Forefront Holdings Inc., the golf accessories company, reported a loss of $ $3.3 million in the quarter ended March 26 versus a $2.9 million deficit a year ago.

According to a filing with the SEC, sales of Datrek golf bags and travel covers decreased 33.8% to $1.76 million. The decline was partly attributed to a reduction of its off-course sales to smaller, independent retail stores, which have historically been its largest sales outlet due to the consolidation of the industry. In addition, large golf specialty stores and sporting goods chains have increased purchases of their own private label golf bags and accessory products in large quantities directly from overseas vendors. Sales of Devant and Sir Christopher Hatton towels fell to $1.65 million from $1.8 million.
Sales of Burton golf bags and travel covers decreased 28.0% to $892,329 due to the aforementioned consolidation and the overall weak economy. Sales of Miller and Burton accessories decreased 43.2% to $368,016 due to the same golf industry conditions as well as the decision to discontinue some of our less profitable accessory items. .

Sales of NCAA items decreased 33.9% to $572,234 as a result of the reduction in off-course sales, as well as the loss of NCAA item sales to one of its major off-course customers. NFL golf bags and accessories                      rose slightly to $174,848 from $173,361.

Sales of Premium/OEM/Internet items increased 28.2% to $2.16 millionas the company has “made great efforts to increase this area of our business” given weakness elsewhere. In 2007, the company had an exclusive worldwide distribution agreement to distribute the GolfLogix-Garmin GPS device, which provided $300,000 in sales in the prior year period. This exclusive distribution agreement expired in the fourth quarter of 2007.

 Cost of sales for the three months ended March 29, 2008 was $6.3 million, or 21.6% gross margin, as compared to $7.8 million, or 22.9% gross margin, for the comparable period in the prior year. Included as part of our cost of sales are direct product costs comprised of material, labor, and production overhead. Other costs include import duties, inbound and outbound transportation costs, and warranty expenses. The decrease in gross margin of 1.3% was the result of amortization of $0.3 million related to a lease modification agreement. Excluding this non-cash amortization, our current year gross margin rate is 25.4%. The 2.5% improvement resulted from a concentrated effort beginning in 2008 to eliminate less profitable business and product lines.

Total operating expenses for the three months ended March 29, 2008 were $4.5 million, compared to $4.9 million for the three months ended March 31, 2007. Operating expenses were comprised of sales and marketing expenses and general and administrative expenses.

Sales and marketing expense includes the employee costs related 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 $1.9 million, or 23.9% of net sales, for the three months ended March 29, 2008, compared to $2.6 million, or 25.8% of net sales, for the three months ended March 31, 2007. The decrease in sales and marketing expense as a percentage of net sales of 1.9% is primarily attributable to the restructuring of our sales group to combine our off-course and on-course sales teams in the third quarter of 2007.

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, amortization of intangibles and public company costs. General and administrative expense was $2.5 million, or 31.5% of net sales, for the three months ended March 29, 2008, as compared to $2.3 million, or 23.0% of net sales, for the comparable period in the prior year. The principal reasons for the increase in administrative expense of $0.2 million are increased information technology (“IT”) expenses and costs associated with the restructuring plan discussed above.

Interest expense was $0.5 million and $0.3 million for the three month periods ended March 29, 2008 and March 31, 2007, respectively. The increase of $0.2 million is attributable to borrowings under our credit facility with SVCH, partially offset by lower borrowings under our credit facility with First Capital Corporation (“FCC”).