Forward's second-quarter gross profit up 50%

Forward Industries, Inc. (NASDAQ:FORD), a designer and distributor of custom carrying case solutions, today announced financial results for its second fiscal quarter ended March 31, 2010.

“Management's Discussion and Analysis of Financial Condition and Results of Operations”

Fiscal 2010 Second Quarter Financial Results - Compared to Fiscal 2009 Second Quarter:

• Net sales increased $163 thousand, or 4%, to $4.4 million in the 2010 Quarter due primarily to an increase in diabetic products sales of $0.4 million, or 13%. Net sales of "other products" decreased $0.2 million, or 21%, caused by the continuing decline in cell phone accessory product sales.
• Gross profit increased $0.3 million, or 50%, to $1.0 million in the 2010 Quarter resulting from the 4% increase in sales revenues and a 5% decrease in cost of goods sold. As a percentage of sales, gross profit was 23% in the 2010 Quarter compared to 16% in the 2009 Quarter.
• Operating expenses decreased $0.3 million, or 21%, to $1.1 million in the 2010 Quarter due primarily to a reduction in selling personnel costs and related travel and entertainment and automobile allowance expenses, and to a lesser extent to smaller decreases in other components of general and administrative expenses.
• Other (expense) income (mainly foreign currency transaction losses plus interest income) declined $89 thousand to $21 thousand in the 2010 Quarter due primarily to lower average interest rates on slightly lower cash balances in the 2010 Quarter.
• Net loss was $0.1 million, or $(0.01) per share, in the 2010 Quarter compared to net loss of $1.1 million, or $(0.13) per share, in the 2009 Quarter as a result of the increase in gross profit, decrease in operating expenses, and the decrease in income tax expense.

Fiscal 2010 Six-Month Period Financial Results - Compared to six-month period ended March 31, 2009:

• Net sales decreased $1.0 million, or 11%, to $8.5 million in the 2010 Period due declines in sales of diabetic products and "Other Products" (which includes cell phone product sales) of $0.6 million and $0.4 million, respectively.
• Gross profit increased $0.3 million, or 19%, to $1.9 million in the 2010 Period, resulting from a 17% decrease in cost of goods sold. As a percentage of sales, gross profit was 22% in the 2010 Period compared to 17% in the 2009 Period.
• Operating expenses decreased $0.5 million, or 19%, to $2.2 million in the 2010 Period due primarily to reductions in selling personnel costs and related travel and entertainment and automobile allowance and to a lesser extent decreases in components of general and administrative expenses.
• Other income (mainly foreign currency transaction losses plus interest income) declined $170 thousand to $14 thousand in the 2010 Period due primarily to lower average interest rates on slightly lower cash balances in the 2010 Period.
• Net loss was $0.3 million, or $(0.04) per share, in the 2010 Period compared to net loss of $1.3 million, or $(0.16) per share, in the 2009 Period as a result of the increase in gross profit, decrease in operating expenses, and decrease in income tax expense.

Douglas W. Sabra, Forward's President and Chief Executive Officer, commented, "Our operating loss narrowed in the 2010 quarter due to lower operating expenses and improved gross profit on a slightly higher revenue base, both of which were achieved as a result of our recent cost cutting efforts."

Mr. Sabra continued: "I am encouraged that we are seeing some improvement in our operating results. In the quarter we were able to increase sales, improve our margins, decrease operating expenses and narrow our operating loss. It is clear that we have more work ahead of us to return the Company to profitability and achieve our goal of expanding our customer base and product portfolio. In that regard, we believe that our efforts are meeting with some preliminary success, as we have received small, initial orders from first time customers. We believe that discussions with these first time customers regarding larger orders, as well as prospective customers regarding initial orders, have been constructive and positive, but we believe that progress in reducing customer concentration in significant measure is uncertain at this time.

"These efforts are being conducted without losing sight of our broader strategic goal of completing an acquisition or other business combination. Our cost containment initiatives have allowed us to conserve our cash balances in order to enhance our ability to achieve that goal. In that regard, we remain very active with our investment banker, Morgan Joseph & Co. Inc., in identifying and evaluating prospective targets. We have evaluated several transactions, but for valuation, due diligence concerns, or structuring issues, we have determined that none of these transactions would be in the best interests of our shareholders or the Company."