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

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Feb 09, 2011
Forward Industries Inc. (FORD, Financial) filed Quarterly Report for the period ended 2010-12-31.

Forward Industries Inc. has a market cap of $27.3 million; its shares were traded at around $3.59 with and P/S ratio of 1.4. Hedge Fund Gurus that owns FORD: Jim Simons of Renaissance Technologies LLC. Mutual Fund and Other Gurus that owns FORD: John Keeley of Keeley Fund Management.

Highlight of Business Operations:

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 December 31, 2010 and September 30, 2010, the allowances for obsolete inventory were approximately $18,000 and $28,000, respectively.

Property 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 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 December 31, 2010 and 2009, the Company recorded approximately $13,000 and $15,000 of depreciation and amortization expense, respectively. Depreciation and amortization for production related property 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 and equipment, is included as a component of operating expenses in the accompanying consolidated statements of operations.

Advertising costs, consisting primarily of samples and product brochures, are expensed as incurred. Advertising costs are included in selling expenses in the accompanying consolidated statements of operations and amounted to approximately $21,000 and $25,000 for the three-month periods ended December 31, 2010 and 2009, respectively.

The functional currency of the Company and each of its wholly owned foreign subsidiaries is the U.S. dollar. Foreign currency transactions may generate receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. Fluctuations in exchange rates between such foreign currency and the functional currency increase or decrease the expected amount of functional currency cash flows upon settlement of the transaction. These increases or decreases in expected functional currency cash flows are foreign currency transaction gains or losses that are included in other expense, net in the accompanying consolidated statements of operations. The net losses from foreign currency transactions were approximately $11,000 and $13,000 for the three-month periods ended December 31, 2010 and 2009, respectively.

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