- Investment of Significant Corporate Funds with Mr. Johnson’s Company, Leading to Significant Losses. Forward has invested nearly $2 million of corporate funds with LaGrange Capital Administration LLC, of which Mr. Johnson is the managing member and entitled to advisory fees, comprised of a 1% asset-based fee and a 20% performance fee. As a result of these activities, Forward recognized approximately $722,000 of net investment losses during fiscal year 2013. I have come to believe that this investment strategy is an unreasonable and inappropriate use of corporate funds that benefits Mr. Johnson at the expense of Forward's shareholders.
- Issuance of New 6% Senior Convertible Preferred Stock. In June 2013, a special committee of the Board unilaterally designated and issued a new series of 6% senior convertible preferred stock to Mr. Johnson and eleven other investors (including another member of the Board—and former LaGrange Capital partner—Tim Gordon), with preferential dividend, governance, and liquidation rights that materially impact the rights of the Company's common stockholders. This private placement was made without any input from (or prior notice to) me or independent director Howard Morgan. Assuming the validity of this issuance, Mr. Johnson, Mr. Gordon, and the other preferred stockholders are entitled to a 6% cumulative dividend, and have the right to demand a so-called liquidation payment (currently equal to $1,275,000) upon certain events, including a change in the composition of a majority of the Board as a result of a proxy contest (a measure clearly designed to entrench a subset of the Board, in my view). Moreover, the terms of the preferred stock prohibit the Company from paying dividends on its common stock without the consent of the preferred stockholders.
- 500%+ Increase in Rent Payable to Mr. Johnson's Company. In May 2014, it came to light that Mr. Johnson was benefiting from yet another lucrative deal with the Company. In February of this year, Forward began leasing an office space for its CEO, Robert Garrett, from Mr. Johnson’s LaGrange Capital at a rate of $2,500 per month, or $30,000 per annum. As of April 1st, however, the Company agreed to increase the amount of rental charges payable to Mr. Johnson's fund to $12,700 per month, or $152,400 per annum. Putting aside the obvious question of why the Company should be paying for an expensive one-man NY office at all, given that the rest of our executive team and head office is in Florida, I find it shocking that the Company would agree to a 500% increase in rent payable to our Chairman without bringing the matter to the full Board. In my view, there is no evident reason for this increase or benefit to the Company in agreeing to it.
Forward Industries' Largest Shareholder And Board Member, Terence Bernard Wise, Warns Board Against Taking Further Value-Destroying Action
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