** **

| **UNITED STATESSECURITIES AND  EXCHANGE COMMISSIONWashington,   D.C. 20549**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **FORM 10-QSB**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (Mark One)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| [X]       QUARTERLY REPORT UNDER SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                  for the quarterly period ended December  31, 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| [   ]       TRANSITION REPORT UNDER SECTION 13 OR  15(d) OF THE EXCHANGE ACT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                  for the transition period from  ____ to  ____                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Commission file number	0-6669                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **FORWARD  INDUSTRIES, INC.**(Exact name of small business issuer as specified in its charter)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                   New York                                                                                                                                                                                                                                                                                             |                         13-1950672                                          |
|                  	(State or other jurisdiction of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | (I.R.S.  Employer Identification No.) |
|                   incorporation or organization)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|                   1801 Green Rd., Suite E, Pompano Beach, FL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |     33064      |
|                    (Address of principal executive  offices)                                                                                                                                                                                                                                                                                                                                                                                                                                                     | (Zip Code) |
|                                                                                                                                                                                                                                                                                                                         |
|                                  (954)  419-9544                              (Issuer's Telephone Number)                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                   (Former name, former address and former fiscal year,  if changed since last report) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Check whether the issuer:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the  Exchange Act during the preceding 12 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 [X] No [   ].                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Indicate  by check mark whether the registrant is a shell company (as defined in Rule  12b-2 of the Exchange Act).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Yes  [  ]  No [X]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| As  of February 2, 2006, 7,861,438 shares of Common Stock were outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Transitional  Small Business Disclosure Format:    Yes [   ]  No [X]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

** **

----

----

**FORWARDINDUSTRIES, INC. AND SUBSIDIARIESFORM 10-QSBTHREEMONTHS ENDED DECEMBER 31, 2005 CONTENTS**

 

 

|              |            |                                                                                        | PAGE       |
|--------------|------------|----------------------------------------------------------------------------------------|------------|
| **PART  I**  | ** ** | **FINANCIAL  INFORMATION**                                                             | ** ** |
|              |            |                                                                                   |            |
|              | Item  1.   | Financial  Statements                                                                  |            |
|              |            |      Consolidated Balance Sheets as of December 31, 2005 (Unaudited)    |            |
|              |            |      and September 30, 2005                                             | 3          |
|              |            |                                                                                   |            |
|              |            |      Unaudited Consolidated Statements of Income for the Three          |            |
|              |            |      Months Ended December 31, 2005 and 2004                            | 4          |
|              |            |                                                                                   |            |
|              |            |      Unaudited Consolidated Statements of Cash Flows for the Three      |            |
|              |            |      Months Ended December 31, 2005 and 2004                            | 5          |
|              |            |                                                                                   |            |
|              |            |      Notes to Consolidated Financial Statements                         | 6          |
|              |            |                                                                                   |            |
|              | Item  2.   | Management's  Discussion and Analysis of Financial Condition and Results of Operations | 14         |
|              |            |                                                                                   |            |
|              | Item  3.   | Controls  and Procedures                                                               | 21         |
|              |            |                                                                                   |            |
| **PART  II** | ** ** | **OTHER  INFORMATION**                                                                 | ** ** |
|              |            |                                                                                   |            |
|              | Item  6.   | Exhibits                                                                               | 22         |
|              |            |                                                                                   |            |
|              |            | Signatures                                                                             | 22         |
|              |            |                                                                                        |            |

 

 

 

**NoteRegarding Use of Certain Terms**

                Inthis Quarterly Report on Form 10-QSB, unless the context otherwise requires,the terms "we", "our", and the "Company"  referto Forward Industries, Inc., a New York corporation, together with itsconsolidated subsidiaries; "Forward" or "Forward Industries" refers to ForwardIndustries, Inc.; "common stock" refers to the common stock, $.01 par value pershare, of Forward Industries, Inc.; "Koszegi" refers to ForwardIndustries' wholly owned subsidiary Koszegi Industries, Inc., an Indianacorporation; "Koszegi Asia" refers toForward Industries' wholly owned subsidiary Koszegi Asia Ltd., a Hong Kongcorporation; "Forward Innovations" refers to Forward Industries' wholly ownedsubsidiary Forward Innovations GmbH, a Swiss corporation;  "GAAP" refers to accounting principles generallyaccepted in the United States; "Commission" refers to the United StatesSecurities and Exchange Commission; "Exchange Act" refers to the United StatesSecurities Exchange Act of 1934; the "2006 Quarter" refers to the three months endedDecember 31, 2005; the "2005 Quarter" refers to the three months ended December31, 2004; Fiscal 2005 refers to our fiscal year ended September 30, 2005; "Fiscal2006" refers to our fiscal year ending September 30, 2006; "EMEA Region" meansthe geographic area encompassing Europe, the Middle East and Africa; and APACRegion means 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.

2

----

**PART I.   FINANCIAL INFORMATION**

ITEM 1.  FINANCIAL STATEMENTS

**FORWARD INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS**

|                                                                                                                                                                                                                 |                  |            |                   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|------------|-------------------|
|                                                                                                                                                                                                                 |                  |            |                   |
|                                                                                                                                                                                                                 | **December 31,** | ** ** | **September 30,** |
|                                                                                                                                                                                                                 | **2005**         | ** ** | **2005**          |
| **ASSETS**                                                                                                                                                                                                      | **(Unaudited)**  | ** ** | ** **        |
|                                                                                                                                                                                                            |                  |            |                   |
| Current assets:                                                                                                                                                                                                 |                  |            |                   |
|    Cash and cash equivalents                                                                                                                                                                          | $18,244,174      |            |  $15,291,739 |
| Investments in marketable equity  securities                                                                                                                                                                    | --               |            | 75,034            |
|    Accounts receivable - net                                                                                                                                                                          | 6,939,880        |            | 12,708,684        |
|    Inventories                                                                                                                                                                                        | 1,492,039        |            | 1,113,157         |
|    Prepaid expenses and other current assets                                                                                                                                                          | 196,869          |            | 214,012           |
|    Deferred tax asset                                                                                                                                                                                 | 203,747          |            | 215,647           |
|       Total current assets                                                                                                                                                             | 27,076,709       |            | 29,618,273        |
|                                                                                                                                                                                                                 |                  |            |                   |
| Property, plant, and equipment - net                                                                                                                                                                            | 221,417          |            | 243,845           |
| Other assets                                                                                                                                                                                                    | 44,467           |            | 44,467            |
|      **TOTAL ASSETS**                                                                                                                                                                       | $27,342,593      |            |  $29,906,585 |
|                                                                                                                                                                                                                 |                  |            |                   |
| **LIABILITIES AND SHAREHOLDERS' EQUITY**                                                                                                                                                                        |                  |            |                   |
|                                                                                                                                                                                                                 |                  |            |                   |
| Current liabilities:                                                                                                                                                                                            |                  |            |                   |
|    Accounts payable                                                                                                                                                                                   | $ 2,217,639      |            |  $ 5,159,020 |
|    Accrued expenses and other current liabilities                                                                                                                                                     | 941,266          |            | 1,905,425         |
|       Total current liabilities                                                                                                                                                        | 3,158,905        |            | 7,064,445         |
|                                                                                                                                                                                                                 |                  |            |                   |
| Commitments and contingencies                                                                                                                                                                                   |                  |            |                   |
|                                                                                                                                                                                                                 |                  |            |                   |
| Shareholders' equity:                                                                                                                                                                                           |                  |            |                   |
|    Preferred stock, 4,000,000 authorized shares, par value $.01;  none issued                                                                                                                         | --               |            | --                |
|    Common stock, 40,000,000  authorized shares, par value $.01; 8,424,931 and 8,397,031 shares issued at December 31, 2005 and September 30, 2005, respectively (including 563,493 held in  treasury) | 84,249           |            | 83,970            |
|    Paid-in capital                                                                                                                                                                                    | 15,287,951       |            | 14,721,172        |
|    Retained earnings                                                                                                                                                                                  | 9,664,647        |            | 8,890,157         |
|                                                                                                                                                                                                                 | 25,036,847       |            | 23,695,299        |
|    Less: Cost of shares in treasury                                                                                                                                                                   | (853,159)        |            | (853,159)         |
|       Total shareholders' equity                                                                                                                                                       | 24,183,688       |            | 22,842,140        |
|                                                                                                                                                                                                                 |                  |            |                   |
| **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY**                                                                                                                                                                  | $27,342,593      |            |  $29,906,585 |

The accompanying notes are an integral part of theconsolidated financial statements.

3

----

****

**FORWARD INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)**

** **

|                                                                             | **Three Months Ended December 31,**        |
|-----------------------------------------------------------------------------|--------------------------------------------|
|                                                                             | **2005**                                   | ** ** | **2004** |
| Net  sales                                                                  | $8,670,359                                 |  | $8,915,890 |
| Cost of goods sold                                                          | 6,026,062                                  |  | 5,685,795 |
| Gross profit                                                                | 2,644,297                                  |  | 3,230,095 |
|                                                                             |                                            |  |  |
| Operating expenses:                                                         |                                            |  |  |
| Selling                                                                     | 776,339                                    |  | 765,516 |
| General and administrative                                                  | 695,223                                    |  | 708,772 |
| Total operating expenses                                                    | 1,471,562                                  |  | 1,474,288 |
|                                                                             |                                            |  |  |
| Income  from operations                                                     | 1,172,735                                  |  | 1,755,807 |
|                                                                             |                                            |  |  |
| Other income:                                                               |                                            |  |  |
| Interest income                                                             | 151,272                                    |  | 13,307 |
| Other (expense) income                                                      | (16,843)                                   |  | 71,322 |
| Total other income                                                          | 134,429                                    |  | 84,629 |
|                                                                             |                                            |  |  |
| Income before provision for  income taxes                                   | 1,307,164                                  |  | 1,840,436 |
| Provision for income taxes.                                                 | 532,674                                    |  | 475,400 |
|                                                                             |                                            |  |  |
| Net income                                                                  | $  774,490                            |  |  $1,365,036 |
|                                                                             |                                            |  |  |
| Net income per common and  common equivalent share                          |                                            |  |  |
| Basic                                                                       | $       0.10 |  | $         0.22 |
| Diluted                                                                     | $       0.10 |  | $         0.21 |
|                                                                             |                                            |  |  |
| Weighted average number of  common and common equivalent shares outstanding |                                            |  |  |
| Basic                                                                       | 7,838,422                                  |  | 6,247,405 |
| Diluted                                                                     | 8,023,535                                  |  | 6,660,289 |
|                                                                             |                                            |  |  |
|                                                                             |                                            |  |  |

The accompanying notes are an integral part of theconsolidated financial statements.

4

----

****

**FORWARD INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)**

** **

|                                                                                                                                       |  | **Three Months Ended December 31,**                                                 |
|---------------------------------------------------------------------------------------------------------------------------------------|--|-------------------------------------------------------------------------------------|
|                                                                                                                                       |  | **     2005**                                                   | ** ** | **2004** |
| **OPERATING ACTIVITIES:**                                                                                                             |  |                                                                                     |  |  |
| Net  income                                                                                                                           |  | $   774,490                                                               |  | $1,365,036 |
| Adjustments to reconcile  net income to net cash provided (used)          by operating activities: |  |                                                                                     |  |  |
| Tax  benefit from exercise of stock options                                                                                           |  | 479,405                                                                             |  | -- |
| Provision  for obsolete inventory                                                                                                     |  | 37,064                                                                              |  | 7,382 |
| Depreciation  and amortization                                                                                                        |  | 28,522                                                                              |  | 31,222 |
| Deferred  income taxes                                                                                                                |  | 11,900                                                                              |  | 383,000 |
|      Changes in operating assets and  liabilities:                                                                |  |                                                                                     |  |  |
| Accounts  receivable                                                                                                                  |  | 5,768,804                                                                           |  | (3,441,508) |
| Inventories                                                                                                                           |  | (415,946)                                                                           |  | (617,082) |
| Prepaid  expenses and other current assets                                                                                            |  | 17,143                                                                              |  | (11,042) |
| Accounts  payable                                                                                                                     |  | (2,941,382)                                                                         |  | 932,294 |
| Accrued  expenses and other current liabilities                                                                                       |  | (964,159)                                                                           |  | (189,857) |
| **NET CASH  PROVIDED  (USED) BY OPERATING ACTIVITIES**                                                                           |  | **2,795,841**                                                                       | ** ** | **(1,540,555)** |
|                                                                                                                                       |  |                                                                                     |  |  |
| **INVESTING ACTIVITIES:**                                                                                                             |  |                                                                                     |  |  |
| Proceeds from sale of  marketable equity securities                                                                                   |  | 75,034                                                                              |  | -- |
| Purchases of property,  plant, and equipment                                                                                          |  | (6,093)                                                                             |  | (59,849) |
| **NET CASH PROVIDED (USED)  BY INVESTING ACTIVITIES**                                                                                 |  | **68,941**                                                                          | ** ** | **(59,849)** |
|                                                                                                                                       |  |                                                                                     |  |  |
| **FINANCING ACTIVITIES:**                                                                                                             |  |                                                                                     |  |  |
| Proceeds from exercise of  stock options                                                                                              |  | 87,653                                                                              |  | 94,349 |
| **NET  CASH PROVIDED BY FINANCING ACTIVITIES**                                                                                        |  | **87,653**                                                                          | ** ** | **94,349** |
|                                                                                                                                       |  |                                                                                     |  |  |
| NET INCREASE (DECREASE) IN  CASH AND CASH EQUIVALENTS                                                                                 |  | 2,952,435                                                                           |  | (1,506,055) |
|                                                                                                                                       |  |                                                                                     |  |  |
| CASH AND CASH  EQUIVALENTS - beginning of period                                                                                      |  | 15,291,739                                                                          |  | 4,487,415 |
|                                                                                                                                       |  |                                                                                     |  |  |
| CASH  AND CASH EQUIVALENTS - end of period                                                                                            |  | $18,244,174                                                                    |  | $2,981,360  |
|                                                                                                                                       |  |                                                                                     |  |  |
| **SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION**:                                                                               |  |                                                                                     |  |  |
| Cash paid during the fiscal year for:                                                                                                 |  |                                                                                     |  |  |
|    Interest                                                                                                                 |  | $               -- |  | $            -- |
|    Income taxes                                                                                                             |  | $    100,300                                                         |  | $   18,700 |
|                                                                                                                                       |  |                                                                                     |  |  |
|                                                                                                                                       |  |                                                                                     |  |  |
|                                                                                                                                       |  |                                                                                     |  |  |
|                                                                                                                                       |  |                                                                                     |  |  |
|                                                                                                                                       |  |                                                                                     |  |  |
|                                                                                                                                       |  |                                                                                     |  |  |

The accompanying notes are an integral part of theconsolidated financial statements.

5

----

**Forward Industries, Inc.Notes to Consolidated Financial StatementsThree-Month Periods Ended December 31, 2005 and 2004(Unaudited) **

----

 

1.             BASIS OF PRESENTATION             

Theaccompanying unaudited consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-QSBand Article 10 of Regulation S-X.  Accordingly, they do not include all theinformation and footnotes required by accounting principles generally acceptedin the United States for complete financial statements.  In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included.  Operatingresults for the three-month period ended December 31, 2005 are not necessarily indicative of the results that may be expected for the fiscal yearending September 30, 2006.

The consolidated balancesheet at September 30, 2005, has been derived from the audited consolidatedbalance sheet at that date, but does not include all of the information andfootnotes required by accounting principles generally accepted in the United States for complete financial statements.

The accounting policiesused in the preparation of the financial statements included in this Form10-QSB are the same as those set forth in the Company's annual report on Form10-KSB for the fiscal year ended September 30, 2005 and should be read inconjunction with the disclosures presented therein.  

For the three-month periods ended December 31, 2005 and 2004 the Company did not have any components of comprehensive incomeother than net income. The functional currency of each of the Company's whollyowned foreign subsidiaries is the U.S. dollar.

**RecentAccounting Pronouncements**

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement ofFinancial Accounting Standards (SFAS) No. 123 (revised 2004), Share-BasedPayment, which revised SFAS No. 123, Accounting for Stock-Based Compensation.SFAS No. 123(R) supersedes APB No. 25, Accounting for Stock Issued toEmployees, and amends SFAS No. 95, Statement of Cash Flows. Generally, theapproach in SFAS No. 123(R) is similar to the approach described in SFAS 123.However, SFAS No.123(R) requires all share-based payments to employees,including grants of employee stock options, to be recognized in the incomestatement based on their fair values. Pro forma disclosure is no longer analternative. In March 2005, the Securities and Exchange Commission issued StaffAccounting Bulletin No. 107 ("SAB 107") which expresses the views ofthe SEC staff regarding the application of SFAS No. 123(R). Among other things,SAB 107 provides interpretive guidance related to the interaction between SFASNo. 123 (R) and certain SEC rules and regulations, as well as provides the SECstaff's views regarding the valuation of share-based payment arrangements forpublic companies. On April 14, 2005, the SEC announced the adoption of a newrule that amends the compliance dates of SFAS 123 (R). The new rule allowscompanies to implement SFAS 123 (R) at the beginning of the fiscal year thatbegins after June 15, 2005 or December 15, 2005 for small business issuers.

SFASNo. 123(R) permits public companies to adopt its requirements using one of twomethods:

A "modifiedprospective" method in which compensation cost is recognized beginningwith the effective date (a) based on the requirements of SFAS No. 123(R) forall share-based payments granted after the effective date and (b) based on therequirements of SFAS No.123 for all awards granted to employees prior to theeffective date of SFAS No. 123(R) that remain unvested on the effective date.

A "modifiedretrospective" method which includes the requirements of the modifiedprospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS No. 123 for purposes of proforma disclosures for either (a) all prior periods presented or (b) priorinterim periods of the year of adoption.

 

6

----

**Forward Industries, Inc.Notes to Consolidated Financial StatementsThree-Month Periods Ended December 31, 2005 and 2004(Unaudited) **

----

1.            BASISOF PRESENTATION (CONTINUED)

**RecentAccounting Pronouncements (continued)**

The Company will adoptSFAS No. 123(R) effective October 1, 2006 using the modified prospectivemethod.

As permitted by SFAS No.123, the Company currently accounts for share-based payments to employees usingthe intrinsic value method per Accounting Principles Board (APB) Opinion No.25, Accounting for Stock Issued to Employees, and, as such, generallyrecognizes no compensation cost for employee stock options. Accordingly, theadoption of Statement 123(R)'s fair value method may have a significant impacton our results of operations, although it will have no impact on our overallfinancial position. The impact of the adoption of SFAS No. 123(R) cannot bepredicted at this time because it will depend on levels of share-based awardsgranted after the date of adoption. However, had the Company adopted SFAS No.123(R) in prior periods, the impact of that standard would have approximatedthe impact of SFAS No. 123 as described in the disclosure of pro forma net incomeand income per share under "Share-Based Compensation" below. SFAS No.123(R) also requires the benefits of tax deductions in excess of recognizedcompensation cost to be reported as a financing cash flow rather than as anoperating cash flow as required under current literature. This requirement mayreduce net operating cash flows and increase net financing cash flows inperiods after adoption. The Company cannot estimate what those amounts will bein the future because they depend on, among other things, when employeesexercise stock options.  For the three-month period ended December 31, 2005, the Company's operating cash flows include approximately $479,000 in suchbenefits.

In November 2004, theFASB issued SFAS No. 151, Inventory Costs, an Amendment of ARB No. 43, Chapter4 to clarify that abnormal amounts of idle facility expense, freight, handlingcosts, and wasted material (spoilage) should be recognized as current-periodcharges. In addition, the statement requires that allocation of fixedproduction overheads to the cost of conversion be based on the normal capacity of the production facilities. Statement 151 is effective for inventorycosts incurred during fiscal years beginning after June 15, 2005, with early application permitted. The Company adopted SFAS No. 151 effective October 1, 2005, which did not have a material impact on its results of operations orfinancial position.

In December 2004, theFASB issued SFAS No.153, Exchanges of Nonmonetary Assets-an amendment of APBOpinion No. 29, which eliminates the exception for nonmonetary exchanges ofsimilar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153is effective for nonmonetary assets exchanges occurring in fiscal periodsbeginning after June 15, 2005. The Company adopted SFAS No. 153 effective October 1, 2005 and did not have a material impact on its results of operations orfinancial position.

In December 2004, theFASB issued FSP 109-1, Application of FASB Statement No. 109, Accountingfor Income Taxes, to the Tax Deduction on Qualified Production ActivitiesProvided by the American Jobs Creation Act of 2004. The American Jobs CreationAct of 2004 (AJCA) introduces a special 9% tax deduction on qualifiedproduction activities. FAS 109-1 clarifies that this tax deduction should beaccounted for as a special tax deduction in accordance with Statement 109. FSP109-1 is effective upon its issuance. The adoption of FSP 109-1 did not have amaterial impact on the Company's results of operations or financial position.

 

7

----

**Forward Industries, Inc.Notes to Consolidated Financial StatementsThree-Month Periods Ended December 31, 2005 and 2004(Unaudited) **

----

 

1.             BASIS OF PRESENTATION(CONTINUED)

**Recent Accounting Pronouncements (continued)**

In December 2004, theFASB issued FASB Staff Position No. FAS 109-2, Accounting and DisclosureGuidance for the Foreign Earnings Repatriation Provision within the AmericanJobs Creations Act of 2004. The AJCA introduces a limited time 85% dividendsreceived deduction on the repatriation of certain foreign earnings to a U.S.taxpayer (repatriation provision), provided certain criteria are met. FAS No.109-2 provides accounting and disclosure guidance for the repatriationprovision. FAS 109-2 is effective upon issuance. The Company is currentlyassessing the repatriation provision to determine whether Forward Innovationsor other subsidiary of the Company might repatriate extraordinary dividends, asdefined in the AJCA. Among other things, this determination will depend on thelevel of earnings outside the United States, the debt level between theCompany's U.S. and non-U.S. affiliates, and administrative guidance from theInternal Revenue Service. The Company expects to complete this evaluationduring Fiscal 2006.

**Share-Based Compensation**TheCompany has adopted the disclosure provisions of SFAS No. 123, Accounting forStock-Based Compensation, but applies Accounting Principles Board (APB) OpinionNo. 25 and related interpretations in accounting for stock options grantedunder its 1996 Stock Incentive Plan. Accordingly, no expense for employeeshare-based compensation was recognized in the three-month periods endedDecember 31, 2005 and 2004, as all options granted under the plan had anexercise price equal to the quoted market value of the underlying common stockon the date of grant.  For awards to non-employees, the Company recognizesexpense in accordance with SFAS 123 and related interpretations andamendments.  No such expense was required during the three-months endedDecember 31, 2005 and 2004.

If the Company had elected to recognize expense in thethree-month periods ended December 31, 2005 and 2004, for the stock optionsgranted based on the fair value at the date of grant consistent with the methodprescribed by SFAS No. 123, unaudited net income and income per share wouldhave been changed to the pro forma amounts indicated below:

|                                                                                                                                     | Three Months Ended                               |
|-------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|
|                                                                                                                                     | December 31,                                     |
|                                                                                                                                     | 2005                                             |  | 2004 |
| Net income, as reported                                                                                                             | $774,490                                         |  | $1,365,036 |
| Less: Stock-based employee compensation costs  determined under fair value based method for all awards, net of related tax  effects | --                                               |  | 29,070 |
| Pro forma net income                                                                                                                | $774,490                                         |  | $1,335,966 |
|                                                                                                                                     |                                                  |  |  |
| Earnings per share:                                                                                                                 |                                                  |  |  |
| Basic  - as reported                                                                                                                | $        0.10 |  | $        0.22 |
| Basic  - pro forma                                                                                                                  | $        0.10 |  | $        0.21 |
|                                                                                                                                     |                                                  |  |  |
| Diluted  - as reported                                                                                                              | $        0.10 |  | $        0.21 |
| Diluted  - pro forma                                                                                                                | $        0.10 |  | $        0.20 |

 

 

8

----

**Forward Industries, Inc.Notes to Consolidated Financial StatementsThree-Month Periods Ended December 31, 2005 and 2004(Unaudited) **

----

 

1.             BASIS OF PRESENTATION(CONTINUED)

**Share-Based Compensation (continued)**The above stock-basedemployee compensation costs determined under the fair value based method werecalculated using the Black-Scholes option valuation model.  The Black-Scholesoption valuation model was developed for use in estimating the fair value oftraded options, which have no vesting restrictions, are fully transferable, anddo not include a discount for large block trades.  In addition, optionvaluation models require the input of highly subjective assumptions includingthe expected stock price volatility, expected life of the option, and otherestimates.  Because the Company's employee stock options have characteristicssignificantly different from those of traded options, and because changes inthe subjective input assumptions can materially affect the fair value estimate,in management's opinion, the existing models do not necessarily provide areliable single measure of the fair value of its employee stock options.

2.             CREDIT FACILITIES

In March 2005, Forwardand its wholly-owned U.S. subsidiary, Koszegi Industries, Inc. entered into acredit facility with a U.S. bank that provides for a committed line of creditin the maximum amount of $3 million, including a $1.5 million sub-limit forletters of credit. The line expires in March 2006 and is renewable annually atthe bank's discretion, subject to our submission of satisfactory financialinformation and other documentation. Forward and Koszegi are required toeliminate borrowings for thirty consecutive days during the term of thefacility and are required to comply with certain financial covenants, including the maintenance of current and tangible net worth ratios, as defined. Amounts drawnunder the credit facility bear interest at LIBOR plus 2.5% and are secured by substantiallyall of Koszegi's assets and certain assets of Forward.  There were nooutstanding borrowings or letter of credit obligations under this facilityduring the three-month period ended December 31, 2005. 

In February 2003,Forward's wholly-owned Swiss subsidiary, Forward Innovations GmbH (ForwardInnovations), established a credit facility with a Swiss bank that provides foran uncommitted line of credit in the maximum amount of $400,000.  Amountsborrowed under the facility may be structured as a term loan or loans, with amaximum repayment period of 12 months, as a letter of credit facility, or as aguarantee facility, or any combination of the foregoing.  Either party mayterminate the facility at any time; however, such termination would not affectthe stated maturity of any term loans outstanding.  Amounts borrowed other thanas a term loan must be settled quarterly or converted into term loans.  Inconnection with this facility, Forward Innovations agreed to certain covenants.Amounts drawn under this credit facility bear interest at variable ratesestablished by the bank (5.5% as of December 31, 2005).  At December 31, 2005, Forward Innovations is contingently liable to the bank in respect of a letterof credit, issued on its behalf in the amount of €224,000 (approximately $265,000as of December 31, 2005) in favor of Forward Innovations' freight forwarder andcustoms agent in connection with its logistics operations in The Netherlands (referto Note 6).  The effect of the issuance of the letter of credit is to reducethe availability of the credit line in an amount equal to the face amount ofthe letter of credit.

 

 

 

9

----

**Forward Industries, Inc.Notes to Consolidated Financial StatementsThree-Month Periods Ended December 31, 2005 and 2004(Unaudited) **

----

3.             BUSINESS SEGMENT INFORMATION**         **

The Company operates in a single segmentthat provides carrying solutions for portable electronic devices. Thiscarrying-solution segment designs and markets products to its customers thatinclude manufacturers of consumer hand held wireless telecommunications andmedical monitoring devices. The carrying solution segment operates ingeographic regions that include primarily the United States, Europe, and Asia. Geographic regions are defined based primarily on the location of the customer. Geographic Segment information is as follows:

**Revenues from external customers (allamounts in thousands of dollars):**

|  
Three Months Ended	December 31,

2005

2004

Asia

$3,621

$2,971

United States

3,399

2,444

Europe

1,650

3,501

Total net sales

$8,670

$8,916

4.            EARNINGS PER SHARE

Basic earnings pershare is computed using the weighted-average number of shares of common stockoutstanding during each period. Diluted earnings per share is computed usingthe weighted-average number of common and dilutive common-equivalent sharesoutstanding during the period. Dilutive common-equivalent shares consist ofshares that would be issued upon the exercise of stock options and warrants,computed using the treasury stock method. For this purpose, the average quotedmarket prices for the Company's common stock for the three-month periods ended December 31, 2005 and 2004 were $18.75 and $2.88, respectively. Calculation of basic and dilutedearnings per share is as follows:

Three Months Ended December 31,

2005

2004

Numerator:

Net  income

$774,490 

$1,365,036 

Denominator:

Denominator for basic earnings per share - weighted  average shares

7,838,422

6,247,405

Dilutive stock options and warrants - treasury stock  method

185,113

412,884

Denominator for diluted earnings per share -  weighted average shares

8,023,535

6,660,289
 
Net  income per common share

Basic

$0.10 

$0.22 

Diluted

$0.10 

$0.21 

Shares excluded due to antidilution

--

216,250

 

10

**Forward Industries, Inc.Notes to Consolidated Financial StatementsThree-Month Periods Ended December 31, 2005 and 2004(Unaudited) **

 

5.            INCOME TAXES

The Company's incometax provision consists of the following United States and foreign components:

Three Months Ended	December 31,

U.S. Federal and State

2005

2004

    Current

$411,074

$29,400

    Deferred

               129,700

               383,000
   
Foreign:

    Current

(8,100)

                63,000

    Deferred

--

--

Income  tax provision

$532,674

$475,400

Forthe three-month period ended December 31, 2005, the Company recorded aprovision for income taxes of approximately $533,000. The Company's effectivetax rate does not approximate the statutory United States federal income taxrate primarily due to tax rate differentials in respect of United States stateand foreign taxes.  Due to the availability of deferred tax assets andadditional tax benefits resulting from the exercise of stock options by certainemployees during the three-month period ended December 31, 2005, the Company has not recorded any amounts payable for U.S. income taxes

Effective June 2001,undistributed earnings of the Company's foreign subsidiaries are considered tobe permanently invested; therefore, in accordance with SFAS No. 109, noprovision for U.S. Federal and state income taxes on those earnings has beenprovided.  At December 31, 2005, the Company's foreign subsidiary hadapproximately $4,805,000 of accumulated undistributed earnings.  (See thediscussion of the possible consequences of action under the American JobsCreation Act of 2004 under "Management's Discussion of Financial Condition andResults of Operations-Results of Operations-Income Taxes".)

6.            COMMITMENTS ANDCONTINGENCIES

**Royalty Commitments**The Company has licensedthe use of certain trademarks of Motorola, Inc. ("Motorola") for thedistribution and sale of carry solution products throughout Europe, the MiddleEast and Africa (the "EMEA Region") under a license agreementeffective October 1, 2004, which replaces a previous agreement that expired September 30, 2004.  Under the terms of the license agreement, the Company isrequired to pay Motorola a royalty based upon a percentage of the Company's net sales to third parties of licensed products within the EMEA Region, subject to payment of minimum royalties (irrespective of actual net sales) to Motorola over the following three contract periods: 

Contract Period 1:  October 1, 2004 to December 31, 2005 

Contract Period 2:  January 1, 2006 to December 31, 2006 

Contract Period 3:  January 1, 2007 to December 31, 2007 

 

11

**Forward Industries, Inc.Notes to Consolidated Financial StatementsThree-Month Periods Ended December 31, 2005 and 2004(Unaudited) **

6.            COMMITMENTS ANDCONTINGENCIES (CONTINUED)

**Royalty Commitments (continued)**The minimum royaltypayment to Motorola for Contract Period 1 is $375,000, or $300,000annualized.  Prior to the end of Contract Period 1 and Contract Period 2,the Company and Motorola have agreed that, at such times, they will establishnew minimum royalty amounts for Contract Period 2 and Contract Period 3,respectively.  If the Company is unable to reach agreement at either suchtime with Motorola on the minimum royalty payment for Contract Period 2 orContract Period 3, as the case may be, then the parties have agreed that the minimumroyalty payment for the ensuing relevant period may not be less thanseventy-five per cent (75%) of the annualized royalties payable in respect ofactual sales for the prior contract period, provided, however, that in no eventshall the minimum royalty in such ensuing contract period be less thanseventy-five percent (75%) nor more than one-hundred-twenty-five percent (125%)of the amount of the prior period's annualized minimum royalty.

If the Company elects toterminate the license before December 31, 2007, it will be required to pay apenalty of an amount equal to up to one year's minimum royalty under certainconditions as specified in the agreement. The minimum royalty commitments arerecognized as expense in the applicable contract period. Under the licenseagreement, the Company recorded royalty expense of $85,000 and $75,000 for thethree-month periods ended December 31, 2005 and 2004, respectively, which areincluded in selling expenses in the accompanying consolidated statements ofincome.

In July 2005, thelicense agreement with Motorola was amended to expand the licensed territory toinclude the APAC Region as well as the EMEA Region in consideration for paymentof additional royalties on sales in the APAC Region, subject to payment ofminimum royalties, separate and apart from royalties payable in respect ofsales in the EMEA Region.  Minimum royalties in respect of the APAC territoryare not material.

**Legal Proceedings**From time to time, theCompany may become a party to legal actions or proceedings in the ordinarycourse of its business.  As of December 31, 2005, there were no such actions orproceedings, either individually or in the aggregate, that, if decidedadversely to the Company's interests, the Company believes would be material toits business.

**Bank Guarantee**In July 2002, ForwardInnovations, the Company's Swiss subsidiary, and its European logisticsprovider (freight forwarding and customs agent) entered into a RepresentationAgreement whereby, among other things, the European logistics provider agreedto act as such subsidiary's fiscal representative in The Netherlands for thepurpose of providing services in connection with any value added tax matters.As part of this agreement, the subsidiary agreed to provide an undertaking to thelogistics provider with respect to any value added tax liability arising in TheNetherlands that the logistics provider paid on the subsidiary's behalf. InFebruary 2004, such subsidiary entered into a guarantee agreement with a Swissbank relating to the repayment of any amount up to €224,000 (approximately $265,000as of December 31, 2005) paid by such bank to the logistics provider pursuantto a letter of credit that was issued by the bank in favor of the logisticsprovider in order to satisfy such undertaking.  The subsidiary would berequired to perform under the guarantee only in the event that: (i) a valueadded tax liability is imposed on the Company's sales in The Netherlands, (ii)the logistics provider asserts that it has been called upon in its capacity assurety by the Dutch Receiver of Taxes to pay such taxes, (iii) the subsidiary or the Company on its behalf fails or refuses to remit the amount of valueadded tax due to the logistics provider, and (iv) the logistics provider makesa drawing under the letter of credit. On December 31, 2004, and on each anniversary thereafter until December 31, 2009, it is intended that the bankletter of credit will be renewed automatically for one-year periods. Thesubsidiary has agreed to keep a letter of credit guarantee in place for five yearsfollowing the date its relationship terminates with the logistics provider. Asof December 31, 2005, the Company has not recorded a liability in connectionwith this guarantee.
 
 

12

**Forward Industries, Inc.Notes to Consolidated Financial StatementsThree-Month Periods Ended December 31, 2005 and 2004(Unaudited) **

 

7.            EQUITY

**Stock OptionExercises**During the three-month period ended December 31, 2005, 27,900 shares of common stock were issued due to the exercise of stockoptions with a range of exercise prices from $2.21 to $3.25.

**Treasury Share Purchases**The Company did not purchase any shares of itscommon stock during the three-month period ended December 31, 2005. 

 

 

 

 

 

 

 

13

ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

**Cautionarystatement for purposes of the "Safe Harbor" provisions of the PrivateSecurities Litigation Reform Act of 1995**

Thisquarterly report contains forward-looking statements that are not based onhistorical fact and that involve assessments of certain risks, developments,and uncertainties.  Such forward looking statements, within the meaning of thePrivate Securities Litigation Reform Act of 1995, can be identified by the useof forward-looking terminology such as "may", "will", "should", "expect","anticipate", estimate", "intend",  "continue", or "believe", or the negativesor other variations of these terms or comparable terminology.  Forward lookingstatements may include projections, forecasts, or estimates of futureperformance.  Forward looking statements are based upon assumptions that webelieve to be reasonable at the time such forward looking statements are made. Whether those assumptions will be realized will be determined by futurefactors, developments, and events, which are difficult to predict and may bebeyond our control.  Actual factors, developments, and events may differmaterially from those assumed.  Such risk factors, uncertainties,contingencies, and developments, including those discussed in this Management'sDiscussion and Analysis of Financial Condition and Results of Operations andthose identified in "Risk Factors" in our annual report on Form 10-KSB for thefiscal year ended September 30, 2005, could cause our future operating resultsto differ materially from those set forth in any forward looking statement.  Suchfactors include, among other, the following: our success in winning newbusiness from our customers and against competing vendors, whether replacementprograms that we win will be as successful as those that are replaced; levelsof demand and pricing generally for cellular handsets and blood glucosemonitoring devices for which we supply carry solutions; general economic andbusiness conditions, nationally and internationally in the countries in whichwe do business; demographic changes; changes in technology, includingdevelopments in cellular handsets or the control of diabetes; increased competition;changes affecting one or more of our principal Original Equipment Manufacturer("OEM") customers; governmental regulations and changes in, or the failure tocomply with, governmental regulations; and other factors included elsewhere inthis report and our other reports filed with the Commission, including withoutlimitation, those described under the caption Risk Factors contained in ourAnnual Report on Form 10-KSB for the year ended September 30, 2005. Accordingly, there can be no assurance that any such forward looking statement,projection, forecast or estimate can be realized or that actual returns orresults will not be materially lower than those that may be estimated.

**Giventhese uncertainties, readers are cautioned not to place undue reliance on suchforward-looking statements.  The Company disclaims any obligation to update anysuch factors or to publicly announce the results of any revisions to any of theforward-looking statements contained herein to reflect future results, events ordevelopments.**

**Management'sDiscussion and Analysis of Financial Condition and Results of Operations**

Thefollowing discussion and analysis shouldbe read in conjunction with our unaudited Consolidated Financial Statements andthe notes thereto and other financial information appearing elsewhere in thisQuarterly Report on Form 10-QSB and in our Annual Report on Form 10-KSB for thefiscal year ended September 30, 2005.  This discussion and analysis compares ourconsolidated results of operations for the three months ended December 31, 2005(the "2006 Quarter"), with the three months ended December 31, 2004 (the "2005Quarter"), and is based on or derived from the Unaudited Consolidated FinancialStatements included elsewhere in this Quarterly Report. There have been nomaterial changes in critical accounting estimates since September 30, 2005.  All figures in the following discussion are presented on a consolidated basis.All dollar amounts and percentages presented herein have been rounded toapproximate values.

 

 

14

 

Thepreparation of financial statements in conformity with GAAP requires us to makeestimates and assumptions that affect the reported amounts of assets,liabilities, and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting periods.  On an on-going basis, we evaluate ourestimates.  We base our estimates on historical experience and on various otherassumptions that are believed to be reasonable under the circumstances, theresults of which form the basis for making estimates about the carrying valuesof assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

**Variabilityof Revenues and Results of Operations**

Becauseour sales revenues are highly concentrated in a few large customers, andbecause the volumes of these customers' order flows to us are highly variable,with short lead times, our quarterly revenues, and consequently our results ofoperations, are highly variable and subject to significant changes over arelatively short period of time.

We dependfor the predominant proportion of our sales revenues on OEM orders from our sixlargest customers, each of which is a large, multinational corporation.  Eachof these customers launches many different products and purchases productsaccessories, such as carrying cases, from many different vendors.  When we areselected to supply a carry solution "in-box" for a specific product and launch,we may not be in a position to know the frequency or volumes of our customers'orders, or the duration of such orders (which will depend on the OEM customerproduct's life cycle), all of which depend on our customers' ongoingassessments of the product's relative contribution to their businesses, as wellas other factors.  Our OEM customers may keep products for which our carrysolutions have been selected to be packaged "in-box" in active promotion formany months, or for a very short period of time, depending on the popularity ofthe product, product development cycles and new product introductions, and ourcustomers' competitors' product offerings.  Short product life cycles areparticularly characteristic of the cellular handset market, where new functionalityis constantly introduced, competition among vendors is high, and industrytechnical standards are subject to continuing change.  When "in-box" programsend, and to the extent that the introduction of new programs does not includeour products as an accessory "in-box", or such new programs do include ourproducts as an accessory "in-box" but do not result in a comparable level ofdemand for our products, the level of our OEM product sales is susceptible tosignificant and rapid change.  

All of thismakes our quarterly revenue levels susceptible to a high degree of variabilityand difficult to predict.  Significant, rapid shifts in our operating resultsmay occur if and when one or more of these customers increases or decreases thesize(s) of, or eliminates, its orders from us by amounts that are material toour business. These factors make the fluctuations in revenues and net incomeexperienced in Fiscal 2005 and the 2006 Quarter fairly typical of thevolatility we can experience in our results of operations.  

**Trendsin Results of Operations**
-  *The three major "in-box"programs that drove our results of operations to exceptional levels duringFiscal 2005 did not drive our 2006 Quarter results to either comparable quarteror sequential gains, thus ending a series of sharp sequential quarterly gainsin revenue, gross profit, and net income*.We believe these three programs are maturing. As a result, and particularly inthe largest of these three programs, we are experiencing pricing pressure,shifts in product mix to lower priced items, and a decline in demand from ourOEM customers with respect to our products included "in-box" in these programs.We believe these factors were responsible for the reductions in sequential and,in certain cases, comparable quarter declines in unit volumes, revenues, andgross profit contributed by these three "in-box" programs in the 2006 Quarter.Furthermore, we believe these factors will continue to impact our results ofoperations in Fiscal 2006 as these programs wind down. The resulting impact onour quarterly results of operations in Fiscal 2006 may be especially pronouncedwhen compared to the record setting quarterly results we achieved as a resultof these programs in Fiscal 2005. While we expect these programs will terminatein Fiscal 2006, we have begun to ship product for a new "in-box" program andanticipate we will begin shipping products for additional "in-box" programs inFiscal 2006. However, the timing and size of the contribution of these new"in-box" programs to our revenue, gross profit, and net income to our Fiscal2006 results of operations are uncertain.

15

 
**-  *Product manufacture isincreasingly being outsourced by our OEM customers to contract manufacturingfirms in China and in Southeast Asia*. Such firms are performing assembly and productpackaging functions, including the bundling of product accessories such as ourswith the product.  As a consequence of this trend, we are increasinglydistributing our carry solution products to the contract manufacturing firm onbehalf of our OEM customer.  In some cases, depending on our sales and paymentarrangements with our OEM customers, we may invoice the contract manufacturingfirm and not the OEM customer.  Therefore, it is the contract manufacturingfirm's credit to which we must look for payment in such cases and not that ofour OEM "customer".  This may alter the credit profile of our customer base andmay involve significant purchase order volumes.  In some, but not all cases,the manufacturing firm is itself a large, multinational entity with significantfinancial resources.  A second result of this trend toward origination oforders from Asia is that Asia has in recent periods accounted for an increasingpercentage of our sales revenues, as seen in the tables below. 
-  *We have been approached byseveral of our OEM customers to enter into hub agreements*. Under theseagreements, we will be required to ship our products to our OEM customers'distribution hubs, but we will not invoice the OEM customers until they withdrawour product from the hub for shipment to their customers.  We have executed oneof these agreements and are currently negotiating several others. We are unableat this time to predict what one-time or recurring effects, if any, theimplementation of these arrangements may have on the timing of our revenuerecognition, costs, or other aspects of our operations.

**Resultsof Operations for the 2006 Quarter compared to the 2005 Quarter**

Net income inthe 2006 Quarter was $0.8 million compared to net income of $1.4 million in the2005 Quarter, a decrease of approximately $0.6 million or 43%.  The decreasewas primarily due to a decline in gross profit, as a result of lower marginsfor cell phone product sales in respect of certain key "in-box" programs, lowertotal sales, and higher operating costs for our Hong Kong facility. Inaddition, net income was adversely affected by an increase in our effective taxrate, offset in part by higher interest income due to higher average cashbalances and higher yields on those cash balances. Basic and diluted earningsper share were $0.10 for the 2006 Quarter, compared to basic and dilutedearnings per share of $0.22 and $0.21, respectively, in the 2005 Quarter. Thedecrease in earnings per share in the 2006 Quarter was due to the decrease innet income and, to a lesser extent, to a 20% increase in the weighed averageshares outstanding compared to the 2005 Quarter. 

**NetSales**

Net sales decreased $0.2 million or 3% to $8.7million in the 2006 Quarter compared to $8.9 million in the 2005 Quarter due tolower sales of diabetic products. Net sales of cell phone and diabetic carrysolution products were adversely affected due to price reductions, shifts inproduct mix to lower priced items, and a decline in demand from some of our OEMcustomers with respect to our products included "in-box" for certain key programs.In addition, our revenue was adversely affected by adoption of a sourcing,billing, and payment arrangement in China for one OEM customer's products inwhich we recognized revenue only to the extent of the related gross profit onsales to this customer. In the 2005 Quarter, we recognized the full sale priceof our products to this customer. The tables below set forth approximate salesby product line and geographic location of our customers for the periodsindicated.

 

 

16

 

**Net Sales for 2006 Quarter	3 Months ended December 31, 2005	(millions of dollars)**

** **

**US**

**Europe**

**Asia**

Total

Cell Phone Products

$ 1.57

$ 1.36

$ 2.76

$ 5.69

Diabetic Products

 1.04

 0.28

0.78

 2.10

Other Products

0.79

--

0.09

0.88

**Total***

**$3.40**

**$1.64**

**$3.63**

**$8.67**

                               

**Net Sales for 2005 Quarter 	3 Months ended December 31, 2004	(millions of dollars)**

** **

**US**

**Europe**

**Asia**

Total

Cell Phone Products

$ 0.97

$ 3.09

$ 1.53

$ 5.59

Diabetic Products

 0.73

 0.41

1.30

 2.44

Other Products

0.74

--

0.14

0.88

**Total***

**$2.44**

**$3.50**

**$2.97**

**$8.92**

* Tables maynot total due to rounding.

**Cell Phone Product Sales:**Our cell phone carrysolutions products include carrying cases for handsets and camera attachments,plastic belt clips, carrying case straps and bags, screen cleaners, decorativefaceplates, and other attachments used to carry or enhance the appearance ofcellular telephone handsets.  

We design to the orderof and sell these products directly to cell phone handset original equipmentmanufacturers Motorola and Nokia.  Our cases are packaged as an accessory"in-box" with the handsets that are sold by our OEM customers. In addition, under our license agreements with Motorola and SAGEM, wedistribute our products as separately packaged accessories directly to thirdparty wholesalers and retailers in the EMEA Region and, under the Motorolalicense, the APAC Region. 

Overall sales of cellphone products increased $0.1 million, or 2%, to $5.7 million in the 2006Quarter from $5.6 million in the 2005 Quarter. Cell phone product sales includeour OEM "in-box" sales to Motorola and Nokia, as well as sales under ourlicense agreements. OEM cell phone product sales were strong in the 2006Quarter with significantly higher overall unit sales compared to the 2005Quarter, driven in particular by the largest of the three "in-box" programsreferred to above. However, price reductions and changes in product mix tolower priced items on that program in particular and other programs adverselyimpacted our net sales.  In addition, our revenue was adversely affected by asourcing, billing, and payment arrangement for one particular cell phonecustomer's products in which we recognized revenue only to the extent of therelated gross profit on sales to this customer. In the 2005 Quarter, werecognized the full sale price of our cell phone products sold to thiscustomer. OEM cell phone product sales for the 2006 Quarter totaled $5.3million, compared to $4.9 million in the 2005 Quarter, an increase of $0.4million or 8%.

Virtually all of our OEMcell phone product sales in the 2006 Quarter were driven by four "in-box"programs. The three programs that drove our sales to exceptional levels duringFiscal 2005 contributed approximately 34%, 6%, and 7%, respectively, of totalnet sales to the results of the 2006 Quarter. The fourth "in-box" program,which was launched in the 2006 Quarter, contributed an additional 13% of salesin the 2006 Quarter. Combined, these four "in-box" programs accounted for approximately$5.3 million or 60% of our total net sales in the 2006 Quarter.

Sales to third partiesunder our license agreement with Motorola totaled $0.4 million in the 2006Quarter compared to $0.7 million in the 2005 Quarter, a decrease of $0.3 million,or 43%, which we believe, in part, is a function of the strong take-up of newOEM handset models generally (including carry accessories "in-box" fromnumerous vendors), which tends to undercut demand for carry solutions soldthrough distributors and retailers in the after market. 

 

 

17

 
****
**Diabetic Product Sales:**We design to the orderof and sell directly to OEMs carrying cases used by diabetics to carry theirpersonal electronic, blood glucose monitoring kits. OEM customers for thesecarrying cases include Abbott Labs, Bayer, Lifescan (a subsidiary of Johnson& Johnson), and Roche Diagnostics. Our carrying cases are packaged as anaccessory "in-box" with the monitoring kits that are sold by our OEMcustomers.

Sales of cases for bloodglucose monitoring kits decreased $0.3 million, or 13%, to $2.1 million in the2006 Quarter from $2.4 million in the 2005 Quarter. The decrease was dueprimarily to lower sales to Lifescan, our largest OEM customer for these cases,and Roche, sales to whom decreased $0.6 million and $0.1 million, or 43% and79%, respectively. These decreases more than offset a $0.4 million increase insales to other OEM customers.  OEM sales of carrying cases for blood glucosemonitoring kits represented 24% of our total net sales in the 2006 Quarter comparedto 27% total net sales in the 2005 Quarter, as a result of the increase in cellphone product sales revenues in the 2006 Quarter.

**Other Product Sales:**We design and sell anumber of other carrying solutions for items such as cameras, portable oxygentanks, bar code scanners, MP3 players, and other carrying solutions for anassortment of products on a made-to-order basis that are customized to meet theindividual needs of our smaller OEM customers.  By the nature of ourdistribution in this market, sales of these customized products to order intheir product category vary from period to period without necessarilyreflecting a significant trend in overall demand for these items. Sales ofother products remained consistent between the 2006 Quarter and 2005 Quarter at$0.8 million.

**GrossProfit**

Gross profit decreased$0.6 million, or 18%, to $2.6 million in the 2006 Quarter from $3.2 million in the2005 Quarter. In addition, gross profit as a percentage of total net sales decreasedto 31% in the 2006 Quarter from 36% in the 2005 Quarter.  Gross profitpercentage would have been several percentage points lower except for theimpact of a product sourcing, billing, and payment arrangement that we have inplace in respect of a product sold to one of our OEM cell phone customers.  Thesedecreases were primarily a result of unit pricing pressure from our largest OEMcustomer in respect of our carry solution products included with a major"in-box" program that is maturing in its life cycle, offset in small part bysubstantial increases in unit volume sales. These reductions in our sales pricewere not matched by reductions in our cost of supplying these carry solutionproducts. Gross profit was also adversely affected by product mix factors forthis major "in-box" program, as the proportion of higher price, higher margincarry cases included with the OEM customer's product decreased relative to thelower price, lower margin cleaning cloth.  Lower levels of diabetic sales alsoresulted in lower gross profit.  In addition, higher operating costs at ourHong Kong Facility, which are included in cost of goods sold, also adverselyaffected gross profit.  The costs of operating the Hong Kong facility increasedto $0.6 million, or 6.4% of net sales, in the 2006 Quarter from $0.5 million,or 5.3% of total net sales in the 2005 Quarter as a result of higher personnelcosts. 

**Selling,General, and Administrative Expenses**

Selling, general, andadministrative expenses remained consistent in total between the 2006 Quarterand 2005 Quarter at $1.5 million.  However, in the 2005 Quarter, Personnelexpenses included $0.3 million of accrued performance-based bonuses, whereasthe 2006 Quarter did not include such an accrual, thereby masking increases inpersonnel expenses, professional fees, and other general and administrativeexpenses.  

**PretaxIncome**

Pretax income decreased$0.5 million or 29% to $1.3 million in the 2006 Quarter from $1.8 million in the2005 Quarter as a result of the decrease in gross profit as described above.

 

 

18

 
****
**IncomeTaxes**

Ourprovision for income taxes increased $58,000 in the 2006 Quarter to $533,000from $475,000 in the 2005 Quarter.  Our effective tax rate increased to 41% inthe 2006 Quarter from 26% in the 2005 Quarter primarily because during the 2006Quarter we earned a higher proportion of our income in the United States versus   Switzerland than in the 2005 Quarter, where the statutory state and federalincome tax rates are significantly higher.

Wehave in the past considered the earnings of our foreign subsidiariesindefinitely invested and, accordingly, have not recorded a provision for U.S. income taxes on their unrepatriated earnings.  At December 31, 2005, those cumulative earnings were approximately $4.8 million.  On October 22, 2004, the American Jobs Creation Act of 2004, or the "Act", became law. The Act creates a one-timetax incentive for United States corporations to repatriate accumulated incomeearned abroad by providing a tax deduction equal to 85% of the dividendsreceived for certain foreign earnings that are repatriated.  We are currently evaluatingthe impact of the Act and have not determined if it would be constructive as astrategic fiscal matter for us to make any repatriation under this new law.  Weexpect to complete this evaluation during Fiscal 2006.

**Liquidityand Capital Resources**

* *During the 2006Quarter, we generated $2.8 million of cash from operations compared to $1.5million of cash used in operations in the 2005 Quarter. Our operating cashflows in the 2006 Quarter consisted of net income of $0.8 million, increased by$0.6 million for non-cash items, including $0.5 million of tax benefit relatedto stock options exercised. These cash flows were increased by net changes inworking capital items of $1.4 million, consisting primarily of a decrease inaccounts receivable $5.8 million, which was offset, in part, by increases in inventoriesand accounts payable, and a decrease in accrued expenses of $0.4 million, $2.9million, and $1 million, respectively.  The lower levels of accounts receivablein the 2006 Quarter are attributable to lower levels of sales in the 2006Quarter compared to the exceptional sales levels experienced in the fourthquarter of Fiscal 2005. The higher level of inventory in the 2006 Quarter is insupport of existing sales orders. The decrease in accrued expenses is primarilya result of accrued remuneration that was subsequently paid in the 2006 Quarter.No such accrual for remuneration was required as of December 31, 2005.

Our operating cash flowsin the 2005 Quarter consisted of net income of $1.3 million, adjusted fornon-cash items consisting of provisions for depreciation of $31,000, obsoleteinventory $7,000 and deferred income taxes of $0.4 million, less net changes inworking capital items of $3.3 million.  Changes in working capital itemsin the 2005 Quarter consisted primarily of increases in accounts receivable andinventories of $3.4 million and $0.6 million, respectively. These increaseswere offset in part by an increase in accounts payable of $0.9 million

Investing activitiesgenerated $75,000 in the 2006 Quarter from the sale of marketable securities,offset in part by purchases of $6,000 for property, plant and equipment,primarily computer and telecommunications hardware and software. Net investingactivities used $60,000 for purchases of property, plant and equipment,primarily computer and telecommunications hardware and software, in the 2005Quarter. 

Net financing activitiesgenerated $88,000 in cash during the 2006 Quarter and $94,000 in the 2005Quarter, primarily from the issuance of common stock upon the exercise of stockoptions to purchase approximately 27,900 and 62,900 shares, respectively, ofcommon stock under our 1996 Stock Incentive Plan.

At December 31, 2005, our current ratio (current assets divided by current liabilities) was 8.57; ourquick ratio (current assets less inventories divided by current liabilities) was8.10; and our working capital (current assets less current liabilities) was $23.9million.  As of such date, we had no short- or long-term debt balancesoutstanding. 

Our primary sources ofliquidity are cash on hand, our operating cash flow, our bank credit facilities,and, under current market conditions, exercises of employee stock options untilsuch options are exercised or they expire. The primary demands on our workingcapital are: our accounts payable arising in the ordinary course of business,the most significant of which arise when our customers place orders and weorder from our suppliers; and our commitments under our license agreement withMotorola. 

We anticipate that ourliquidity and financial resources for the ensuing fiscal year will be adequateto manage our financial requirements.

 

19

 

In March 2005, Forwardand Koszegi entered into a new credit facility with a U.S. bank that providesfor a committed line of credit in the maximum amount of $3 million, including a$1.5 million sub-limit for letters of credit. The line expires in March 2006and is renewable annually, at the discretion of the bank, subject to our submissionof satisfactory financial information and other documentation. Forward andKoszegi are required to eliminate borrowings for thirty consecutive days duringthe term of the facility and are required to maintain certain financialcovenants including the  maintenance of current and tangible net worth ratios,as defined. Amounts drawn under the credit facility bear interest at LIBOR plus2.5% and are secured by substantially all of Koszegi's assets and certainassets of Forward.  At December 31, 2005, there were no outstanding borrowingsor letter of credit obligations under this facility. 

In February 2003,Forward Innovations established a credit facility with a Swiss bank thatprovides for an uncommitted line of credit in the maximum amount of $400,000. Amounts borrowed under the facility may be structured as a term loan or loans,with a maximum repayment period of 12 months, or as a guarantee facility, orany combination of the foregoing.  Either party may terminate the facilityat any time; however, such termination would not affect the stated maturity of anyterm loan outstanding under the facility.  Amounts borrowed other than asa term loan must be settled quarterly or converted into term loans. Inconnection with this facility, Forward Innovations has agreed to certaincovenants.  Amounts drawn under this credit facility bear interest at variablerates established by the bank (5.5% as of December 31, 2005). At December 31, 2005, Forward Innovations is contingently liable to the bank under a letterof credit, issued on its behalf in the amount of €224,000 (approximately $265,000as of December 31, 2005) in favor of Forward Innovations' freight forwarder andcustoms agent in connection with its logistics operations in The Netherlands.  Theeffect of the issuance of the letter of credit is to reduce the availability ofthe credit line in an amount equal to the face amount of the letter of credit.

On September 27, 2002, our Board of Directors authorized the repurchase of up to400,000 shares of our outstanding common stock, or approximately 7% of thenumber of shares then outstanding. On January 21, 2004, our Board increased the amount of shares authorized for repurchase to 486,200. As of December 31 , 2005, we had repurchased an aggregate of 102,600 shares at a cost ofapproximately $171,000, but none during the 2006 Quarter, under thatauthorization.

**Contractual Obligations and Commercial Commitments**

The Company has entered into various contractualobligations and commercial commitments that, under accounting principlesgenerally accepted in the United States, are not recorded as a liability.   Thefollowing is a summary of such contractual cash obligations as of December 31, 2005:

**Contractual  Obligation or Commitment**

**Jan 05 - Dec 05**

**Jan 06- Dec 07**

**Jan 08 - Dec 09**

**Thereafter**

Employment & Consulting Agreements

$     835,000

$      1,020,000

$    185,000

$            	--

Operating Leases

218,000

                194,000

--

--

License Agreements**

275,000

244,000

--

--

Totals

$  1,328,000

$   1,458,000

$    185,000

$             --

**The amounts shown as licensee agreement obligations represent the minimumamounts the Company would incur as a royalty expense under the present terms ofits Motorola license agreement. 

TheCompany has not guaranteed the debt of any unconsolidated entity and does notengage in derivative transactions or maintain any off-balance sheet specialpurpose entities.  

 

 

20

 

ITEM 3.          CONTROLS AND PROCEDURES

**Evaluation of disclosure controls and procedures**.  

Our management is responsible for establishing and maintaining a system ofdisclosure controls and procedures (as defined in Rule 13a-15(e))  under theExchange Act) that is designed to ensure that information required to bedisclosed by the Company in the reports that we file or submit under theExchange Act is recorded, processed, summarized and reported, within the timeperiods specified in the Commission's rules and forms. Disclosure controls andprocedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by an issuer in the reportsthat it files or submits under the Exchange Act is accumulated and communicatedto the issuer's management, including its principal executive officer orofficers and principal financial officer or officers, or persons performingsimilar functions, as appropriate to allow timely decisions regarding requireddisclosure.

Inaccordance with Exchange Act Rules 13a-15, our management, with theparticipation of our Chief Executive Officer and Chief Financial Officer,performed an evaluation of the effectiveness of the Company's disclosurecontrols and procedures as of the end of the period covered by this QuarterlyReport. Based on that evaluation, the Company's Chief Executive Officer andChief Financial Officer concluded that the Company's disclosure controls andprocedures were effective, as of the end of the period covered by thisQuarterly Report, to provide reasonable assurance that information required tobe disclosed in the Company's reports filed or submitted under the Exchange Actis recorded, processed, summarized and reported within the time periodsspecified in the Commission's rules and forms. 

**Changes in internal controls**.

Our management, with the participation our Chief Executive Officer and Chief Financial Officer, performed an evaluation as to whether any change in our internal controls over financial reporting  occurred during the 2006 Quarter.  Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company's internal controls over financial reporting during the 2006 Quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

 

 

 

21

 

PART II.   OTHER INFORMATION

ITEM 6.       EXHIBITS 

 Exhibits filed herewith:

                31.1 Certification of the ChiefExecutive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

                31.2 Certification of the Chief Financial Officer under Section302 of the Sarbanes-Oxley Act of 2002

                32.1Certifications of the Chief Executive Officer and Chief Financial Officer underSection 906 of the Sarbanes-Oxley Act of 2002

               

 

 

**SIGNATURES**

Inaccordance with the requirements of the Securities Exchange Act of 1934, theregistrant caused this report to be signed on its behalf by the undersigned,hereunto duly authorized.

Dated:  February 2, 2006
 
FORWARDINDUSTRIES, INC.(Registrant)
     
By:/s/Jerome E. Ball
 
JeromeE. Ball  
 
Chairmanand Chief Executive Officer
 
                                                                               
   
By:/s/Douglas W. Sabra
 
DouglasW. Sabra
 
VicePresident, Chief Financial Officer and
 
PrincipalAccounting Officer

                                                                               

 

22
  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|