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• The Board believes that having the Chief Executive Officer serve in both capacitiesallows him to more effectively execute Forward’sForward's strategic initiatives and business plansand confront its challenges. A combined Chairman and Chief Executive Officer structure provides us with decisiveand effective leadership with clearer accountability to our shareholders. The combined role is both counterbalanced and enhanced by the effective oversight andindependence of our Board and the independent leadership provided by our Lead Director. The Board believes that the appointment of a strong independent Lead Director and theuse of regular executive sessions of the non-management directors, along with the Boardsstrong committee system, and substantial majority of independent directors being independent except for the Chief Executive Officer, allow it to maintain effective oversight of management.

Role of Board in Risk Oversight

Our risk management function is overseen by our Board. Our management keeps itsthe Board apprised of material risks and provides its directors access to all information necessary for them to understand and evaluate how these risks interrelate, how they affect us, and how management addresses those risks. Terence Wise, as our Chief Executive Officer and Chairman of the Board, and Michael Matte, our Chief Financial Officer, work closely together with the Board and our Lead Director, once material risks are identified on how to best address suchidentified risks. If the identified risk poses an actual or potential conflict with management, our independent directors may conduct the assessment. Presently, the primary risks affecting us are: (i) our ability to grow our business, (ii) increase our customer base, and (iii) diversify our sales outside of the medical industry.industry and (iv) obtaining the benefits that we anticipate from the acquisition of IPS.

Code of Business Conduct and Ethics

Our Board has adopted a Code of Business Conduct and Ethics (“("Code of Ethics”Ethics"), that applies to all of our employees, including our Chief Executive Officer and Chief Financial Officer. Although not required, the Code of Ethics also applies to our Board. The Code of Ethics provides written standards that we believe are reasonably designed to deter wrongdoing and promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, full, fair, accurate, timely and understandable disclosure, and compliance with laws, rules and regulations, including insider trading, corporate opportunities and whistle-blowing or the prompt reporting of illegal or unethical behavior. A copy of our Code of Ethics may be accessed athttp://forwardindustries.com/corporate-governance.html.

Communication with our Board of Directors

Although we do not have a formal policy regarding communications with the Board, shareholders may communicate with the Board by writing to us at Forward Industries, Inc., 477 S. Rosemary Avenue, Suite 219, West Palm Beach, Florida 33401, Attention: Corporate Secretary, or by facsimile (561) 465-0074. Shareholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate.

Related Person Transactions

        Buying Agency and Supply Agreement

On March 12, 2012, the Company entered into a Buying Agency and Supply Agreement (the “First"First Sourcing Agreement”Agreement") with Forward China.  Terence Wise, the Company's Chairman, Chief Executive Officer and largest shareholder, is the owner of Forward China. In addition, Jenny P. Yu, a Managing Director of Forward China, owns more than 5% of the Company's common stock.  On March 13, 2014, the Company entered into Amendment No. 1 to the First Sourcing Agreement with Forward China, dated as of March 11, 2014. The First Sourcing Agreement, as amended, provided that Forward China would act as the Company’sCompany's exclusive buying agent and supplier of products in the Asia Pacific region. The Company will purchase products at Forward China’sChina's cost and pay Forward China a monthly fee for services it provides under the First Sourcing Agreement.

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On September 9, 2015, the Company entered into a Buying Agency and Supply Agreement (the “Second"Second Sourcing Agreement”Agreement") with Forward IndustriesChina  on substantially the same terms as the First Sourcing Agreement, which was due to expire on September 11, 2015. The Second Sourcing Agreement provides that Forward China will act as the Company’sCompany's exclusive buying agent of carry and protective solutions in the APAC Region. Forward China also arranges for sourcing, manufacture and exportation of such products. The Company purchases products at cost and pays a service fee to the Forward China. The service fee is calculated at $100,000 monthly plus 4% of “Adjusted"Adjusted Gross Profit.” “Adjusted" "Adjusted Gross Profit”Profit" is defined as the selling price less the cost from Forward China. Terence Wise, the Company’s Chairman, Chief Executive Officer and largest shareholder, is a principal of Forward China. In addition, Jenny P. Yu, a Managing Director of Forward China, owns more than 5% of the Company’s common stock.  The Company recognized approximately $1,425,000 and $1,435,000 (inclusive of the extension fee below) and $1,466,000 during the fiscal years ended September 30, 20172018 and 2016,2017, respectively, in service fees paid to Forward China.  As a result of the continued decrease in the Company’sCompany's net revenues, Forward China agreed to forgo its rights to the 4% portion of the service fee under the Supply Agreement beginning with the third fiscal quarter through the end of fiscal year 2017. On September 19, 2017, the Supply Agreement was amended whereby the Company agreed to pay Forward China $70,000 in order to extend the Supply Agreement for an additional six months to March 8, 2019. In addition, the 4% of Adjusted Gross Profit was reinstated for the fourth quarter of fiscal 2017.

The sister of Paul Severino, the Chief Operator of IPS, is employed by IPS as its Chief Marketing Officer and receives an annual salary of $156,500 per year. 

In order to fund the acquisition of IPS, the Company issued a $1.6 million promissory note to Forward China in consideration for a one-year loan (due January 18, 2019).   The note bears an interest rate of 8% and pays monthly interest.  

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers, and persons who own more than 10% of our common stock to file with the SEC initial reports of ownership and changes in ownership of our common stock and other equity securities with the SEC.securities. These individuals are required by the regulations of the SEC to furnish us with copies of all Section 16(a) forms they file. BasedExcept as described below, based solely on a review of the copies of the forms furnished to us, and written representations from reporting persons that no Forms 5 were required to report delinquent filings, we believe that all filing requirements applicable to our officers, directors and 10% beneficial owners were complied with during fiscal year 2017.2018.  Ms. Jenny Yu, a 10% shareholder, failed to file 18 Form 4s and a Form 5 which should have reported 18 transactions.

Voting Securities and Principal Holders Thereof

The following table sets forth the number of shares of our common stock beneficially owned as of the record date by (i) those persons known by us to be owners of more than 5% of our common stock, (ii) each director, (iii) our Named Executive Officers, and (iv) all of our executive officers and directors  of as a group. Unless otherwise specified in the notes to this table, the address for each person is: c/o Forward Industries, Inc., 477 Rosemary Avenue, Suite 219, West Palm Beach, Florida 33401.

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-------

* Less than 1%.

Renaissance.  Based on a Schedule 13G/A filed on February 14, 2018.  Address is 800 Third Avenue, New York, NY 10022. 

Compensation of Directors

TheIn fiscal 2018, the Company payspaid annual cash compensation of $65,000$35,000 to its non-employee directors. Effective January 1, 2018, our non-employee directors will be paidas well as additional fees for service on the Acquisition Committee and Business Development Committee ($20,000 for service as a cash compensationchairperson of $35,000these committees and 50,000 shares of common stock$15,000 for their annual Board service. non-chairperson members).

In fiscal 2017,2018, non-employee members of our Board of Directorsdirectors were compensated for as follows:

11(2)   Resigned during Fiscal 2018.

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Executive Compensation

                The following information is related to the compensation paid, distributed or accrued by us for fiscal 20172018 and 20162017 to all Chief Executive Officers (principal executive officers) serving during the last fiscal year and the two other most highly compensated executive officers serving at the end of the last fiscal year whose compensation exceeded $100,000. We refer to these individuals as our “Named"Named Executive Officers.” During fiscal 2017 and 2016, Messrs. Wise and Matte were the Company’s only executive officers.

"

2018 Summary Compensation Table

(1) 

(1)Represents insurance reimbursements. reimbursements to Mr. Matte and cell phone and auto reimbursements to Messrs. Maiman and Severino. 

(2)   Appointment commenced with the acquisition of IPS.

Named Executive Officer Employment Compensation Arrangements/Agreements

Terence Wise.   Effective May 16, 2018, the Company and Terence Wise entered into a three year Employment Agreement.  Pursuant to his Employment Agreement, Mr. Wise shall receive an annual base salary of $300,000.

Michael Matte.   Effective May 16, 2018, the Company and Michael Matte the Company’s Chief Financial Officer, is the only Named Executive Officer with anentered into a three year Employment Agreement.  Pursuant to his Employment Agreement, Mr. Matte shall receive an annual base salary of $225,000.

Under thehis prior Employment Agreement, Mr. Matte was to be paid $225,000 per year and was issued 50,000 shares of common stock and 50,000 stock options. On November 1, 2015, Mr. Matte agreed to reduce his annual base salary to $150,000$150,000.  Effective February 1, 2018, Mr. Matte's annual salary reverted back to $225,000. 

Maiman and Severino.  In connection with the acquisition of IPS, the Company entered into three year employment agreements with Mitch Maiman and Paul Severino.  Under the Employment Agreements, each of Messrs. Maiman and Severino receive an annual base salary of $256,000 and $900 per year.  From July 1, 2015 through July 1, 2017, Terence Wise had anmonth for auto and cell phone allowance.

Bonus

Under his Employment Agreement, under which he was paid $300,000 per year.  Mr. Wise continuesis eligible to receive for each full fiscal year a bonus in the amount of up to 25% of his base salary to be paid $300,000 per year under an oral agreement.in restricted stock or other equity, the combination and vesting of which shall be determined by the Compensation Committee in its sole discretion.  

Bonus

Under his Employment Agreement, Mr. Matte will beis eligible to receive for each full fiscal year a bonus based onin the termsamount of up to 25% of his base salary to be paid in cash and/or restricted stock or other equity, the bonus plancombination and performance metrics thatvesting of which shall be determined by the Compensation Committee of the Board adopts, in its sole discretion, from year to year, which may range in an amount equal to or between 0 and 50% of Mr. Matte’s annual salary and may be awarded in a combination of cash, restricted stock, restricted stock units and/or other equity. Asdiscretion.

Each of the record date,Named Executive Officers is entitled to receive discretionary bonuses under their Employment Agreements at the discretion of the Compensation Committee had not adopted the terms of a bonus plan or set any performance metrics.Committee.

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Termination Provisions

In

Pursuant to Messrs. Wise's and Matte's Employment Agreements, in the event Mr. Matte terminates histhey terminate their employment for Good Reason, or in the event Mr. Matte’sCompany terminates their employment is terminated without Cause, Mr. Mattethey shall be entitled, subject to execution and effectiveness of a general release, to receive any earned and unpaid salary accrued througha lump-sum payment in the dateamount equal to  six month of termination, one year’stheir then base salary, compensation for any unused vacation days and any unpaid benefits accrued through the termination date.salary.

Pursuant to Mr. Wise's Employment Agreement, Good Reason is generally defined as (i) the material diminutionassignment to the executive without his consent of Mr. Matte’s duties materially inconsistent with his position as contemplated by the Employment Agreement, (ii) a decrease in annual base salary, other than an across the board decrease in salary applicable to all senior executives of the Company of not more than 10%, (iii) any failure by the Company to perform any material obligation under, or its breach of a material provision of, the Employment Agreement, and (iv) failure of any Company successor to expressly assume and agree to perform the Employment Agreement in the same manner and to the same extent as the Company would have had there been no successor.  Good Reason in Mr. Matte's Employment Agreement also includes the relocation of Mr. Matte’shis principal place of business more than 30 miles from West Palm Beach, Florida or any failure by the Company to perform any material obligation under the Employment Agreement.Florida. Cause is generally defined as willful misconduct material breachin connection with the performance of, or willful failure, neglect or refusal to perform, any duties or services under the Employment Agreement, the Company’s Insider Trading Policy or other material policy and/or the commission of, conviction of, or nolo contendere or guilty plea in connection with, a felony or a crime of moral turpitude.

Upon

In the expiration of Mr. Matte’s Employment Agreement, Mr. Matte shall beevent Messrs. Maiman's and Severino's employment is terminated without Cause, they are entitled to receive, in a lump sum payment, one year's base salary. Additionally, they shall receive one year of benefits.  Cause is generally defined as (i) gross misconduct, (ii) committing a felony, (iii) death or disability, (iv) failure to perform his duties and (v) material breach of the Employment Agreement. 

Retirement Plans

The Company has a Section 401(k) plan and provides an employer matching contribution, for all of its employees, including Named Executive Officers. The Company does not offer any earned and unpaid salary accrued throughnonqualified pension plans, supplemental executive retirement plans, or other plans that provide for the datepayment of termination, compensation for any unused vacation days and any unpaid benefits accrued through the expiration date.retirement benefits.

Outstanding Awards at Fiscal Year End

Listed below is information with respect to unexercised options, stock that has not vested, and equity incentive plan awards for each Named Executive Officer outstanding as of September 30, 2017:2018:

Outstanding Equity Awards At 2017 Fiscal Year-End 2018

(1) Vest on June 22, 2018.

Risk Assessment Regarding Compensation Policies and Practices as they Relate to Risk Management

Our compensation program for employees does not create incentives for excessive risk taking by our employees or involve risks that are reasonably likely to have a material adverse effect on us. Our compensation has the following risk-limiting characteristics:

• Our base pay programs consistconsisting of competitive salary rates that represent a reasonableportion of total compensation and provide a reliable level of income on a regular basis,which decreases incentive on the part of our executives to take unnecessary or imprudentrisks;

• A portion of executive incentive compensation opportunity is tied to long-term incentivecompensation that emphasizes sustained performance over time. This reduces anyincentive to take risks that might increase short-term compensation at the expense oflonger term company results;

• Awards are not tied to formulas that could focus executives on specific short-termoutcomes;

• Equity awards may be recovered by us should a restatement of earnings occur uponwhich incentive compensation awards were based, or in the event of other wrongdoing bythe recipient; and

• Equity awards, generally, have multi-year vesting which aligns the long-term interests ofour executives with those of our shareholders and, again, discourages the taking of short-term risk at the expense of long-term performance.

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PROPOSAL 2.  RATIFICATION AND APPROVAL OF AN AMENDMENT

TO INCREASE THE SHARES ISSUABLEAVAILABLE FOR ISSUANCE UNDER FULL VALUE AWARDS  
UNDER THE 2011 LONG TERM INCENTIVE PLAN

Our Board has adopted a resolution declaring it advisable and in the best interests of Forward and its shareholders that the priorto approve an increase in the number of shares authorizedavailable for issuance under Full Value Awards under the 2011 Long Term Incentive Plan (“("2011 Plan”Plan") be ratified and approved by shareholders.  The Board approved the increasefrom 400,000 shares to 800,000 shares.  Full Value Awards are defined as an Award other than in the numberform of sharesa stock option or a stock appreciation right ("SAR"), and is settled in the issuance of Common Stock reserved andStock.  As of the record date, there are only 31,019 shares available for issuance under the 2011 Plan from 850,000 to 1,850,000 shares.Full Value Awards.   

Summary of the 2011 Plan

Purpose of the 2011 Plan

The purposes of the 2011 Plan is intended as an incentiveare to enable Forward to attract, motivate, and retain employees, directors, consultants and other independent contractors, upon whose judgment, initiative, and efforts the financial success and growth of the business of the Company largely depend, and to provide an additional incentive for such individuals through stock ownership and other rights that promote and recognize the financial success and growth of the Company and create value for shareholders.

Administration of the 2011 Plan

The 2011 Plan is administered by the Compensation Committee consisting of two or more directors who are “non-employee directors”"non-employee directors" within the meaning of Rule 16b-3 and, “outside directors”"outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986 (the “Tax Code”"Tax Code"). In the event that for any reason the Committee is unable to act or if the Committee at the time of any grant, award or other acquisition under the 2011 Plan does not consist of two or more “non-employee"non-employee directors,”" or if there is no such Committee, then the 2011 Plan will be administered by the Board (such administrative body, for the purposes of this Proposal 2 only, the “Committee”"Committee").

Subject to the other provisions of the 2011 Plan, the Committee has the authority, in its discretion: (i) to grant cash-based awards, nonqualified stock options, incentive stock options, stock appreciation rights (“SARs”),SARs, restricted stock, restricted stock units, performance shares, performance units and other stock-based awards, all of which are referred to collectively as “Awards”"Awards"; (ii) to determine the terms and conditions of each Award granted (which need not be identical); (iii) to interpret the 2011 Plan and all awards granted thereunder; and (iv) to make all other determinations necessary or advisable for the administration of the 2011 Plan.

Eligibility

 The persons eligible for participation in the 2011 Plan as recipients of Awards include employees, directors, consultants and other independent contractors to the Company or any subsidiary or affiliate of the Company, except that only employees of the Company and certain corporate subsidiaries may receive incentive stock options. In selecting participants, and determining the number of shares of common stock covered by each Award, the Committee may consider any factors that it deems relevant.

Shares Subject to the 2011 Plan

Subject to the conditions outlined below, the total number of shares of Common Stock which may be issued pursuant to Awards granted under the 2011 Plan may not exceed 850,0001,850,000 shares of Common Stock. However, the Company is seeking shareholder approval to increase this amount to 1,850,000. There isare currently 321,4791,021,453 shares of Common Stock available under the 2011 Plan.

In the event of certain corporate events or transactions (including, but not limited to, unusual or nonrecurring events or a change in the shares of the Company or the capitalization of the Company), the Committee, in its sole discretion, in order to prevent dilution or enlargement of a participant’sparticipant's rights under the 2011 Plan, shall substitute or adjust, as applicable, the number and kind of shares of Common Stock that may be issued under the 2011 Plan or under particular forms of Awards, the number and kind of shares of Common Stock subject to outstanding Awards, the option price or grantexercise price applicable to outstanding Awards, the annual Award limits, and other value determinations applicable to outstanding Awards.

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Options

An option granted under the 2011 Plan is designated at the time of grant as either an incentive stock option or as a non-qualified stock option. Upon the grant of an option to purchase shares of Common Stock, the Committee will specify the option exercise price, the maximum duration of the option, the number of shares of Common Stock to which the option pertains, the conditions upon which an option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the 2011 Plan.  The purchaseexercise price of each share of Common Stock purchasable under an option will be determined by the Committee at the time of grant, but may not be less than 100% of the fair market value of sucha share of Common Stock on the date the option is granted.  However, if the grantee of an incentive stock option is a person who owns, or who is deemed to own under Section 424(d) of the Tax Code, stock possessing more than ten percent (10%)10% of the total combined voting power of the Company or any subsidiary (a “Ten"Ten Percent Shareholder”Shareholder"), then the exercise price of the option shall be at least one hundred ten percent (110%)110% of the fair market value of such shares of Common Stock on the on the date the option is granted.  No option shall be exercisable later than the tenth anniversary date of its grant, provided, that forincentive stock options granted to Ten Percent Shareholders granted incentive stock options, the option may not be exercisable later than the fifth anniversary of itsthe grant. 

SARs

SARs will be exercisable at such time or times and subject to such terms and conditions as determined by the Committee. The term of SARs granted under the 2011 Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee, no stock appreciation rightSAR shall be exercisable later than the tenth anniversary date of its grant.  SARs may be settled in stock, cash, or a combination of both.

Restricted Stock and Restricted Stock Units

Shares of restricted stock and/or restricted stock units may be granted under the 2011 Plan aside from, or in association with, any other Award and will be subject to certain conditions and contain such additional terms and conditions, not inconsistent with the terms of the 2011 Plan, as the Committee deems desirable. Except with respect to a maximum of 50% of the shares authorized under the 2011 Plan, any Awards of restricted stock and/or restricted stock units which vest on the basis of the participant’sparticipant's continued employment with or provision of service to the Company shall not provide for vesting which is any more rapid than annual pro rata vesting over a three year period and any Awards of restricted stock and/or restricted stock units which vest upon the attainment of performance goals shall provide for a performance period of at least 3three months.  The receipt of dividends on account of shares of restricted stock or restricted stock units shall be determined by the Committee.

Performance Units/Performance Shares

Subject to the terms and provisions of the 2011 Plan, the Committee at any time and from time to time, may grant performance units and/or performance shares to participants in such amounts and upon such terms as the Committee shall determine. Each performance unit shall have an initial value that is established by the Committee at the time of grant. Each performance share shall have an initial value equal to the fair market value of a share of Common Stock on the date of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of performance units/performance shares that will be paid out to the participant.

Limits on Awards

Subject to the restrictions alreadyon the number of shares issuable pursuant to Full Value Awards mentioned above, the maximum number of shares of Common Stock that may be issued to any one participant in the 2011 Plan in a fiscal year is 300,000. This 300,000 share limit is an aggregate of all shares issued under the 2011 Plan, and includes shares of Common Stock subject to options, incentive stock options, SARs, restricted stock or restricted stock units, performance shares and performance units. 

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Restrictions on Transferability

Except as otherwise provided in an Award or as determined from time to time by the Compensation Committee, the Awards granted under the 2011 Plan are not transferable and may be exercised solely by a participant during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution or as otherwise required by law. Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject to execution, attachment or similar process, any Award contrary to the provisions set forth in the 2011 Plan will be void and ineffective and will give no right to the purported transferee.

Termination of the 2011 Plan

Unless sooner terminated as provided therein, the 2011 Plan shall terminate onin March 7, 2021.

Amendments to the 2011 Plan

The Committee may at any time alter, amend, modify, accelerate, suspend, or terminate the 2011 Plan or any evidence of Award in whole or in part; provided, however, that, without the prior approval of the Company’s shareholders,part. However, options issued under the 2011 Plan willmay not be re-priced, replaced, or re-granted through cancellation without the prior approval of the Company's shareholders, and no amendment of the 2011 Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule.  However,Furthermore, no such alteration, amendment, modification, suspension or amendment shall adversely affect in any material way any Award previously granted, without the grantee’sgrantee's written consent, except as required under tax laws.  Additional, theThe 2011 Plan can be amended from time to time to complyensure continued compliance with Tax Code Section 409A.

The Committee may specify any conditions or events that may cause an Award to be forfeited, reduced, cancelled or be subject to recoupment.  The Committee may provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to certain performance measures.  In addition, the Committee may accelerate the vesting and exercisability of outstanding options, freestanding SARS, orSARs, restricted stock or restricted stock units in the event of a change in control of the Company. A change in control is defined under the 2011 Plan as (i) an acquisition by any person or a group of persons of all or substantially all of the assets of the Company (meaning assets with a total gross fair market value of at least 50.1% of the total gross fair market value of all of Forward's assets immediately before such acquisition or acquisitions); or (ii) a merger, consolidation, or reorganization of Forward into or with another corporation or entity resulting in less than 50.1% of the outstanding securities entitled to vote generally in the election of directors or other capital interests of the surviving or acquiring corporation being beneficially owned by the shareholders of Forward immediately prior to the completion of the transaction, in each case during a 12-month period.

Forfeiture

The 2011 Plan provides that any current or former executive officer who received any Awards within a 36-month period prior to the date the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws shall return such Award to the Company upon demand by the Company. The amount to be recovered shall be the amount of incentive-based Awards, including equity awards, in excess of what would have been paid without the restated results. The operation of these provisions of the 2011 Plan shall be in accordance with the provisions of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and any applicable guidance.

Federal Income Tax Consequences

Incentive Options

Options that are granted under the 2011 Plan and that are intended to qualify as incentive stock options must comply with the requirements of Section 422 of the Tax Code. An option holder is not taxed upon the grant or exercise of an incentive stock option; however, the difference between the fair market value of the shares of Common Stock on the exercise date and the option price will be an item of adjustment for purposes of the alternative minimum tax (unless the stock acquired through the exercise of the incentive stock option is disposed of in the same tax year). If an option holder holds shares of Common Stock acquired upon the exercise of an incentive stock option for at least two years following the date of the grant of the option and at least one year following the exercise of the option, the option holder’sholder's gain, if any, upon a subsequent disposition of such shares will be treated as long-term capital gain for federal income tax purposes. The measure of the gain is the difference between the proceeds received on disposition and the option holder’sholder's basis in the shares (which generally would equal the exercise price). If the option holder disposes of shares of Common Stock acquired pursuant to exercise of an incentive stock option before satisfying the one-and-two year holding periods described above, the option holder may recognize both ordinary income and capital gain in the year of disposition. The amount of the ordinary income will be the lesser of (i) the amount realized on disposition less the option holder’sholder's adjusted basis in the shares (generally the option exercise price); or (ii) the difference between the fair market value of the shares on the exercise date and the option price. The balance of the consideration received on such disposition will be long-term capital gain if the shares had been held for at least one year following exercise of the incentive stock option.

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The Company is not entitled to an income tax deduction on the grant or the exercise of an incentive stock option or on the option holder’sholder's disposition of the shares of Common Stock after satisfying the holding period requirement described above. If the holding periods are not satisfied, the Company generally will generally be entitled to an income tax deduction in the year the option holder disposes of the shares, in an amount equal to the ordinary income recognized by the option holder.

Nonqualified Options

In the case of a non-qualified stock option, an option holder is not taxed on the grant of such option. Upon exercise, however, the participant recognizes ordinary income equal to the difference between the option price and the fair market value of the shares of Common Stock on the date of the exercise. The Company generally is generally entitled to an income tax deduction in the year of exercise in the amount of the ordinary income recognized by the option holder. Any gain on subsequent disposition of the shares of Common Stock is long-term capital gain if the shares are held for at least one year following the exercise. The Company does not receive an income tax deduction for this gain.

SARs

No taxable income will be recognized by an option holderthe participant upon receipt of a stock appreciation rightSAR and the Company will not be entitled to a tax deduction upon the grant of such right.

Upon the exercise of a stock appreciation right,SAR, the holder will include in taxable income, for federal income tax purposes, the fair market value of the cash and other property received with respect to the stock appreciation rightSAR and the Company will generally wil  be entitled to a corresponding tax deduction. 

Other Awards

A recipient of restricted stock, restricted stock units, performance shares and performance units will not have taxable income upon grant, but will have ordinary income at the time of vesting. The amount of income will equal the fair market value on the vesting date of the shares and/or cash received minus the amount, if any, paid by the recipient. A recipient of restricted stock may instead, however, elect to be taxed at the time of grant. The Company will generally be entitled to an income tax deduction for the taxable year for which the recipient includes the amount in income.

The 2011 Plan isoriginally was intended to satisfy the performance-based compensation exception to the limitation on the Company’sCompany's tax deductions imposed by Section 162(m) of the Tax Code with respect to those grants for which such qualification as available and for such exception is intended.  Effective January 1, 2018, the performance-based compensation exemption and the exemption of the chief financial officer from Section 162(m)'s deduction limit have been repealed, such that awards paid to the Company's covered executive officers (including chief executive officer) in excess of $1 million will not be deductible in future years, unless it qualifies for transition relief applicable to certain grandfathered arrangements. The 2011 Plan is also intended to be exempt from Tax Code Section 409A or to comply with Tax Code Section 401A to the extent it is applicable.

Equity Compensation Plan Information

The following chart reflects the number of awards granted under equity compensation plans approved and not approved by shareholders and the weighted average exercise price for such plans as of September 30, 2017.2018.

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Prior Plans

There are 17,823no shares of common stock reserved for issuance under the Company’sCompany's 2007 Equity Incentive Plan (the “Prior Plan”"Prior Plan"). Forward will not issue any more awards under the Prior Plan.

New Plan Benefits

Because future grants of awards under the 2011 Plan are subject to the discretion of the Board and the Administrator, the future awards that may be granted to participants cannot be determined at this time.  There are no grants that have been previously made which are contingent upon receiving shareholder approval of the grant.

The Board recommends a vote “For”"For" this Proposal No. 2.

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PROPOSAL 3.  3. RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 20182019

Our Board has appointed CohnReznick LLP to serve as our independent registered public accounting firm for the fiscal year ending September 30, 2018.2019. CohnReznick LLP has been Forward’sForward's independent registered public accounting firm since 2010. Selection of Forward’sForward's independent registered public accounting firm is not required to be submitted to a vote of the shareholders of Forward for ratification. However, Forward is submitting this matter to the shareholders as a matter of good corporate governance. Even if the appointment is ratified, the Board may, in its discretion, appoint a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of Forward and its shareholders. If the appointment is not ratified, the Board will consider its options.

A representative of CohnReznick LLP is expected to be present at the Annual Meeting.

The Board recommends a vote “For"For"” this ProposalProposal No. 3

The Audit Committee, which currently consists of Sangita Shah, James Frost,Ziglar, and Howard Morgan, reviews Forward’sForward's financial reporting process on behalf of the Board and administers our engagement of the independent registered public accounting firm. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of its examinations, the evaluations of our internal controls, and the overall quality of our financial reporting. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls.

The Audit Committee has met and held discussions with management and CohnReznick. Management represented to the Audit Committee that our financial statements were prepared in accordance with generally accepted accounting principles and the Audit Committee has reviewed and discussed the financial statements with management and CohnReznick. The Audit Committee reviewed with CohnReznick its judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee in accordance with the standards of the Public Company Accounting Oversight Board, which we refer to as the "PCAOB."

Audit Committee Report

The Audit Committee has:

• reviewed and discussed the audited financial statements with management;
  

• met privately with the independent registered public accounting firm and discussedmatters required by Auditing Standard 1301, Communications with Audit CommitteesCommittees, as adopted by the PCAOB;
  

• received the written disclosures and the letter from the independent registered publicaccounting firm, as required by the applicable requirements of the PCAOB regarding theindependent registered public accounting firm’sfirm's communications with the AuditCommittee concerning independence, and has discussed with its independent registeredpublic accounting firm its independence from us; and
  

• in reliance on the review and discussions referred to above, the Audit Committeerecommended to the Board that the audited financial statements be included in theAnnual Report on Form 10-K for the fiscal year ended September 30, 20172018 filed with theSEC.

This report is submitted by the Audit Committee:

Sangita Shah
James Frost

Howard Morgan

19James Ziglar

The above Audit Committee Report is not deemed to be “soliciting"soliciting material,”" is not “filed”"filed" with the SEC and is not to be incorporated by reference in any filings that Forward files with the SEC.

It is not the duty of the Audit Committee to determine that Forward’sForward's financial statements and disclosures are complete and accurate and in accordance with generally accepted accounting principles or to plan or conduct audits. Those are the responsibilities of management and Forward’sForward's independent registered public accounting firm. In giving its recommendation to the Board, the Audit Committee has relied on: (1) management’smanagement's representations that such financial statements have been prepared with integrity and objectivity and in conformity with GAAP; and (2) the report of Forward independent registered public accounting firm with respect to such financial statements.

Audit Committee’sCommittee's Pre-Approval Policy

The Audit Committee pre-approves all audit and permissible non-audit services on a case-by-case basis. In its review of non-audit services, the Audit Committee considers whether the engagement could compromise the independence of our independent registered public accounting firm, and whether the reasons of efficiency or convenience is in our best interest to engage our independent registered public accounting firm to perform the services.

Principal Accountant Fees and Services

The following table sets forth the aggregate fees for audit and other services provided by CohnReznick LLP for the fiscal years ended 20172018 and 2016:2017:

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