38264--12/8/2010--FORWARD_INDUSTRIES

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Our business remains highly concentrated in our Diabetic Products line, posing risks to our financial condition and results of operations compared to periods when revenue from customers from two principal product lines were more balanced. If our Diabetic Products line were to suffer the loss of a principal customer or a material decline in or loss of sales, our business would be materially and adversely affected. Our business is and has been characterized by a high degree of customer concentration. Our three largest customers accounted for approximately 73% and 66% of net sales in Fiscal 2010 and Fiscal 2009, respectively; the loss of, or material reduction in orders from, any of these customers would materially and adversely affect our results of operations and financial condition. We have previously announced our intention to diversify our business by means of acquisition or other business combination. If any one or more of our OEM customers elect to reduce or discontinue inclusion of cases in-box , our results of operations and financial condition would be materially and adversely affected. Our business strategy is to develop and grow our existing business; to the extent that operating expenses trend significantly higher before we realize higher revenues, our operating results may be adversely and materially affected. At any time, a significant percentage of our accounts receivable risk may be concentrated in a small number of customers. In a price constrained global economy we continue to encounter pressures from our largest OEM customers to maintain or even roll back prices or to supply lower priced carry solutions. The effects of such price constraints on our business may be exacerbated by inflationary pressures that affect our costs of supply. Our results of operations are subject to the risks of fluctuations in the values of foreign currencies relative to the U.S. Dollar; for example, if the factors tending to support appreciation of the Chinese renminbi, in which a significant portion of our suppliers costs are denominated, and depreciation of the US Dollar, in which most of our revenues are denominated, continue, our gross margins will be subject to pressure. Payments to us by or on behalf of our customers of accounts receivable originated in China may become subject to local regulations or moratorium that restrict the right to convert foreign currencies into U.S. dollars or U.S. dollars into foreign currencies, or that prevent, delay, or restrict the ability to remit U.S. dollars to the United States. Future revenues are difficult to predict and are likely to show significant variability as a consequence of customer concentration. Our gross margins, and therefore our profitability, vary considerably by customer and by product type, and if the revenue contribution from one or more OEM customers changes materially, relative to total revenues, our gross profit percentage may fluctuate or decline. Product manufacture is often outsourced by our OEM customers to contract manufacturing firms in China and in these cases it is the contract manufacturer to which we must look for payment. Our dependence on foreign manufacturers creates quality control and other risks to our business. From time to time we may experience certain quality control, on-time delivery, cost, or other issues that may jeopardize customer relationships. Our shipments of products via container freight to customers in the United States and Europe may become subject to delays or cancellation due to work stoppages or slowdowns, piracy, damage to port facilities caused by weather or terrorism, and congestion due to inadequacy of port terminal equipment and other causes. The carrying solutions business is highly competitive and does not pose significant barriers to entry. Our business could suffer if the services of key sales personnel we rely on were lost to us. We do not pay dividends on our common stock. We have in place anti-takeover measures and charter provisions that may prevent a hostile or unwanted effort to acquire Forward. We maintain cash balances in our bank accounts that exceed the FDIC insurance limitation.

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38264--12/8/2010--FORWARD_INDUSTRIES_INC