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Forward Industries Inc. Reports Operating Results (10-Q)

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Aug 10, 2010
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Forward Industries Inc. (FORD, Financial) filed Quarterly Report for the period ended 2010-06-30.

Forward Industries Inc. has a market cap of $26.6 million; its shares were traded at around $3.34 with and P/S ratio of 1.5. FORD is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Accounts receivable consist of unsecured trade accounts with various customers. The Company performs ongoing credit evaluations of its customers and believes that adequate allowances for any uncollectible receivables are maintained. Credit terms to the majority of customers are generally net thirty (30) days to net sixty (60) days; however, the Company extends to certain customers, particularly its largest, payment terms up to 90 days. The Company has not historically experienced significant losses in extending credit to customers. At June 30, 2010 and September 30, 2009, the allowance for doubtful accounts was approximately $22,000 and $25,000, respectively.

Inventories consist primarily of finished goods and are stated at the lower of cost (determined by the first-in, first-out method) or market. Based on managements estimates, an allowance is made to reduce excess, obsolete, or otherwise un-saleable inventories to net realizable value. The allowance is established through charges to cost of goods sold on the Companys consolidated statements of operations. As reserved inventory is disposed of, the Company charges off the associated allowance. In determining the adequacy of the allowance, managements estimates are based upon several factors, including analyses of inventory levels, historical loss trends, sales history, and projections of future sales demand. The Companys estimates of the allowance may change from time to time based on managements assessments, and such changes could be material. At June 30, 2010 and September 30, 2009, the allowance for obsolete inventory was approximately $15,000 and $33,000, respectively.

Property, plant and equipment consist of furniture, fixtures, and equipment and leasehold improvements and are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property, plant and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The estimated useful life for furniture, fixtures and equipment ranges from three to ten years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements. For the three-month periods ended June 30, 2010 and 2009, the Company recorded approximately $13,000 and $18,000 of depreciation and amortization expense, respectively. For the nine-month periods ended June 30, 2010 and 2009, the Company recorded approximately $41,000 and $59,000 of depreciation and amortization expense, respectively. Depreciation and amortization for production related property, plant and equipment is included as a component of costs of goods sold in the accompanying consolidated statements of operations. Depreciation and amortization for selling and general and administrative related property, plant and equipment, is included as a component of operating expenses in the accompanying consolidated statements of operations.

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