<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 1997
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number: 0-6669
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Forward Industries, Inc.
------------------------
(Exact name of Registrant as specified in its Charter)
New York 13-1950672
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
275 Hempstead Turnpike
West Hempstead, NY 11552
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(Address of principal executive offices)
(516) 564-1100
-----------------------------------------
(Registrant's telephone number)
---------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if changed since
last Report)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
As of August 11, 1997, 8,276,282 shares of the issuer's common stock were
outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
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FORWARD INDUSTRIES, INC. AND SUBSIDIARY
FORM 10-QSB
THREE MONTHS ENDED JUNE 30, 1997
CONTENTS
<TABLE>
<CONTENT>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
as of June 30, 1997 (Unaudited)
and September 30, 1996
Consolidated Statements of Operations 5
(Unaudited) for the Nine and Three Months
Ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows 6
(Unaudited) for the Nine Months
Ended June 30, 1997 and 1996
Notes to Form 10-QSB (Unaudited) 8
Item 2. Management's Discussions and Analysis 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Exhibits and Reports on Form 8-K 17
</TABLE>
2
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ITEM 1. FINANCIAL STATEMENTS
FORWARD INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996*
--------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 994,235 $ 208,214
Accounts receivable, less allowance for doubtful
accounts of $91,300 and $50,000 2,415,111 2,774,660
Inventories 1,893,605 1,916,874
Prepaid expenses and other current assets 250,523 213,736
Notes and loans receivable - current portion 69,996 69,996
Notes and loans receivable - officers - current portion 57,730 74,052
Deferred income taxes 399,000 399,000
------------ ------------
Total current assets 6,080,200 5,656,532
------------ ------------
PROPERTY, PLANT AND EQUIPMENT - net 715,258 745,639
------------ ------------
OTHER ASSETS:
Deferred income taxes 1,753,272 1,831,000
Building held for sale or lease 137,414 161,963
Note receivable - net of current portion 133,777 186,274
Notes and loans receivable - officers - net of
current portion 129,169 165,535
Deferred offering costs 176,102 -
Deferred debt costs 117,401 -
Other assets 91,240 53,813
------------ ------------
2,538,375 2,398,585
------------ ------------
$ 9,333,833 $ 8,800,756
============ ============
</TABLE>
*The balance sheet at September 30, 1996 is derived from the audited financial
statements of that date.
The accompanying notes are an integral part of the consolidated
financial statements
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FORWARD INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996*
--------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Acceptances and notes payable $ 1,481,674 $ 1,169,712
Accounts payable 1,227,332 1,568,101
Private placement deposits 522,500 -
Current maturities of mortgage payable 16,461 15,164
Current maturities of long-term debt 150,000 445,750
Notes payable - private placement 110,000 -
Accrued expenses and other current liabilities 457,722 636,484
------------ ------------
Total current liabilities 3,965,689 3,835,211
------------ ------------
LONG-TERM LIABILITIES:
Mortgage payable, net of current maturities 1,100,763 1,113,277
Long-term debt, net of current maturities 109,697 66,667
Notes payable - related parties 88,700 90,950
Other liabilities - 22,500
------------ ------------
1,299,160 1,293,394
------------ ------------
Total liabilities 5,264,849 5,128,605
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, 10,000,000 authorized shares, par value $.01;
issued 7,112,062 and 3,739,462 shares
(including 329,780 held in treasury) 71,120 60,520
Paid-in capital 5,944,607 5,669,457
Deficit (1,708,630) (1,819,713)
------------ ------------
4,307,097 3,910,264
Less: Cost of shares in treasury 238,113 238,113
------------ ------------
Total stockholders' equity 4,068,984 3,672,151
------------ ------------
$ 9,333,833 $ 8,800,756
============ ============
</TABLE>
*The balance sheet at September 30, 1996 is derived from the audited financial
statements of that date.
The accompanying notes are an integral part of the consolidated
financial statements
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<PAGE>
FORWARD INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE THREE
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1997 1996 1997 1996
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 10,848,948 $ 13,342,959 $ 3,710,977 $ 3,881,188
COST OF GOODS SOLD 7,450,525 10,913,605 2,500,843 3,108,736
-------------- ------------- ------------ ------------
GROSS PROFIT 3,398,423 2,429,354 1,210,134 772,452
-------------- ------------- ------------ ------------
OPERATING EXPENSES:
Distribution and selling 1,356,107 1,851,061 421,085 591,769
General and administrative 1,751,334 1,681,719 688,808 511,129
-------------- ------------- ------------ ------------
3,107,441 3,532,780 1,109,893 1,102,898
-------------- ------------- ------------ ------------
INCOME (LOSS) FROM OPERATIONS 290,982 (1,103,426) 100,241 (330,446)
-------------- ------------- ------------ ------------
OTHER INCOME (DEDUCTIONS):
Interest expense (109,439) (174,090) (36,558) (53,378)
Interest expense - related parties (39,871) (33,469) (9,439) (8,610)
Interest income 27,972 26,492 9,177 5,631
Rental income - net (106,158) (94,449) (29,948) (54,567)
Other income - net 130,833 42,394 69,489 (8,380)
-------------- ------------- ------------ ------------
(96,663) (233,122) 2,721 (119,304)
-------------- ------------- ------------ ------------
INCOME (LOSS) BEFORE PROVISION (CREDIT)
FOR INCOME TAXES 194,319 (1,336,548) 102,962 (449,750)
PROVISION (CREDIT) FOR INCOME TAXES 83,236 (494,000) 42,597 (206,000)
-------------- ------------- ------------ ------------
NET INCOME (LOSS) $ 111,083 $ (842,548) $ 60,365 $ (243,750)
============== ============= ============ ============
NET INCOME (LOSS) PER COMMON SHARE (Note E) $.02 $(.21) $.01 $(.05)
==== ===== ==== =====
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING (Note E) 5,950,853 3,959,182 6,022,282 4,713,782
========= ========= ========= =========
DIVIDENDS NONE NONE NONE NONE
==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
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<PAGE>
FORWARD INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 111,083 $ (842,548)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Accrued interest receivable - (15,304)
Depreciation and amortization 117,668 175,200
Deferred taxes 77,728 (494,000)
Non-cash compensation 18,750 66,657
Changes in assets and liabilities:
Accounts receivable 359,549 618,387
Inventories 23,269 (374,476)
Prepaid expenses and other current assets (36,787) (206,193)
Other assets (37,427) (6,180)
Accounts payable (340,769) (1,594,454)
Accrued expenses and other current liabilities (178,762) (98,468)
Other liabilities (22,500) (36,000)
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 91,802 (2,807,379)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from notes and loans receivable 52,497 283,997
Purchases of property, plant and equipment (62,738) (41,484)
Collections from officers 52,688 48,894
------------ ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 42,447 291,407
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 311,962 353,329
Proceeds from notes payable - private placement 110,000 -
Proceeds from issuance of stock 167,000 2,671,800
Proceeds from private placement deposits 522,500 -
Payments of long-term notes (152,720) (347,740)
Payments of mortgage (11,217) (12,167)
Repayments of notes payable - related parties (2,250) (750)
Deferred offering costs (176,102) (243,240)
Deferred debt costs (117,401) -
Proceeds from long-term notes - 250,000
Proceeds from notes payable - related parties - 164,200
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 651,772 2,835,432
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 786,021 319,460
CASH AND CASH EQUIVALENTS - beginning 208,214 478,784
------------ ------------
CASH AND CASH EQUIVALENTS - ending $ 994,235 $ 798,244
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
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<PAGE>
FORWARD INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
---------------------------
1997 1996
------------ -------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 230,380 $ 300,707
Income taxes 529 -
SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Warrants issued for services rendered $ 18,750 $66,657
========== =======
Conversion of long-term debt into equity $ 100,000 $557,200
========== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
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<PAGE>
FORWARD INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO FORM 10-QSB
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
NOTE A
The attached summarized financial information does not include all
disclosures required to be included in a complete set of financial
statements prepared in conformity with generally accepted accounting
principles. Such disclosures were included with the consolidated financial
statements of the Company at September 30, 1996, included in its Form
10-KSB. Such statements should be read in conjunction with the data
herein.
NOTE B
The financial information reflects all normal recurring adjustments which,
in the opinion of management, are deemed necessary for a fair presentation
of the results for the interim periods. The results for the interim
periods are not necessarily indicative of the results to be expected for
the year.
NOTE C
Certain 1996 amounts have been reclassified to conform to the 1997
presentation.
NOTE D
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Finished goods $ 1,069,665 $ 910,780
Work-in-process 534,979 507,372
Raw materials and supplies 288,961 498,722
------------ ------------
$ 1,893,605 $ 1,916,874
============ ============
</TABLE>
NOTE E
Earnings (loss) per share are based on the weighted average number of
shares outstanding during each period presented. Common stock equivalents
have not been included for the nine and three months ended June 30, 1997
as their effect would be anti-dilutive. For the nine and three months
ended June 30, 1997, the modified treasury stock method was not utilized
to calculate the dilutive effect of the options and warrants as their
exercise prices were below the market price of the underlying securities.
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<PAGE>
FORWARD INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO FORM 10-QSB
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
NOTE F
On December 27, 1995, the Board of Directors declared a two-for-one stock
split in the form of a 100% stock dividend. All share data and per share
amounts have been adjusted to reflect the stock split on a retroactive
basis.
NOTE G
In May 1997, the Company began offering for sale, through a private
placement, units, at a price of $25,000 per unit. Each unit consists of
(i) 60,000 shares of its common stock, (ii) one warrant to purchase up to
60,000 shares of common stock at $2.00 per share of common stock and
(iii) one unsecured convertible promissory note in the principal amount
of $10,000 bearing interests at a rate of 10% per annum (convertible at
the sole option of the Company under certain circumstances).
For the nine months ended June 30, 1997, the Company sold eleven units.
Amounts received for units that did not close by June 30, 1997 have been
classified as private placement deposits in the consolidated balance
sheets.
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<PAGE>
This Quarterly Report on Form 10-QSB contains forward looking
statements that involve certain risks and uncertainties. The Company's actual
results could differ materially from the results discussed in the forward
looking statements
Item 2. Management's Discussion and Analysis
NINE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD") COMPARED WITH NINE MONTHS
ENDED JUNE 30, 1996 (THE "1996 PERIOD").
Net income in the 1997 Period of $111,083 is a significant improvement from the
($842,548) net loss in the 1996 Period. Earnings per share increased from a
loss of ($.21) in the 1996 Period to a profit of $.02 in the 1997 Period.
REVENUES. Net sales decreased $2,494,011 (18.7%) to $10,848,948 in the 1997
Period, from $13,342,959 in the 1996 Period. Sales of total carrying cases
decreased by $1,839,542 and sales of advertising specialties decreased by
$654,469. Within carrying cases, the Company's retail Terrapin (Registered
Trademark) line accounted for an increase of $277,354. Custom case sales
declined because of lower volumes with three large customers.
OPERATING INCOME. Consolidated income from operations increased by $1,394,408
to a profit of $290,982 in the 1997 Period, up significantly from a
($1,103,426) loss in the 1996 Period. Although net sales decreased in the 1997
Period, gross profits and margin increased significantly. Gross profit
increased $969,069 (39.9%) to $3,398,423 in the 1997 Period up from $2,429,354
in the 1996 Period. The gross margin improved 13.1 percentage points to 31.3%
in the 1997 Period up from 18.2% in the 1996 Period. These operating
improvements reflect the cumulative impact of numerous management programs
focused on increasing manufacturing efficiencies, raising quality standards and
eliminating unprofitable product offerings.
Distribution expenses decreased $51,352 (58.5%) from $87,821 in the 1996 Period
to $36,469 in the 1997 Period and from .7% of net sales in the 1996 Period to
.3% in the 1997 Period, primarily as a result of better control of import
shipping expenses.
Selling expenses decreased $443,602 (25.2%) from $1,763,240 in the 1996 Period
to $1,319,638 in the 1997 Period. In the 1997 Period, the ratio of selling
expenses to net sales was 12.2% down from 13.2% in the 1996 Period. The
decrease in selling expenses in the 1997 Period was primarily the result of a
37.2% decrease in sales salaries and commissions reflecting a curtailed level
of sales staffing coupled with lower sales volume, and lower travel and
advertising expenses, all partially offset by increased samples expenditures
and trade show expenses.
General and administrative expenses increased as a percent of net sales from
12.6% in the 1996 Period to 16.1% in the 1997 Period, while the amount
increased by $69,615 (4.1%) to $1,751,334 in the 1997 Period from $1,681,719 in
the 1996 Period. The increase in general and administrative expenses consisted
primarily of increases in salaries, reflecting key management additions, and
increased travel related to cost containment efforts, all partially offset by
lower group insurance cost, professional fees, costs associated with the
opening of letters of credit for overseas sourcing of carrying cases, and
employment fees coupled with workmen's
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<PAGE>
compensation and group health insurance refunds (total refunds of $87,842).
OTHER INCOME (DEDUCTIONS) AND TAXES. Total interest expenses decreased by
$58,249 (28.1%) to $149,310 in the 1997 Period from $207,559 in the 1996 Period
due to lower borrowing levels reflecting payments of debt.
The Company's rental building in Brooklyn, New York, was partially leased
during both the 1997 and 1996 Periods. Rental income - net increased from a
loss of ($94,449) in the 1996 Period to a loss of ($106,158) in the 1997 Period
as a result of higher real estate taxes and lower rental receipts.
Other income - net increased $88,439 in the 1997 Period from the 1996 Period
resulting from the write-off of various accounts payable and a $58,171 credit
resulting from the Company's planned pension fund termination.
The effective tax rate in the 1997 Period was 42.8% compared to 37.0% rate in
the 1996 Period. The differential in rates occurred primarily due to the
balance sheet approach used to calculate deferred income taxes for the 1996
Period.
THREE MONTHS ENDED JUNE 30, 1997 (THE "1997 QUARTER") COMPARED WITH THREE
MONTHS ENDED JUNE 30, 1996 (THE "1996 QUARTER").
Net income in the 1997 Quarter of $60,365 is a significant improvement from the
($243,750) net loss in the 1996 Quarter. Earnings per share increased from a
loss of ($.05) in the 1996 Quarter to a profit of $.01 in the 1997 Quarter.
REVENUES. Net sales decreased $170,211 (4.4%) to $3,710,977 in the 1997
Quarter, from $3,881,188 in the 1996 Quarter. Sales of total carrying cases
decreased by $45,376 and sales of advertising specialties decreased by
$124,835. Within carrying cases, the Company's retail Terrapin (Registered
Trademark) line accounted for an increase of $13,359. Lower advertising
specialties revenues reflect discontinued lower margin product offerings.
OPERATING INCOME. Consolidated income from operations increased by $430,687 to
a profit of $100,241 in the 1997 Quarter, up significantly from a ($330,446)
loss in the 1996 Quarter.
Although net sales decreased in the 1997 Quarter, gross profits and margin
increased significantly. Gross profit increased $437,682 (56.7%) to $1,210,134
in the 1997 Quarter up from $772,452 in the 1996 Quarter. The gross margin
improved 12.7 percentage points to 32.6% in the 1997 Quarter up from 19.9% in
the 1996 Quarter. These operating improvements reflect the cumulative impact of
numerous management programs focused on increasing manufacturing efficiencies,
raising quality standards and eliminating unprofitable product offerings.
Distribution expenses decreased $24,849 (73.6%) from $33,765 in the 1996
Quarter to $8,916 in the 1997 Quarter and from .9% of net sales in the 1996
Quarter to .2% in the 1997 Quarter, primarily as a result of better control of
import shipping expenses.
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<PAGE>
Selling expenses decreased $145,835 (26.1%) from $558,004 in the 1996 Quarter
to $412,169 in the 1997 Quarter. In the 1997 Quarter, the ratio of selling
expenses to net sales was 11.1%, compared to 14.4% in the 1996 Quarter. The
decrease in selling expenses in the 1997 Quarter was primarily the result of a
34.5% decrease in sales salaries and commissions reflecting a curtailed level
of sales staffing, lower sales volume and advertising, all partially offset by
increased samples expenditures, trade show expenses and travel expenses.
General and administrative expenses increased by $177,679 (34.8%) to $688,808
in the 1997 Quarter from $511,129 in the 1996 Quarter, and as a percent of net
sales from 13.2% in the 1996 Quarter to 18.6% in the 1997 Quarter. This
increase in general and administrative expenses consisted primarily of higher
professional fees, costs associated with the opening of letters of credit for
overseas sourcing of carrying cases, and general insurance expenses, all
partially offset by lower travel expenses, employment fees, and computer costs.
OTHER INCOME (DEDUCTIONS) AND TAXES. Total interest expenses decreased by
$15,991 (25.8%) to $45,977 in the 1997 Quarter from $61,988 in the 1996 Quarter
due to lower borrowing levels.
The Company's rental building in Brooklyn, New York, was partially leased
during both the 1997 and 1996 Quarters. Rental income - net increased from a
loss of ($54,567) in the 1996 Quarter to a loss of ($29,948) in the 1997
Quarter as a result of lower real estate taxes partially offset by a decrease
in lease revenues.
Other income - net increased $77,869 in the 1997 Quarter from the 1996 Quarter
primarily resulting from a $58,171 pension fund termination.
The effective tax rate in the 1997 Quarter was 41.4% compared to 45.8% rate in
the 1996 Quarter. The differential in rates occurred primarily due to the
balance sheet approach used to calculate deferred income taxes for the 1996
Quarter.
LIQUIDITY AND CAPITAL RESOURCES.
In the 1997 Period, $91,802 of cash was provided by operating activities. This
increase in operational cash resulted from: net income in the 1997 Period of
$111,083; a reduction of accounts receivable of $359,549; deferred taxes of
$77,728; and lower inventories of $23,269. Reductions of accounts payable
($340,769), accrued expenses and other liabilities ($178,762), and, higher
prepaid and various other assets of ($74,214) offset cash provided from
operations.
Net investing activities in the 1997 Period provided cash of $42,447. The
Company collected $52,497 of notes receivable, which arose from the sale of its
discontinued operations in 1994 and collected $52,688 of loans made to its
officers. In the 1997 Period, the Company purchased $62,738 of property, plant
and equipment.
Financing activities in the 1997 Period provided cash of $651,772. Funds were
provided through: increased letters of credit activity of $311,962; issuance of
convertible notes payable from a private placement of $110,000; private
placement deposits (not yet closed) of $522,500; and, increased Common Stock
and additional paid-in capital of $167,000 from a private placement. Funds
were used for payments of long-term
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<PAGE>
notes payable of $152,720, and for deferred costs of $293,503, relating to a
private placement of equity and notes.
In May 1997, the Company began offering for sale, through a private placement,
units, at a price of $25,000 per unit. Each unit consists of (i) 60,000 shares
of its common stock, (ii) one warrant to purchase up to 60,000 shares of
common stock at $2.00 per share of common stock and (iii) one unsecured
convertible promissory note in the principal amount of $10,000 bearing
interests at a rate of 10% per annum (convertible at the sole option of
the Company under certain circumstances).
For the nine months ended June 30,1997, the Company sold thirty-one point nine
(31.9) units and closed eleven (11.0) units. Amounts received for the units
which did not close by June 30, 1997 have been classified as private placement
deposits in the consolidated balance sheet.
In May 1997, the Company closed on $275,000 of private placement equity and
notes. During July 1997, an additional $622,500 of private placement equity and
notes was closed. At the end of July 1997, private placement equity totaled
$538,500; and private placement notes totaled $359,000.
-13-
<PAGE>
The Company has a line of credit with its bank and is indebted to such bank for
short-term borrowings and acceptances. The total line is for $1,100,000 of
which $750,000 is reserved for letters of credit (acceptances). The Company's
line of credit with its bank was scheduled to mature on August 15, 1996 but was
extended to August 30, 1997. In connection with such extension, the rate of
interest on outstanding borrowings was increased from 1% to 1-1/2% over prime.
The line of credit contains certain financial covenants, including maintaining
certain financial ratios. At September 30, 1996, the Company was not
maintaining such ratios and the bank has waived compliance through August 30,
1997. At June 30, 1997, the Company owed the bank $1,083,037 under this line.
The Company is currently negotiating a line of credit with the asset based
financing division of a large Midwestern regional bank to replace its existing
bank line of credit, but has not received any commitments in this regard and
there can be no assurance that any commitments will be forthcoming or will be
on terms which will not be unduly burdensome to the Company.
On February 14, 1996, the Company obtained a thirteen-month loan of $250,000
bearing interest at 10% per annum. In October 1996, $100,000 of such debt was
converted into 200,000 shares of Common Stock. The balance of the note is
payable as follows:
1. The remaining $150,000 note is convertible into shares of Common
Stock at $.25 per share. The note shall not be convertible until April 15, 1998
and is due on or after July 15, 1998.
2. A warrant was issued to the note holder for the purchase of 60,000
shares of the Company's stock at $2.00 per share.
The Company did not incur any other long-term debt in the 1997 Period. At June
30, 1997, long-term debt totalled $259,697 and all payments were made on a
0timely basis. Long-term debt is scheduled to mature as follows: $150,000 to
be paid in the next twelve months and $109,697 to be paid thereafter.
DEFERRED INCOME TAXES.
The Company's balance sheet at June 30, 1997 includes $2,152,272 of deferred
income taxes as an asset. The Company was profitable in the 1997 Period and
fully anticipates
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<PAGE>
being profitable during the entire 1997 Fiscal Year and beyond. However, to
the extent that the Company's operation may not be profitable in future
periods, the Company would not be able to realize the benefit of its deferred
tax assets. Without such deferred tax assets, at June 30, 1997, the Company's
stockholder's equity at such date of $4,068,984 would have been reduced by
$2,152,272 to a stockholder's equity of $1,916,712 and the Company's working
capital at March 31, 1997 would have been reduced by $399,000 from $2,114,511
to $1,715,511.
-15-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None.
Item 2. Changes in Securities None.
Item 3. Defaults Upon Senior Securities None.
Item 4. Submission of Matters to a Vote of Security-Holders
On August 7, 1997 the Company held its Annual Meeting of
Shareholders. The holders of 8,276,282 shares of Common Stock of the
Company were entitled to vote at the meeting and the holders of
7,899,516 shares of Common Stock, or 95% of shares entitled to vote at
the meeting, were represented by proxy. No stockholders were present in
person. The following actions took place:
1. The holders of 7,799,537 shares of Common Stock voted for the
election of Theodore H. Schiffman to continue to serve as a director of
the Company and the holders of 99,979 shares of Common Stock abstained
from voting. The holders of 7,782,137 shares of Common Stock voted for
the election of Michael Schiffman to continue to serve as a director of
the Company and the holders of 117,379 shares of Common Stock abstained
from voting. The holders of 7,802,137 shares of Common Stock voted for
the election of William E. Mooar to continue to serve as a director of
the Company and the holders of 97,379 shares of Common Stock abstained
from voting. The holders of 7,802,851 shares of Common Stock voted for
the election of Noah Fleschner to continue to serve as a director of the
Company and the holders of 96,665 shares of Common Stock abstained from
voting. No stockholders voted against any of the nominees.
2. The shareholders approved a proposal to amend the Company's
Certificate of Incorporation to increase the authorized capital stock of
the Company such that the aggregate number of shares which the Company
shall have the authority to issue shall be increased from 10,000,000 to
40,000,000, all of which shall be designated "Common Stock." The holders
of 7,505,751 shares of Common Stock voted for the proposal, the holders
of 360,965 shares of Common Stock voted against the proposal and the
holders of 32,800 shares of Common Stock abstained from voting.
3. The shareholders approved a proposal to amend the Company's
Certificate of Incorporation to increase the authorized capital stock of
the Company such that the
-16-
<PAGE>
Company shall have the authority to issue an additional 4,000,000
shares, all of which shall be designated "Preferred Stock." The holders
of 5,285,142 shares of Common Stock voted for the proposal, the holders
of 370,044 shares of Common Stock voted against the proposal and the
holders of 58,206 shares of Common Stock abstained from voting.
4. The shareholders approved a proposal to effectuate a one-for-two
reverse stock split of the Company's Common Stock. The holders of
7,407,256 shares of Common Stock voted for the proposal, the holders of
446,575 shares of Common Stock voted against the proposal and the
holders of 45,685 shares of Common Stock abstained from voting.
5. The shareholders approved a proposal to adopt the Company's Stock
Incentive Plan. The holders of 5,231,391 shares of Common Stock voted
for the proposal, the holders of 417,909 shares of Common Stock voted
against the proposal and the holders of 64,092 shares of Common Stock
abstained from voting.
6. Finally the shareholders ratified the appointment of Patrusky, Mintz
& Semel, as independent accountants of the Company for the fiscal year
ending September 30, 1997. The holders of 7,750,204 shares of Common
Stock voted for the ratification, the holders of 108,641 shares of
Common Stock voted against the ratification and the holders of 40,671
shares of Common Stock abstained from voting.
Item 5. Exhibit and Reports on Form 8-K
(a) Exhibit 27: Financial Data Schedule
(b) The Company's Current Report on Form 8-K dated June 9, 1997.
-17-
<PAGE>
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 14, 1997
FORWARD INDUSTRIES, INC.
(Registrant)
By: /s/ Theodore H. Schiffman
----------------------------
THEODORE H. SCHIFFMAN
Chairman and Chief Executive
Officer and Principal Financial
Officer
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<PAGE>
EXHIBIT INDEX
Ex. No. Exhibit Page
- ------ ------- ----
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
FORWARD INDUSTRIES, INC. AND SUBSIDIARY
EXHIBIT 27-FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND UNAUDITED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-1-1996
<PERIOD-END> JUN-30-1997
<CASH> 994,235
<SECURITIES> 0
<RECEIVABLES> 2,506,411
<ALLOWANCES> 91,300
<INVENTORY> 1,893,605
<CURRENT-ASSETS> 6,080,200
<PP&E> 2,426,465
<DEPRECIATION> 1,711,207
<TOTAL-ASSETS> 9,333,833
<CURRENT-LIABILITIES> 3,965,689
<BONDS> 0
<COMMON> 71,120
0
0
<OTHER-SE> 3,997,864
<TOTAL-LIABILITY-AND-EQUITY> 9,333,833
<SALES> 10,848,948
<TOTAL-REVENUES> 10,848,948
<CGS> 7,450,525
<TOTAL-COSTS> 7,450,525
<OTHER-EXPENSES> 3,107,441
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149,310
<INCOME-PRETAX> 194,319
<INCOME-TAX> 83,236
<INCOME-CONTINUING> 111,083
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,083
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
