NOTE 9 COMMITMENTS AND CONTINGENCIES

Employment and Retention Agreements

Mr. Brett M. Johnson, the Company’s Chief Executive Officer, receives salary at the rate of $250,000 per annum and serves in such capacity without a written employment agreement. Until such time as the Company and Mr. Johnson enter into a definitive written agreement, it is the parties’ understanding that the terms of Mr. Johnson’s compensation upon termination will be the equivalent of those of his predecessor, which provided for severance payment equal to one year’s salary in the event of termination without cause.

Pursuant to an Employment Agreement, dated as of August 10, 2010, between the Company and James O. McKenna, Mr. McKenna serves as the Company’s Chief Financial Officer and Treasurer.

Pursuant to a Retention Agreement, dated as of August 10, 2010, between the Company and Mr. McKenna, the Company paid $175,000 to Mr. McKenna on March 1, 2011, upon the satisfactory completion of the performance period. $125,000 of this amount is reflected in the “General and administrative expenses” in the statement of operations for the nine month period ended June 30, 2011, but none in the three month period ended June 30, 2011.

On March 7, 2011, the Compensation Committee approved changes in the terms of compensatory arrangements with Mr. McKenna under his employment agreement with the Company, subject to and effective upon his relocation to California in connection with moving the Company’s executive offices to Los Angeles, which condition was subsequently satisfied. The changes relate to salary, housing allowance/relocation, and termination, as described below. Other terms of the executive’s employment agreement remain unchanged.

Salary: increase of base salary to $225,000 per annum from $175,000 per annum.

Housing Allowance/Relocation: (i) Payment of a housing allowance of $7,500 per month, or $90,000 per annum. The allowance will be phased out over time according to a schedule approved by the Compensation Committee. (ii) Reimbursement of the executive’s reasonable out-of-pocket costs incurred in the relocation, and current monthly expense in respect of his existing lease of his house in Florida up to July 2011.

Termination of Employment. In case of termination for good reason or without cause, in either case within the first 36 months after relocation, the Company’s reimbursement for out-of-pocket costs incurred in connection with a return to Florida will not exceed 12 months of such expense.

The foregoing summary is qualified in its entirety by the terms of executive’s new employment agreement, which is attached as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 11, 2011.

Guarantee Obligation

In February 2010, Forward Switzerland, a wholly owned subsidiary, and its European logistics provider (freight forwarding and customs agent) entered into a Representation Agreement whereby, among other things, the European logistics provider agreed to act as such subsidiary's fiscal representative in The Netherlands for the purpose of providing services in connection with any value added tax matters. As part of this agreement, which succeeds a substantially similar agreement (except as to the amount and term of the undertaking) between the parties that expired on December 31, 2009, the subsidiary agreed to provide an undertaking in the form of a bank letter of guarantee to the logistics provider with respect to any value added tax liability arising in The Netherlands that the logistics provider is required to pay to Dutch tax authorities on the subsidiary's behalf. As of February 1, 2010, such subsidiary entered into a guarantee agreement with a Swiss bank relating to the repayment of any amount up to €75,000 (equal to approximately $109,000 as of June 30, 2011) paid by such bank to the logistics provider in order to satisfy such undertaking pursuant to the bank letter of guarantee. The subsidiary would be required to perform under the guarantee agreement only in the event that: (i) a value added 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 as surety 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 value added tax due to the logistics provider upon its demand, and (iv) the logistics provider makes a drawing under the bank letter of guarantee. Under the Representation Agreement the subsidiary agreed that the letter of guarantee would remain available for drawing for three years following the date that its relationship terminates with the logistics provider to satisfy any value added tax liability arising prior to expiration of the Representation Agreement but asserted by The Netherlands after expiration. The term of the bank letter of guarantee will be renewed automatically for one-year periods until February 28, 2014, unless the subsidiary provides the Swiss bank with written notice of termination at least 60 days prior to the renewal date. It is the intent of the subsidiary and the logistics provider that the bank letter of guarantee amount be adjusted annually. In consideration of the issuance of the letter of guarantee, the subsidiary has granted the Swiss bank a security interest on all of the subsidiary’s assets on deposit with, held by, or credited to the subsidiary’s accounts with, the Swiss bank (approximately $929,000 at June 30, 2011). As of June 30, 2011, the Company had not incurred a liability in connection with this guarantee.

Lease Commitments

The Company rents certain of its facilities under leases expiring at various dates through September 2016 as shown in the following table:

For the fiscal years ending September 30:		Amount

2011 (for the remaining three months).......................................................................................		$115,000
2012.................................................................................................................................................		486,000
2013.................................................................................................................................................		354,000
2014.................................................................................................................................................		354,000
2015.................................................................................................................................................		178,000
Thereafter.......................................................................................................................................		178,000
Total lease commitments ........................................................................................................		$1,665,000