38264--12/9/2009--FORWARD_INDUSTRIES

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Our business has become more highly concentrated in our Diabetic Products line, thus increasing the 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 further 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 66% and 75% of net sales in Fiscal 2009 and Fiscal 2008, respectively; the loss of, or material reduction in orders from, any of these customers could materially and adversely affect our results of operations and financial condition. Our business could suffer if the services of key sales personnel we rely on were lost to us. 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. 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 certain OEM customers to maintain or even roll back prices or to supply lower priced carry solutions. The effects of price constraints on our business may from time to time 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 further pressure. Payments to us by or on behalf of our customers of accounts receivable originated in China or other Asian nations may be 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 relative 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, product cost, pricing, availability, and delivery risks. As a result, from time to time we experience certain quality control, on-time delivery, cost, or other issues that may threaten customer relationships. Our shipments of products via container freight to customers in the United States and Europe are 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. We have announced our intention to diversify our business by means of acquisition or other business combination. We do not pay dividends on our common stock. We have in place anti We maintain cash balances in our bank accounts that exceed the FDIC insurance limitation.

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38264--12/9/2009--FORWARD_INDUSTRIES_INC