UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2015.

 

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

 

 

FORWARD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

 

New York	13-1950672
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 

477 Rosemary Ave., Suite 219, West Palm Beach, FL 33401

(Address of principal executive offices, including zip code)

 

(561) 465-0030

(Registrant’s telephone number, including area code)

 

 

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 twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.            Yes ☒            No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).             Yes ☐            No ☒

 

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.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☒

 

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

 

The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, on August 7, 2015, which is the latest practical date prior to the filing of this report, was  8,641,755 shares.

 

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

 

PART I.	FINANCIAL INFORMATION		Page
			No.
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2015 (Unaudited) and September 30, 2014		3
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited) for the Three and Nine Months Ended June 30, 2015 and 2014		4
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended June 30, 2015 and 2014		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		23
Item 4.	Controls and Procedures		23
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		25
Item 1A.	Risk Factors		25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 3.	Defaults Upon Senior Securities		25
Item 4.	Mine Safety Disclosures		25
Item 5.	Other Information		25
Item 6.	Exhibits		26
	Signatures		27

 

 

Note Regarding Use of Certain Terms

 

In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the following terms have the meanings assigned to them as set forth below: 

 

“we”, “our”, and the “Company” refer to Forward Industries, Inc., a New York corporation, together with its consolidated subsidiaries; 
“Forward” or “Forward Industries” refers to Forward Industries, Inc.; 
“common stock” refers to the common stock, $0.01 par value per share, of Forward Industries, Inc.; 
“Forward US” refers to Forward Industries’ wholly owned subsidiary Forward Industries (IN), Inc., an Indiana corporation;
“Forward Switzerland” refers to Forward Industries’ wholly owned subsidiary Forward Industries (Switzerland) GmbH, a Swiss corporation;

“Forward UK” refers to Forward Industries’ former wholly owned subsidiary Forward Ind. (UK) Limited, a limited company of England and Wales;

“Forward China” refers to Forward Industries Asia-Pacific Corporation (f/k/a Seaton Global Corporation), Forward’s exclusive sourcing agent in the Asia-Pacific region;

“GAAP” refers to accounting principles generally accepted in the United States; 
“Commission” refers to the United States Securities and Exchange Commission; 
“Exchange Act” refers to the United States Securities Exchange Act of 1934, as amended;

“Fiscal 2014” refers to our fiscal year ended September 30, 2014;

“Fiscal 2015” refers to our fiscal year ending September 30, 2015; 
“Europe” refers to the countries included in the European Union;

“EMEA Region” means the geographic area encompassing Europe, the Middle East and Africa;

“APAC Region” refers to the Asia Pacific Region, consisting of Australia, New Zealand, Hong Kong, Taiwan, China, South Korea, Japan, Singapore, Malaysia, Thailand, Indonesia, India, the Philippines and Vietnam;

“Americas” refers to the geographic area encompassing North, Central, and South America;

“OEM” refers to Original Equipment Manufacturer; and

“Retail” refers to the retail distribution channel.

 

Note Regarding Presentation of Financial Information

 

Certain figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments; accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

 

 

 

 

 

Part I. Financial Information

 

Item 1. Financial Statements

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		June 30,				September 30,
		2015				2014
		(Unaudited)				(Note 1)
Assets
Current assets:
Cash and cash equivalents		$	4,287,166			$	6,477,132
Marketable securities			-				1,051,230
Accounts receivable			5,327,398				6,124,871
Inventories			2,883,835				2,374,837
Prepaid expenses and other current assets			369,210				401,549
Total current assets			12,867,609				16,429,619
Property and equipment, net			90,284				98,990
Other assets			40,962				40,962
Total assets		$	12,998,855			$	16,569,571
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities		$	1,365,977			$	1,218,541
Due to Forward China			4,506,660				5,215,768
Total current liabilities			5,872,637				6,434,309
Other liabilities			119,231				115,202
Total liabilities			5,991,868				6,549,511
6% Senior Convertible Preferred Stock, par value $0.01 per share; 1,500,000 shares authorized; 851,154 shares available; 0 and 648,846 shares issued and outstanding; aggregate liquidation value of $0 and $1,275,000; as of June 30, 2015 and September 30, 2014, respectively			-				833,365
Commitments and contingencies
Shareholders’ equity:
Preferred stock, par value $0.01 per share; 4,000,000 shares authorized; 2,400,000 undesignated at June 30, 2015 and September 30, 2014
Series A Participating Preferred stock, par value $0.01; 100,000 shares authorized; no shares issued and outstanding			-				-
Common stock, par value $0.01 per share; 40,000,000 shares authorized; 8,606,755 and 9,159,796 shares issued; 8,606,755 and 8,453,386 shares outstanding; at June 30, 2015 and September 30, 2014, respectively			86,068				91,598
Additional paid-in capital			17,483,710				18,747,371
Treasury stock, 0 and 706,410 shares at cost at June 30, 2015 and September 30, 2014, respectively			-				(1,260,057	)
Accumulated deficit			(10,541,765	)			(8,371,806	)
Accumulated other comprehensive loss			(21,026	)			(20,411	)
Total shareholders’ equity			7,006,987				9,186,695
Total liabilities and shareholders’ equity		$	12,998,855			$	16,569,571

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

 

		Three Months Ended June 30,								Nine Months Ended June 30,
		2015				2014				2015				2014
Net sales		$	7,230,953			$	9,065,568			$	22,422,152			$	24,180,926
Cost of goods sold			5,883,174				7,399,430				18,160,131				19,265,957
Gross profit			1,347,779				1,666,138				4,262,021				4,914,969
Operating expenses:
Sales and marketing			497,961				708,793				1,876,046				2,050,740
General and administrative			355,661				925,659				4,163,344				2,594,382
Total operating expenses			853,622				1,634,452				6,039,390				4,645,122
Income (loss) from operations			494,157				31,686				(1,777,369	)			269,847
Other (income) expense:
Interest income			-				(8,037	)			(3,022	)			(25,767	)
(Gain) loss on marketable securities, net			-				(8,904	)			110,001				30,528
Loss on change in fair value of warrant liability			-				-				-				136,258
Other (income) expense, net			(953	)			7,401				8,994				23,403
Total other (income) expense, net			(953	)			(9,540	)			115,973				164,422
Income (loss) from continuing operations			495,110				41,226				(1,893,342	)			105,425
Income (loss) from discontinued operations, net			-				(21,317	)			198,963				(35,103	)
Net income (loss)			495,110				19,909				(1,694,379	)			70,322
Preferred stock dividends and accretion			-				(48,100	)			(475,580	)			(144,571	)
Net income (loss) applicable to common equity		$	495,110			$	(28,191	)		$	(2,169,959	)		$	(74,249	)
Net income (loss)		$	495,110			$	19,909			$	(1,694,379	)		$	70,322
Other comprehensive income (loss):
Translation adjustments			1,091				111				(615	)			1,144
Comprehensive income (loss)		$	496,201			$	20,020			$	(1,694,994	)		$	71,466
Net income (loss) per basic common share:
Income (loss) from continuing operations		$	0.06			$	(0.00	)		$	(0.28	)		$	(0.01	)
Income (loss) from discontinued operations			0.00				(0.00	)			0.02				(0.00	)
Net income (loss) per basic common share		$	0.06			$	(0.00	)		$	(0.26	)		$	(0.01	)
Net income (loss) per diluted common share:
Income (loss) from continuing operations		$	0.06			$	(0.00	)		$	(0.28	)		$	(0.01	)
Income (loss) from discontinued operations			0.00				(0.00	)			0.02				(0.00	)
Net income (loss) per diluted common share		$	0.06			$	(0.00	)		$	(0.26	)		$	(0.01	)
Weighted average number of common and common equivalent shares outstanding:
Basic			8,364,247				8,195,808				8,329,950				8,183,933
Diluted			8,373,336				8,195,808				8,329,950				8,183,933

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		Nine Months Ended June 30,
Cash Flows From Operating Activities:		2015				2014
Net (loss) income		$	(1,694,379	)		$	70,322
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Realized and unrealized loss on marketable securities			110,001				30,528
Share-based compensation			3,065				203,110
Depreciation and amortization			41,894				48,235
Change in fair value of warrant liability			-				136,258
Deferred rent			4,029				(19,369	)
Changes in operating assets and liabilities:
Accounts receivable			797,473				(1,084,680	)
Inventories			(508,998	)			(345,977	)
Prepaid expenses and other current assets			32,339				(88,834	)
Accounts payable, due to Forward China, accrued expenses and other current liabilities			(562,287	)			1,726,936
Net cash (used in) provided by operating activities			(1,776,863	)			676,529
Cash Flows From Investing Activities:
Proceeds from sales of marketable securities			952,127				5,563,050
Purchases of marketable securities			(10,898	)			(5,769,609	)
Purchases of property and equipment			(33,188	)			(16,048	)
Net cash provided by (used in) investing activities			908,041				(222,607	)
Cash Flows From Financing Activities:
Redemption of 6% Senior Convertible Preferred Stock			(1,287,737	)			-
Dividends paid			(21,208	)			(57,217	)
Restricted stock repurchased and retired			(12,199	)			-
Net cash used in financing activities			(1,321,144	)			(57,217	)
Net (decrease) increase in cash and cash equivalents			(2,189,966	)			396,705
Cash and cash equivalents at beginning of period			6,477,132				6,616,995
Cash and cash equivalents at end of period		$	4,287,166			$	7,013,700
Supplemental Disclosure of Cash Flow Information:
Supplemental disclosure of non-cash investing and financing activities:
Preferred stock accretion		$	454,372			$	87,354
Retirement of treasury stock		$	1,260,057			$	-
Reclassification of warrant liability, net		$	-			$	599,929

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

NOTE 1

OVERVIEW

 

Forward Industries, Inc. (“Forward” or the “Company”) was incorporated under the laws of the State of New York and began operations in 1961 as a manufacturer and distributor of specialty and promotional products. The Company designs, markets, and distributes carry and protective solutions, primarily for hand held electronic devices. The Company’s principal customer market is original equipment manufacturers, or “OEMs” (or the contract manufacturing firms of these OEM customers), that either package their products as accessories “in box” together with their branded product offerings, or sell them through their retail distribution channels. The Company’s OEM products include carrying cases and other accessories for medical monitoring and diagnostic kits and a variety of other portable electronic and non-electronic products (such as sporting & recreational products, bar code scanners, smartphones, GPS location devices, tablets, and firearms). The Company’s OEM customers are located in the Americas, the EMEA Region, and the APAC Region. The Company does not manufacture any of its OEM products and sources substantially all of its OEM products from independent suppliers in China (refer to Note 8 – Buying Agency and Supply Agreement).

 

On June 21, 2012, the Company determined to exit its global retail business and focus solely on growing its OEM business. The decision to eliminate the Retail division was primarily driven by the longer than estimated path to bring it to profitability and the strong top line growth and cost rationalizations in the OEM business. The Retail business is presented as discontinued operations.

 

On December 30, 2014, the Company held its 2014 annual meeting of shareholders (the “2014 Annual Meeting”) primarily for the purpose of electing either a slate of directors proposed by the then-incumbent board of directors or a slate of directors proposed by Terence Bernard Wise, a director and significant shareholder in the Company at the time. At the 2014 Annual Meeting, the Company’s shareholders voted for the election of the slate of directors proposed by Mr. Wise, which resulted in the turnover of a majority of the Company’s directors.

 

In the opinion of management, the accompanying condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q reflect all normal recurring adjustments necessary to present fairly the financial position and results of operations and cash flows for the interim periods presented herein, but are not necessarily indicative of the results of operations for the year ending September 30, 2015. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2014, and with the disclosures and risk factors presented herein and therein, respectively. The September 30, 2014 condensed consolidated balance sheet has been derived from the audited consolidated financial statements.

 

NOTE 2

ACCOUNTING POLICIES

 

Accounting Estimates

 

The preparation of the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements include the accounts of Forward Industries, Inc. and its wholly owned subsidiaries (Forward US, Forward Switzerland, Forward HK (inactive) and Forward UK (inactive)). All significant intercompany transactions and balances have been eliminated in consolidation.

 

Reclassifications

 

Certain prior period amounts have been reclassified to conform to the current period presentation.

 

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

NOTE 2

ACCOUNTING POLICIES (CONTINUED)

 

Income Taxes

 

The Company accounts for its income taxes in accordance with U.S. GAAP, which requires, among other things, recognition of future tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax bases of assets and liabilities and to net tax operating loss carry-forwards to the extent that realization of these benefits is more likely than not. As of June 30, 2015, there was no change to our assessment that a full valuation allowance was required against all net deferred tax assets. Accordingly, any deferred tax provision was offset by an equal and opposite change to the valuation allowance.

 

6% Senior Convertible Preferred Stock

 

Temporary Equity

 

The 6% Senior Convertible Preferred Stock was classified as temporary equity in accordance with Accounting Standards Codification (“ASC”) 480-10-s99 - Distinguishing Liabilities from Equity – Overall – SEC Materials and Accounting Series Release (“ASR”) 268 – Presentation in Financial Statements of “Redeemable Preferred Stock”, as the redemption feature was not solely within the control of the Company.

 

Warrants

 

In accordance with ASC 815-40 – Derivatives and Hedging – Contracts in Entity’s Own Equity, the Company’s warrants were initially classified as a liability, at fair value, as a result of a related registration rights agreement that contained certain requirements for registering the underlying common shares, but had no provision for penalties upon the failure to register. At each balance sheet date, this liability’s fair value was re-measured and adjusted with the corresponding change in fair value recorded in the condensed consolidated statements of operations and comprehensive (loss) income. As of March 31, 2014, the underlying shares were registered and the liability was marked-to-the-market and reclassified to equity.

 

Preferred Stock Accretion

 

 As of the issuance date, the carrying amount of the convertible preferred stock was less than the redemption value. As a result of the Company’s determination that redemption was probable (See Note 4 – Shareholders’ Equity – 6% Senior Convertible Preferred Stock and Warrants), the carrying value was increased by periodic accretions so that the carrying value would equal the redemption amount at the earliest redemption date. Such accretion is recorded as a preferred stock dividend.

 

Revenue Recognition

 

The Company generally recognizes revenue from product sales to its customers when: (1) title and risk of loss are transferred (in general, these conditions occur at either point of shipment or point of destination, depending on the terms of sale); (2) persuasive evidence of an arrangement exists; (3) the Company has no continuing obligations to the customer; and (4) collection of the related accounts receivable is reasonably assured.

 

Share-Based Payment Expense

 

The Company recognizes employee and director share-based compensation in its condensed consolidated statements of operations and comprehensive (loss) income at the grant-date fair value of stock options and other equity-based compensation. The determination of stock option grant-date fair value is estimated using the Black-Scholes option-pricing model, which includes variables such as the expected volatility of the Company’s share price, the exercise behavior of its grantees, interest rates, and dividend yields. These variables are projected based on the Company’s historical data, experience, and other factors. In the case of awards with multiple vesting periods, the Company has elected to use the graded vesting attribution method, which recognizes compensation cost on a straight-line basis over each separately vesting portion of the award as if the award was, in-substance, multiple awards. Refer to Note 5 – Share Based Compensation. In addition, the Company recognizes share-based compensation to non-employees based upon the fair value, using the Black-Scholes option pricing model, determined at the deemed measurement dates over the related contract service period.

 

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

NOTE 2

ACCOUNTING POLICIES (CONTINUED)

 

Recent Accounting Pronouncements

 

In July 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” This ASU addresses the requirements regarding the financial statement presentation of an unrecognized tax benefit within ASC Topic 740 for the purpose of providing consistency between the financial reporting of U.S. GAAP entities. Generally, this ASU provides guidance for the preparation of financial statements and disclosures when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2013 and did not have a material impact on the Company’s condensed consolidated financial statements or disclosures.

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605 - Revenue Recognition and most industry-specific guidance throughout the ASC. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 was further amended in July 2015 and is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, last-out (“LIFO”). This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of the adoption of ASU 2015-11 on its consolidated financial statements.

 

NOTE 3

DISCONTINUED OPERATIONS

 

On June 21, 2012, the Company determined to exit its global retail business and focus solely on growing its OEM business. The decision to eliminate the Retail division was primarily driven by the longer than estimated path to bring it to profitability and the strong net sales growth and cost rationalizations in the OEM business. Accordingly, the results of operations for the Retail division have been recorded as discontinued operations in the accompanying condensed consolidated financial statements for the periods presented. The Company has completed its exit of its Retail business. Summarized operating results of discontinued operations are presented in the following table:

 

		For the Three Months Ended								For the Nine Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
Net sales		$	-			$	-			$	-			$	-
Gross loss			-				-				-				(9,700	)
Operating expenses			-				(21,317	)			(1,082	)			(25,403	)
Other income			-				-				200,045				-
Income (loss) from discontinued operations, net		$	-			$	(21,317	)		$	198,963			$	(35,103	)

 

The Company had $280,000 of accounts receivable relating to overdue payments pursuant to a Settlement Agreement and General Release (“Settlement Agreement”) executed on July 3, 2013 between the Company and G-Form LLC (“G-Form”) in exchange for certain retail inventories, the Company’s cooperation with certain administrative matters, and a mutual general release. Due to the age of the accounts receivable and G-Form’s non-responsiveness to the Company’s communication related to the matter, the Company established a full reserve for this receivable as of September 30, 2014. In December 2014, the Company recovered $200,000 from a third party, which was recognized as other income during the nine months ended June 30, 2015.

 

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

NOTE 4

SHAREHOLDERS’ EQUITY

 

6% Senior Convertible Preferred Stock

 

In the event of a liquidation (or deemed liquidation, as described below) of the Company, the holders of the Company’s 6% Senior Convertible Preferred Stock, par value $0.001 per share (“Convertible Preferred Stock”), shall receive in preference to the holders of common stock and any junior securities of the Company an amount (the “Liquidation Preference”) equal to (i) $1.965 (the “Original Issue Price”) per each outstanding share of Convertible Preferred Stock (subject to adjustment upon the occurrence of certain customary events), plus (ii) any accrued but unpaid dividends. A Change of Control of the Company (as defined in the Certificate of Amendment) will be treated as a liquidation at the option of the holders of a majority of the Convertible Preferred Stock, provided that the amount paid to holders of Convertible Preferred Stock in such event will be equal to 101% of the Original Issue Price, plus accrued but unpaid dividends.

 

Dividends on the Convertible Preferred Stock were payable, on a cumulative basis, in cash, at the rate per annum of 6% of the Liquidation Preference (as defined below) and were payable quarterly, in arrears, on each March 31, June 30, September 30 and December 31, commencing on September 30, 2013. The Company was prohibited from paying any dividend with respect to shares of common stock or other junior securities in any quarter unless full dividends were paid on the Convertible Preferred Stock in such quarter.

 

At the December 30, 2014 Annual Meeting, the shareholder vote resulted in the turnover of a majority of the Board members, which represented a Change of Control pursuant to the terms of the Convertible Preferred Stock. On December 31, 2014, the Company determined to recognize the balance of the accretion and bring the Convertible Preferred Stock carrying value up to its redemption value due to the likelihood of the holders requesting redemption. On January 9, 2015, the Company received a notice of deemed liquidation from a majority of the outstanding Convertible Preferred Stockholders in which they requested redemption of their Convertible Preferred Stock. On February 23, 2015 the Company paid an aggregate $1,287,737 to the Convertible Preferred Stockholders, in order to redeem all of the outstanding shares of Convertible Preferred Stock.

 

Dividends on the Convertible Preferred Stock totaled approximately $0 and $19,000 for each of the three months ended June 30, 2015 and 2014, respectively, and totaled approximately $21,000 and $57,000 for the nine months ended June 30, 2015 and 2014, respectively. These dividends, in addition to the accretion, totaled approximately $0 and $48,000 for the three months ended June 30, 2015 and 2014, respectively, and $476,000 and $145,000 for the nine months ended June 30, 2015 and 2014, respectively. As of June 30, 2015 and September 30, 2014, the carrying value of the Convertible Preferred Stock was $0 and approximately $833,000, respectively, and is included on the Company’s condensed consolidated balance sheets as temporary equity.

 

Stock Repurchase

 

In September 2002 and January 2004, the Board authorized the repurchase of up to an aggregate of 486,200 shares of outstanding common stock. Under those authorizations, through June 30, 2015, the Company repurchased an aggregate of 223,614 shares at a cost of approximately $485,000. In November 2014, the Company repurchased and retired an aggregate of 10,340 shares of its outstanding restricted common stock at a cost of approximately $12,000, in connection with the vesting of employee restricted stock awards, wherein certain employees surrendered a portion of their award in order to fund certain tax withholding obligations.

 

Retirement of Treasury Stock

 

On December 5, 2014, the Board of Directors approved the retirement of 706,410 shares of existing treasury stock.

 

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

NOTE 4

SHAREHOLDERS’ EQUITY (CONTINUED)

 

Changes in Shareholders’ Equity

 

Changes in shareholders’ equity for the nine months ended June 30, 2015 are summarized below:

 

																										Accumulated
										Additional																Other
		Common Stock								Paid-In				Treasury Stock								Accumulated				Comprehensive
		Shares				Amount				Capital				Shares				Amount				Deficit				Loss				Total
Balance - September 30, 2014			9,159,796			$	91,598			$	18,747,371				706,410			$	(1,260,057	)		$	(8,371,806	)		$	(20,411	)		$	9,186,695
Restricted stock award issuances			290,000				2,900				(2,900	)			-				-				-				-				-
Restricted stock award forfeitures			(126,291	)			(1,263	)			1,263				-				-				-				-				-
Restricted stock repurchased and retired			(10,340	)			(103	)			(12,096	)			-				-				-				-				(12,199	)
Treasury stock retired			(706,410	)			(7,064	)			(1,252,993	)			(706,410	)			1,260,057				-				-				-
Share-based compensation			-				-				3,065				-				-				-				-				3,065
Preferred stock dividends			-				-				-				-				-				(21,208	)			-				(21,208	)
Preferred stock accretion			-				-				-				-				-				(454,372	)			-				(454,372	)
Foreign currency translation			-				-				-				-				-				-				(615	)			(615	)
Net loss			-				-				-				-				-				(1,694,379	)			-				(1,694,379	)
Balance - June 30, 2015			8,606,755			$	86,068			$	17,483,710				-			$	-			$	(10,541,765	)		$	(21,026	)		$	7,006,987

 

 

NOTE 5

SHARE-BASED COMPENSATION

 

Stock Option Awards

 

Effective January 15, 2015, in connection with the Company’s former Chief Executive Officer’s voluntary termination, previously outstanding unvested stock options to purchase an aggregate of 83,334 shares of common stock at exercise prices ranging from $1.59 to $5.31 per share that would have been forfeited pursuant to their original terms were modified such that the options vested on January 28, 2015. In connection with the “improbable to probable” modification, the Company recorded a credit of approximately $0 and $(31,000) during the three and nine months ended June 30, 2015, respectively. See Note 7 for additional details in connection with the termination.

 

On June 25, 2015, the Company granted a ten-year incentive stock option to purchase 50,000 shares of common stock at an exercise price of $0.64 per share to an executive of the Company, pursuant to the 2011 Plan. The option vests as follows: 15,000 shares on the date of grant, 15,000 shares on the two year anniversary of the date of grant and 20,000 shares on the three year anniversary of the date of grant. The option had a grant date value of $19,000.

 

The fair value of each stock option on the date of grant was estimated using the Black-Scholes option-pricing formula applying the following assumptions:

 

		Three Months Ended								Nine Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
Risk free interest rate			1.92	%			n/a				1.92	%			1.86	%
Expected term (years)			5.90				n/a				5.90				6.00
Expected volatility			64.4	%			n/a				64.4	%			63.2	%
Expected dividends			0	%			n/a				0	%			0	%
Estimated annual forfeiture rate			10	%			n/a				10	%			10	%

 

During the three and nine months ended June 30, 2015, the Company granted 50,000 stock options at a weighted average grant date fair value of $0.38 per share. There were no options granted during the three months ended June 30, 2014. During the nine months ended June 30, 2014, the Company granted 32,500 stock options at a weighted average grant date fair value of $0.90 per share.

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

NOTE 5

SHARE-BASED COMPENSATION (CONTINUED)

 

Stock Option Awards (continued)

 

The expected term represents the period over which the stock option awards are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The Company based the risk-free interest rate used in its assumptions on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equivalent to the award’s expected term. The volatility factor used in the Company’s assumptions is based on the historical price of its stock over the most recent period commensurate with the expected term of the award. The Company historically has not paid any dividends on its common stock and had no intention to do so on the date the share-based awards were granted.

 

The Company recognized compensation expense of approximately $1,000 and $13,000 in continuing operations for stock option awards in its condensed consolidated statements of operations and comprehensive (loss) income for the three months ended June 30, 2015 and 2014, respectively, and $(36,000) and $79,000 for the nine months ended June 30, 2015 and 2014, respectively.

 

As of June 30, 2015, there was approximately $24,000 of total unrecognized compensation cost related to unvested stock option awards, which is expected to be recognized over the remainder of the weighted average vesting period of 1.5 years.

 

The following table summarizes stock option activity during the nine months ended June 30, 2015:

 

										Weighted
						Weighted				Average
						Average				Remaining
		Number of				Exercise				Life				Intrinsic
		Options				Price				In Years				Value
Outstanding, September 30, 2014			778,500			$	3.12
Granted			50,000				0.64
Exercised			-				-
Forfeited			(550,000	)			3.17
Outstanding, June 30, 2015			278,500			$	2.59				5.5			$	2,500
Exercisable, June 30, 2015			234,875			$	2.84				4.8			$	750

 

The table below provides additional information regarding stock option awards that were outstanding and exercisable at June 30, 2015:

 

Options Outstanding										Options Exercisable
		Weighted								Weighted				Weighted
		Average				Outstanding				Average				Average				Exercisable
Exercise		Exercise				Number of				Exercise				Remaining Life				Number of
Price			Price				Options				Price				In Years				Options
$0.64 to $1.99		$	1.03				90,000			$	1.28				6.7				55,000
$2.00 to $2.99			2.46				96,000				2.46				4.1				95,500
$3.00 to $3.99			3.74				72,500				3.74				5.6				64,375
$4.00 to $6.02			6.02				20,000				6.02				0.8				20,000
							278,500								4.8				234,875

 

Restricted Stock Awards

 

On December 5, 2014, the Company granted an aggregate of 30,000 shares of restricted stock to directors of the Company, pursuant to the 2011 Plan. The shares were scheduled to vest on the one-year anniversary from the date of grant.

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

NOTE 5

SHARE-BASED COMPENSATION (CONTINUED)

 

The aggregate grant date value of $34,800 was scheduled to be recognized proportionate to the vesting period. On January 5, 2015, the aggregate of 30,000 shares of restricted stock were forfeited and retired when the shareholders did not elect these directors.

 

On February 23, 2015, the Company granted an aggregate of 210,000 shares of restricted stock, of which 175,000 shares went to current directors and 35,000 went to a former officer (see Note 7 – Commitments and Contingencies – Former CFO Agreement) of the Company, of which 140,000 shares and 70,000 shares were pursuant to the 2007 Plan and 2011 Plan, respectively. The shares vest as follows: (i) 35,000 shares vest immediately, and (ii) 175,000 shares vest on the one-year anniversary from the date of grant. The aggregate grant date value of $193,200 will be recognized proportionate to the vesting period.

 

On June 25, 2015, the Company granted 50,000 shares of restricted stock to an executive of the Company, pursuant to the 2011 Plan. The shares vest as follows: 15,000 shares on the date of grant, 15,000 shares on the two year anniversary of the date of grant and 20,000 shares on the three year anniversary of the date of grant. The grant date value of $32,000 will be recognized proportionate to the vesting period.

 

The Company recognized compensation expense of approximately $42,000 and $62,000 in continuing operations for restricted stock awards in its condensed consolidated statements of operations and comprehensive (loss) income for the three months ended June 30, 2015 and 2014, respectively, and $39,000 and $124,000 for the nine months ended June 30, 2015 and 2014, respectively.

 

As of June 30, 2015, there was approximately $143,000 of unrecognized compensation cost related to shares of unvested restricted stock, which is expected to be recognized over the remainder of the weighted average vesting period of 0.9 years.

 

The following table summarizes restricted stock activity during the nine months ended June 30, 2015:

 

						Weighted
						Average				Total
		Number of				Grant Date				Grant Date
		Shares				Fair Value				Fair Value
Non-vested, September 30, 2014			257,581			$	1.32			$	340,044
Granted			290,000				0.90				260,000
Vested			(192,958	)			1.21				(234,281	)
Forfeited			(126,291	)			1.26				(159,398	)
Non-vested, June 30, 2015			228,332			$	0.90			$	206,365

 

 

NOTE 6

INCOME (LOSS) PER SHARE

 

Basic income (loss) per share data for each period presented is computed using the weighted-average number of shares of common stock outstanding during each such period. Diluted income (loss) per share data is computed using the weighted-average number of common and dilutive common-equivalent shares outstanding during each period. Dilutive common-equivalent shares consist of (a) shares that would be issued upon the exercise of stock options and warrants, computed using the treasury stock method, (b) shares that would be issued upon the conversion of convertible preferred stock and (c) shares of non-vested restricted stock. Net income (loss) from continuing operations per basic and diluted share for the three and nine months ended June 30, 2015 and 2014 is net of preferred stock cash dividends and accretion.

 

 

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

NOTE 6

INCOME (LOSS) PER SHARE (CONTINUED)

 

For the three and nine months ended June 30, 2014, the Company did not have any effects of dilutive securities. For the three and nine months ended June 30, 2015, the Company calculated the potential diluted earnings per share in accordance with ASC 260, as follows:

 

	For the Three			For the Nine
	Months Ended			Months Ended
	June 30, 2015			June 30, 2015
Numerator:
Net income (loss) applicable to common equity (numerator for basic and diluted earnings per share)	$	495,110		$		(2,169,959)
Weighted average shares outstanding (denominator for basic earnings per share)		8,364,247				8,329,950
Effective of dilutive securities
Assumed exercise of stock options, treasury stock method		-				-
Assumed exercise of warrants, treasury stock method		-				-
Assumed vesting of restricted stock, treasury stock method		9,089				-
Dilutive potential common shares		9,089				-
Denominator for diluted earnings per share - weighted average shares and assumed potential common shares		8,373,336				8,329,950
Earnings (loss) per share, diluted	$	0.06		$		(0.26)

 

 

The following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

 

		For the Three Months Ended June 30,								For the Nine Months Ended June 30,
		2015				2014				2015				2014
Options			278,500				901,000				278,500				901,000
Warrants			723,846				723,846				723,846				723,846
Convertible preferred stock			-				648,846				-				648,846
Non-vested restricted stock			176,666				327,581				228,332				327,581
Total potentially dilutive shares			1,179,012				2,601,273				1,230,678				2,601,273

 

 

NOTE 7

COMMITMENTS AND CONTINGENCIES

 

Former CEO Agreement

 

Effective January 15, 2015, the Company’s Chief Executive Officer (“Former CEO”) voluntarily resigned from his position and entered into an agreement with the Company, pursuant to which the Former CEO agreed to waive all payments under his Employment Agreement and all future claims against the Company. Under the agreement, for six months following his termination of active employment, the Former CEO will receive his regular monthly base salary and will remain eligible to participate in medical and dental plans similar to his current coverage level for a period of twelve months. The Former CEO will also receive a cash payment of $7,852 in lieu of shares of restricted stock of the Company that would otherwise vest on November 8, 2015. In addition, the Former CEO will retain certain other ancillary benefits for limited periods. The agreement includes customary confidentiality, non-solicitation, non-competition, non-disparagement and release provisions. As of June 30, 2015, the remaining obligation to the Former CEO of approximately $16,000 is reflected as an accrual in the condensed consolidated balance sheet.

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

NOTE 7

COMMITMENTS AND CONTINGENCIES (CONTINUED)

 

Former CFO Agreement

 

On February 16, 2015, the Company entered into a settlement agreement and mutual release with the Company’s former Chief Financial Officer (“Former CFO”), James McKenna, in connection with a lawsuit filed by Mr. McKenna on August 26, 2014 in the U.S. District Court for the Southern District of New York against the Company and then-directors Frank LaGrange Johnson, Robert Garrett, John F. Chiste, Timothy Gordon and Owen P.J. King (the “SDNY Lawsuit”), alleging purported claims of retaliation for whistleblowing under the Dodd-Frank Act, breach of contract and breach of the covenant of good faith and fair dealing all as against the Company, and a single claim for tortious interference with contract as against the individual defendants. The complaint sought an unspecified amount of monetary consequential damages and punitive damages. Pursuant to the agreement, Mr. McKenna and the Company have agreed to settle and release all disputes or claims against the other party related to the SDNY Lawsuit and any such disputes or claims arising out of Mr. McKenna’s employment with the Company, without an admission of liability or wrongdoing. Under the Agreement, Mr. McKenna will receive a cash payment of $315,000, representing 18 months’ salary at the rate specified in Mr. McKenna’s Amended Employment Agreement, signed between the Company and Mr. McKenna and dated October 26, 2012. Mr. McKenna will also receive approximately $375,000 in legal fees, back pay, prior out-of-pocket benefits, taxes and penalties on Mr. McKenna’s 401(k) loan, and accrued paid time off, in addition to 35,000 restricted stock units vesting immediately. The Agreement includes customary non-disparagement and release provisions. As of June 30, 2015, the remaining obligation to the Former CFO of approximately $150,000 is reflected as an accrual in the condensed consolidated balance sheet.

 

On June 26, 2015, the Company entered into a Claim Release between Forward Industries, Inc. and Zurich American Insurance Company (the “release”) for the claim made under an Employment Practices Liability Policy related to the settlement agreement noted above. Under the release, the Zurich American reimbursed the company for a total of $425,000 which represents a portion of the settlement amounts set forth in the settlement agreement with the company’s former Chief Financial Officer, James McKenna. Pursuant to the release, the Company agreed to fully release and forever discharge Zurich American from any and all charges hereafter that may arise out of the SDNY lawsuit. As of June 30, 2015, the reimbursement amount of $425,000 was recorded in general and administrative expenses in the condensed consolidated statements of operations and comprehensive (loss) income.

 

NOTE 8

RELATED PARTY TRANSACTIONS

 

New York Office Services Agreement

 

On February 1, 2014, the Company began leasing office space in New York, New York for its Chief Executive Officer at a rate of $2,500 per month from LaGrange Capital Administration, L.L.C. (“LCA”). Frank LaGrange Johnson, the Company’s former Chairman of the Board, serves as the Managing Member of LCA. This lease was month-to-month and was cancellable by either the Company or LCA at any time. Effective April 1, 2014, LCA increased the monthly rental charge (inclusive of rent, allocable share of office assistant, and equipment leases) from $2,500 to approximately $12,700 per month. On January 16, 2015, the Company provided notice to LCA that it was immediately terminating the New York Office Services Agreement. During the three and nine months ended June 30, 2015, the Company recognized approximately $0 and $51,000 respectively, of rent expense related to the New York office. During the three and nine months ended June 30, 2014, the Company recognized approximately $38,000 and $43,000, respectively, of rent expense related to the New York office.

 

Buying Agency and Supply Agreement

 

On March 12, 2012, the Company, entered into a Buying Agency and Supply Agreement (the “Agreement”) with Forward Industries Asia-Pacific Corporation (f/k/a Seaton Global Corporation), a British Virgin Islands corporation (“Forward China”). On March 13, 2014 and March 11, 2015, the Company entered into amendments to the Agreement with Forward China. The Agreement, as amended, provides that, upon the terms and subject to the conditions set forth therein, Forward China will act as the Company’s exclusive buying agent and supplier of Products (as defined in the Agreement) in the Asia Pacific region.  The Company purchases products at Forward China’s cost and pays a service fee to Forward China. The service fee is calculated at $100,000 monthly plus 4% of “Adjusted Gross Profit.” “Adjusted Gross Profit” is defined as the selling price less the cost from Forward China. The Agreement, as amended, terminates on September 11, 2015. The Company is currently in discussions to agree a renewal of the Agreement and is working to complete these discussions with Forward China prior to the expiration of the Agreement.

 

 

 

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

NOTE 8

RELATED PARTY TRANSACTIONS (CONTINUED)

 

Terence Bernard Wise, a director of the Company, is a principal of Forward China. In addition, Jenny P. Yu, a Managing Director of Forward China, owns shares of the Company’s common stock. The Company recognized approximately $371,000 and $387,000, respectively, during the three months ended June 30, 2015 and 2014 and $1,144,000 and $930,000, respectively, during the nine months ended June 30, 2015 and 2014 in service fees paid to Forward China, which are included as a component of costs of goods sold in continuing operations in the accompanying condensed consolidated statements of operations and comprehensive (loss) income.

 

Investment Management Agreement

 

On April 16, 2013, the Company entered into an Investment Management Agreement (the “Investment Management Agreement”) with LCA, pursuant to which the Company retained LCA to manage certain investment accounts funded by the Company (collectively, the “Account”). Operations ceased just prior to December 31, 2014 and the Investment Management Agreement formally terminated effective February 1, 2015.

 

As compensation for its services to the Company, LCA was entitled to advisory fees, comprised of an asset-based fee and a performance fee, as provided in the Investment Management Agreement.  The asset-based fee was equal 1% per annum of the average Account Net Asset Value (“Account NAV”).  The performance fee was equal to 20% of the increase (if any) in the Account NAV over an annual period. No performance fee was payable for any annual period in which the Account NAV at the end of such annual period was below the highest Account NAV at the end of any previous annual period. In addition to such advisory fees, the Company reimbursed LCA for certain investment and operational expenses. The Company didn’t recognize any advisory fee expense during the three and nine months ended June 30, 2015, and recognized approximately $3,000 and $9,000, respectively, during the three and nine months ended June 30, 2014, related to asset-based or performance fees which are included in continuing operations in the accompanying condensed consolidated statements of operations and comprehensive (loss) income.

 

There were no new funds invested with LCA during the nine months ended June 30, 2015 and 2014. During the three months ended June 30, 2015 and 2014, the Company purchased approximately $0 and $372,000, of marketable securities, respectively. During the nine months ended June 30, 2015 and 2014, the Company purchased approximately $11,000 and $5,770,000 of marketable securities, respectively. During the three months ended June 30, 2015 and 2014, the Company sold approximately $0 and $349,000 of marketable securities, respectively. During the nine months ended June 30, 2015 and 2014, the Company sold approximately $952,000 and $5,563,000 of marketable securities, respectively. As a result of these activities, the Company recognized net investment gains (losses) of approximately $0 and $9,000 during the three months ended June 30, 2015 and 2014, respectively, and $(110,000) and $(31,000) during the nine months ended June 30, 2015 and 2014, respectively.

 

NOTE 9

LEGAL PROCEEDINGS

 

From time to time, the Company may become a party to legal actions or proceedings in the ordinary course of business. As of June 30, 2015, there were no such actions or proceedings, either individually or in the aggregate that the Company believes would be material to its business, if decided adversely to its interests.

 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements, and the notes thereto, and other financial information appearing elsewhere in this Quarterly Report on Form 10- Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014. The following discussion and analysis compares our consolidated results of operations for the three and nine months ended June 30, 2015 (the “2015 Quarter” and “2015 Period”, respectively), with those for the three and nine months ended June 30, 2014 (the “2014 Quarter” and “2014 Period”, respectively ). All figures in the following discussion are presented on a consolidated basis. All dollar amounts and percentages presented herein have been rounded to approximate values.

 

Cautionary statement for purposes of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995

 

The following management’s discussion and analysis includes “forward-looking statements”, as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995. These “forward-looking statements” are not based on historical fact and involve assessments of certain risks, developments, and uncertainties in our business looking to the future. Such forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “estimate”, “intend”, “continue”, or “believe”, or the negatives or other variations of these terms or comparable terminology. Forward-looking statements may include projections, forecasts, or estimates of future performance and developments. Forward-looking statements contained in this Quarterly Report on Form 10-Q are based upon assumptions and assessments that we believe to be reasonable as of the date of this Quarterly Report on Form 10-Q. Whether those assumptions and assessments will be realized will be determined by future factors, developments, and events, which are difficult to predict and may be beyond our control. Actual results, factors, developments, and events may differ materially from those we assumed and assessed. Risks, uncertainties, contingencies, and developments, including those discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and those identified in “Risk Factors” in Item 1A of Forward’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014, could cause our future operating results to differ materially from those set forth in any forward-looking statement. There can be no assurance that any such forward- looking statement, projection, forecast or estimate contained can be realized or that actual returns, results, or business prospects will not differ materially from those set forth in any forward-looking statement.