10-Q

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

1

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.

2

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.

3

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.

4

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.

5

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.

6

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.

7

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.

8

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.

9

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.

10

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.

11

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.

12

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.

13

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.

14

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.

15

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.

Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.

Business Overview

Trends and Economic Environment

In June 2012, the Company made the strategic decision to focus solely on its core OEM business. Initially, we implemented several key restructuring measures in order to improve our operating performance and return the Company to profitability. These actions included replacing our legacy sourcing and quality assurance infrastructure with a variable lower cost solution through our use of an exclusive Asia-based sourcing agent (see Note 8 in our Notes to Condensed Consolidated Financial Statements) and rationalizing our fixed operating expenses, including office closures and headcount reductions. Our financial results for the 2015 Period and the 2014 Period, reflect the impact of these restructuring measures.

We remain challenged by a highly concentrated customer base and product offering, especially with respect to our Diabetic Products line, where we operate in a price sensitive environment in which we continue to experience volatility in demand and downward pricing pressure from our major Diabetic Products customers. We continue to be challenged by pricing pressures from our customers, which causes our gross margins to narrow. Our dedicated Asia-based sourcing agent has made meaningful progress in areas such as quality assurance and overall operational performance, which has better positioned us with our customers. However, there was no expansion of our supplier base during the 2015 Period and 2014 Period. As a result, our ability to effectively push back against such rising material costs may diminish.

Variability of Revenues and Results of Operation

Because a high percentage of our revenues are highly concentrated in a few large customers, and because the volumes of these customers’ order flows to us are highly variable, with short lead times, our quarterly revenues, and consequently our results of operations, are susceptible to significant variability over a relatively short period of time.

16

Change of Directors and Officers

On December 30, 2014, the Company held its 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. Following the 2014 Annual Meeting, (a) our incumbent President and Chief Executive Officer voluntarily resigned and we executed an agreement with him which superseded his employment agreement; (b) the new board appointed an Interim President; (c) we entered into a settlement agreement and mutual release with the Company’s former Chief Financial Officer; and (d) we expanded the size of the Board of Directors from five to six Directors by appointing Sangita Shah to be a new Director. In connection with the incumbent Chief Executive Officer’s departure, we cancelled the month-to-month New York Office Services Agreement at a savings of $12,700 per month and we cancelled the Investment Management Agreement.

The then-incumbent Board of Directors engaged professional services, including a proxy advisory solicitation service and supplementary legal representation, in order to facilitate the election of and promote its slate of director nominees. Such expenses, which were borne by the Company, significantly increased our 2015 first quarter expenses. In addition, the then-incumbent team was conducting an accelerated search process to identify attractive acquisition targets and the related financing to fund such acquisitions and the professional services associated with that effort also significantly increased our 2015 first quarter expenses.

On June 25, 2015, (a) we expanded the Board of Directors from six to seven Directors by appointing Sharon Hrynkow to be a new Director; (b) we appointed Mr. Scott Fine to serve as Lead Director of the Board of the Company; (c) we appointed Mr. Michael Matte, who was hired on June 22, 2015, to be our Chief Financial Officer; (d) we appointed Mr. Terence Wise, Chairman of the Board of Directors, to become Chief Executive Officer effective July 1, 2015, following the completion of the term of the Interim President on June 30, 2015. On June 26, 2015, we entered into a claim release with our insurance carrier related to the settlement agreement and mutual release associated with our former Chief Financial Officer wherein the Company was reimbursed $425,000 in connection with our Employment Practices Liability Insurance Policy.

Critical Accounting Policies and Estimates

This management’s discussion and analysis of financial condition and results of operations is based upon or derived from the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates and such differences could be significant.

We discuss the material accounting policies that are critical in making these estimates and judgments in our Annual Report on Form 10 -K for the fiscal year ended September 30, 2014, under the caption “Management’s Discussion and Analysis—Critical Accounting Policies and Estimates”. There has been no material change in critical accounting policies or estimates since September 30, 2014.

Recent Accounting Pronouncements

In July 2013, the 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.

17

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 adopting this guidance.

RESULTS OF OPERATIONS FOR THE 2015 QUARTER COMPARED TO THE 2014 QUARTER

Income from Continuing Operations

Income from continuing operations in the 2015 Quarter was $495 thousand compared to income of $41 thousand in the 2014 Quarter. The increase in 2015 Quarter income from the same quarter in 2014 was primarily due to an insurance claim settlement of $425 thousand in cash which reimbursed the Company for a portion of the settlement of the lawsuit filed by the former CFO against the company and a reduction in various operating expenses.

	Main Components of Loss from Continuing Operations
				(thousands of dollars)
	2015				2014
	Quarter				Quarter	Increase (Decrease)
Net sales	$	7,231	$		9,066	$	(1,835)
Gross profit		1,348			1,666		(318)
Sales and marketing expenses		498			709		(211)
General and administrative expenses		356			926		(570)
Other expense (income), net		(1)			(10)		9
Income from continuing operations	$	495		$	41	$	454

Earnings (loss) from continuing operations attributable to common shareholders, after deducting preferred stock dividends and accretion in the 2014 quarter, per basic and diluted share was $0.06 and $(0.00) for the 2015 Quarter and 2014 Quarter, respectively.

Net Sales

Net sales in the 2015 Quarter declined $1.8 million, or 20%, to $7.2 million from $9.1 million in the 2014 Quarter due to lower sales of both Diabetic Products and Other Products. The tables below set forth sales by channel, product line, and geographic location of our customers for the periods indicated:

18

	Net Sales for 2015 Quarter
	(millions of dollars)
	APAC		Americas		EMEA			Total*
Diabetic products	$	2.8	$	1.4	$	1.7	$	5.9
Other products		0.6		0.3		0.5	$	1.3
Total net sales	$	3.4	$	1.7	$	2.2	$	7.2

	Net Sales for 2014 Quarter
	(millions of dollars)
	APAC		Americas		EMEA			Total*
Diabetic products	$	2.3	$	1.6	$	3.0	$	6.9
Other products		0.4		1.3		0.5	$	2.2
Total net sales	$	2.7	$	2.9	$	3.5	$	9.1

*Tables may not total due to rounding.

Diabetic Product Sales

We custom design, and sell carrying cases for blood glucose diagnostic kits directly to OEMs (or their contract manufacturers) . The OEM customer or its contract manufacturer packages our carry cases “in box” as a custom accessory for the OEM’s blood glucose testing and monitoring kits, and to a lesser extent, sells them through its retail distribution channels.

Sales of Diabetic Products declined $1.0 million to $5.9 million in the 2015 Quarter, from $6.9 million in the 2014 Quarter. This decrease was primarily due to the dramatic drop in volume for three of our major Diabetic customers (Diabetic customers B, C, and D) and other Diabetic customers. The decrease was offset, in part, by a sharp rise in sales to a major Diabetic customer (Diabetic customer A).

The following table sets forth our sales by Diabetic Products’ customers for the periods indicated:

	(millions of dollars)
	2015			2014		Increase
	Quarter			Quarter		(Decrease)
Diabetic Customer A	$	2.9	$	1.9	$	1.0
Diabetic Customer B		0.8		1.1		(0.3)
Diabetic Customer C		1.3		2.4		(1.1)
Diabetic Customer D		0.9		1.1		(0.2)
All other Diabetic Customers		0.0		0.4		(0.4)
Totals*	$	5.9	$	6.9	$	(1.0)

*Tables may not total due to rounding.

Sales of Diabetic Products represented 82% of our total net sales in the 2015 Quarter compared to 76% of our total net sales in the 2014 Quarter.

Other Product Sales

We design and sell cases and protective solutions to OEMs for a diverse array of portable electronic devices (such as bar code scanners, GPS devices, cellular phones, tablets and cameras), as well as a variety of other products (such as sporting and recreational products and firearms) on a made-to-order basis that are customized to fit the products sold by our OEM customers.

Sales of Other Products decreased approximately $0.9 million to $1.3 million in the 2015 Quarter from approximately $2.2 million in the 2014 Quarter. The decrease is primarily due to the loss of a major recreational products customer. Lesser fluctuations in several other customer accounts between 2015 Quarter and 2014 Quarter were not individually material.

19

Sales of Other Products represented 18% of our net sales in the 2015 Quarter compared to 24% of our total net sales in the 2014 Quarter.

Gross Profit

Gross profit decreased $0.3 million, or 19%, to $1.3 million in the 2015 Quarter from $1.7 million in the 2014 Quarter. As a percentage of sales, our gross profit rose to 19% in the 2015 Quarter, compared to 18% in the 2014 Quarter.

The gross profit decrease was driven primarily by a drop in sales volume. In the 2015 Quarter, sales in the Americas dropped 44% to $1.7 million and sales in Europe declined 37% to $2.2 million. However, sales in Asia-Pacific increased 28% to $3.4 million. The increase in gross profit as a percentage of sales is due to product mix.

Sales and Marketing Expenses

Sales and marketing expenses decreased $0.2 million, or 30%, to $0.5 million in the 2015 Quarter compared to $0.7 million in the 2014 Quarter, primarily due to the decline in personnel expenses related to the reduction in workforce which took place in the second quarter of fiscal 2015.

General and Administrative Expenses

General and administrative expenses decreased $0.6 million, or 62%, to $0.4 million in the 2015 Quarter from $0.9 million in the 2014 Quarter, due primarily to the following:

• $0.4 million insurance claim recovery related to the lawsuit and subsequent settlement with the former CFO;

• $0.1 million in savings related to the vacancy of the CFO position during the quarter; and

• $0.1 million combined reduction in legal fees related to the defending the derivative lawsuit filed against the former chairman and directors, reduction in occupancy costs due to the closure of the NY office, and a reduction in professional fees for consulting on potential acquisition attempts in Q3 2014.

Fluctuations in other components of “General and Administrative Expenses” were not individually material.

Other Income

Other income, net, consisting primarily of realized and unrealized gain on investments in marketable securities was $1 thousand in the 2015 Quarter compared to $10 thousand in the 2014 Quarter.

RESULTS OF OPERATIONS FOR THE 2015 PERIOD COMPARED TO THE 2014 PERIOD

Income (Loss) from Continuing Operations

Loss from continuing operations in the 2015 Period was $1.9 million compared to income of $0.1 million in the 2014 Period. The 2015 Period loss is primarily due to an increase in general and administrative expenses, primarily due to costs associated with the proxy contest, litigation costs, settlements cost for the former CFO and CEO, and, to a lesser extent, a decline in gross profit driven by a decline in sales. The losses were mitigated, in part, by the insurance claim recovery which reduced the General and Administrative Expenses and a reduction in workforce which resulted in a savings in Sales and Marketing expenses.

		Main Components of (Loss) Income from Continuing Operations
	(thousands of dollars)
		2015		2014
		Period		Period	Increase (Decrease)
Net sales	$	22,422	$	24,181	$	(1,759)
Gross profit		4,262		4,915		(653)
Sales and marketing expenses		1,876		2,051		(175)
General and administrative expenses		4,163		2,594		1,569
Other expense, net		116		165		(49)
(Loss) income from continuing operations	$	(1,893)	$	105	$	(1,998)

20

Loss from continuing operations attributable to common shareholders, after deducting preferred stock dividends and accretion, per basic and diluted share was $(0.28) and $(0.01) for the 2015 Period and 2014 Period, respectively.

Net Sales

Net sales in the 2015 Period declined $1.8 million, or 7%, to $22.4 from $24.2 million in the 2014 Period due to lower sales for all product lines. The tables below set forth sales by channel, product line, and geographic location of our customers for the periods indicated:

	Net Sales for 2015 Period
	(millions of dollars)
	APAC		Americas		EMEA			Total*
Diabetic products	$	7.9	$	4.3	$	6.4	$	18.6
Other products		1.3		1.5		1.0	$	3.8
Total net sales	$	9.2	$	5.9	$	7.4	$	22.4

	Net Sales for 2014 Period
	(millions of dollars)
	APAC		Americas		EMEA			Total*
Diabetic products	$	7.3	$	4.8	$	7.0	$	19.1
Other products		1.4		2.5		1.2	$	5.1
Total net sales	$	8.7	$	7.3	$	8.2	$	24.2

*Tables may not total due to rounding.

Diabetic Product Sales

We custom design, and sell carrying cases for blood glucose diagnostic kits directly to, OEMs (or their contract manufacturers). The OEM customer or its contract manufacturer packages our carry cases “in box” as a custom accessory

for the OEM’s blood glucose testing and monitoring kits, or to a lesser extent, sell them through their retail distribution channels.

Sales of Diabetic products decreased $0.5 million, to $18.6 million in the 2015 Period, from $19.1 million in the 2014 Period. This decrease was primarily due to the loss of a smaller diabetic customer and a drop in sales of legacy programs from two major diabetic customers (Customer B and Customer C). The decrease was offset, in part, by an increase in sales to the other two major Diabetic customers (Customer A and Customer D).

The following table sets forth our sales by Diabetic Products customer for the periods indicated.

	(millions of dollars)
		2015		2014		Increase
		Period		Period		(Decrease)
Diabetic Customer A	$	7.7	$	6.5	$	1.2
Diabetic Customer B		2.4		3.1		(0.7)
Diabetic Customer C		5.2		5.5		(0.3)
Diabetic Customer D		3.2		3.1		0.1
All other Diabetic Customers		0.1		0.9		(0.8)
Totals*	$	18.6	$	19.1	$	(0.5)

*Tables may not total due to rounding.

Sales of carrying cases for blood glucose monitoring kits represented 83% of our net sales in the 2015 Period and 79% of our total net sales the 2014 Period.

Other Product Sales

We custom design and sell cases and protective solutions to OEMs for a diverse array of portable electronic devices (such as smartphones, tablets, GPS devices, and bar code scanners), as well as a variety of other products (such as firearms, sporting, and other recreational products) on a made-to-order basis that are customized to fit the products sold by our OEM customers.

21

Sales of Other Products decreased approximately $ 1.3 million to $3.8 million in the 2015 Period from $5.1 million for the same period in 2014. The majority of the decrease was primarily due to a $1.0 million drop in sales due to the loss of a recreational products customer, which contributed $0.4 million to net sales in the 2015 Period. In addition, a $0.5 million decline in sales to a camera customer, which contributed $0.5 million to net sales in the 2015 Period and a $0.3 million decline in sales to a GPS customer, which contributed $0.4 million to net sales in the 2015 period, also contributed to the decrease in Other Products sales. The revenue reductions were offset, in part, by an increase in sales to an electronics devices customer of $0.5 million, which did not contribute to sales in the 2014 period. Lesser fluctuations in several other customer accounts between 2015 Period and 2014 Period were not individually material.

Sales of Other Products represented 17% of our net sales in the 2015 Period and 21% of our net sales in the 2014 Period.

Gross Profit

Gross profit decreased $0.6 million, or 13%, to $4.3 million in the 2015 Period from $4.9 million in the 2014 Period. As a percentage of sales, our gross profit declined to 19% in the 2015 Period, compared to 20% in the 2014 Period.

The gross profit decrease was driven primarily by a year over year decline in sales volume. In the 2015 Period, sales in the Americas dropped 20% to $5.9 million and sales in Europe dropped 10% to $7.4 million. However, sales in Asia-Pacific increased 6% to $9.2 million.

Sales and Marketing Expenses

Sales and marketing expenses decreased $0.2 million, or 9%, to $1.9 million in the 2015 Period compared to $2.1 million in the 2014 Period. Personnel costs declined $160 thousand, or 9%, in the 2015 Period primarily as a result of the reduction in workforce. Decreases in other components of “Sales and Marketing Expenses” were not material, individually, or in the aggregate.

General and Administrative Expenses

General and administrative expenses increased $1.6 million, or 61% to $4.2 million in the 2015 Period from $2.6 million in the 2014 Period due primarily to the following:

• $1.4 million increase in professional fees (primarily attorney’s fees) related to the legal support and representation surrounding the proxy defense, employment litigation and other legal matters;

• $0.5 million, net of insurance recovery of $0.4 million, related to the employment settlements with the separations of the former CFO and CEO; and

• Offset by a $0.3 million reduction of salaries and wages and a $0.1 million reduction in share-based compensation expense.

Fluctuations in other components of “General and Administrative Expenses” were not individually material.

Other Expense

Other expense, net, consisting primarily of realized and unrealized losses on investments in marketable securities and the change in the fair market value of warrant liabilities, was $0.1 million in the 2015 Period compared to $0.2 million in the 2014 Period.

RESULTS OF DISCONTINUED OPERATIONS FOR THE 2015 PERIOD COMPARED TO THE 2014 PERIOD

Income from discontinued operations was $0.2 million in the 2015 Period compared to a loss of $35 thousand in the 2014 Period. In the 2015 Period, we assigned our rights to a judgment against G-Form for a cash payment of $0.2 million.

LIQUIDITY AND CAPITAL RESOURCES

Our primary potential sources of liquidity are our operations and financing activities. The primary go forward demands on our working capital should be: i) operating losses, should they occur, and ii) accounts receivable and inventories arising in the ordinary course of business. Historically, our sources of liquidity have been adequate to satisfy working capital requirements arising in the ordinary course of business. We anticipate that our liquidity and financial resources for the next twelve months will be adequate to manage our operating and financial requirements.

22

At June 30, 2015, our current ratio (current assets divided by current liabilities) was 2.2; our quick ratio (current assets less inventories divided by current liabilities) was 1.7; and our working capital (current assets less current liabilities) was $7.0 million. As of such date, we had no short or long-term debt outstanding.

During the nine months ended June 30, 2015 and 2014, our sources and use of cash were as follows:

Cash Flows from Operating Activities

During the 2015 Period, we used $1.8 million of cash in operations, which is derived from a net loss of $1.7 million, offset by $0.2 million of non-cash credits, plus net cash used for working capital items of $0.3 million. Cash used for working capital items consisted primarily of pay downs of accounts payable, accrued expenses and other current liabilities (including due to Forward China) and increased inventory of $1.1 million, partially offset by a decrease in accounts receivable of $0.8 million.

During the 2014 Period, operating activities provided $0.7 million of cash, which consisted of net income of $70 thousand, supplemented by $0.4 million of non-cash credits (primarily the change in the fair value of the warrant liability and share-based compensation), and $0.2 million of cash provided by working capital items. Cash provided by working capital items consisted of an increase in cash generated by an increase in accounts payable and due to Forward China of $1.7 million. These changes were offset, in part by decreases in accounts receivable, inventories, and prepaid expenses and other current assets of $1.1 million, $0.3 million, and $0.1 million, respectively, as well as decreases in accrued expenses and other current liabilities and other liabilities of $86 thousand and $49 thousand, respectively.

Cash Flows from Investing Activities

In the 2015 Period, net cash provided by investing activities was $0.9 million, which was primarily related to the liquidation of marketable equity securities due to the cancellation of the Investment Management Agreement.

In the 2014 Period, net investing activities used $0.2 million, which primarily consisted of $5.8 million used for purchases of marketable equity securities and $5.6 million generated from sales of marketable equity securities.

Cash Flows from Financing Activities

In the 2015 Period, net financing activities used $1.3 million, which primarily consisted of the funds used to fully redeem the 6% Senior Convertible Preferred Stock.

In the 2014 Period, net financing activities used $57 thousand to pay dividends on the 6% Senior Convertible Preferred Stock.

ITEM 3.            QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4.            CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In accordance with Exchange Act Rule 13a-15(b), our management, under the supervision and with the participation of our Principal Executive and Principal Financial Officer, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of the fiscal quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s Principal Executive and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective, as of the end of the 2015 Quarter, to provide reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

23

Changes in Internal Control

Our management, with the participation of our Principal Executive and Principal Financial Officer, performed an evaluation required by Rule 13a-15(d) of the Exchange Act as to whether any change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the 2015 Period. Based on that evaluation, our Principal Executive and Principal Financial Officer concluded that there were no changes in our internal control over financial reporting during the 2015 Period.

Limitations of the Effectiveness of Controls and Procedures

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations of any control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

24

PART II.         OTHER INFORMATION

ITEM 1.            LEGAL PROCEEDINGS

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

ITEM 1A.          RISK FACTORS

Please review our Annual Report on Form 10-K for the fiscal year ended September 30, 2014, for a complete statement of “Risk Factors” that pertain to our business. Please refer to ITEM 2. “CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 on page 16 of this Quarterly Report on Form 10-Q as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion of certain of such risk factors.

ITEM 2.           UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered sales of equity securities

None.

Purchases of equity securities

None.

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.           MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.           OTHER INFORMATION

On June 26, 2015, the Company entered into a claim release (the “Claim Release”) with Zurich American Insurance Company (“ZAIC”) with respect to the settlement agreement and mutual release (the “Settlement Agreement”) previously disclosed regarding a lawsuit filed by James McKenna, our former Chief Financial Officer, 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, 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.

Pursuant to an Employment Practices Liability Policy (the “Policy”) issued by ZAIC that affords coverage for employment-related Wrongful Termination, Discrimination, Sexual Harassment and Workplace Torts liability, under which we are an insured, we submitted a claim in which it sought coverage for the aforementioned Settlement Agreement in the amount of $425,000, representing reimbursement of a portion of the settlement amounts set forth in the Settlement Agreement. Such sum represents fully ZAIC’s coverage obligations under the Policy with respect to the Settlement Agreement.

25

ITEM 6.           EXHIBITS

10.		Material Contracts
	10.1	Employment Agreement, effective as of July 1, 2015, by and between Forward Industries, Inc. and Terence Wise (incorporated by reference to Exhibit 10.1 to the Company’s Current Report, Form 8-K as filed with the Securities and Exchange Commission on June 29, 2015).
	10.2	Employment Agreement, effective as of June 22, 2015, by and between Forward Industries, Inc. and Michael Matte (incorporated by reference to Exhibit 10.2 to the Company’s Current Report, Form 8-K as filed with the Securities and Exchange Commission on June 29, 2015).
	10.3**	Claim Release, entered into on June 26, 2015, by and between Forward Industries, Inc. and Zurich American Insurance Company.
31.		Certifications Pursuant to Rule 13a-14(a) (Section 302 of Sarbanes-Oxley)
	31.1**	Certification of Terence Wise
	31.2**	Certification of Michael Matte
32.		Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350 (Section 906 of Sarbanes-Oxley)
	32.1*	Certification of Terence Wise
	32.2*	Certification of Michael Matte
101.INS**		XBRL Instance Document.
101.SCH**		XBRL Taxonomy Extension Schema Document.
101.CAL**		XBRL Taxonomy Calculation Linkbase Document.
101.DEF**		XBRL Taxonomy Definition Linkbase Document.
101.LAB**		XBRL Taxonomy Label Linkbase Document.
101.PRE**		XBRL Taxonomy Presentation Linkbase Document.
*  Furnished and not filed herewith
**  Filed herewith

26

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

Dated: August 11, 2015

FORWARD INDUSTRIES, INC. (Registrant)

By: /s/ Terence Wise       

Terence Wise

Chief Executive Officer (Principal Executive Officer)

By: /s/ Michael Matte     

Michael Matte

Chief Financial Officer (Principal Financial Officer)

27

EXHIBIT INDEX

10.		Material Contracts
	10.1	Employment Agreement, effective as of July 1, 2015, by and between Forward Industries, Inc. and Terence Wise (incorporated by reference to Exhibit 10.1 to the Company’s Current Report, Form 8-K as filed with the Securities and Exchange Commission on June 29, 2015).
	10.2	Employment Agreement, effective as of June 22, 2015, by and between Forward Industries, Inc. and Michael Matte (incorporated by reference to Exhibit 10.2 to the Company’s Current Report, Form 8-K as filed with the Securities and Exchange Commission on June 29, 2015).
	10.3**	Claim Release, entered into on June 26, 2015, by and between Forward Industries, Inc. and Zurich American Insurance Company.
31.		Certifications Pursuant to Rule 13a-14(a) (Section 302 of Sarbanes-Oxley)
	31.1**	Certification of Terence Wise
	31.2**	Certification of Michael Matte
32.		Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350 (Section 906 of Sarbanes-Oxley)
	32.1*	Certification of Terence Wise
	32.2*	Certification of Michael Matte
101.INS**		XBRL Instance Document.
101.SCH**		XBRL Taxonomy Extension Schema Document.
101.CAL**		XBRL Taxonomy Calculation Linkbase Document.
101.DEF**		XBRL Taxonomy Definition Linkbase Document.
101.LAB**		XBRL Taxonomy Label Linkbase Document.
101.PRE**		XBRL Taxonomy Presentation Linkbase Document.
*  Furnished and not filed herewith
**  Filed herewith

EX-10

Exhibit 10.3

CLAIM RELEASE

            This Release (“Release”) is entered into this 26^th day of June, 2015, between Forward Industries, Inc. and Zurich American Insurance Company (“ZAIC”) (“the Parties”) on their own behalf and on behalf of their respective affiliates, parents, successors and subsidiaries.

RECITALS

            WHEREAS, ZAIC issued an Employment Practices Liability Policy No. 9327147 00 for the policy period October 1, 2013 to October 1, 2015 (hereinafter “the Policy”);

            WHEREAS, Forward Industries, Inc. is identified as an Insured under the Policy;

WHEREAS, the Policy affords coverage for employment related Wrongful Termination, Discrimination, Sexual Harassment and Workplace Torts liability, for claims made during the Policy period and within the Policy’s coverage territory, subject to the Policy’s other terms, conditions and exclusions;

WHEREAS, Forward Industries, Inc. submitted a claim in which it sought coverage under the Policy arising out of a lawsuit entitled James McKenna v Forward Industries, Inc., Frank Lagrange Johnson; Robert Garrett; Owen P. J. King; Timothy Gordon; and John F. Chiste (Civil Action No. 14-cv-6944-RA) filed in the United States District Court for the Southern District of New York (“Lawsuit”);

WHEREAS, ZAIC disputed coverage under the Policy;

WHEREAS, the parties to the Lawsuit have agreed to resolve the matter by entering into a Settlement Agreement and Mutual Release dated February 14, 2015 (“Settlement Agreement”);

WHEREAS, ZAIC and Forward Industries, Inc. have agreed to resolve their dispute regarding coverage for the Lawsuit;

NOW, THEREFORE, in accordance with the foregoing recitals, and for good and valuable consideration received, Forward Industries, Inc. and ZAIC hereby agree, represent, and warrant as follows:

1.         The foregoing recitals are incorporated hereto;

2.         Subject to the terms and conditions of this Release, ZAIC will issue payment to Forward Industries, Inc. in the amount of $425,000 representing reimbursement to Forward Industries, Inc. of  a portion of the settlement amounts set forth in the Settlement Agreement;  

3.         Upon receipt of the $425,000, Forward Industries, Inc. hereby fully releases and forever discharges ZAIC, its current and former affiliates, parents, successors, subsidiaries, divisions, agents, employees, officers, owners, directors, administrators, attorneys and insurers from any and all claims, demands, damages or causes of action whatsoever that Forward Industries, Inc. and/or its affiliates, parents, successors and subsidiaries, and each of them, now have or hereafter may acquire, arising out of, based upon directly or indirectly out of the Lawsuit or any matters relating to the Lawsuit, including but not limited to any claims by Forward Industries, Inc. against ZAIC or the parties released above for bad faith or breach of the covenant of good faith and fair dealing related to the Lawsuit or this settlement.  At that time, ZAIC hereby fully releases and forever discharges Forward Industries, Inc., its current and former affiliates, parents, successors, subsidiaries, divisions, agents, employees, officers, owners, directors, administrators, attorneys and insurers from any and all claims, demands, damages or causes of action whatsoever that ZAIC and/or its affiliates, parents, successors and subsidiaries, and each of them, now have or hereafter may acquire, arising out of, based upon directly or indirectly out of the Lawsuit or any matters relating to the Lawsuit. 

4.         Forward Industries, Inc. acknowledges and agrees that it will not assign any rights under the Policy in relation to the Lawsuit to any individuals, natural persons, entities, companies, and/or their affiliates, and subsidiaries. 

5.         Immediately upon execution of this Release by Forward Industries, Inc., ZAIC shall issue a check payable to Forward Industries, Inc. in the sum of $425,000.  Such sum represents fully ZAIC’s coverage obligation under the Policy with respect to the Lawsuit.

6.         The provisions of this Release and the release of the claims arising from the Lawsuit extend to the Parties and to all of their respective subsidiaries, parents, divisions, affiliates, successors, agents, employees, officers, directors, administrators, attorneys and reinsurers (but only in their capacity as reinsurers of the Policy).  The Parties understand, acknowledge and agree that this Release shall be binding upon the Parties and their respective directors, officers, successors, administrators, executors, representatives, estates, heirs and assigns.

7.         The Parties to this Release understand, acknowledge and agree that this Release may be pleaded as a full and complete defense to, and used as a basis for an injunction against, any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this Release and its terms.

8.         The Parties to this Release represent and warrant that they have read, fully understand, and voluntarily accept the terms of this Release.

9.         The Parties to this Release acknowledge, represent and warrant that they have not assigned, sold, transferred or otherwise disposed of any of the causes of actions, claims or other matters which are being released hereby.  Nothing in this Release, whether express or implied, shall be construed as giving any third person or entity any right of action against any of the Parties hereto, under any purported right of subrogation, direct action statute, or otherwise, and the releases set forth in this Release are intended and shall be deemed to extinguish and preclude any and all claims concerning the subject matter of such releases by any third person or entity against any of the Parties hereto.

10.       In the event that any of the provisions of this Release should be deemed invalid or unenforceable, such provisions shall be severed from the remainder of this Release only if and to the extent agreed upon by all of the Parties hereto.  No breach of any provision hereof can be waived unless done so in writing.  Waiver of any one breach shall not be deemed to be a waiver of any other breach of the same or other provisions hereof.  This Release may be amended only by written agreement by all Parties who are signatories hereto.

11.       Each of the Parties declare and represent that no promise, inducement, or agreement not herein expressed has been made to it or to any of its representatives, and this Release contains the entire agreement between the Parties and supersedes any prior or contemporaneous written or oral agreements or understandings with respect to the subject matter hereof.

12.      Other than as necessary to enforce the terms of this Agreement, and other than disclosing the fact of this settlement, each party agrees that the terms of this Agreement as well as the settlement between the Parties shall remain confidential and none of the Parties shall disclose to any other person, entity, or agency the terms of the settlement between the Parties of the terms of this Agreement, except (i) as required by law or regulation, including in response to a subpoena or court order or in connection with the reporting obligations of Forward Industries, Inc. as a public company; (ii) to any attorney, reinsurer, auditor or accountant of any of the Parties; (iii) as required in connection with any governmental, administrative, fiscal, supervisory or regulatory request, inquiry, direction, or order, including but not limited to any insurance regulatory authority or any other governmental authority or agency; and (iv) as mutually agreed upon by the Parties in writing.

12.       The signatories to this Release who sign on behalf of Forward Industries, Inc. and ZAIC hereby warrant that he or she has the authority to sign on behalf of said Parties.  This Release may be signed in counter-parts; each counter-part to be deemed to be part of the original document.  Facsimile signatures shall be treated as originals.

Dated:   June 26, 2015	________________________________
	Forward Industries, Inc.
	By  /s/ Michael Luetkemeyer
Dated:  June 26, 2015	________________________________
	Zurich American Insurance Company
	By /s/ James Mandarino

EX-31

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT

I, Terence Wise, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, of Forward Industries, Inc. (“registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and I have:
		a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
		b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
		a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2015

/s/ Terence Wise
      Terence Wise

      Chief Executive Officer
      (Principal Executive Officer)

EX-31

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT

I, Michael Matte, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, of Forward Industries, Inc. (“registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and I have:
		a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
		b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
		a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2015

/s/ Michael Matte
     Michael Matte

     Chief Financial Officer
     (Principal Financial Officer)

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Terence Wise, Chief Executive Officer of Forward Industries, Inc. (“Forward) does certify pursuant to 18 U.S.C. §1350 that, to the best of his knowledge:

1. Forward’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Forward.

IN WITNESS WHEREOF, the undersigned has set his hand hereto as of the 11^th day of August 2015.

/s/ Terence Wise
      Terence Wise
      Chief Executive Officer
      (Principal Executive Officer)

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Michael Matte, Chief Financial Officer of Forward Industries, Inc. (“Forward) does certify pursuant to 18 U.S.C. §1350 that, to the best of his knowledge:

1. Forward’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Forward.

IN WITNESS WHEREOF, the undersigned has set his hand hereto as of the 11^th day of August 2015.

/s/ Michael Matte
     Michael Matte
     Chief Financial Officer
     (Principal Financial Officer)

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SHARE-BASED COMPENSATION (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Shares, Outstanding at Begining			778,500
Shares, Granted	50,000	0	50,000	32,500
Shares, Exercised
Shares, Forfeited			(550,000)
Shares, Outstanding at Ending	278,500		278,500
Shares, Exercisable	234,875		234,875
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Weighted average exercise price, Outstanding at Begining			$ 3.12
Weighted average exercise price, Granted			$ 0.64
Weighted average exercise price, Exercised
Weighted average exercise price, Forfeited			$ 3.17
Weighted average exercise price, Outstanding at Ending	$ 2.59		2.59
Weighted average exercise price, Exercisable	$ 2.84		$ 2.84
Share-Based Compensation Arrangement By Share-Based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term [Roll Forward]
Weighted average remaining contractual term (Years), Outstanding			5 years 6 months
Weighted average remaining contractual term (Years), Exercisable			4 years 9 months 18 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value [Abstract]
Aggregate intrinsic value, Outstanding	$ 2,500		$ 2,500
Aggregate intrinsic value, Exercisable	$ 750		$ 750

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SHAREHOLDERS' EQUITY

9 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

SHAREHOLDERS' EQUITY

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.

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

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INCOME (LOSS) PER SHARE (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Net income (loss) applicable to common equity (numerator for basic and diluted earnings per share)	$ 495,110	$ 19,909	$ (1,694,379)	$ 70,322
Weighted average shares outstanding (denominator for basic earnings per share)	8,364,247	8,195,808	8,329,950	8,183,933
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	8,195,808	8,329,950	8,183,933
Earnings (loss) per share, diluted	$ 0.06	$ 0	$ (0.26)	$ (0.01)

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SHARE-BASED COMPENSATION (Detail Narrative)		1 Months Ended		3 Months Ended		9 Months Ended
	Dec. 05, 2014 USD ($) shares	Jun. 25, 2015 $ / shares shares	Feb. 23, 2015 $ / shares shares	Jun. 30, 2015 USD ($) $ / shares shares	Jun. 30, 2014 USD ($) shares	Jun. 30, 2015 USD ($) $ / shares shares	Jun. 30, 2014 USD ($) $ / shares shares	Jan. 15, 2015 $ / shares shares	Sep. 30, 2014 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Granted				50,000	0	50,000	32,500
Weighted average grant date fair values (in dollars per share) | $ / shares						$ 0.38	$ 0.90
Allocated Share-based Compensation Expense | $				$ 1,000	$ 13,000	$ (36,000)	$ 79,000
Unrecognized compensation expense | $				24,000		$ 24,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period						1 year 6 months
Improbable to probable credit | $				0		$ (31,000)
Former Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of nonvested options								83,334
Minimum [Member] | Former Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Nonvested options exercise price | $ / shares								1.59
Maximum [Member] | Former Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Nonvested options exercise price | $ / shares								5.31
2011 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Granted		50,000
Description of vesting shares		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.
Aggregate grant date value | $ / shares		$ 19,000
Stock option exercise price | $ / shares		$ 0.64
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value | $						234,281
Allocated Share-based Compensation Expense | $				42,000	$ 62,000	39,000	$ 124,000
Unrecognized compensation expense | $				$ 143,000		$ 143,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period						10 months 24 days
Number of shares granted			210,000
Aggregate grant date value | $ / shares			$ 193,200	$ 0.90		$ 0.90			$ 1.32
Restricted Stock [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares granted			175,000
Restricted Stock [Member] | Former Chief Financial Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares granted			35,000
Description of vesting shares			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.
Restricted Stock [Member] | 2011 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares granted			70,000
Restricted Stock [Member] | 2011 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Granted	30,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value | $	$ 34,800
Restricted Stock [Member] | 2011 Plan [Member] | Executive [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Granted		50,000
Description of vesting shares		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.
Aggregate grant date value | $ / shares		$ 32,000
Restricted Stock [Member] | 2007 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares granted			140,000

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INCOME (LOSS) PER SHARE (Details 1) - shares	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,179,012	2,601,273	1,230,678	2,601,273
Convertible Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		648,846		648,846
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	278,500	901,000	278,500	901,000
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	723,846	723,846	723,846	723,846
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	176,666	327,581	228,332	327,581

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COMMITMENTS AND CONTINGENCIES (Detail Narrative) - USD ($)		1 Months Ended
	Jan. 15, 2015	Feb. 16, 2015	Jun. 30, 2015
Former Chief Executive Officer [Member]
Cash payment lieu of shares of restricted stock	$ 7,852
Vesting period	Nov. 08, 2015
Remaining obligation			$ 16,000
Former Chief Financial Officer [Member]
Remaining obligation			150,000
Cash payment lieu of salary		$ 315,000
Number of shares vested immediately		35,000
Paid litigation settlement		$ 375,000
Reimbursement amount			$ 425,000

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DISCONTINUED OPERATIONS

9 Months Ended

Jun. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

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			-
Iincome (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.

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RELATED PARTY TRANSACTIONS (Detail Narrative) - USD ($)			3 Months Ended		9 Months Ended
	Apr. 02, 2014	Feb. 02, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Related Party Transaction [Line Items]
Service Fees Paid Expenses Related Parties			$ 371,000	$ 387,000	$ 1,144,000	$ 930,000
Payments to Acquire Marketable Securities, Total				1,296,000	10,898	5,769,609
Proceeds from Sale and Maturity of Marketable Securities, Total				1,282,000	952,127	5,563,050
Marketable Securities, Realized Gain (Loss), Total				(8,904)	$ 110,001	30,528
La Grange Capital Administration Llc [Member] | Investment Management Agreement [Member]
Related Party Transaction [Line Items]
Asset Based Fee Percentage Of Average Account Net Asset Value					1.00%
Performance Fee In Percentage Of Increase In Annual Account Net Asset Value					20.00%
Noninterest Expense Investment Advisory Fees			$ 0	3,000	$ 0	9,000
Payments to Acquire Marketable Securities, Total			0	372,000	11,000	5,770,000
Proceeds from Sale and Maturity of Marketable Securities, Total			0	349,000	952,000	5,563,000
Marketable Securities, Realized Gain (Loss), Total			0	9,000	(110,000)	(31,000)
La Grange Capital Administration Llc [Member] | Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Revenue from Related Parties		$ 2,500
La Grange Capital Administration Llc [Member] | New York office [Member]
Related Party Transaction [Line Items]
Operating Leases, Rent Expense, Net	$ 2,500		$ 0	$ 38,000	$ 51,000	$ 43,000
Operating Leases, Rent Expense, Contingent Rentals	$ 12,700

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Jun. 30, 2015	Sep. 30, 2014
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
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

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OVERVIEW

9 Months Ended

Jun. 30, 2015

Overview [Abstract]

OVERVIEW

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.

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SHAREHOLDERS' EQUITY (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Beginning Balance			$ 9,186,695
Resticted stock award issuances
Resticted stock award forfeitures
Resticted stock repurchased and retired			$ (12,199)
Treasury stock retired
Share-based compensation			$ 3,065
Preferred stock dividends			(21,208)
Preferred stock accretion			(454,372)
Foreign currency translation	$ 1,091	$ 111	(615)	$ 1,144
Net (loss) income	495,110	$ 19,909	(1,694,379)	$ 70,322
Ening Balance	7,006,987		7,006,987
Common Stock [Member]
Beginning Balance			$ 91,598
Beginning Balance (in shares)			9,159,796
Resticted stock award issuances			$ 2,900
Resticted stock award issuances (in shares)			290,000
Resticted stock award forfeitures			$ (1,263)
Resticted stock award forfeitures (in shares)			(126,291)
Resticted stock repurchased and retired			$ (103)
Resticted stock repurchased and retired (in shares)			(10,340)
Treasury stock retired			$ (7,064)
Treasury stock retired (in shares)			(706,410)
Share-based compensation
Preferred stock dividends
Preferred stock accretion
Foreign currency translation
Net (loss) income
Ening Balance	$ 86,068		$ 86,068
Ening Balance (in shares)	8,606,755		8,606,755
Additional Paid-in Capital [Member]
Beginning Balance			$ 18,747,371
Resticted stock award issuances			(2,900)
Resticted stock award forfeitures			1,263
Resticted stock repurchased and retired			(12,096)
Treasury stock retired			(1,252,993)
Share-based compensation			$ 3,065
Preferred stock dividends
Preferred stock accretion
Foreign currency translation
Net (loss) income
Ening Balance	$ 17,483,710		$ 17,483,710
Treasury Stock [Member]
Beginning Balance			$ (1,260,057)
Beginning Balance (in shares)			706,410
Resticted stock award issuances
Resticted stock award issuances (in shares)
Resticted stock award forfeitures
Resticted stock award forfeitures (in shares)
Resticted stock repurchased and retired
Resticted stock repurchased and retired (in shares)
Treasury stock retired			$ 1,260,057
Treasury stock retired (in shares)			(706,410)
Share-based compensation
Preferred stock accretion
Foreign currency translation
Net (loss) income
Ening Balance
Ening Balance (in shares)
Accumulated Deficit [Member]
Beginning Balance			$ (8,371,806)
Resticted stock award issuances
Resticted stock award forfeitures
Resticted stock repurchased and retired
Treasury stock retired
Share-based compensation
Preferred stock dividends			$ (21,208)
Preferred stock accretion			$ (454,372)
Foreign currency translation
Net (loss) income			$ (1,694,379)
Ening Balance	$ (10,541,765)		(10,541,765)
Accumulated Other Comprehensive Loss [Member]
Beginning Balance			$ (20,411)
Resticted stock award issuances
Resticted stock award forfeitures
Resticted stock repurchased and retired
Treasury stock retired
Share-based compensation
Preferred stock dividends
Preferred stock accretion
Foreign currency translation			$ (615)
Net (loss) income
Ening Balance	$ (21,026)		$ (21,026)

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SHARE-BASED COMPENSATION (Details)	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Risk free interest rate	1.92%		1.92%	1.86%
Expected term (years)	5 years 10 months 24 days		5 years 10 months 24 days	6 years
Expected volatility	64.40%		64.40%	63.20%
Expected dividends	0.00%		0.00%	0.00%
Estimated annual forfeiture rate	10.00%		10.00%	10.00%

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ACCOUNTING POLICIES

9 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

ACCOUNTING POLICIES

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.

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.

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.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	9 Months Ended	12 Months Ended
	Jun. 30, 2015	Sep. 30, 2014
Preferred Stock, Shares Undesignated	2,400,000	2,400,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	4,000,000	4,000,000
Common stock, par or stated value per share (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	40,000,000	40,000,000
Common stock, shares issued (in shares)	8,606,755	9,159,796
Common stock, shares outstanding (in shares)	8,606,755	8,453,386
Treasury Stock, shares (in shares)	0	706,410
Convertible Preferred Stock [Member]
Preferred Stock, Dividend Rate, Percentage	6.00%	6.00%
Temporary equity, liquidation preference (in dollars)	$ 0	$ 1,275,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	1,500,000	1,500,000
Preferred stock, shares available (in shares)	851,154	851,154
Preferred stock, shares issued (in shares)	0	648,846
Preferred stock, shares outstanding (in shares)	0	648,846
Series A Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	100,000	100,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0

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SHAREHOLDERS' EQUITY (Tables)

9 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Schedule of 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

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Document And Entity Information - shares	9 Months Ended
	Jun. 30, 2015	Aug. 07, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Entity Registrant Name	FORWARD INDUSTRIES INC
Entity Central Index Key	0000038264
Current Fiscal Year End Date	--09-30
Entity Filer Category	Smaller Reporting Company
Trading Symbol	FORD
Entity Common Stock, Shares Outstanding		8,641,755
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes

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SHARE-BASED COMPENSATION (Tables)

9 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of stock options valuation assumptions

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	%

Schedule of stock option activity

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

Schedule of additional information regarding stock option awards

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

Schedule Of summarizes restricted stock activity

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

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
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	$ (0.28)	$ (0.01)
Income (loss) from discontinued operations	0	0	0.02	0
Net income (loss) per basic common share	0.06	0	(0.26)	(0.01)
Net income (loss) per diluted common share:
Income (loss) from continuing operations	0.06	0	(0.28)	(0.01)
Income (loss) from discontinued operations	0	0	0.02	0
Net income (loss) per diluted common share	$ 0.06	$ 0	$ (0.26)	$ (0.01)
Weighted average number of common and common equivalent shares outstanding:
Basic (in shares)	8,364,247	8,195,808	8,329,950	8,183,933
Diluted (in sares)	8,373,336	8,195,808	8,329,950	8,183,933

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

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.

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.

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INCOME (LOSS) PER SHARE

9 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

(LOSS) INCOME PER SHARE

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.

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

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SHAREHOLDERS' EQUITY (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Nov. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Sep. 30, 2014	Sep. 30, 2002
Temporary Equity [Line Items]
Dividends, Preferred Stock				$ (21,208)
Dividends Preferred Stock Including Accretion		$ 0	$ 48,000	$ 476,000	$ 145,000
Temporary Equity, Par Value						$ 833,365
Convertible Preferred Stock [Member]
Temporary Equity [Line Items]
Preferred Stock, Dividend Rate, Percentage				6.00%		6.00%
Temporary Equity, Par or Stated Value Per Share		$ 0.001		$ 0.001
Temporary Equity Minimum Percentage Of Consent Of Holders Required For Automatic Conversion Of Stock In Common Stock At Applicable Conversion Price				101.00%
Dividends, Preferred Stock		$ 0	$ 19,000	$ 21,000	$ 57,000
Temporary Equity, Par Value		$ 0		$ 0
Warrant [Member] | Convertible Preferred Stock [Member]
Temporary Equity [Line Items]
Private Placement Aggregate Purchase Price Per Share				$ 1.965
Common Stock [Member]
Temporary Equity [Line Items]
Dividends, Preferred Stock
Stock Repurchase Program, Number of Shares Authorized to be Repurchased							486,200
Stock Repurchased During Period, Shares				223,614
Stock Repurchased During Period, Value				$ 485,000
Stock Repurchased and Retired During Period, Shares	10,340
Stock Repurchased and Retired During Period, Value	$ 12,000
Treasury stock retired (in shares)				(706,410)
Treasury Stock [Member]
Temporary Equity [Line Items]
Treasury stock retired (in shares)				(706,410)

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INCOME (LOSS) PER SHARE (Tables)

9 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Schedule of calculated potential diluted earnings per share

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)

Schedule of securities are excluded from the calculation of weighted average dilutive common shares

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

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ACCOUNTING POLICIES (Policies)

9 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Accounting Estimates

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

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

Reclassifications

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

Income Taxes

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

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

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

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.

Recent Accounting Pronouncements

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.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

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.

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.

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LEGAL PROCEEDINGS

9 Months Ended

Jun. 30, 2015

Legal Matters and Contingencies [Abstract]

LEGAL PROCEEDINGS

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.

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DISCONTINUED OPERATIONS (Tables)

9 Months Ended

Jun. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Schedule of summarized operating results of discontinued operations

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	)

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DISCONTINUED OPERATIONS (Detail Narrative) - Jun. 30, 2015 - USD ($)	Total
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Other income	$ 200,000
G Form LLC [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Accounts Receivable	$ 280,000

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SHARE BASED COMPENSATION (Details 2) - Jun. 30, 2015 - $ / shares	Total
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding, Outstanding Number of Options	278,500
Options Exercisable, Weighted Average Remaining Life In Years	4 years 9 months 18 days
Options Exercisable, Exercisable Number of Options	234,875
$0.64 to $1.99 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding, Weighted Average Exercise Price	$ 1.03
Options Outstanding, Outstanding Number of Options	90,000
Options Exercisable, Weighted Average Exercise Price	$ 1.28
Options Exercisable, Weighted Average Remaining Life In Years	6 years 8 months 12 days
Options Exercisable, Exercisable Number of Options	55,000
$2.00 to $2.99 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding, Weighted Average Exercise Price	$ 2.46
Options Outstanding, Outstanding Number of Options	96,000
Options Exercisable, Weighted Average Exercise Price	$ 2.46
Options Exercisable, Weighted Average Remaining Life In Years	4 years 1 month 6 days
Options Exercisable, Exercisable Number of Options	95,500
$3.00 to $3.99 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding, Weighted Average Exercise Price	$ 3.74
Options Outstanding, Outstanding Number of Options	72,500
Options Exercisable, Weighted Average Exercise Price	$ 3.74
Options Exercisable, Weighted Average Remaining Life In Years	5 years 7 months 6 days
Options Exercisable, Exercisable Number of Options	64,375
$4.00 to $6.02 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding, Weighted Average Exercise Price	$ 6.02
Options Outstanding, Outstanding Number of Options	20,000
Options Exercisable, Weighted Average Exercise Price	$ 6.02
Options Exercisable, Weighted Average Remaining Life In Years	9 months 18 days
Options Exercisable, Exercisable Number of Options	20,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash Flows From Operating Activities:
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 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

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SHARE-BASED COMPENSATION

9 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION

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.

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.

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

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SHARE-BASED COMPENSATION (Details 3) - 9 months ended Jun. 30, 2015 - Restricted Stock [Member] - USD ($)	Total
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Shares, Non-vested balance	257,581
Shares granted	290,000
Shares vested	(192,958)
Shares forfeited	(126,291)
Shares, Non-vested balance	228,332
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Weighted average grant date fair value, Non-vested balance	$ 1.32
Weighted average grant date fair value, granted	0.90
Weighted average grant date fair value, vested	1.21
Weighted average grant date fair value, forfeited	1.26
Weighted average grant date fair value, Non-vested balance	$ 0.90
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Total Grant Date Fair Value [Roll Forward] [Abstract]
Total grant date fair value, Non-vested balance	$ 340,044
Total grant date fair value, granted	260,000
Total grant date fair value, vested	(234,281)
Total grant date fair value, forfeited	(159,398)
Total grant date fair value, Non-vested balance	$ 206,365

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DISCONTINUED OPERATIONS (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Discontinued Operations and Disposal Groups [Abstract]
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)