The following discussion and analysis should be read in conjunction with our audited Consolidated Financial Statements and the notes thereto and other financial information appearing in Item 8 of this Annual Report on Form 10-K. This discussion and analysis compares our consolidated results of operations for the Fiscal year ended September 30, 2012 ("Fiscal 2012"), with those for the Fiscal year ended September 30, 2011 ("Fiscal 2011"), and is based on or derived from the audited Consolidated Financial Statements included in Item 8 in this Annual Report. All figures in the following discussion are presented on a consolidated basis. All dollar amounts and percentages presented herein have been rounded to approximate values.

Cautionary statement for purposes of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995

The following management's discussion and analysis includes "forward-looking statements", as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995. These "forward-looking statements" are not based on historical fact and involve assessments of certain risks, developments, and uncertainties in our business looking to the future. Such forward looking statements can be identified by the use of forward-looking terminology such as "may", "will", "should", "expect", "anticipate", "estimate", "intend", "continue", or "believe", or the negatives or other variations of these terms or comparable terminology. Forward-looking statements may include projections, forecasts, or estimates of future performance and developments. Forward-looking statements contained in this Annual Report are based upon assumptions and assessments that we believe to be reasonable as of the date of this Annual Report. Whether those assumptions and assessments will be realized will be determined by future factors, developments, and events, which are difficult to predict and may be beyond our control. Actual results, factors, developments, and events may differ materially from those we assumed and assessed. Risks, uncertainties, contingencies, and developments, including those discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations and those identified in "Risk Factors" in Item 1A of this Annual Report on Form 10-K, could cause our future operating results to differ materially from those set forth in any forward looking statement. There can be no assurance that any such forward looking statement, projection, forecast or estimate contained can be realized or that actual returns, results, or business prospects will not differ materially from those set forth in any forward looking statement.

Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.

Business Overview

Trends and Economic Environment

In June 2012, we determined to exit our global retail business and focus solely on growing our OEM business. Our decision to eliminate our retail division was based primarily on the longer than estimated path to bring it to profitability and the strong top-line growth and cost rationalizations achieved in the OEM business over the past two years.

In connection with the exit of our retail business, we entered into a second Memorandum of Understanding (the "New MOU") with G-Form. In accordance with this New MOU we have assisted G-Form on a short-term basis with transitioning certain operational and sales functions previously performed by Forward for G-Form products. We continue to work with G-Form to distribute our remaining retail product inventory and are working with them to settle on the amount of funds owed to us as a result of the net effect of certain transactions between G-Form and us, as contemplated under the New MOU.

As part of our ongoing restructuring, we implemented several key measures beginning in mid-Fiscal 2012 to improve our operating performance and return our company to profitability. These actions included replacing our legacy sourcing and quality assurance infrastructure with a variable, lower cost, solution through our use of an exclusive, Asia-based, sourcing agent (refer to Note 14 in our Notes to Financial Statements). We believe that this agency relationship will yield meaningful, longer-term benefits, in terms of negotiating favorable material costs, improving the quality of our products, and diversifying our supplier base. With regard to lowering our fixed overhead, we have closed our offices in London, Dubai Saarbrucken, and Santa Monica, and relocated our corporate headquarters to West Palm Beach, where we expect costs of operation to be lower. In addition, we have significantly reduced headcount through elimination of personnel dedicated to our Retail business and reinvested a portion of these costs savings to expand and restructure our sales, design, customer service, finance and IT personnel focused on growing our OEM business. Lastly, we have begun to implement a rigorous cost rationalization plan with regard to other components of our operating expenses that we believe will result in a more streamlined and efficient use of our working capital.

With regard to our OEM business, it remains highly concentrated by customer and product type, especially with respect to our Diabetic Products line, where we continue to operate in a very challenging price sensitive environment. We continue to experience pricing pressure from our major Diabetic Products customers, but especially with respect to certain of our longer-lived programs for which price concessions are expected to be granted to them over an extended period of time. Moreover, we are encountering higher costs from our China-based suppliers due to materials and labor price increases that place continuing pressure on our profit margins. In certain cases, we are not able to pass these higher costs through to customers, particularly when replacement program products resemble their predecessors or historically similar products, for which customers have become accustomed to a narrow price range. Through our exclusive sourcing agent in the APAC region, we have intensified our search for alternative sources of supply to expand and diversify our manufacturing capabilities in order to mitigate this trend.

In late Fiscal 2011, we were awarded several large programs by Diabetic Products customers C and D that have contributed meaningfully to our net sales and overall product mix in Fiscal 2012. As we expected, these new programs increased our sales volume, but depressed our overall gross margin in the Fiscal 2012, as the gross margins on these programs are lower than those seen in Fiscal 2011. We expect that these new programs will continue to represent a significant portion of our overall product mix during Fiscal 2013 and anticipate that our overall gross margin for will continue to reflect this.

Our gross margin in Fiscal 2012 was also negatively impacted by a significant level of quality remediation charges, as well as transition and termination costs in respect of the restructure of our sourcing and quality operations. We believe these to be non-recurring.

Variability of Revenues and Results of Operation

Because a high percentage of our sales revenues is highly concentrated in a few large customers, and because the volumes of these customers' order flows to us are highly variable, with short lead times, our quarterly revenues, and consequently our results of operations, are susceptible to significant variability over a relatively short period of time.

Critical Accounting Policies and Estimates

We have identified the accounting policies and significant estimation processes below as critical to our business operations and the understanding of our results of operations. The discussion below is not intended to be comprehensive. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management's judgment of a particular transaction. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. The impact and any associated risks related to these policies on our business operations are discussed throughout this "Management's Discussion and Analysis of Financial Condition and Results of Operations" where such policies affect reported and expected financial results. For a detailed discussion of the applications of these and other accounting policies, refer to Item 8. "Financial Statements and Supplementary Data" in this Annual Report. Our preparation of our consolidated financial statements requires us to make estimates and assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates and such differences could be significant.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of cash on deposit and highly liquid money market accounts, short-term bonds, and certificates of deposit with original contractual maturities of three months or less, predominately in U.S. dollar denominated instruments. We may purchase these short-term bonds with anticipated maturity of 90 days or less at a premium or discount. We record these investments as cash and cash equivalents net of amortization of premium or discount. We minimize our credit risk associated with cash and cash equivalents by investing in high quality instruments and by periodically evaluating the credit quality of the primary financial institution issuers of such instruments. We hold cash and cash equivalents at major financial institutions in the United States, at which cash amounts may significantly exceed FDIC insured limits. At September 30, 2012, this amount was approximately $4.4 million. Historically, we have not experienced any losses due to such cash concentrations.

Marketable Securities

The Company has investments in marketable equity securities that are classified as available-for-sale and are recorded at fair value with the corresponding unrealized holding gains or losses, net of taxes, recorded as a separate component of "Accumulated Other Comprehensive Loss" within shareholders' equity. Unrealized losses that are determined to be other-than-temporary, based on current and expected market conditions, are recognized in earnings. The fair value of marketable securities is determined based on quoted market prices at the balance sheet dates. The cost of marketable securities sold is determined by the specific identification method.

Accounts Receivable

Accounts receivable consist of unsecured trade accounts with customers or their contract manufacturers. We perform periodic credit evaluations of its customers including an evaluation of days outstanding, payment history, recent payment trends, and perceived credit worthiness, and believes that adequate allowances for any uncollectible receivables are maintained. Credit terms to customers generally range from net thirty (30) days to net ninety (90) days. We have not historically experienced significant credit or collection problems with our OEM customers or their contract manufacturers. In addition, we maintain credit insurance that provides up to 90% coverage on trade accounts with customers in the EMEA region. At September 30, 2012, no allowance for doubtful accounts relating to our continuing operations was deemed necessary. At September 30, 2011, the allowance for doubtful accounts was approximately $14,000.

Inventories

Inventories consist primarily of finished goods and are stated at the lower of cost (determined by the first-in, first-out method) or market. Based on management's estimates, an allowance is made to reduce excess, obsolete, or otherwise un-saleable inventories to net realizable value. The allowance is established through charges to cost of goods sold in the Company's consolidated statements of operations. As reserved inventory is disposed of, the Company charges off the associated allowance. In determining the adequacy of the allowance, management's estimates are based upon several factors, including analyses of inventory levels, historical loss trends, sales history, and projections of future sales demand. The Company's estimates of the allowance may change from time to time based on management's assessments, and such changes could be material. At September 30, 2012, the allowance for obsolete inventory of the Company's continuing operations was approximately $99,000. At September 30, 2011, no allowance for obsolete inventory was deemed necessary.

Property and Equipment

Property and equipment consist of furniture, fixtures, and equipment and leasehold improvements and are recorded at cost. Expenditures for major additions and improvements are capitalized, and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method. The estimated useful life for furniture, fixtures and equipment ranges from three to ten years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements. For the fiscal years ended September 30, 2012 and 2011, we recorded approximately $103,000 and $54,000 of depreciation and amortization expense from continuing operations, respectively. Depreciation and amortization for selling and general and administrative related property and equipment is included as a component of operating expenses of continuing operations in the accompanying consolidated statements of operations.

Income Taxes

We account for income taxes in accordance with accounting principles generally accepted in the United States of America, which requires, among other things, recognition of future tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax bases of assets and liabilities and to net tax operating loss carryforwards to the extent that realization of these benefits is more likely than not. We periodically evaluate the realizability of our net deferred tax assets. Our policy is to account for interest and penalties relating to income taxes, if any, in "income tax expense" in its consolidated statement of operations and include accrued interest and penalties within the "accrued liabilities" in its balance sheets, if applicable. For fiscal years ended September 30, 2012 and 2011, no income tax related interest or penalties were assessed or recorded.

Revenue Recognition

We generally recognize revenue from product sales to our customers when:
(1) title and risk of loss are transferred (in general, these conditions occur at either point of shipment or point of destination, depending on the terms of sale); (2) persuasive evidence of an arrangement exists; (3) we have no continuing obligations to the customer; and (4) collection of the related accounts receivable is reasonably assured.

Shipping and Handling Costs

We classify shipping and handling costs (including inbound and outbound freight charges, purchasing and receiving costs, quality assurance costs, and internal transfer costs), as a component of cost of goods sold in the accompanying consolidated statements of operations.

Advertising and Promotion Costs

Advertising and promotion costs, consisting primarily of sampling related costs, are expensed as incurred. Advertising and promotion costs for continuing operations are included in selling expenses in the accompanying consolidated statements of operations and amounted to approximately $43,000 and $158,000 for the fiscal years ended September 30, 2012 and 2011, respectively.

Foreign Currency Transactions

The functional currency of the Company and its wholly owned foreign subsidiaries is the U.S. dollar. Foreign currency transactions may generate receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. Fluctuations in exchange rates between such foreign currency and the functional currency increase or decrease the expected amount of functional currency cash flows upon settlement of the transaction. These increases or decreases in expected functional currency cash flows are foreign currency transaction gains or losses that are included in "other income (expense), net" in the accompanying consolidated statements of operations. The net loss from foreign currency transactions and translations for continuing operations was approximately $55,000 and $33,000 for the fiscal years ended September 30, 2012 and 2011, respectively.

Comprehensive Loss

We calculate comprehensive loss as the total of our net loss and all other changes in equity (other than transactions with owners), including foreign currency translation adjustments. Comprehensive loss was approximately $(9,670,000) for the fiscal year ended September 30, 2012. We did not have any material components of comprehensive loss, other than net loss, for the fiscal year ended September 30, 2011.

Fair Value of Financial Instruments

For certain of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and other accrued liabilities, the carrying amount approximates fair value due to the short-term maturities of these instruments.

Share-Based Payment Expense

We recognize share-based equity compensation in our consolidated statements of operations at the grant-date fair value of stock options and other equity-based compensation. The determination of grant-date fair value is estimated using the Black-Scholes option-pricing model, which includes variables such as the expected volatility of our share price, the exercise behavior of its grantees, interest rates, and dividend yields. These variables are projected based on our historical data, experience, and other factors. Changes in any of these variables could result in material increases to the valuation of options granted in future periods and increases in the expense recognized for share-based payments. In the case of awards with multiple vesting periods, we have elected to use the graded vesting attribution method, which recognizes compensation cost on a straight-line basis over each separately vesting portion of the award as if the award was, in-substance, multiple awards. In addition, we recognize share-based compensation to non-employees based upon the fair value, using the Black-Scholes pricing model, determined at the deemed measurement dates over the related contract service period.

RESULTS OF OPERATIONS FOR FISCAL 2012 COMPARED TO FISCAL 2011

Loss from Continuing Operations

Loss from continuing operations increased $1.3 million to $3.3 million in Fiscal
2012 from $2.0 million in Fiscal 2011. The increase is primarily due to: i)
decreased gross profit on a higher sales base, ii) higher sales and marketing
expenses, iii) higher general and administrative expenses and, to a lesser
extent, iv) changes in other (expense) income and income taxes, as reflected in
the table below:

                                       Main Components of Net Loss from Continuing Operations
                                                                                                       (thousands of dollars)
                                                                                                                           Increase
                                                                                                 Fiscal 2012  Fiscal 2011 (Decrease)
Net sales......................................................................................       $29,403     $22,763      $6,640
Gross profit.................................................................................           3,974       5,081     (1,107)
Sales and marketing expenses.................................................                         (1,676)    (2,591)        (917)
General and administrative expenses                                                                   (5,562)     (4,630)         932
Other (expense) income............................................................                       (34)          58        (92)
 Income taxes expense (benefit)..............................................                            (15)          56          71
Loss from continuing operations*........................................                             $(3,313)    $(2,025)       1,288

* Table may not total due to rounding.

Loss from continuing operations per basic and diluted share was $(0.41) and $(0.25) for Fiscal 2012 and 2011, respectively.

Net Sales

Net sales increased $6.6 million, or 29%, to $29.4 million in the Fiscal 2012
from $22.8 million in Fiscal 2011 due primarily to higher sales of Diabetic
Products, which increased $5.0 million, and to a lesser extent, higher sales of
Other Products, which increased $1.6 million. The tables below set forth sales
by channel, product line, and geographic location of our customers for the
periods indicated.

                          Net Sales for Fiscal 2012
                            (millions of dollars)
                                                 APAC  Americas Europe Total*
Diabetic products.............................   $10.6     $5.0   $6.1  $21.7
Other products..................................   1.0      5.6    1.1    7.7
Total net sales*................... .            $11.6    $10.6   $7.2  $29.4

                          Net Sales for Fiscal 2011
                            (millions of dollars)
                                                 APAC  Americas Europe Total*
Diabetic products.............................    $9.1     $2.6   $5.0  $16.7
Other products..................................   1.4      3.8    0.9    6.1
Total net sales*...................              $10.4     $6.4   $5.9  $22.8

* Tables may not total due to rounding.

Diabetic Product Sales

We design to the order of, and sell carrying cases for blood glucose diagnostic kits directly to, OEMs (or their contract manufacturers). The OEM customer or its contract manufacturer packages our carry cases "in box" as a custom accessory for the OEM's blood glucose testing and monitoring kits, or to a lesser extent, sell them through their retail distribution channels.

Sales of Diabetic products increased $5.0 million, or 30%, to $21.7 million in Fiscal 2012, from $16.7 million in Fiscal 2011. This increase was primarily due to the addition of a new major Diabetic Products customer in Fiscal 2012, and to higher sales to our largest long-standing Diabetic Products customer.

The following table sets forth our sales by Diabetic Products customer for the periods indicated.

                                                                        (millions of dollars)
                                                                                          Increase
                                                                 Fiscal 2012 Fiscal 2011 (Decrease)
Diabetic Customer A...........................................          $9.7        $8.4       $1.3
Diabetic Customer B...........................................           3.7         3.7        0.0
Diabetic Customer C...........................................           4.6         3.7        0.9
Diabetic Customer D...........................................           2.4          --        2.4
All other Diabetic Product Customers.............                        1.3         0.8        0.5
Totals*.........................................................       $21.7       $16.7       $5.0

* Table may not total due to rounding.

Sales of Diabetic Products represented 74% of our total net sales in Fiscal 2012 compared to 73% of our total net sales in Fiscal 2011.

Other Product Sales

We design and sell cases and protective solutions to OEMs for a diverse array of portable electronic devices (such as smartphones, tablets, GPS devices, and bar code scanners), as well as a variety of other products (such as firearms, sporting, and other recreational products) on a made-to-order basis that are customized to fit the products sold by our OEM customers.

Sales of Other products increased $1.6 million, or 26%, to $7.7 million in Fiscal 2012 from $6.1 million in Fiscal 2011. This increase was primarily due to higher sales to two existing customers, as well as contributions from two new customers added in Fiscal 2012. With regard to the two existing customers, sales to a sporting and recreational products customer increased $0.9 million to $1.5 million in Fiscal 2012, whereas sales to a long-standing cellular customer increased $0.6 million to $1.2 million in Fiscal 2012. With regard to the two new customers added in Fiscal 2012, a tablet customer contributed $0.6 million of sales, whereas a personal computer/laptop customer contributed $0.4 million of sales, which we believe to be non-reoccurring. In addition, in Fiscal 2011, we sold $0.4 million of products to Flash Ventures, Inc. (refer to Note 5 - Notes Receivable in the Notes to Financial Statements), under their brand, which we considered as non-recurring business. Smaller changes in a number of Other Products customers largely offset each other, none of which changes individually was material.

Sales of Other Products represented 26% of our net sales in Fiscal 2012 compared to 27% of our total net sales in Fiscal 2011.

Gross Profit

Gross profit decreased $1.1 million, or 22%, to $4.0 million in Fiscal 2012 from $5.1 million in Fiscal 2011. As a percentage of sales, our gross profit declined to 14% in Fiscal 2012 from 22% in Fiscal 2011. This decline was driven primarily by our Diabetic Products business, and in particular, factors specific to three major Diabetic customers, as discussed more fully below:

º Net Sales to Diabetic Customer B were $3.7 million in both Fiscal 2012 and 2011; however, price concessions granted on two larger, longer-lived programs, combined with increases in materials, labor, and other production costs passed on to us from our suppliers, compressed our gross margins on such programs and decreased our total gross margin for this Diabetic Customer by approximately 6%.

º Our total unit sales to Diabetic Customer C increased 28% in Fiscal 2012 from Fiscal 2011; however, our average sales price in respect of several new and replacement programs are significantly lower than the average sales price of their predecessor programs in Fiscal 2011. In addition, our . . .