17 per share for net proceeds totaling $153,426. In addition, in May 1993,
the Company issued 166,667 shares of Series B preferred stock for $0.75 per
share for net proceeds totaling $120,755 and, in March 1994, the Company issued
185,000 shares of Series C preferred stock for $1.40 per share for net proceeds
totaling $250,793.
Holders of the Series A, Series B and Series C preferred stock can convert their
holdings into one share of common stock for each share of preferred stock at any
time. Upon the sale of the Company's common stock in a public offering, shares
of Series A, Series B and Series C preferred stock automatically convert into
common stock on a one-for-one basis. The Company has reserved sufficient
authorized but unissued shares of common stock to effect the conversion.
In the event a dividend is declared, the holders of the Series A, Series B and
Series C preferred stock are entitled to receive noncumulative dividends, in any
fiscal year, equal to the greater of (a) the respective issuance price of each
series of preferred stock or (b), if dividends have been declared on the common
stock, a preference of dividends in an amount per share equal to that which
would have been payable if the holders had converted their respective shares of
preferred stock into common stock.
Notwithstanding the foregoing, any time after two years from the date of the
first issuance of Series C preferred stock the majority stockholders may elect
in writing to receive cumulative dividends on the Series C preferred stock from
that date of election equal to 7 percent of the purchase price per annum. The
dividends are payable annually. Once the election is made, the holders of the
Series C preferred stock shall be entitled to dividends for the complete annual
period in progress at such time, notwithstanding an election to redeem such
Series C preferred stock as described above. After the dividend election, such
dividends on the Series C preferred stock shall be payable in preference and
priority to any payment of any dividend on the common stock, the Series A
preferred stock and the Series B preferred stock.
5. STOCK OPTION PLAN:
------------------
On May 23, 1994, the Company's stockholders approved the 1994 Stock Option Plan
(the Plan). Under the Plan, as amended, 100,000 shares of common stock have
been reserved for issuance upon exercise of incentive stock options. The term
of each option is determined by the board of directors with a maximum term of 10
years from the date of grant, but the options generally vest over a four-year
period. In March 1994, the Company granted three consultants non-qualified stock
options to purchase 48,000 shares of common stock at $0.25 per share. The
options vest over a two-year period, and 20,458 shares are vested and
exercisable at December 31, 1995
10
<PAGE>
as 20,000 shares were canceled during 1995. The weighted-average exercise price
of all options outstanding at December 31, 1995, was $0.25. At December 31,
1995, options to purchase 62,000 shares were available for future grants under
the Plan. The Company believes that, at date of grant, the exercise price
approximates fair value.
A summary of stock option activity follows:
<TABLE>
<CAPTION>
Options Price
Outstanding Per Share
------------ ---------
<S> <C> <C>
Balance at December 31, 1994 60,500 $0.25
Canceled (22,500) 0.25
------- -----
Balance at December 31, 1995 38,000 $0.25
======= =====
Exercisable at December 31, 1995 29,385 $0.25
======= =====
</TABLE>
During 1995, the Financial Accounting Standards Board adopted SFAS No. 123,
"Accounting for Stock-Based Compensation," which is effective for the Company's
1996 fiscal year. SFAS No. 123 would have required the Company to disclose in
1996 the effect of adoption of the alternative method, which would generally
require the Company to record compensation expense equal to the valuation of a
stock option on the grant date.
6. DISTRIBUTION AGREEMENT:
-----------------------
In August 1993, the Company entered into a one-year distribution agreement with
a third party whereby the customer would market certain of the Company's
software products. The agreement is extended for one-year periods until
canceled by either party with 90 days' written notice. The Company is obligated
to pay the customer a designated portion of the license fees to assist in
marketing the licensed products, but the Company is not required to provide
additional products or postcontract technical support. The Company recognized
product revenues of $574,000 during 1995 pursuant to this agreement.
7. COMMITMENTS:
------------
The Company leases approximately 1,800 feet of office space pursuant to an
operating lease which extends through December 1996. The Company paid $40,000
pursuant to the lease in 1995 and is committed to an additional $40,000 through
December 1996.
11
<PAGE>
PRO FORMA STATEMENTS OF OPERATIONS
The following tables set forth the unaudited pro forma statements of
operations for the Company for the year ended December 31, 1995, and the six
months ended June 30, 1996, after giving effect to the Company's acquisition on
June 12, 1996, of BookMaker. The unaudited pro forma financial information
assumes that the acquisition occurred as of January 1, 1995.
The unaudited pro forma statements of operations are based upon estimates and
assumptions related to the accounting for the BookMaker acquisition which are
subject to subsequent determination and more detailed analyses and evaluations
of the specific assets and liabilities. The final allocation of the purchase
price of the BookMaker acquisition may differ from the amounts contained in
these unaudited pro forma statements of operations.
The following unaudited pro forma statements of operations should be read in
conjunction with the Financial Statements of the Company and the related notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995 and the Company's Quarterly Report on Form 10-QSB for
the quarter ended June 30, 1996 as well as the audited financial statements of
BookMaker for the year ended December 31, 1995 and related notes thereto
included elsewhere herein. The unaudited pro forma financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the operating results that would have occurred had the BookMaker acquisition
taken place at the beginning of the period specified and is not intended to be a
projection of future operating results.
12
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
The ForeFront BookMaker
Group, Inc. Corporation Pro Forma
Historical Historical Adjustment Pro Forma
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
REVENUES:
Licenses and royalties $ 214,193 $1,700,771 $ -- $ 1,914,964
Maintenance and services 52,600 -- -- 52,600
Other 10,452 -- -- 10,452
----------- ---------- ----------- -----------
Total revenues 277,245 1,700,771 -- 1,978,016
Cost of Maintenance Services
and Product Licenses 136,911 420,109 -- 557,020
----------- ---------- ----------- -----------
Gross Profit 140,334 1,280,662 -- 1,420,996
OPERATING EXPENSES:
Research and development 837,007 242,647 -- 1,079,654
Selling and marketing 453,210 680,383 -- 1,133,593
General and administrative 367,537 411,785 44,600(a) 823,922
Acquired research and development -- -- -- --
----------- ---------- ----------- -----------
Operating loss (1,517,420) (54,153) (44,600) (1,616,173)
OTHER:
Interest income 22,772 1,853 -- 24,625
Interest expense (34,997) -- -- (34,997)
----------- ---------- ----------- -----------
Net loss $(1,529,645) $ (52,300) $(44,600) $(1,626,545)
=========== ========== =========== ===========
Net loss per share $(0.46) $(0.46)
=========== ===========
Shares used in computing
net loss per share 3,327,338 3,550,876
=========== ===========
</TABLE>
13
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
The ForeFront BookMaker
Group, Inc. Corporation Pro Forma
Historical Historical Adjustment Pro Forma
-------------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Licenses and royalties $ 1,169,147 $715,019 $ -- $ 1,884,166
Maintenance and services 44,611 -- -- 44,611
Other 11,669 -- -- 11,669
----------- -------- ----------- -----------
Total revenues 1,225,427 715,019 -- 1,940,446
Cost of Maintenance Services
and Product Licenses 196,791 168,936 -- 365,727
----------- -------- ----------- -----------
Gross Profit 1,028,636 546,083 -- 1,574,719
OPERATING EXPENSES:
Research and development 933,979 105,757 -- 1,039,736
Selling and marketing 975,343 273,679 -- 1,249,022
General and administrative 619,065 209,275 22,300(a) 850,640
Acquired research and development 2,798,604 -- -- 2,798,604
----------- -------- ----------- -----------
Operating loss (4,298,355) (42,628) (22,300) (4,363,283)
OTHER:
Interest income 301,349 -- -- 301,349
Interest expense -- (10) -- (10)
----------- -------- ----------- -----------
Net loss $(3,997,006) $(42,638) $(22,300) $(4,061,944)
=========== ======== =========== ===========
Net loss per share $(0.83) $(0.81)
=========== ===========
Shares used in computing
net loss per share 4,800,931 5,002,115
=========== ===========
</TABLE>
14
<PAGE>
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
GENERAL
The following notes set forth the assumptions used in preparing the
unaudited pro forma statements of operations. The pro forma adjustment is based
on estimates made by the Company's management using information currently
available. For purposes of preparing these unaudited pro forma statements of
operations, certain assumptions have been made in allocating the purchase price
to the net assets of BookMaker acquired. As a result, the pro forma adjustment
discussed below is subject to change pending the completion of the detailed
evaluation of the net assets acquired.
PRO FORMA ADJUSTMENT
The adjustment to the accompanying unaudited pro forma statements of
operations is described below:
(a) To record additional amortization expense relating to the purchased
software recorded in connection with the acquisition of BookMaker.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE FOREFRONT GROUP, INC.
/s/ Ernest D. Rapp
---------------------------------------
Ernest D. Rapp
Chief Financial Officer
16
