Shares of Forward Industries, Inc. (NASDAQ:FORD) jumped 165% during early Friday trading. Driving the monstrous surge was the news that the company has acquired a leading product design and development company, Intelligent Product Solutions (IPS), for a material consideration comprising of cash, equity, and contingent earn outs.
IPS clients include leading brands in consumer electronics, medical devices, enterprise and security solution providers and Internet of Things connected solutions, including Google, Physio Control, PepsiCo, Motorola, ABInBev, Zebra and Charity Water.
In consideration for the acquisition, the Company: (I) paid approximately $1.9 million in cash, (II) assumed approximately $1.5 million of outstanding debt, (III) issued a total of 401,835 shares of the Company’s common stock to the two owners of IPS, (IV) agreed to pay $1,000,000 of deferred cash payments (with the first payment of $500,000 due on May 18, 2018) and (V) up to $2.2 million of earnout payments based upon IPS meeting certain EBITDA milestones over a three year period. Additionally, the Company entered into three-year employment agreements with Mitchell Maiman, the President of IPS and Paul Severino, the Chief Operating Officer of IPS, and agreed to pay them each $256,000 per year.
In order to fund the acquisition of IPS, the Company issued a $1.6 million promissory note to Forward Industries (Asia-Pacific) Corporation (“Forward China”) in consideration for a one-year loan. The note bears an interest rate of 8% and pays monthly interest. Forward China is an entity which is principally owned by the Company’s Chairman and Chief Executive Officer.
Commenting on the transaction, Terry Wise, CEO of Forward Industries remarked, “I am delighted and excited with the acquisition of IPS. The company is an excellent strategic fit for Forward Industries. Its expertise and strong track record in designing connected/IOT products and developing products such as the AdhereTech `smart` pill bottle will significantly strengthen and contribute to Forward Industries. As a Group, we are now able to offer a complete design, development, manufacturing and distribution service. We face exciting times ahead.”
According to Mitch Maiman, CEO of IPS, “Forward Industries is an ideal partner for IPS because of its strength in medical products and we will continue delivering exceptional product design and development services. And, IPS will remain committed to our team and to maintaining our offices on Long Island and in Minneapolis.”