Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Sep. 30, 2013 | Jan. 14, 2014 | Feb. 28, 2013 | |
Document and Entity Information: | ' | ' | ' |
Entity Registrant Name | 'FORWARD INDUSTRIES INC | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 30-Sep-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Entity Central Index Key | '0000038264 | ' | ' |
Current Fiscal Year End Date | '--09-30 | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 8,236,479 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Current Reporting Status | 'Yes | ' | ' |
Entity Voluntary Filers | 'No | ' | ' |
Entity Well-known Seasoned Issuer | 'No | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Entity Public Float | ' | ' | $11,774,936 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2013 | Sep. 30, 2012 |
Current assets: | ' | ' |
Cash and cash equivalent | $6,616,995 | $4,608,246 |
Marketable securities, | 1,080,747 | 420,605 |
Accounts receivable, net | 4,382,406 | 7,533,491 |
Inventories, net | 2,050,710 | 3,380,813 |
Prepaid expenses and other current assets | 390,153 | 367,552 |
Current assets of discontinued operations | 339,382 | 621,879 |
Total current assets | 14,860,393 | 16,932,586 |
Property and equipment, net | 129,987 | 138,774 |
Other assets | 40,493 | 40,442 |
Total Assets | 15,030,873 | 17,111,802 |
Current liabilities: | ' | ' |
Accounts payable | 3,541,193 | 5,936,848 |
Accrued expenses and other current liabilities | 1,270,457 | 1,725,185 |
Current liabilities of discontinued operations | 25,438 | 261,806 |
Total current liabilities | 4,837,088 | 7,923,839 |
Other liabilities | 82,811 | 0 |
Total Liabilities | 4,919,899 | 7,923,839 |
6% Senior convertible preferred stock, par value $0.01 per share; 1,500,000 shares authorized; 648,846 shares issued and outstanding (aggregate liquidation value of $1,274,988) | 716,664 | 0 |
Commitments and contingencies. | ' | ' |
Shareholders' equity: | ' | ' |
Preferred stock, par value $0.01 per share; 4,000,000 shares authorized; 2,400,000 undesignated; no shares issued and outstanding | 0 | 0 |
Series A participating preferred stock, par value $0.01; 100,000 shares authorized; no shares issued and outstanding | 0 | 0 |
Common stock, par value $0.01 per share; 40,000,000 shares authorized, 8,819,095 and 8,811,595 shares issued; and 8,112,685 and 8,105,185 shares outstanding, respectively | 88,191 | 88,116 |
Additional paid-in capital | 17,965,327 | 17,020,771 |
Treasury stock, 706,410 shares at cost | -1,260,057 | -1,260,057 |
Accumulated deficit | -7,378,700 | -6,624,926 |
Accumulated other comprehensive loss , | -20,451 | -35,941 |
Total shareholders' equity | 9,394,310 | 9,187,963 |
Total liabilities and shareholders' equity | $15,030,873 | $17,111,802 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS Parentheticals (USD $) | Sep. 30, 2013 | Sep. 30, 2012 |
Parentheticals | ' | ' |
Preferred Stock, Dividend Rate, Percentage | 6.00% | ' |
Temporary equity, par or stated value per share (in dollars per share) | $0.01 | ' |
Temporary equity, liquidation preference (in dollars) | $1,274,988 | ' |
Temporary equity, shares authorized (in shares) | 1,500,000 | ' |
Temporary equity, shares issued (in shares) | 648,846 | ' |
Temporary equity, shares outstanding (in shares) | 648,846 | ' |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, shares authorized (in shares) | 4,000,000 | 4,000,000 |
Series A Participating Preferred Stock authorized with par value of $0.01 per share | 100,000 | ' |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par or stated value per share (in dollars per share) | $0.01 | $0.01 |
Common stock, shares authorized (in shares) | 40,000,000 | 40,000,000 |
Common stock, shares issued (in shares) | 8,819,095 | 8,811,595 |
Common stock, shares outstanding (in shares) | 8,112,685 | 8,105,185 |
Treasury Stock, shares (in shares) | 706,410 | 706,410 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Revenues: | ' | ' |
Net sales | $30,910,506 | $29,403,004 |
Cost of goods sold | 24,533,154 | 25,512,846 |
Gross profit | 6,377,352 | 3,890,158 |
Operating expenses: | ' | ' |
Sales and marketing | 2,187,315 | 1,591,930 |
General and administrative | 3,484,222 | 5,562,019 |
Total operating expenses | 5,671,537 | 7,153,949 |
Income (loss) from operations | 705,815 | -3,263,791 |
Other (income) expense: | ' | ' |
Interest income | -4,626 | -61,882 |
Loss on marketable securities, net | 722,347 | 0 |
Other (income) expense, net | -17,848 | 96,069 |
Total other expense, net | 699,873 | 34,187 |
Income (loss) from continuing operations before income tax expense | 5,942 | -3,297,978 |
Income tax expense | 507 | 15,110 |
Income (loss) from continuing operations | 5,435 | -3,313,088 |
Loss from discontinued operations, net of tax benefit of $(6,002) and $0, respectively | -212,321 | -6,320,968 |
Net loss | -206,886 | -9,634,056 |
Preferred stock dividends, accretion and beneficial conversion feature | -546,888 | 0 |
Net loss applicable to common equity | -753,774 | -9,634,056 |
Net loss, | -206,886 | -9,634,056 |
Other comprehensive income (loss): | ' | ' |
Change in unrealized gains on marketable securities | 23,744 | -23,744 |
Translation adjustments | -8,254 | -12,197 |
Total other comprehensive income (loss) | 15,490 | -35,941 |
Comprehensive loss | ($191,396) | ($9,669,997) |
Net loss per basic and diluted common share: | ' | ' |
Loss from continuing operations | ($0.07) | ($0.41) |
Loss from discontinued operations | ($0.02) | ($0.78) |
Net loss per share | ($0.09) | ($1.19) |
Weighted average number of common and common equivalent shares outstanding | ' | ' |
Basic and diluted | 8,111,226 | 8,101,661 |
CONSOLIDATED_STATEMENTS_OF_OPE1
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) [Parenthetical] (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
COMPREHENSIVE INCOME (LOSS) | ' | ' |
Tax effect on loss from discontinued operations (in dollars) | ($6,002) | $0 |
CONSOLIDATED_STATEMENTS_OF_SHA
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $) | Common Stock Number of Shares | Common Stock Par Value | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Treasury Stock Number of Shares | Treasury Stock Amount | Accumulated Other Comprehensive Income (Loss) | Total. |
USD ($) | USD ($) | USD ($) | USD ($) | |||||
Balance at Sep. 30, 2011 | 8,794,296 | 87,943 | 16,845,673 | 3,009,130 | 706,410 | -1,260,057 | ' | 18,682,689 |
Share-based compensation, | 17,299 | 173 | 175,098 | ' | ' | ' | ' | 175,271 |
Foreign currency translation, | ' | ' | ' | ' | ' | ' | ($12,197) | ($12,197) |
Unrealized loss on marketable securities | ' | ' | ' | ' | ' | ' | -23,744 | -23,744 |
Net loss for 2012 | ' | ' | ' | -9,634,056 | ' | ' | ' | -9,634,056 |
Balance at Sep. 30, 2012 | 8,811,595 | 88,116 | 17,020,771 | -6,624,926 | 706,410 | -1,260,057 | -35,941 | 9,187,963 |
Share-based compensation; | 7,500 | 75 | 436,347 | ' | ' | ' | ' | 436,422 |
Preferred stock dividends, | ' | ' | ' | -14,527 | ' | ' | ' | -14,527 |
Preferred stock accretion, | ' | ' | ' | -24,152 | ' | ' | ' | -24,152 |
Beneficial conversion on preferred stock | ' | ' | 508,209 | -508,209 | ' | ' | ' | ' |
Foreign currency translation; | ' | ' | ' | ' | ' | ' | -8,254 | -8,254 |
Net reclassification of adjustments on marketable securities | ' | ' | ' | ' | ' | ' | 23,744 | 23,744 |
Net loss for 2013 | ' | ' | ' | ($206,886) | ' | ' | ' | ($206,886) |
Balance at Sep. 30, 2013 | 8,819,095 | 88,191 | 17,965,327 | -7,378,700 | 706,410 | -1,260,057 | -20,451 | 9,394,310 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Operating activities: | ' | ' |
Net loss for the period | ($206,886) | ($9,634,056) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ' | ' |
Realized and unrealized loss on marketable securities | 722,347 | 0 |
Share-based compensation. | 436,422 | 175,271 |
Depreciation and amortization. | 75,188 | 103,973 |
Bad debt expense. | 35,028 | 23,504 |
Change in fair value of warrant liability. | -49,618 | 0 |
Loss on disposal of property and equipment | 9,486 | 130,178 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable. | 2,862,208 | -3,689,063 |
Inventories. | 1,681,045 | -2,686,536 |
Prepaid expenses and other current assets. | 161,103 | 407,624 |
Other assets. | -51 | 48,274 |
Accounts payable. | -2,416,091 | 3,035,160 |
Accrued expenses and other current liabilities. | -1,059,769 | 1,298,889 |
Net cash provided by (used in) operating activities | 2,250,412 | -10,786,782 |
Investing activities: | ' | ' |
Sales of marketable securities | 87,275,809 | 0 |
Purchases of marketable securities | -88,634,554 | -444,349 |
Repayments received from notes receivable | 0 | 1,000,000 |
Purchases of property and equipment | -74,187 | -72,467 |
Net cash (used in) provided by investing activities | -1,432,932 | 483,184 |
Financing activities: | ' | ' |
Proceeds from issuance of convertible preferred stock and warrants, net | 1,205,796 | 0 |
Dividends paid | -14,527 | 0 |
Net cash provided by financing activities | 1,191,269 | 0 |
Net increase (decrease) in cash and cash equivalents | 2,008,749 | -10,303,598 |
Cash and cash equivalents at beginning of year | 4,608,246 | 14,911,844 |
Cash and cash equivalents at end of year | 6,616,995 | 4,608,246 |
Cash paid during the Fiscal year for: | ' | ' |
Income Taxes. | 5,962 | 0 |
Supplemental Disclosure of Non-Cash Financing Activity: | ' | ' |
Preferred stock accretion. | $24,152 | $0 |
OVERVIEW
OVERVIEW | 12 Months Ended |
Sep. 30, 2013 | |
OVERVIEW | ' |
OVERVIEW | ' |
NOTE 1 OVERVIEW | |
Forward Industries, Inc. (“Forward” or the “Company”) was incorporated under the laws of the State of New York and began operations in 1961 as a manufacturer and distributor of specialty and promotional products. The Company designs, markets, and distributes carry and protective solutions, primarily for hand held electronic devices. The Company’s principal customer market is original equipment manufacturers, or “OEMs” (or the contract manufacturing firms of these OEM customers), that either package its products as accessories “in box” together with their branded product offerings, or sell them through their retail distribution channels. The Company’s OEM products include carrying cases and other accessories for medical monitoring and diagnostic kits and a variety of other portable electronic and non-electronic products (such as sporting & recreational products, bar code scanners, smartphones, GPS location devices, tablets, and firearms). The Company’s OEM customers are located in the Americas, the EMEA Region, and the APAC Region. The Company does not manufacture any of its OEM products and sources substantially all of its OEM products from independent suppliers in China (refer to Note 12 – Buying Agency and Supply Agreement). | |
On June 21, 2012, the Company determined to exit its global Retail business and focus solely on growing its OEM business. The decision to eliminate the Retail division was primarily driven by the longer than estimated path to bring it to profitability and the strong top line growth and cost rationalizations in the OEM business. The Retail business is presented as discontinued operations. |
ACCOUNTING_POLICIES
ACCOUNTING POLICIES | 12 Months Ended |
Sep. 30, 2013 | |
ACCOUNTING POLICIES | ' |
ACCOUNTING POLICIES | ' |
NOTE 2 ACCOUNTING POLICIES | |
Accounting Estimates | |
The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. | |
Basis of Presentation | |
The accompanying consolidated financial statements include the accounts of Forward Industries, Inc. (“Forward”) and its wholly owned subsidiaries (Forward US, Forward Switzerland, Forward HK, and Forward UK). All significant intercompany transactions and balances have been eliminated in consolidation. | |
Reclassifications | |
Certain prior period amounts have been reclassified to conform to the current period presentation. | |
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. The Company may purchase these short-term bonds with anticipated maturity of 90 days or less at a premium or discount. The Company records these investments as cash and cash equivalents net of amortization of premium or discount. The Company minimizes its 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. The Company holds cash and cash equivalents at major financial institutions in the United States, at which cash amounts may significantly exceed the Federal Deposit Insurance Corporation’s insured limits. At September 30, 2013 and 2012, this amount was approximately $6.5 million (which includes $1.4 million in a foreign bank) and $4.4 million, respectively. Historically, the Company has not experienced any losses due to such cash concentrations. | |
Marketable Securities | |
At September 30, 2013, the Company has investments in marketable securities that are classified as trading and are recorded at fair value with the corresponding unrealized holding gains or losses recognized in earnings. The fair value of marketable securities is determined based on quoted market prices. The cost of marketable securities sold is determined by the specific identification method. At September 30, 2012, the Company classified its investments in marketable securities as “available-for-sale”. Securities that were classified as available-for-sale were recorded at fair value with the corresponding unrealized holding gains and losses, net of taxes, recorded as a separate component of “Accumulated Other Comprehensive Loss” within shareholders’ equity. The Company classifies its realized and unrealized gains and losses as non-operating income (expense) in its consolidated statements of operations and comprehensive loss. In addition, the Company classifies the cash flows from the trading of these marketable securities as investing activities in its consolidated statements of cash flows. | |
Accounts Receivable | |
Accounts receivable consist of unsecured trade accounts with customers or their contract manufacturers. The Company performs periodic credit evaluations of its customers including an evaluation of days outstanding, payment history, recent payment trends, and perceived creditworthiness, 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. The Company has not historically experienced significant credit or collection problems with its OEM customers or their contract manufacturers. At September 30, 2013 and 2012, no allowance for doubtful accounts relating to the Company’s continuing operations was deemed necessary. | |
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 and comprehensive loss. 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, 2013, no allowance for obsolete inventory of the Company’s continuing operations was deemed necessary. At September 30, 2012, the allowance for obsolete inventory of the Company’s continuing operations was approximately $99,000. | |
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, 2013 and 2012, the Company recorded approximately $75,000 and $103,000 of depreciation and amortization expense from continuing operations, respectively. | |
Income Taxes | |
The Company accounts for its 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 carry-forwards to the extent that realization of these benefits is more likely than not. The Company periodically evaluates the realizability of its net deferred tax assets. See Note 9 to these Notes to Consolidated Financial Statements. The Company’s policy is to account for interest and penalties relating to income taxes, if any, in “income tax expense” in its consolidated statements of operations and comprehensive loss and include accrued interest and penalties within the “accrued liabilities” in its consolidated balance sheets, if applicable. For fiscal years ended September 30, 2013 and 2012, no income tax related interest or penalties were assessed or recorded. | |
6% Senior Convertible Preferred Stock | |
Temporary Equity | |
In accordance with Accounting Standards Codification (“ASC”) 480-10-s99 and Accounting Series Release (“ASR”) ASR 268, equity securities are required to be classified out of permanent equity and classified as temporary equity, as the redemption of the convertible preferred stock is not solely within the control of the Company since it is at the option of the holder. | |
Warrants | |
In accordance with ASC 815-40, the Company’s warrants have been classified as a liability, at fair value, as a result of a related registration rights agreement that contains certain requirements for registering the underlying common shares, but has no provision for penalties upon the failure to register. At each balance sheet date, this liability’s fair value will be re-measured and adjusted. The liability associated with the warrants is included in the “Accrued expenses and other current liabilities” line item of the consolidated balance sheet. | |
Preferred Stock Accretion | |
The carrying amount of the convertible preferred stock is less than the redemption value. As a result of the Company’s determination that redemption is probable, the carrying value will be increased by periodic accretions so that the carrying value will equal the redemption amount at the earliest redemption date. Such accretion is recorded as a preferred stock dividend. | |
Preferred Stock Beneficial Conversion Feature | |
On the date of issuance, the fair value, or carrying amount, of the securities could be converted into common stock at a discount to the market price of the underlying common stock at the conversion date. Such embedded “beneficial conversion feature”, which is equal to the difference between the accounting conversion price and the fair value of the common stock, is analogous to a dividend and has been recorded as a return to preferred stockholders as of the date of issuance, which is the earliest possible conversion date. | |
Revenue Recognition | |
The Company generally recognizes revenue from product sales to its 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) the Company has no continuing obligations to the customer; and (4) collection of the related accounts receivable is reasonably assured. | |
Shipping and Handling Costs | |
The Company classifies shipping and handling costs, including inbound and outbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs and other costs associated with the Company’s Asia-based distribution capability, as a component of cost of goods sold in the accompanying consolidated statements of operations and comprehensive loss. | |
Foreign Currency Transactions | |
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 and comprehensive loss. The approximate net losses from foreign currency transactions for continuing operations was approximately $16,000 and $55,000 for the fiscal years ended September 30, 2013 and 2012, respectively. Such foreign currency transaction losses were primarily the result of Euro denominated sales to certain customers. | |
Accumulated Other Comprehensive Loss | |
Accumulated other comprehensive loss, which is included as a component of shareholders’ equity, includes unrealized gains or losses on available-for-sale securities as of September 30, 2012 and currency translation adjustments related to the Company’s foreign subsidiaries. | |
Fair Value of Financial Instruments | |
For certain of the Company’s 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. The Company records its financial instruments that are accounted for under ASC 320, “Investments-Debt and Equity Securities” (“ASC 320”) at fair value. In addition, the Company records its warrant liability at fair value. The determination of fair value is based upon the fair value framework established by ASC 820 “Fair Value Measurement”. ASC 820 provides that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The fair value hierarchy is broken down into three levels based on the source of inputs as follows: (a) Level 1 – valuations based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; (b) Level 2 – valuations based on quoted prices in markets that are not active, or financial instruments for which all significant inputs are observable; either directly or indirectly; and (c) Level 3 – valuations based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable, thus, reflecting assumptions about the market participants. | |
Share-Based Payment Expense | |
The Company recognizes share-based compensation in its consolidated statements of operations and comprehensive loss 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 the Company’s share price, the exercise behavior of its grantees, interest rates, and dividend yields. These variables are projected based on the Company’s historical data, experience, and other factors. In the case of awards with multiple vesting periods, the Company has 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. Refer to Note 8 Share-Based Compensation. In addition, the Company recognizes share-based compensation to non-employees based upon the fair value, using the Black-Scholes option pricing model, determined at the deemed measurement dates over the related contract service period. | |
Recent Accounting Pronouncements | |
In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. ASU 2013-02 is effective for annual periods and interim periods within those periods beginning after December 15, 2012. ASU 2013-02 will be effective for the Company beginning in the first quarter of fiscal 2014 and is not expected to have a material impact on the Company’s consolidated financial statements. | |
In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (ASC Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The objective is to end some inconsistent practices with regard to the presentation on the balance sheet of unrecognized tax benefits. The update is effective for financial statement periods beginning after December 15, 2013, with early adoption permitted. The Company will adopt this standard beginning January 1, 2014. The Company does not expect these changes to have a material impact on its consolidated financial statements. |
DISCONTINUED_OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended | |||
Sep. 30, 2013 | ||||
DISCONTINUED OPERATIONS | ' | |||
DISCONTINUED OPERATIONS | ' | |||
NOTE 3 DISCONTINUED OPERATIONS | ||||
On June 21, 2012, the Company determined to exit its global Retail business and focus solely on growing its OEM business. The decision to eliminate the Retail division was primarily driven by the longer than estimated path to bring it to profitability and the strong net sales growth and cost rationalizations in the OEM business. Accordingly, the results of operations for the Retail division have been recorded as discontinued operations in the accompanying consolidated financial statements for the fiscal years presented. Summarized operating results of discontinued operations are presented in the following table: | ||||
Fiscal Year Ended September 30, | ||||
2013 | 2012 | |||
Net sales | $655,658 | $2,199,008 | ||
Gross profit (loss) | 181,039 | -1,896,864 | ||
Operating expenses | -406,297 | -4,356,402 | ||
Other income (expense) | 6,934 | -67,702 | ||
Loss from discontinued operations, net of tax benefit of $(6,002) and $0, respectively | ($212,321) | ($6,320,968) | ||
Summarized assets and liabilities of discontinued operations are presented in the following table: | ||||
September 30, | September 30, | |||
2013 | 2012 | |||
Accounts receivable, net | $280,034 | $26,186 | ||
Inventory, net | -- | 350,942 | ||
Prepaid assets and other current assets | 59,348 | 244,751 | ||
Total assets of discontinued operations | $339,382 | $621,879 | ||
Accounts payable | $25,438 | $45,874 | ||
Accrued liabilities | -- | 215,932 | ||
Total liabilities of discontinued operations | $25,438 | $261,806 | ||
The above asset amounts as of September 30, 2013, include approximately $280,000 relating to expected payments pursuant to a Settlement Agreement and General Release (“Settlement Agreement”) executed on July 3, 2013 between the Company and G-Form LLC (“G-Form”) in exchange for certain retail inventories, the Company’s cooperation with certain administrative matters, and a mutual general release. G-Form paid $31,000 of the settlement in July 2013 with the balance due in October 2013 (refer to Note 17 – Subsequent Events). The Company has substantially completed its exit of its Retail business as of March 31, 2013. The Company has not had, and does not expect to have, any continuing involvement in the Retail business after this date. |
MARKETABLE_SECURITIES
MARKETABLE SECURITIES | 12 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
MARKETABLE SECURITIES | ' | |||||||
MARKETABLE SECURITIES | ' | |||||||
NOTE 4 MARKETABLE SECURITIES | ||||||||
The Company classifies its marketable securities as either (i) held-to-maturity, (ii) trading, or (iii) available-for-sale. Effective October 1, 2012, the Company changed its classification of marketable equity securities and corporate bonds from available-for-sale to trading. As a result of this reclassification, a gross gain of $4,764 and a gross loss of $(28,508) was reclassed out of accumulated other comprehensive loss and charged to earnings using a specific identification basis. Equity securities are carried at fair value, as determined by quoted market prices, which is a Level 1 input, as established by the fair value hierarchy under ASC 820. Corporate bonds are carried at amortized cost, which approximates market value. The corresponding unrealized holding gains or losses are recognized in earnings. The Company’s marketable securities are summarized in the table below: | ||||||||
September 30, | September 30, | |||||||
2013 | 2012 | |||||||
Trading: | ||||||||
Cost | $954,053 | $-- | ||||||
Unrealized Gains | 174,940 | -- | ||||||
Unrealized Losses | -48,246 | -- | ||||||
Total Fair Value | $1,080,747 | $-- | ||||||
Available-for-sale: | ||||||||
Cost | $-- | $444,349 | ||||||
Unrealized Gains | -- | 4,764 | ||||||
Unrealized Losses | -- | -28,508 | ||||||
Total Fair Value | $-- | $420,605 | ||||||
Realized gains and losses on marketable securities for the fiscal year ended September 30, 2013 were approximately $3,146,000 and $(3,868,000), respectively and are included in the accompanying consolidated statements of operations and comprehensive loss. There were no net realized gains or losses on marketable securities for the fiscal year ended September 30, 2012. | ||||||||
The following table presents the Company’s fair value hierarchy for assets, consisting of marketable securities, measured at fair value on a recurring basis at September 30, 2013 and 2012: | ||||||||
Level 1 | Level 2 | Level 3 | Total | |||||
Equity securities. | $1,080,747 | $ -- | $-- | $1,080,747 | ||||
Total assets at fair value at September 30, 2013 | $1,080,747 | $-- | $-- | $1,080,747 | ||||
Equity securities | $420,605 | $ -- | $-- | $420,605 | ||||
Total assets at fair value at September 30, 2012 | $420,605 | $-- | ||||||
$-- | $420,605 | |||||||
PROPERTY_AND_EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended | ||||
Sep. 30, 2013 | |||||
PROPERTY AND EQUIPMENT | ' | ||||
PROPERTY AND EQUIPMENT | ' | ||||
NOTE 5 PROPERTY AND EQUIPMENT | |||||
Property and equipment and related accumulated depreciation and amortization of continuing operations are summarized in the table below: | |||||
September 30, | |||||
2013 | 2012 | ||||
Furniture, fixtures and equipment | $404,871 | $397,049 | |||
Leasehold improvements | 97,618 | 57,833 | |||
Property and equipment, cost | 502,489 | 454,882 | |||
Less accumulated depreciation and amortization | -372,502 | -316,108 | |||
Property and equipment, net.. | $129,987 | $138,774 |
ACCRUED_EXPENSES_AND_OTHER_CUR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended | ||||
Sep. 30, 2013 | |||||
Payables and Accruals: | ' | ||||
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ' | ||||
NOTE 6 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |||||
Accrued expenses and other current liabilities of continuing operations are summarized in the table below: | |||||
September 30, | |||||
2013 | 2012 | ||||
Warrants, net of unamortized transaction costs of $29,452 | $463,671 | $ -- | |||
Personnel costs. | 372,766 | 507,269 | |||
Taxes | 44,128 | 47,256 | |||
Professional fees | 11,000 | 297,060 | |||
Due to customers | -- | 581,343 | |||
Other | 378,892 | 292,257 | |||
Accrued expenses and other current liabilities | $1,270,457 | $1,725,185 |
SHAREHOLDERS_EQUITY
SHAREHOLDER'S EQUITY | 12 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
SHAREHOLDER'S EQUITY | ' | ||||||||
SHAREHOLDER'S EQUITY | ' | ||||||||
NOTE 7 SHAREHOLDERS’ EQUITY | |||||||||
“Blank Check” Preferred Stock | |||||||||
The Company is authorized to issue up to 4,000,000 shares of “blank check” preferred stock. The Board of Directors (the “Board”) has the authority and discretion, without shareholder approval, to issue preferred stock in one or more series for any consideration it deems appropriate, and to fix the relative rights and preferences thereof including their redemption, dividend and conversion rights. Of these shares, 1,500,000 shares have been authorized as the 6% Senior Convertible Preferred Stock and 100,000 shares have been authorized as the Series A Participating Preferred Stock. | |||||||||
6% Senior Convertible Preferred Stock with Warrants | |||||||||
On June 28, 2013, the Company completed the sale of (i) 381,674 shares of its newly authorized 6% Senior Convertible Preferred Stock, par value $0.01 per share (the “Convertible Preferred Stock”) and (ii) warrants to purchase a total of 381,674 shares of the Company’s common stock (“Common Stock”) (the “Warrants” and together with the Convertible Preferred Stock, the “Securities”) to accredited investors in a private placement pursuant to the terms of securities purchase agreements, dated June 28, 2013, by and between the Company and each Investor. The June 28, 2013 private placement included purchases of Securities by two directors of the Company that, in the aggregate, purchased 114,502 shares of Convertible Preferred Stock and Warrants. | |||||||||
On August 7, 2013, the Company completed the sale of (i) an additional 216,282 shares of its Convertible Preferred Stock and (ii) Warrants to purchase a total of 216,282 shares of the Company’s Common Stock to accredited investors in a private placement pursuant to the terms of a securities purchase agreement, dated August 7, 2013, by and between the Company and such accredited investors. | |||||||||
On August 14, 2013, the Company completed the sale of (i) an additional 50,890 shares of its Convertible Preferred Stock and (ii) Warrants to purchase a total of 50,890 shares of the Company’s Common Stock to accredited investors in a private placement pursuant to the terms of a securities purchase agreement, dated August 14, 2013, by and between the Company and such accredited investors. | |||||||||
The total aggregate purchase price paid by accredited investors via the June 28, 2013, August 7, 2013 and August 14, 2013 private placements (together, the “Investors”) for each share of Convertible Preferred Stock and Warrant was $1.965. The June 28, 2013, August 7, 2013 and August 14, 2013 private placements (together, the “Private Placements”) resulted in gross proceeds of approximately $1,275,000 to the Company. The Company has sold a total of 648,846 shares of Convertible Preferred Stock and Warrants to purchase 648,846 shares of Common Stock through these Private Placements. The Company may sell additional shares of Convertible Preferred Stock, together with related Warrants, in one or more subsequent closings. | |||||||||
The total purchase price paid by the Investors for each share of Convertible Preferred Stock and Warrant purchased in the Closing was $1.965, consisting of (i) fair values ranging from $1.105 to $1.145 in respect of the Convertible Preferred Stock, plus (ii) fair values ranging from $0.82 to $0.86 in respect of the Warrant. The Warrants have an initial exercise price of $1.84 per share, subject to adjustment upon the occurrence of certain customary events. The Warrants are exercisable at any time on or after January 1, 2014 (the “Initial Exercise Date”) and terminate on the 10-year anniversary of the Initial Exercise Date. Each share of Convertible Preferred Stock is convertible into one share of Common Stock at an initial conversion price of $1.84 per share, subject to adjustment upon the occurrence of certain customary events (the “Conversion Price”). At the initial Conversion Price, the total of 648,846 shares of Convertible Preferred Stock issued in the Private Placement as of the date of the Closing are convertible into an aggregate of 692,919 shares of Common Stock. The proceeds from these Private Placements of $1,275,000 have been allocated to the Convertible Preferred Stock and the Warrants based upon their fair values assigned (net of issuance costs of approximately $69,000) of approximately $693,000 and $513,000, respectively, as of the dates of issuance. | |||||||||
As of September 30, 2013, the carrying value of the Convertible Preferred Stock was approximately $717,000 and is included on the Company’s consolidated balance sheets as temporary equity. The change in the carrying value, or accretion, of the Convertible Preferred Stock from the issuance dates to September 30, 2013 is classified as a preferred stock dividend in the amount of approximately $24,000 and is included as a component of “Net loss available to common equity” in calculating loss per share for the fiscal year ended September 30, 2013. As a result of the Convertible Preferred Stock containing a beneficial conversion feature, whereby the accounting conversion price is lower than the fair value of the common stock, the Company recorded a preferred stock dividend in the amount of approximately $508,000 for the fiscal year ended September 30, 2013. This amount has also been recorded as an increase to additional paid in capital and included as a component of “Net loss applicable to common equity” for the fiscal year ended September 30, 2013. | |||||||||
Dividends on the Convertible Preferred Stock are payable, on a cumulative basis, in cash, at the rate per annum of 6% of the Liquidation Preference (as defined below) and are payable quarterly, in arrears, on each March 31, June 30, September 30 and December 31, commencing on September 30, 2013. The Company is prohibited from paying any dividend with respect to shares of Common Stock or other junior securities in any quarter unless full dividends are paid on the Convertible Preferred Stock in such quarter. Dividends on the Convertible Preferred Stock totaled approximately $15,000 for the fiscal year ended September 30, 2013. These dividends, in addition to the accretion and beneficial conversion feature, totaled $546,888 for the year ended September 30, 2013. | |||||||||
In the event of a liquidation (or deemed liquidation, as described below) of the Company, the holders of the Convertible Preferred Stock shall receive in preference to the holders of Common Stock and any junior securities of the Company an amount (the “Liquidation Preference”) equal to (i) $1.965 (the “Original Issue Price”) per each outstanding share of Convertible Preferred Stock (subject to adjustment upon the occurrence of certain customary events), plus (ii) any accrued but unpaid dividends. A Change of Control of the Company (as defined in the Certificate of Amendment) will be treated as a liquidation at the option of the holders of a majority of the Convertible Preferred Stock; provided that the amount paid to holders of Convertible Preferred Stock in such event will be equal to 101% of the Original Issue Price, plus accrued but unpaid dividends. | |||||||||
Each share of Convertible Preferred Stock is convertible at any time, at the option of the holder, into shares of Common Stock at the then applicable Conversion Price. In addition, upon the consent of 80% of the holders of the Convertible Preferred Stock, the Convertible Preferred Stock automatically will be converted to shares of Common Stock at the then-applicable Conversion Price. | |||||||||
On or after June 28, 2018, the Company may, at its option and upon at least 30 days prior written notice to the holders of the Convertible Preferred Stock, redeem all or any portion of the outstanding Convertible Preferred Stock in cash at a redemption price equal to the full Liquidation Preference as of the redemption date. In addition, at any time on or after June 28, 2023, each holder of the Convertible Preferred Stock will have the right to require the Company to redeem (provided that funds are legally available to do so) all or any portion of such holder’s outstanding Convertible Preferred Stock at a redemption price equal to the full Liquidation Preference of such shares of Convertible Preferred Stock as of the redemption date. | |||||||||
The Convertible Preferred Stock will vote together with the Common Stock on an as-converted basis on all matters except as required by law. In addition, for so long as 50% of the shares of Convertible Preferred Stock remains outstanding, without the approval of the holders of a majority of the Convertible Preferred Stock, voting as a separate class, the Company may not: (i) authorize or issue any equity security senior to the Convertible Preferred Stock; (ii) declare or pay any dividends on the Common Stock or any series of preferred stock that ranks junior to the Convertible Preferred Stock; (iii) increase or decrease the total number of authorized shares of Convertible Preferred Stock; (iv) alter or change the rights, preferences or privileges of the Convertible Preferred Stock so as to affect materially and adversely the Convertible Preferred Stock; or (v) increase the authorized capitalization of the Company, or otherwise amend its certificate of incorporation or bylaws in a manner which adversely affects the rights or preferences of the Convertible Preferred Stock. | |||||||||
As of September 30, 2013, the liability associated with the Warrants was approximately $464,000 (net of issuance costs) and is included in the “Accrued expenses and other current liabilities” line of the Company’s consolidated balance sheets. | |||||||||
The fair value of the Warrants was determined using a Black-Scholes closed-form call option pricing model, which is considered a level 3 instrument under the fair value hierarchy. The fair value of the Warrants were estimated using the following assumptions as of September 30, 2013: | |||||||||
Risk-free interest rate | 2.60% | ||||||||
Dividend yield | -- | ||||||||
Volatility | 30.00% | ||||||||
Expected term (in years) | 10.3 | ||||||||
The change in the fair value of the convertible preferred stock warrant liability for the year ended September 30, 2013 is summarized below: | |||||||||
Opening balance | $0 | ||||||||
Issuance of convertible preferred stock warrant | 542,741 | ||||||||
Decrease in fair value | -49,618 | ||||||||
Closing balance | $493,123 | ||||||||
The following table presents the Company’s fair value hierarchy for liabilities, consisting of a warrant liability, measured at fair value and prior to issuance costs, on a recurring basis at September 30, 2013: | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Warrant liability | $-- | $-- | $493,123 | $493,123 | |||||
Anti-takeover Provisions | |||||||||
Shareholder Rights Plan | |||||||||
On April 26, 2013, the Board adopted a Shareholder Rights Plan, as set forth in the Rights Agreement between the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent. Pursuant to the Rights Agreement, the Board declared a dividend distribution of one Right (a “Right”) for each outstanding share of Company Common Stock, par value $0.01 per share (the “Common Stock”) to shareholders of record at the close of business on May 6, 2013, which date will be the record date, and for each share of Common Stock issued (including shares distributed from treasury) by the Company thereafter and prior to the Distribution Date (as described below and defined in the Rights Agreement). Each Right entitles the registered holder, subject to the terms of the Rights Agreement, to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, $0.01 par value per share (the “Series A Preferred Stock”), at an exercise price of $4.00 per one one-thousandth of a share of Series A Preferred Stock, subject to adjustment. | |||||||||
Initially, no separate Rights Certificates will be distributed and instead the Rights will attach to all certificates representing shares of outstanding Common Stock. Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and become exercisable on the distribution date (the “Distribution Date”), which will occur on the earlier of (i) the 10th business day (or such later date as may be determined by the Board) after the public announcement that an Acquiring Person (as defined in the Rights Agreement) has acquired beneficial ownership of 20% or more of the Common Stock then outstanding or (ii) the 10th business day (or such later date as may be determined by the Board) after a person or group announces a tender or exchange offer that would result in a person or group of affiliated and associated persons beneficially owning 20% or more of the Common Stock then outstanding. | |||||||||
“Blank Check” Preferred Stock | |||||||||
As discussed above, the Company is authorized to issue up to 4,000,000 shares of “blank check” preferred stock. The Board has the authority and discretion, without shareholder approval, to issue preferred stock in one or more series for any consideration it deems appropriate, and to fix the relative rights and preferences thereof including their redemption, dividend and conversion rights. Of these shares, 1,500,000 shares have been authorized as the 6% Senior Convertible Preferred Stock and 100,000 shares have been authorized as the Series A Participating Preferred Stock. | |||||||||
Stock Repurchase | |||||||||
In September 2002 and January 2004, the Board authorized the repurchase of up to an aggregate of 486,200 shares of outstanding common stock. Under those authorizations, as of September 30, 2013, the Company had repurchased an aggregate of 172,603 shares at a cost of approximately $403,000, but none during the fiscal years ended September 30, 2013 and 2012. |
SHAREBASED_COMPNESATION
SHARE-BASED COMPNESATION | 12 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
SHARE-BASED COMPNESATION | ' | |||||||
SHARE-BASED COMPNESATION | ' | |||||||
NOTE 8 SHARE BASED COMPENSATION | ||||||||
2011 Long Term Incentive Plan | ||||||||
In March 2011, shareholders of the Company approved the 2011 Long Term Incentive Plan (the “2011 Plan”), which authorizes 850,000 shares of common stock for grants of various types of equity awards to officers, directors, employees, consultants, and independent contractors. Under the 2011 Plan, as of September 30, 2013, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) has approved awards of restricted common stock and stock options of 1,315,000 shares of common stock, in the aggregate, to certain of the Company’s executive officers and employees (1,020,000 shares), a consultant (160,000 shares), non-employee directors (130,000 shares), and to a non-employee executive officer (5,000 shares). Of these awards, as of September 30, 2013, 530,500 shares were forfeited and reverted to, and are eligible for re-grant under, the 2011 Plan. The total shares of common stock available for grants of equity awards under the 2011 Plan was 65,500 as of September 30, 2013. The prices at which equity awards may be granted and the exercise prices of stock options granted may not be less than the fair market value of the common stock as quoted at the close on the Nasdaq Stock Market on the grant date. The Compensation Committee administers the plan. Options generally expire ten years after the date of grant and vest one year from the date of grant for non-employee directors, and, in the case of initial grants to officers and employees, vest over five years with 50%, 25% and 25% vesting on the third, fourth, and fifth anniversary of the grant date, respectively. Options granted under a consulting agreement in November 2011 expire three years after the grant date and vested equally over the term of the consulting agreement, which concluded February 29, 2012. | ||||||||
2007 Equity Incentive Plan | ||||||||
The 2007 Equity Incentive Plan (the “2007 Plan”), which was approved by shareholders of the Company in May 2007, and, as amended, in February 2010, authorizes an aggregate of 800,000 shares of common stock for grants of restricted common stock and stock options to officers, employees, and non-employee directors of the Company. Under the 2007 Plan, the Compensation Committee of the Company’s Board of Directors approved awards of restricted common stock and stock options of 977,375, in the aggregate, to certain officers, employees and non-employee directors. Of these awards, as of September 30, 2013, 278,366 shares were forfeited and reverted to, and are eligible for re-grant under, the 2007 Plan. The total shares of common stock available for grants of equity awards under the 2007 Plan was 100,991 as of September 30, 2013. The prices at which restricted common stock may be granted and the exercise price of stock options granted may not be less than the fair market value of the common stock as quoted at the close on the Nasdaq Stock Market on the grant date. The Compensation Committee administers the 2007 Plan. Options generally expire ten years after the date of grant, and in the case of non-employee directors, vest on the first anniversary of the date of grant. In the case of officers and employees, options either vest in equal amounts over three to five years or vest over five years with 50%, 25% and 25% vesting on the third, fourth, and fifth anniversary of the grant date, respectively. Restricted stock grants generally vest in equal proportions over three years. | ||||||||
1996 Stock Incentive Plan | ||||||||
The Company’s 1996 Stock Incentive Plan (the “1996 Plan”) expired in accordance with its terms in November 2006. The exercise price of incentive options granted under the 1996 Plan to officers, employees, and non-employee directors of the Company was required by 1996 Plan provisions to be equal at least to the fair market value of the common stock at the date of grant. In general, options under this plan expire ten years after the date of grant and generally vest in equal proportions over three years. Unexercised options granted prior to 1996 Plan expiration remain outstanding until the earlier of exercise or option expiration. Under the 1996 Plan 30,000 fully vested common stock options are the only awards that remain outstanding and unexercised, all at exercise prices higher than the fair market value of the common stock at September 30, 2013. | ||||||||
Under the 2011 and 2007 Plans, the Compensation Committee has approved awards of stock options to purchase an aggregate of 1,737,500 shares of common stock to the Company’s current and certain former non-employee directors, to certain key employees, to current and certain former Company officers, and to a consultant, of which awards covering 278,366 shares from the 2007 Plan and 530,500 shares from the 2011 Plan of common stock were forfeited, with such shares reverting to the respective plans and eligible for grant. The exercise prices of the awards granted was, in each case equal, to the closing market value of the Company’s common stock on the Nasdaq Stock Market on the various grant dates. | ||||||||
The Company recognized approximately $220,000 and $225,000 of compensation expense in continuing operations for stock option awards in its consolidated statements of operations and comprehensive loss for the fiscal years ended September 30, 2013 and 2012, respectively. The Company recognized a recovery of $(49,000) of compensation in discontinued operations for stock option awards in its consolidated statements of operations and comprehensive loss for the fiscal year ended September 30, 2012. | ||||||||
As of September 30, 2013, there was approximately $144,000 of total unrecognized compensation cost related to 414,834 shares of unvested stock option awards granted under the 2007 and 2011 Plans, which is expected to be recognized over the remainder of the weighted average vesting period (extending to February 2017). | ||||||||
The following table summarizes stock option activity under the 2011 Plan and 2007 Plan from September 30, 2012 through September 30, 2013 (there was no activity during such period in respect of 1996 Plan grants): | ||||||||
Shares | Weighted AverageExercise Price | Weighted AverageRemaining Contractual Term (Years) | ||||||
Aggregate Intrinsic Value | ||||||||
Outstanding at September 30, 2012 | 1,142,000 | $3.31 | 4.7 | |||||
Granted | 120,000 | 1.14 | 9 | |||||
Exercised | -- | -- | -- | |||||
Forfeited | -365,000 | 3.43 | -- | |||||
Expired | -- | -- | -- | |||||
Outstanding at September 30, 2013 | 897,000 | $2.98 | 6.1 | $ -- | ||||
Options expected to vest at September 30, 2013 | 372,351 | $2.88 | 8.2 | $ -- | ||||
Options vested and exercisable at September 30, 2013 | 482,166 | $3.03 | 4.5 | $ -- | ||||
The table below provides additional information regarding stock option awards that were outstanding and exercisable at September 30, 2013: | ||||||||
Stock Options Outstanding and Exercisable | ||||||||
Range of Exercise Prices | Outstanding at September 30, 2013 | Weighted | Weighted Average Exercise Price | |||||
AverageRemaining Contractual Term (Years) | ||||||||
$1.80 | 20,000 | 5.4 | $1.80 | |||||
$2.02 to $2.85 | 272,500 | 3.1 | $2.21 | |||||
$3.00 to $3.79 | 159,666 | 7.8 | $3.43 | |||||
$6.02 | 20,000 | 3.6 | $6.02 | |||||
$15.91 | 10,000 | 2.6 | $15.91 | |||||
482,166 | 4.5 | $3.03 | ||||||
During the fiscal years ended September 30, 2013 and 2012, the Company granted 120,000 and 420,000 stock options at weighted average grant date fair values of $0.61 and $0.96, respectively. | ||||||||
The fair value of each stock option on the date of grant was estimated using a Black-Scholes option-pricing formula applying the following assumptions for each respective period: | ||||||||
For the Fiscal Years Ended September 30, | ||||||||
2013 | 2012 | |||||||
Expected term (in years) | 5 | 3.0 to 5.0 | ||||||
Risk-free interest rate | 0.06% to 0.7% | 0.04% to 0.83% | ||||||
Expected volatility | 70% to 70.4% | 63% to 69% | ||||||
Expected dividend yield | 0% | 0% | ||||||
Estimated Annual Forfeiture rate | 5% | 13% | ||||||
The expected term represents the period over which the stock option awards are expected to be outstanding. The Company based the risk-free interest rate used in its assumptions on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equivalent to the award’s expected term. The volatility factor used in the Company’s assumptions is based on the historical price of its stock over the most recent period commensurate with the expected term of the award. The Company historically has not paid any dividends on its common stock and had no intention to do so on the date the share-based awards were granted. Accordingly, the Company used a dividend yield of zero in its assumptions. The Company estimates the expected term, volatility and forfeitures of share-based awards based upon historical data. The Company adjusted its estimated forfeiture rate effective October 1, 2011 and recognized a recovery of approximately $46,000 during the fiscal year ended September 30, 2012. | ||||||||
Restricted Stock Awards | ||||||||
Under the 2011 Plan and 2007 Plan, the Compensation Committee has approved and granted awards of 554,875 shares of restricted stock, in the aggregate, to certain key employees. Of these awards, 160,134 have vested and 23,366 shares of restricted stock were forfeited and reverted to, and are eligible for re-grant under, the 2011 Plan and 2007 Plan. Vesting of restricted stock awards is generally subject to a continued service condition with one-third of the awards vesting each year on the three successive anniversary dates of the grant date, typically commencing on the first such anniversary date. The fair value of the awards granted was equal to the closing market value of the Company’s common stock as quoted on the Nasdaq Stock Market on the grant date. For the fiscal years ended September 30, 2013 and 2012, the Company recognized approximately $217,000 and $(5,000) of compensation, net of forfeitures, from continuing operations in its consolidated statements of operations and comprehensive loss related to restricted stock awards. | ||||||||
The following table summarizes restricted stock activity under the 2011 Plan and 2007 Plan during the fiscal year ended September 30, 2013. | ||||||||
WeightedAverage Grant DateFair Value | ||||||||
Shares | ||||||||
Non-Vested balance at September 30, 2012 | 7,500 | $2.02 | ||||||
Changes during the period | ||||||||
Shares granted | 371,375 | 1.16 | ||||||
Shares forfeited | -- | -- | ||||||
Shares vested | -7,500 | 2.02 | ||||||
Non-Vested balance at September 30, 2013 | 371,375 | $1.16 | ||||||
As of September 30, 2013, there was approximately $171,000 of total unrecognized compensation cost related to shares of unvested restricted stock awards (reflected in the table above) granted under the 2011 Plan and 2007 Plan. That cost is expected to be recognized over the remainder of the requisite service (vesting) periods. The total grant date fair value of restricted stock that vested during the fiscal years ended September 30, 2013 and 2012 was approximately $15,000 and $35,000, respectively. | ||||||||
Warrants | ||||||||
As of September 30, 2013, warrants to purchase 75,000 shares of the Company’s common stock at an exercise price of $1.75 were outstanding. By their terms these warrants expire 90 days after a registration statement registering common stock (other than pursuant to employee benefit plans) is declared effective by the Securities and Exchange Commission. As of September 30, 2013, no such registration statement has been filed with the Securities and Exchange Commission. |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||
Sep. 30, 2013 | |||||
INCOME TAXES | ' | ||||
INCOME TAXES | ' | ||||
NOTE 9 INCOME TAXES | |||||
The Company’s provision (benefit) for income taxes consists of the following United States Federal and State, and foreign components: | |||||
For the Fiscal Years EndedSeptember 30, | |||||
2013 | 2012 | ||||
Current: | |||||
Federal | $-- | $-- | |||
State | 75 | 15,110 | |||
Foreign | -5,570 | -- | |||
Deferred: | |||||
Federal | 89,832 | -1,996,931 | |||
State | -107,296 | -114,149 | |||
Foreign | -5,598 | -326,047 | |||
Change in valuation allowance | 23,062 | 2,437,127 | |||
Income taxe (benefit) expense | ($5,495) | $15,110 | |||
The provision for income taxes of approximately $15,000 recorded in the fiscal year ended September 30, 2012 is attributable to U.S. state income taxes in respect of Fiscal 2011. | |||||
Income tax benefit from discontinued operations of approximately $(6,000) in the fiscal year ended September 30, 2013 is attributable to Forward UK. | |||||
The deferred tax expense (benefit) is the change in the deferred tax assets and liabilities representing the tax consequences of changes in the amounts of temporary differences, net operating loss carry forwards and changes in tax rates during the fiscal year. The Company’s deferred tax assets and liabilities are comprised of the following: | |||||
As of September 30, | |||||
2013 | 2012 | ||||
Deferred tax assets: | |||||
Net operating losses | $3,213,001 | $3,485,217 | |||
Realized loss on investments in marketable securities | 304,586 | -- | |||
Share-based compensation | 303,164 | 195,315 | |||
Alternative minimum tax credit | 99,757 | 99,757 | |||
Excess tax over book basis in inventory | 87,381 | 132,525 | |||
Reserve for obsolete inventory | -- | 73,798 | |||
Allowance for accounts receivable | 2,369 | 20,237 | |||
4,010,258 | 4,006,849 | ||||
Valuation allowance | -3,840,958 | -3,817,896 | |||
Net deferred tax assets | 169,300 | 188,953 | |||
Deferred tax liabilities: | |||||
Prepaid insurance | -92,602 | -142,756 | |||
Unrealized gains on investments in marketable securities | -44,950 | -- | |||
Depreciation | -31,748 | -46,197 | |||
-169,300 | -188,953 | ||||
Total | $ -- | $ -- | |||
As of September 30, 2013 and 2012, the Company has no unrecognized income tax benefits. At September 30, 2013, the Company had available total net operating loss carryforwards for U.S. Federal and state income tax purposes of approximately $7,597,000 and $6,714,000, respectively, expiring through 2033, resulting in deferred tax assets in respect of U.S. Federal and state income taxes of approximately $2,454,000 and $325,000, respectively. In addition, at September 30, 2013, the Company had total available net operating loss carryforwards for foreign income tax purposes of approximately $4,929,000 resulting in a deferred tax asset of $434,000 approximately, expiring through 2020. Total net deferred tax assets, before valuation allowances, was $3,841,000 and $3,818,000 at September 30, 2013 and 2012, respectively. Undistributed earnings of the Company’s foreign subsidiaries are considered to be permanently invested; therefore, in accordance with U.S. generally accepted accounting principles, no provision for U.S. Federal and state income taxes would result. As of September 30, 2013, there were no accumulated earnings of any of the Company’s foreign subsidiaries. | |||||
As of September 30, 2013, as part of its periodic evaluation of the necessity to maintain a valuation allowance against its deferred tax assets, and after consideration of all factors, both positive and negative (including, among others, projections of future taxable income, current year net operating loss carryforward utilization and the extent of the Company’s cumulative losses in recent years), the Company determined that, on a more likely than not basis, it would not be able to use its remaining deferred tax assets (except in respect of United States income taxes in the event the Company elects to effect the repatriation of certain foreign source income of its Swiss subsidiary, which income is currently considered to be permanently invested and for which no United States tax liability has been accrued). Accordingly, the Company has determined to maintain a full valuation allowance against its total deferred tax assets. As of September 30, 2013 and 2012, the valuation allowances were approximately $3,841,000 and $3,818,000, respectively. The utilization of the Company's net operating loss carryfoward may be subject to certain change of control limitations. The Company is currently undergoing a study to determine the extent of these limitations, if any. If the Company determines in a future reporting period that it will be able to use some or all of its deferred tax assets, the adjustment to reduce or eliminate the valuation allowance would reduce its tax expense and increase after-tax income. Changes in deferred tax assets and valuation allowance are reflected in the “Income tax expense” line item of the Company’s consolidated statements of operations and comprehensive loss. | |||||
The significant elements contributing to the difference between the United States Federal statutory tax rate and the Company’s effective tax rate are as follows: | |||||
For the Fiscal Years Ended September 30, | |||||
2013 | 2012 | ||||
Statutory U.S. Federal income tax rate | 34.00% | 34.00% | |||
State taxes, net of Federal benefit | 1.90% | 2.00% | |||
Permanent differences arising from incentive stock options.. | (20.0%) | -- | |||
Other permanent differences | -2.80% | -0.10% | |||
Foreign tax rate differential | -5.60% | -17.10% | |||
Valuation allowance | -8.10% | -19.30% | |||
Other | -2.00% | -- | |||
Effective tax rate | (2.6%) | (0.5%) | |||
As of September 30, 2013 and 2012, the Company has not accrued any interest and penalties related to uncertain tax positions. It is the Company’s policy to recognize interest and/or penalties, if any, related to income tax matters in income tax expense in the consolidated statements of operations and comprehensive loss. For the periods presented in the accompanying consolidated statements of operations and comprehensive loss, no income tax related interest or penalties were assessed or recorded. All fiscal years prior to the fiscal year ended September 30, 2010 are closed to Federal and State examination, except with respect to net operating losses generated in prior fiscal years. |
LOSS_PER_SHARE
LOSS PER SHARE | 12 Months Ended | |||
Sep. 30, 2013 | ||||
Earnings Per Share: | ' | |||
LOSS PER SHARE | ' | |||
NOTE 10 LOSS PER SHARE | ||||
Basic per share data for each period presented is computed using the weighted-average number of shares of common stock outstanding during each such period. Diluted per share data is computed using the weighted-average number of common and dilutive common-equivalent shares outstanding during each period. Dilutive common-equivalent shares consist of shares that would be issued upon the exercise of stock options and warrants, computed using the treasury stock method. Diluted loss per share data for the fiscal years ended September 30, 2013 and 2012, exclude 1,992,221 and 1,224,500 of outstanding common equivalent shares as inclusion of such shares would be anti-dilutive. Net loss from continuing operations per basic and diluted share for the fiscal year ended September 30, 2013 includes preferred stock dividends and accretion and beneficial conversion feature. The calculation of basic and diluted loss per share for the years ended September 30, 2013 and 2012 was as follows: | ||||
2013 | 2012 | |||
Numerator: | ||||
Net loss | ($206,886) | ($9,634,056) | ||
Preferred stock dividend | -546,888 | -- | ||
Net loss to common shareholders | ($753,774) | ($9,634,056) | ||
Denominator: | ||||
Weighted average basic common shares | 8,111,226 | 8,101,661 | ||
Effect of dilutive securities (1) | -- | -- | ||
Weighted average diluted common shares | 8,111,226 | 8,101,661 | ||
Basic loss per share | ($0.09) | ($1.19) | ||
Diluted loss per share (1) | ($0.09) | ($1.19) | ||
(1) Due to the net loss to common shareholders in each of the years presented above, diluted earnings per share was computed without consideration to potentially dilutive instruments as their inclusion would have been antidilutive. Potentially dilutive instruments include stock options, warrants and convertible preferred stock. |
COMMITMENT_AND_CONTINGENCIES
COMMITMENT AND CONTINGENCIES | 12 Months Ended | ||
Sep. 30, 2013 | |||
COMMITMENT AND CONTINGENCIES | ' | ||
COMMITMENT AND CONTINGENCIES | ' | ||
NOTE 11 COMMITMENTS AND CONTINGENCIES | |||
Employment and Agreements | |||
Robert Garrett Jr. Employment Agreement | |||
Under his employment agreement, which was effective as of March 1, 2012, Mr. Robert Garrett Jr. is currently employed as the Company’s Chief Executive Officer at an annual salary of $250,000. In executing his employment agreement, Mr. Garrett received a signing bonus of $9,167. During the fiscal year ended September 30, 2012 (Mr. Garrett’s first year of employment), he received a bonus of $50,000. In addition, during each year of his employment, Mr. Garrett is eligible to receive an annual bonus at the discretion of the Compensation Committee in a combination of cash or equity-based compensation. The Company recorded $100,000 of estimated bonus expense for Mr. Garrett in continuing operations for the fiscal year ended September 30, 2013. Mr. Garrett’s employment agreement also entitles him to awards of stock options to purchase an aggregate of 200,000 shares of the Company’s common stock pursuant to the 2011 Plan, which have been granted in their entirety. | |||
Mr. Garrett’s employment agreement provides for successive one-year renewal terms, unless either party provides written notice of its intention not to renew the agreement not later than 90 days prior to the end of the term (or renewal period). In the event of the termination of Mr. Garrett’s employment, depending on the circumstances, Mr. Garrett could be entitled to receive a severance payment which could be up to (12) twelve months of his salary, and under certain circumstances, the immediate vesting of any unvested options pursuant to applicable equity compensation plans, as well as any accrued discretionary bonus. | |||
Mr. Garrett’s employment agreement binds him to customary non-competition and non-solicitation covenants of up to one year following the expiration of the employment term. | |||
James O. McKenna III Employment Agreement | |||
James O. McKenna III serves as the Company’s Chief Financial Officer, Treasurer and Assistant Secretary pursuant to an Amended Employment Agreement, dated as of April 1, 2011 (the “Employment Agreement”), between the Company and Mr. McKenna. On November 8, 2012, Mr. McKenna’s Employment Agreement was further amended (the “Amendment”) in connection with the logistical coordination, planning and implementation of the move of the Company’s executive offices to West Palm Beach, Florida from Santa Monica, California, and his relocation from California to Florida at the Company’s request. Among other things, the Amendment reduced his base salary to $210,000 per annum from $225,000 per annum, eliminated his housing allowance of $90,000 per annum (paid pursuant to the Employment Agreement), and provided for a bonus payment in the amount of $172,456, less applicable withholdings and deductions, all subject to the provisions provided in the Amendment. Approximately $86,000 of such bonus payment was attributed as a bonus to Mr. McKenna in the fiscal year ended September 30, 2012. The Company expensed the remainder as an estimated bonus for Mr. McKenna in continuing operations for the fiscal year ended September 30, 2013. The term of the Employment Agreement expires on December 31, 2013, with automatic renewal for successive terms of one year each. Pursuant to the Employment Agreement, Mr. McKenna is entitled to a payment equal to one year of his salary as severance in the event of his termination “without cause” and termination for “good reason” (as such terms are defined in the Employment Agreement). | |||
Guarantee Obligation | |||
In February 2010, Forward Switzerland and its European logistics provider (freight forwarding and customs agent) entered into a Representation Agreement (the “Representation Agreement”) whereby, among other things, the European logistics provider agreed to act as Forward Switzerland'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 June 30, 2009, Forward Switzerland 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 its behalf. | |||
As of February 1, 2010, Forward Switzerland entered into a guarantee agreement with a Swiss bank relating to the repayment of any amount up to €75,000 (equal to approximately $101,000 as of September 30, 2013) paid by such bank to the logistics provider in order to satisfy such undertaking pursuant to the bank letter of guarantee. Forward Switzerland 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) Forward Switzerland 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, Forward Switzerland 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 initial term of the bank letter of guarantee expired February 28, 2011, but renews automatically for one-year periods until February 28, 2014, unless Forward Switzerland provides the Swiss bank with written notice of termination at least 60 days prior to the renewal date. It is the intent of Forward Switzerland and the logistics provider that the bank letter of guarantee amount be adjusted annually. In consideration of the issuance of the letter of guarantee, Forward Switzerland has granted the Swiss bank a security interest in all of its assets on deposit with, held by, or credited to Forward Switzerland’s accounts with, the Swiss bank (approximately $1,443,000 at September 30, 2013). As of September 30, 2013, 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. Total rent expense included in continuing operations for the years ended September 30, 2013 and 2012, amounted to approximately $252,000 (net of $46,000 of rental income from a sub-lease) and $456,000, respectively. The following table summarizes the future minimum lease payments required under these leases (exclusive of future minimum sublease rental receipts in the aggregate of approximately $556,000 due under non-cancelable subleases). | |||
Fiscal Year Ended September 30, | Amount | ||
2014 | $261,000 | ||
2015 | 259,000 | ||
2016 | 267,000 | ||
2017 | 85,000 | ||
2018 | 87,000 | ||
Thereafter | 183,000 | ||
Total lease commitments | $1,142,000 |
BUYING_AGENCY_AND_SUPPLY_AGREE
BUYING AGENCY AND SUPPLY AGREEMENT | 12 Months Ended |
Sep. 30, 2013 | |
BUYING AGENCY AND SUPPLY AGREEMENT: | ' |
BUYING AGENCY AND SUPPLY AGREEMENT | ' |
NOTE 12 BUYING AGENCY AND SUPPLY AGREEMENT | |
On March 12, 2012, the Company, entered into a Buying Agency and Supply Agreement (the “Agreement”) with Forward Industries Asia-Pacific Corporation (f/k/a Seaton Global Corporation), a British Virgin Islands corporation (“Forward China”), dated as of March 7, 2012. The Agreement provides that, upon the terms and subject to the conditions set forth therein, Forward China will act as the Company’s exclusive buying agent and supplier of Products (as defined in the Agreement) in the Asia Pacific region. The Company purchases products at Forward China’s cost and pays a service fee on the net purchase price. The Agreement terminates on March 11, 2014, subject to renewal. Terence Wise, a director of the Company, is a principal of Forward China. In addition, Jenny P. Yu, a Managing Director of Forward China, owns shares of the Company’s common stock. The Company incurred approximately $1,292,000 and $691,000, respectively, during the fiscal years ended September 30, 2013 and 2012, in service fees paid to Forward China, which are included as a component of costs of goods sold in continuing operations in the accompanying consolidated statements of operations and comprehensive loss. |
INVESTMENT_MANAGEMENT_AGREEMEN
INVESTMENT MANAGEMENT AGREEMENT | 12 Months Ended |
Sep. 30, 2013 | |
INVESTMENT MANAGEMENT AGREEMENT | ' |
INVESTMENT MANAGEMENT AGREEMENT | ' |
NOTE 13 INVESTMENT MANAGEMENT AGREEMENT | |
On April 16, 2013, the Company entered into an Investment Management Agreement (the “Agreement”) with LaGrange Capital Administration, L.L.C. (“LCA”), pursuant to which the Company retained LCA to manage certain investment accounts funded by the Company (collectively, the “Account”). Frank LaGrange Johnson, the Company’s Chairman of the Board, serves as the Managing Member of LCA. | |
Pursuant to the Agreement, LCA is authorized, subject to supervision of the Investment Committee of the Board and the terms and conditions of the Agreement, to take all actions and make all decisions regarding the investment and reinvestment of the assets of the Account utilizing the Investment Strategy (as defined in the Agreement). As compensation for its services to the Company, LCA shall be entitled to advisory fees, comprised of an asset-based fee and a performance fee, as provided in the Agreement. The asset-based fee will equal 1% per annum of the average Account Net Asset Value (“Account NAV”). The performance fee will equal 20% of the increase (if any) in the Account NAV over an annual period. No performance fee will be payable for any annual period in which the Account NAV at the end of such annual period is below the highest Account NAV at the end of any previous annual period. In addition to such advisory fees, the Company will reimburse LCA for certain investment and operational expenses. Under the Agreement, the Company or its designees may make cash withdrawals from the Account on March 31, June 30, September 30 or December 31 of each year upon 45 days’ prior written notice to LCA; provided, that, in the event of a breach of certain terms of the Agreement, the Company may make a complete cash withdrawal from the Account immediately without LCA’s consent. During the fiscal year ended September 30, 2013, the Company recognized approximately $13,000 of expense in continuing operations in its consolidated statements of operations and comprehensive loss related to asset based advisory fees. The Company has not recorded any expense related to performance based advisory fees during the fiscal year ended September 30, 2013. | |
The Agreement is effective as of February 1, 2013 and shall continue until the second anniversary of the effective date. Thereafter, the term of the Agreement shall automatically renew for additional one year terms unless terminated in accordance with the terms of the Agreement or if a party provides notice to the other party no less than 60 days prior to the end of a term of its decision to terminate the Agreement at the end of the then current term. | |
The amount of funds invested with LCA during the fiscal years ended September 30, 2013 and 2012 were $1,200,000 and $444,000, respectively. | |
During the years ended September 30, 2013 and 2012, the Company purchased approximately $88,600,000 and $444,000 of marketable securities, respectively. During the year ended September 30, 2013, the Company sold approximately $87,300,000 of marketable securities. There were no such sales during the year ended September 30, 2012. As a result of these activities, the Company recognized approximately $722,000 of net investment losses during the year ended September 30, 2013. There were no gains or losses recognized for the year ended September 30, 2012. |
LEGAL_PROCEEDINGS
LEGAL PROCEEDINGS | 12 Months Ended |
Sep. 30, 2013 | |
LEGAL PROCEEDINGS: | ' |
LEGAL PROCEEDINGS | ' |
NOTE 14 LEGAL PROCEEDINGS | |
From time to time, the Company may become a party to other legal actions or proceedings in the ordinary course of its business. As of September 30, 2013, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material to its business. |
401K_PLAN
401(K) PLAN | 12 Months Ended |
Sep. 30, 2013 | |
401(K) PLAN | ' |
401(K) PLAN | ' |
NOTE 15 401(K) PLAN | |
The Company maintains a 401(k) benefit plan allowing eligible United States-based employees to contribute a portion of their salary in an amount up to the annual maximum amounts as set periodically by the Internal Revenue Service. In accordance with applicable Safe Harbor provisions, the Company had elected to match 100% on the first 6% of eligible contributions by its employees through June 30, 2012, at which time the Company elected to discontinue the matching contribution. As such, there were no matching contributions relative to the Company’s continuing operations for the year ended September 30, 2013. The Company's matching contributions relative to its continuing operations for the year ended September 30, 2012 were approximately $48,000 and are reflected in the accompanying consolidated statements of operations and comprehensive loss. The Company’s contributions vest immediately. |
OPERATING_SEGMENT_INFORMATION
OPERATING SEGMENT INFORMATION | 12 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
OPERATING SEGMENT INFORMATION | ' | ||||||||
OPERATING SEGMENT INFORMATION | ' | ||||||||
NOTE 16 OPERATING SEGMENT INFORMATION | |||||||||
The Company reports and manages its continuing operations based on a single operating segment: the design and distribution of carry and protective solutions, primarily for hand held electronic devices. Products designed and distributed by this segment include carrying cases and other accessories for medical monitoring and diagnostic kits, portable consumer electronic devices (such as smartphones, tablets, personnel computers, notebooks, and GPS devices), and a variety of other portable electronic and non-electronic products (such as firearms, sporting, and other recreational products). This segment operates in geographic regions that include primarily APAC, the Americas, and Europe. Geographic regions are defined by reference primarily to the location of the customer or its contract manufacturer. | |||||||||
On June 21, 2012, the Company determined to wind down its Retail segment and focus solely on growing its OEM business. The decision to eliminate the Retail division was primarily driven by the longer than estimated path to bring it to profitability and the strong net sales growth and cost rationalizations in the OEM business. The Company has substantially completed its exit of its Retail business as of March 31, 2013. The Company has not had, and does not expect to have, any continuing involvement in the Retail business after this date. | |||||||||
Revenues from External Customers | |||||||||
The following table presents net sales by geographic region. | |||||||||
(dollars in thousands) | |||||||||
Year Ended September 30, | |||||||||
2013 | 2012 | ||||||||
Americas: | |||||||||
United States | $9,424 | $8,843 | |||||||
Other | 1,538 | 1,483 | |||||||
Total Americas | 10,962 | 10,326 | |||||||
APAC Region: | |||||||||
Hong Kong | 7,491 | 9,510 | |||||||
Other | 3,273 | 2,055 | |||||||
Total APAC | 10,764 | 11,565 | |||||||
EMEA Region: | |||||||||
Germany. | 5,097 | 4,071 | |||||||
Poland. | 3,525 | 2,596 | |||||||
Other | 563 | 845 | |||||||
Total Europe | 9,185 | 7,512 | |||||||
Total net sales | $30,911 | $29,403 | |||||||
Long-Lived Assets (Net of Accumulated Depreciation and Amortization) | |||||||||
Identifiable long-lived assets, consisting predominately of property, plant and equipment, by geographic region are as follows: | |||||||||
(dollars in thousands) | |||||||||
Year Ended September 30, | |||||||||
2013 | 2012 | ||||||||
Americas | $170 | $178 | |||||||
EMEA Region | -- | 1 | |||||||
APAC Region. | -- | -- | |||||||
Total long-lived assets (net) | $170 | $179 | |||||||
Supplier Concentration | |||||||||
The Company procures substantially all its supply of carrying solutions products from independent suppliers in China through Forward China. Depending on the product, the Company may require several different suppliers to furnish component parts or pieces. The Company purchased approximately 92% and 90% of its OEM products from four such suppliers in Fiscal 2013 and 2012, respectively. The approximate percentages of purchases of OEM products from each of these four suppliers with respect to continuing operations for Fiscal 2013 and Fiscal 2012 are as follows: | |||||||||
Fiscal Year Ended | |||||||||
Supplier: | 2013 | 2012 | |||||||
OEM Supplier A | 50% | 54% | |||||||
OEM Supplier B | 19% | 17% | |||||||
OEM Supplier C | 14% | 9% | |||||||
OEM Supplier D | 9% | 10% | |||||||
Totals* | 92% | 90% | |||||||
Major Customers | |||||||||
The following customers or their affiliates or contract manufacturers accounted for more than ten percent of the Company’s net sales, by geographic region. | |||||||||
Fiscal Year Ended September 30, 2013 | |||||||||
Total | |||||||||
Americas | APAC Region | EMEA Region | Company | ||||||
Diabetic Customer A | -- | 70% | 1% | 24% | |||||
Diabetic Customer B | 21% | 3% | 15% | 13% | |||||
Diabetic Customer C | 24% | -- | 51% | 24% | |||||
Diabetic Customer D | 18% | 2% | 24% | 14% | |||||
Other Customer C | 18% | -- | 1% | 7% | |||||
Fiscal Year Ended September 30, 2012 | |||||||||
Total | |||||||||
Americas | APAC Region | EMEA Region | Company | ||||||
Diabetic Customer A | 2% | 82% | -- | 33% | |||||
Diabetic Customer B | 21% | 2% | 18% | 13% | |||||
Diabetic Customer C | 12% | -- | 46% | 16% | |||||
Diabetic Customer D | 9% | 1% | 19% | 8% | |||||
Other Customer C | 14% | -- | -- | 5% | |||||
Other Customer D | 11% | -- | -- | 4% | |||||
* Other Customer A B, and D represented less than ten percent of the Company’s net sales of any geographic region during the fiscal year ended September 30, 2013. Other Customer A and B represented less than ten percent of the Company’s net sales of any geographic region during the fiscal year ended September 30, 2012. | |||||||||
Four customers (including their affiliates or contract manufacturers) accounted for approximately 73% of the Company's accounts receivable at September 30, 2013. Three customers, including their affiliates or contract manufacturers, accounted for approximately 76% of the Company's accounts receivable at September 30, 2012. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Sep. 30, 2013 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | ' |
NOTE 17 SUBSEQUENT EVENTS | |
In connection with the Settlement Agreement executed on July 3, 2013 between the Company and G-Form, as described in Note 3 to our audited consolidated financial statements, G-Form is required to make a settlement payment to the Company in the approximate amount of $280,000. G-Form’s payment is overdue, and the Company has filed a demand for arbitration seeking enforcement of the terms of the Settlement Agreement. The Company expects payment to be made in its entirety and as such, no provision or allowance is reflected in the accompanying consolidated financial statements. |
ACCOUNTING_POLICIESPOLICIES
ACCOUNTING POLICIES.(POLICIES) | 12 Months Ended |
Sep. 30, 2013 | |
ACCOUNTING POLICIES.(POLICIES): | ' |
Accounting Estimates | ' |
Accounting Estimates | |
The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. | |
Basis of Presentation | ' |
Basis of Presentation | |
The accompanying consolidated financial statements include the accounts of Forward Industries, Inc. (“Forward”) and its wholly owned subsidiaries (Forward US, Forward Switzerland, Forward HK, and Forward UK). All significant intercompany transactions and balances have been eliminated in consolidation. | |
Reclassifications | ' |
Reclassifications | |
Certain prior period amounts have been reclassified to conform to the current period presentation. | |
Cash and Cash Equivalents | ' |
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. The Company may purchase these short-term bonds with anticipated maturity of 90 days or less at a premium or discount. The Company records these investments as cash and cash equivalents net of amortization of premium or discount. The Company minimizes its 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. The Company holds cash and cash equivalents at major financial institutions in the United States, at which cash amounts may significantly exceed the Federal Deposit Insurance Corporation’s insured limits. At September 30, 2013 and 2012, this amount was approximately $6.5 million (which includes $1.4 million in a foreign bank) and $4.4 million, respectively. Historically, the Company has not experienced any losses due to such cash concentrations. | |
Marketable Securities | ' |
Marketable Securities | |
At September 30, 2013, the Company has investments in marketable securities that are classified as trading and are recorded at fair value with the corresponding unrealized holding gains or losses recognized in earnings. The fair value of marketable securities is determined based on quoted market prices. The cost of marketable securities sold is determined by the specific identification method. At September 30, 2012, the Company classified its investments in marketable securities as “available-for-sale”. Securities that were classified as available-for-sale were recorded at fair value with the corresponding unrealized holding gains and losses, net of taxes, recorded as a separate component of “Accumulated Other Comprehensive Loss” within shareholders’ equity. The Company classifies its realized and unrealized gains and losses as non-operating income (expense) in its consolidated statements of operations and comprehensive loss. In addition, the Company classifies the cash flows from the trading of these marketable securities as investing activities in its consolidated statements of cash flows. | |
Accounts Receivables | ' |
Accounts Receivable | |
Accounts receivable consist of unsecured trade accounts with customers or their contract manufacturers. The Company performs periodic credit evaluations of its customers including an evaluation of days outstanding, payment history, recent payment trends, and perceived creditworthiness, 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. The Company has not historically experienced significant credit or collection problems with its OEM customers or their contract manufacturers. At September 30, 2013 and 2012, no allowance for doubtful accounts relating to the Company’s continuing operations was deemed necessary. | |
Inventories | ' |
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 and comprehensive loss. 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, 2013, no allowance for obsolete inventory of the Company’s continuing operations was deemed necessary. At September 30, 2012, the allowance for obsolete inventory of the Company’s continuing operations was approximately $99,000. | |
Property and Equipment | ' |
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, 2013 and 2012, the Company recorded approximately $75,000 and $103,000 of depreciation and amortization expense from continuing operations, respectively. | |
Income Taxes; | ' |
Income Taxes | |
The Company accounts for its 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 carry-forwards to the extent that realization of these benefits is more likely than not. The Company periodically evaluates the realizability of its net deferred tax assets. See Note 9 to these Notes to Consolidated Financial Statements. The Company’s policy is to account for interest and penalties relating to income taxes, if any, in “income tax expense” in its consolidated statements of operations and comprehensive loss and include accrued interest and penalties within the “accrued liabilities” in its consolidated balance sheets, if applicable. For fiscal years ended September 30, 2013 and 2012, no income tax related interest or penalties were assessed or recorded. | |
6% Senior Convertible Preferred Stock | ' |
6% Senior Convertible Preferred Stock | |
Temporary Equity | |
In accordance with Accounting Standards Codification (“ASC”) 480-10-s99 and Accounting Series Release (“ASR”) ASR 268, equity securities are required to be classified out of permanent equity and classified as temporary equity, as the redemption of the convertible preferred stock is not solely within the control of the Company since it is at the option of the holder. | |
Warrants | |
In accordance with ASC 815-40, the Company’s warrants have been classified as a liability, at fair value, as a result of a related registration rights agreement that contains certain requirements for registering the underlying common shares, but has no provision for penalties upon the failure to register. At each balance sheet date, this liability’s fair value will be re-measured and adjusted. The liability associated with the warrants is included in the “Accrued expenses and other current liabilities” line item of the consolidated balance sheet. | |
Preferred Stock Accretion | |
The carrying amount of the convertible preferred stock is less than the redemption value. As a result of the Company’s determination that redemption is probable, the carrying value will be increased by periodic accretions so that the carrying value will equal the redemption amount at the earliest redemption date. Such accretion is recorded as a preferred stock dividend. | |
Preferred Stock Beneficial Conversion Feature | |
On the date of issuance, the fair value, or carrying amount, of the securities could be converted into common stock at a discount to the market price of the underlying common stock at the conversion date. Such embedded “beneficial conversion feature”, which is equal to the difference between the accounting conversion price and the fair value of the common stock, is analogous to a dividend and has been recorded as a return to preferred stockholders as of the date of issuance, which is the earliest possible conversion date. | |
Revenue Recognition | ' |
Revenue Recognition | |
The Company generally recognizes revenue from product sales to its 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) the Company has no continuing obligations to the customer; and (4) collection of the related accounts receivable is reasonably assured. | |
Shipping and Handling Costs | ' |
Shipping and Handling Costs | |
The Company classifies shipping and handling costs, including inbound and outbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs and other costs associated with the Company’s Asia-based distribution capability, as a component of cost of goods sold in the accompanying consolidated statements of operations and comprehensive loss. | |
Foreign Currency Transactions | ' |
Foreign Currency Transactions | |
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 and comprehensive loss. The approximate net losses from foreign currency transactions for continuing operations was approximately $16,000 and $55,000 for the fiscal years ended September 30, 2013 and 2012, respectively. Such foreign currency transaction losses were primarily the result of Euro denominated sales to certain customers. | |
Accumulated Other Comprehensive Loss | ' |
Accumulated Other Comprehensive Loss | |
Accumulated other comprehensive loss, which is included as a component of shareholders’ equity, includes unrealized gains or losses on available-for-sale securities as of September 30, 2012 and currency translation adjustments related to the Company’s foreign subsidiaries. | |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments | |
For certain of the Company’s 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. The Company records its financial instruments that are accounted for under ASC 320, “Investments-Debt and Equity Securities” (“ASC 320”) at fair value. In addition, the Company records its warrant liability at fair value. The determination of fair value is based upon the fair value framework established by ASC 820 “Fair Value Measurement”. ASC 820 provides that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The fair value hierarchy is broken down into three levels based on the source of inputs as follows: (a) Level 1 – valuations based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; (b) Level 2 – valuations based on quoted prices in markets that are not active, or financial instruments for which all significant inputs are observable; either directly or indirectly; and (c) Level 3 – valuations based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable, thus, reflecting assumptions about the market participants. | |
Share-Based Payment Expense | ' |
Share-Based Payment Expense | |
The Company recognizes share-based compensation in its consolidated statements of operations and comprehensive loss 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 the Company’s share price, the exercise behavior of its grantees, interest rates, and dividend yields. These variables are projected based on the Company’s historical data, experience, and other factors. In the case of awards with multiple vesting periods, the Company has 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. Refer to Note 8 Share-Based Compensation. In addition, the Company recognizes share-based compensation to non-employees based upon the fair value, using the Black-Scholes option pricing model, determined at the deemed measurement dates over the related contract service period. | |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements | |
In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. ASU 2013-02 is effective for annual periods and interim periods within those periods beginning after December 15, 2012. ASU 2013-02 will be effective for the Company beginning in the first quarter of fiscal 2014 and is not expected to have a material impact on the Company’s consolidated financial statements. | |
In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (ASC Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The objective is to end some inconsistent practices with regard to the presentation on the balance sheet of unrecognized tax benefits. The update is effective for financial statement periods beginning after December 15, 2013, with early adoption permitted. The Company will adopt this standard beginning January 1, 2014. The Company does not expect these changes to have a material impact on its consolidated financial statements. |
Fair_value_of_Marketable_Secur
Fair value of Marketable Securities (Tables) | 12 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
Fair value of Marketable Securities: | ' | |||||||
Fair value of Marketable Securities | ' | |||||||
The Company’s marketable securities are summarized in the table below: | ||||||||
September 30, | September 30, | |||||||
2013 | 2012 | |||||||
Trading: | ||||||||
Cost | $954,053 | $-- | ||||||
Unrealized Gains | 174,940 | -- | ||||||
Unrealized Losses | -48,246 | -- | ||||||
Total Fair Value | $1,080,747 | $-- | ||||||
Available-for-sale: | ||||||||
Cost | $-- | $444,349 | ||||||
Unrealized Gains | -- | 4,764 | ||||||
Unrealized Losses | -- | -28,508 | ||||||
Total Fair Value | $-- | $420,605 | ||||||
Company's fair value hierarchy for assets | ' | |||||||
The following table presents the Company’s fair value hierarchy for assets, consisting of marketable securities, measured at fair value on a recurring basis at September 30, 2013 and 2012: | ||||||||
Level 1 | Level 2 | Level 3 | Total | |||||
Equity securities. | $1,080,747 | $ -- | $-- | $1,080,747 | ||||
Total assets at fair value at September 30, 2013 | $1,080,747 | $-- | $-- | $1,080,747 | ||||
Equity securities | $420,605 | $ -- | $-- | $420,605 | ||||
Total assets at fair value at September 30, 2012 | $420,605 | $-- | ||||||
$-- | $420,605 | |||||||
Summary_of_Discontinued_Operat
Summary of Discontinued Operations and Disposal Groups (Table) | 12 Months Ended | |||
Sep. 30, 2013 | ||||
Summary of Discontinued Operations and Disposal Groups (Table): | ' | |||
Summary of Discontinued Operations and Disposal Groups (Table) | ' | |||
Summarized operating results of discontinued operations are presented in the following table: | ||||
Fiscal Year Ended September 30, | ||||
2013 | 2012 | |||
Net sales | $655,658 | $2,199,008 | ||
Gross profit (loss) | 181,039 | -1,896,864 | ||
Operating expenses | -406,297 | -4,356,402 | ||
Other income (expense) | 6,934 | -67,702 | ||
Loss from discontinued operations, net of tax benefit of $(6,002) and $0, respectively | ($212,321) | ($6,320,968) | ||
Summarized assets and liabilities of discontinued operations are presented in the following table: | ||||
September 30, | September 30, | |||
2013 | 2012 | |||
Accounts receivable, net | $280,034 | $26,186 | ||
Inventory, net | -- | 350,942 | ||
Prepaid assets and other current assets | 59,348 | 244,751 | ||
Total assets of discontinued operations | $339,382 | $621,879 | ||
Accounts payable | $25,438 | $45,874 | ||
Accrued liabilities | -- | 215,932 | ||
Total liabilities of discontinued operations | $25,438 | $261,806 |
Schedule_of_Property_and_Equip
Schedule of Property and Equipment (Tables) | 12 Months Ended | ||||
Sep. 30, 2013 | |||||
Schedule of Property and Equipment: | ' | ||||
Schedule of Property and Equipment | ' | ||||
Property and equipment and related accumulated depreciation and amortization of continuing operations are summarized in the table below: | |||||
September 30, | |||||
2013 | 2012 | ||||
Furniture, fixtures and equipment | $404,871 | $397,049 | |||
Leasehold improvements | 97,618 | 57,833 | |||
Property and equipment, cost | 502,489 | 454,882 | |||
Less accumulated depreciation and amortization | -372,502 | -316,108 | |||
Property and equipment, net.. | $129,987 | $138,774 |
Schedule_of_Accrued_Liabilitie
Schedule of Accrued Liabilities (Tables) | 12 Months Ended | ||||
Sep. 30, 2013 | |||||
Schedule of Accrued Liabilities: | ' | ||||
Schedule of Accrued Liabilities | ' | ||||
Accrued expenses and other current liabilities of continuing operations are summarized in the table below: | |||||
September 30, | |||||
2013 | 2012 | ||||
Warrants, net of unamortized transaction costs of $29,452 | $463,671 | $ -- | |||
Personnel costs. | 372,766 | 507,269 | |||
Taxes | 44,128 | 47,256 | |||
Professional fees | 11,000 | 297,060 | |||
Due to customers | -- | 581,343 | |||
Other | 378,892 | 292,257 | |||
Accrued expenses and other current liabilities | $1,270,457 | $1,725,185 |
Summary_Of_Warrant_Activities_
Summary Of Warrant Activities (Tables) | 12 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Summary Of Warrant Activities: | ' | ||||||||
Schedule of Derivative Financial Instruments Indexed to, and Potentially Settled in, Entity's Own Stock, Equity | ' | ||||||||
The fair value of the Warrants was determined using a Black-Scholes closed-form call option pricing model, which is considered a level 3 instrument under the fair value hierarchy. The fair value of the Warrants were estimated using the following assumptions as of September 30, 2013: | |||||||||
Risk-free interest rate | 2.60% | ||||||||
Dividend yield | -- | ||||||||
Volatility | 30.00% | ||||||||
Expected term (in years) | 10.3 | ||||||||
The change in the fair value of the convertible preferred stock warrant liability for the year ended September 30, 2013 is summarized below: | |||||||||
Opening balance | $0 | ||||||||
Issuance of convertible preferred stock warrant | 542,741 | ||||||||
Decrease in fair value | -49,618 | ||||||||
Closing balance | $493,123 | ||||||||
Schedule of Stockholders' Equity Note, Warrants or Rights | ' | ||||||||
The following table presents the Company’s fair value hierarchy for liabilities, consisting of a warrant liability, measured at fair value and prior to issuance costs, on a recurring basis at September 30, 2013: | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Warrant liability | $-- | $-- | $493,123 | $493,123 |
Stock_option_activity_Tables
Stock option activity (Tables) | 12 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
Stock option activity: | ' | |||||||
Schedule of Share-based Compensation, Stock Options and Stock Appreciation Rights Award Activity | ' | |||||||
The following table summarizes stock option activity under the 2011 Plan and 2007 Plan from September 30, 2012 through September 30, 2013 (there was no activity during such period in respect of 1996 Plan grants): | ||||||||
Shares | Weighted AverageExercise Price | Weighted AverageRemaining Contractual Term (Years) | ||||||
Aggregate Intrinsic Value | ||||||||
Outstanding at September 30, 2012 | 1,142,000 | $3.31 | 4.7 | |||||
Granted | 120,000 | 1.14 | 9 | |||||
Exercised | -- | -- | -- | |||||
Forfeited | -365,000 | 3.43 | -- | |||||
Expired | -- | -- | -- | |||||
Outstanding at September 30, 2013 | 897,000 | $2.98 | 6.1 | $ -- | ||||
Options expected to vest at September 30, 2013 | 372,351 | $2.88 | 8.2 | $ -- | ||||
Options vested and exercisable at September 30, 2013 | 482,166 | $3.03 | 4.5 | $ -- | ||||
Schedule of Share-based Compensation, Stock Options, Activity | ' | |||||||
The table below provides additional information regarding stock option awards that were outstanding and exercisable at September 30, 2013: | ||||||||
Stock Options Outstanding and Exercisable | ||||||||
Range of Exercise Prices | Outstanding at September 30, 2013 | Weighted | Weighted Average Exercise Price | |||||
AverageRemaining Contractual Term (Years) | ||||||||
$1.80 | 20,000 | 5.4 | $1.80 | |||||
$2.02 to $2.85 | 272,500 | 3.1 | $2.21 | |||||
$3.00 to $3.79 | 159,666 | 7.8 | $3.43 | |||||
$6.02 | 20,000 | 3.6 | $6.02 | |||||
$15.91 | 10,000 | 2.6 | $15.91 | |||||
482,166 | 4.5 | $3.03 | ||||||
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | ' | |||||||
The fair value of each stock option on the date of grant was estimated using a Black-Scholes option-pricing formula applying the following assumptions for each respective period: | ||||||||
For the Fiscal Years Ended September 30, | ||||||||
2013 | 2012 | |||||||
Expected term (in years) | 5 | 3.0 to 5.0 | ||||||
Risk-free interest rate | 0.06% to 0.7% | 0.04% to 0.83% | ||||||
Expected volatility | 70% to 70.4% | 63% to 69% | ||||||
Expected dividend yield | 0% | 0% | ||||||
Estimated Annual Forfeiture rate | 5% | 13% | ||||||
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | ' | |||||||
The following table summarizes restricted stock activity under the 2011 Plan and 2007 Plan during the fiscal year ended September 30, 2013. | ||||||||
WeightedAverage Grant DateFair Value | ||||||||
Shares | ||||||||
Non-Vested balance at September 30, 2012 | 7,500 | $2.02 | ||||||
Changes during the period | ||||||||
Shares granted | 371,375 | 1.16 | ||||||
Shares forfeited | -- | -- | ||||||
Shares vested | -7,500 | 2.02 | ||||||
Non-Vested balance at September 30, 2013 | 371,375 | $1.16 |
Components_of_Income_Taxes_Tab
Components of Income Taxes (Tables) | 12 Months Ended | ||||
Sep. 30, 2013 | |||||
Components of Income Taxes: | ' | ||||
Schedule of Components of Income Tax Expense (Benefit) | ' | ||||
The Company’s provision (benefit) for income taxes consists of the following United States Federal and State, and foreign components: | |||||
For the Fiscal Years EndedSeptember 30, | |||||
2013 | 2012 | ||||
Current: | |||||
Federal | $-- | $-- | |||
State | 75 | 15,110 | |||
Foreign | -5,570 | -- | |||
Deferred: | |||||
Federal | 89,832 | -1,996,931 | |||
State | -107,296 | -114,149 | |||
Foreign | -5,598 | -326,047 | |||
Change in valuation allowance | 23,062 | 2,437,127 | |||
Income taxe (benefit) expense | ($5,495) | $15,110 | |||
Schedule of Deferred Tax Assets and Liabilities | ' | ||||
The Company’s deferred tax assets and liabilities are comprised of the following: | |||||
As of September 30, | |||||
2013 | 2012 | ||||
Deferred tax assets: | |||||
Net operating losses | $3,213,001 | $3,485,217 | |||
Realized loss on investments in marketable securities | 304,586 | -- | |||
Share-based compensation | 303,164 | 195,315 | |||
Alternative minimum tax credit | 99,757 | 99,757 | |||
Excess tax over book basis in inventory | 87,381 | 132,525 | |||
Reserve for obsolete inventory | -- | 73,798 | |||
Allowance for accounts receivable | 2,369 | 20,237 | |||
4,010,258 | 4,006,849 | ||||
Valuation allowance | -3,840,958 | -3,817,896 | |||
Net deferred tax assets | 169,300 | 188,953 | |||
Deferred tax liabilities: | |||||
Prepaid insurance | -92,602 | -142,756 | |||
Unrealized gains on investments in marketable securities | -44,950 | -- | |||
Depreciation | -31,748 | -46,197 | |||
-169,300 | -188,953 | ||||
Total | $ -- | $ -- | |||
Schedule of Effective Income Tax Rate Reconciliation | ' | ||||
The significant elements contributing to the difference between the United States Federal statutory tax rate and the Company’s effective tax rate are as follows: | |||||
For the Fiscal Years Ended September 30, | |||||
2013 | 2012 | ||||
Statutory U.S. Federal income tax rate | 34.00% | 34.00% | |||
State taxes, net of Federal benefit | 1.90% | 2.00% | |||
Permanent differences arising from incentive stock options.. | (20.0%) | -- | |||
Other permanent differences | -2.80% | -0.10% | |||
Foreign tax rate differential | -5.60% | -17.10% | |||
Valuation allowance | -8.10% | -19.30% | |||
Other | -2.00% | -- | |||
Effective tax rate | (2.6%) | (0.5%) |
Calculation_of_basic_and_dilut
Calculation of basic and diluted loss per share (Tables) | 12 Months Ended | |||
Sep. 30, 2013 | ||||
Calculation of basic and diluted loss per share: | ' | |||
Calculation of basic and diluted loss per share | ' | |||
The calculation of basic and diluted loss per share for the years ended September 30, 2013 and 2012 was as follows: | ||||
2013 | 2012 | |||
Numerator: | ||||
Net loss | ($206,886) | ($9,634,056) | ||
Preferred stock dividend | -546,888 | -- | ||
Net loss to common shareholders | ($753,774) | ($9,634,056) | ||
Denominator: | ||||
Weighted average basic common shares | 8,111,226 | 8,101,661 | ||
Effect of dilutive securities (1) | -- | -- | ||
Weighted average diluted common shares | 8,111,226 | 8,101,661 | ||
Basic loss per share | ($0.09) | ($1.19) | ||
Diluted loss per share (1) | ($0.09) | ($1.19) |
Schedule_of_Future_Minimum_Ren
Schedule of Future Minimum Rental Payments (Tables) | 12 Months Ended | ||
Sep. 30, 2013 | |||
Schedule of Future Minimum Rental Payments: | ' | ||
Schedule of Future Minimum Rental Payments | ' | ||
The following table summarizes the future minimum lease payments required under these leases (exclusive of future minimum sublease rental receipts in the aggregate of approximately $556,000 due under non-cancelable subleases). | |||
Fiscal Year Ended September 30, | Amount | ||
2014 | $261,000 | ||
2015 | 259,000 | ||
2016 | 267,000 | ||
2017 | 85,000 | ||
2018 | 87,000 | ||
Thereafter | 183,000 | ||
Total lease commitments | $1,142,000 |
Geographical_Segment_Reporting
Geographical Segment Reporting (Tables) | 12 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Geographical Segment Reporting: | ' | ||||||||
Schedule of Segment Reporting Information, by Segment | ' | ||||||||
The following table presents net sales by geographic region. | |||||||||
(dollars in thousands) | |||||||||
Year Ended September 30, | |||||||||
2013 | 2012 | ||||||||
Americas: | |||||||||
United States | $9,424 | $8,843 | |||||||
Other | 1,538 | 1,483 | |||||||
Total Americas | 10,962 | 10,326 | |||||||
APAC Region: | |||||||||
Hong Kong | 7,491 | 9,510 | |||||||
Other | 3,273 | 2,055 | |||||||
Total APAC | 10,764 | 11,565 | |||||||
EMEA Region: | |||||||||
Germany. | 5,097 | 4,071 | |||||||
Poland. | 3,525 | 2,596 | |||||||
Other | 563 | 845 | |||||||
Total Europe | 9,185 | 7,512 | |||||||
Total net sales | $30,911 | $29,403 | |||||||
Schedule of Assets | ' | ||||||||
Identifiable long-lived assets, consisting predominately of property, plant and equipment, by geographic region are as follows: | |||||||||
(dollars in thousands) | |||||||||
Year Ended September 30, | |||||||||
2013 | 2012 | ||||||||
Americas | $170 | $178 | |||||||
EMEA Region | -- | 1 | |||||||
APAC Region. | -- | -- | |||||||
Total long-lived assets (net) | $170 | $179 | |||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated | ' | ||||||||
The approximate percentages of purchases of OEM products from each of these four suppliers with respect to continuing operations for Fiscal 2013 and Fiscal 2012 are as follows: | |||||||||
Fiscal Year Ended | |||||||||
Supplier: | 2013 | 2012 | |||||||
OEM Supplier A | 50% | 54% | |||||||
OEM Supplier B | 19% | 17% | |||||||
OEM Supplier C | 14% | 9% | |||||||
OEM Supplier D | 9% | 10% | |||||||
Totals* | 92% | 90% | |||||||
Schedule of Major Customers | ' | ||||||||
The following customers or their affiliates or contract manufacturers accounted for more than ten percent of the Company’s net sales, by geographic region. | |||||||||
Fiscal Year Ended September 30, 2013 | |||||||||
Total | |||||||||
Americas | APAC Region | EMEA Region | Company | ||||||
Diabetic Customer A | -- | 70% | 1% | 24% | |||||
Diabetic Customer B | 21% | 3% | 15% | 13% | |||||
Diabetic Customer C | 24% | -- | 51% | 24% | |||||
Diabetic Customer D | 18% | 2% | 24% | 14% | |||||
Other Customer C | 18% | -- | 1% | 7% | |||||
Fiscal Year Ended September 30, 2012 | |||||||||
Total | |||||||||
Americas | APAC Region | EMEA Region | Company | ||||||
Diabetic Customer A | 2% | 82% | -- | 33% | |||||
Diabetic Customer B | 21% | 2% | 18% | 13% | |||||
Diabetic Customer C | 12% | -- | 46% | 16% | |||||
Diabetic Customer D | 9% | 1% | 19% | 8% | |||||
Other Customer C | 14% | -- | -- | 5% | |||||
Other Customer D | 11% | -- | -- | 4% |
Accounting_Policies_Details
Accounting Policies. (Details) (USD $) | Sep. 30, 2013 | Sep. 30, 2012 |
Accounting Policies Details | ' | ' |
Cash holdings in excess of Fdic limit in millions | 6.5 | 4.4 |
Term of Short Term Bonds maturity in days | 90 | ' |
Allowance for doubtful accounts with respect to continuing operations | $22,000 | ' |
Allowance for obsolete inventory of the Company's continuing operations | ' | $99,000 |
Minimum estimated useful life for furniture, fixtures and equipment | 3 | ' |
Maximum estimated useful life for furniture, fixtures and equipment | 10 | ' |
Accounting_Policies_2_Details
Accounting Policies 2 (Details) (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Accounting Policies 2 Details | ' | ' |
Depreciation and amortization expense from continuing operations on property and equipment | $75,000 | $103,000 |
Approximate net losses from foreign currency transactions for continuing operations | $16,000 | $55,000 |
Summary_of_operating_results_o
Summary of operating results of discontinued operations (Details) (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Summary of operating results of discontinued operations | ' | ' |
Net sales.................................................... | $655,658 | $2,199,008 |
Gross profit (loss) .................................... | 181,039 | -1,896,864 |
Operating expenses................................. | -406,297 | -4,356,402 |
Other income (expense).......................... | 6,934 | -67,702 |
Loss from discontinued operations, net of tax expense (benefit) of $(6,002) and $ 0, respectively..................... | ($212,321) | ($6,320,968) |
Summary_of_operating_results_o1
Summary of operating results of discontinued operations parentheticals (Details) (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Summary of operating results of discontinued operations parentheticals | ' | ' |
Tax effect on Loss from discontinued operations | ($6,002) | $0 |
Summarized_assets_and_liabilit
Summarized assets and liabilities of discontinued operations (Details) (USD $) | Sep. 30, 2013 | Jul. 03, 2013 | Sep. 30, 2012 |
Summarized assets and liabilities of discontinued operations | ' | ' | ' |
Accounts receivable, net, | $280,034 | ' | $26,186 |
Inventories, net, | 0 | ' | 350,942 |
Prepaid assets and other current assets , | 59,348 | ' | 244,751 |
Total assets of discontinued operations , | 339,382 | ' | 621,879 |
Accounts payable, | 25,438 | ' | 45,874 |
Accrued liabilities. , | 0 | ' | 215,932 |
Total liabilities of discontinued operations, | 25,438 | ' | 261,806 |
Assets Of Disposal Group expected payments pursuant to a Settlement Agreement and General Release | 280,000 | ' | ' |
G Form paid amount pursuant to Settlement Agreement and General Release | ' | $31,000 | ' |
Marketable_securities_classifi
Marketable securities classification (Details) (USD $) | Sep. 30, 2013 | Sep. 30, 2012 |
Trading: | ' | ' |
Cost | $954,053 | $0 |
Unrealized Gains | 174,940 | 0 |
Unrealized Losses | -48,246 | 0 |
Total Fair Value | 1,080,747 | 0 |
Available-for-sale: | ' | ' |
Cost, | 0 | 444,349 |
Unrealized Losses, | 0 | -28,508 |
Total Fair Value, | $0 | $420,605 |
Fair_value_hierarchy_for_asset
Fair value hierarchy for assets (Details) (USD $) | Sep. 30, 2013 | Sep. 30, 2012 |
Equity securities at September 30, 2013. | $1,080,747 | ' |
Equity securities at September 30, 2013. | 1,080,747 | ' |
Total assets at fair value at September 30, 2013. | 1,080,747 | ' |
Equity securities at September 30, 2012 | ' | 420,605 |
Total assets at fair value at September 30, 2012 | ' | 420,605 |
Level 1 | ' | ' |
Equity securities at September 30, 2013. | 1,080,747 | ' |
Equity securities at September 30, 2013. | 1,080,747 | ' |
Total assets at fair value at September 30, 2013. | 1,080,747 | ' |
Equity securities at September 30, 2012 | ' | 420,605 |
Total assets at fair value at September 30, 2012 | ' | 420,605 |
Level 2 | ' | ' |
Equity securities at September 30, 2013. | 0 | ' |
Equity securities at September 30, 2013. | 0 | ' |
Total assets at fair value at September 30, 2013. | 0 | ' |
Equity securities at September 30, 2012 | ' | 0 |
Total assets at fair value at September 30, 2012 | ' | 0 |
Level 3 | ' | ' |
Equity securities at September 30, 2013. | 0 | ' |
Equity securities at September 30, 2013. | 0 | ' |
Total assets at fair value at September 30, 2013. | 0 | ' |
Equity securities at September 30, 2012 | ' | 0 |
Total assets at fair value at September 30, 2012 | ' | $0 |
Effect_of_marketable_securitie
Effect of marketable securities reclassification (Details) (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Effect of marketable securities reclassification | ' | ' |
Gross loss on marketable securities | $0 | ($28,508) |
Realized Net loss on marketable securities | 3,146,000 | 0 |
Gross gain on marketable securities | 0 | 4,764 |
Realized Net gain on marketable securities | ($3,868,000) | $0 |
Summary_of_Property_and_equipm
Summary of Property and equipment (Details) (USD $) | Sep. 30, 2013 | Sep. 30, 2012 |
Summary of Property and equipment | ' | ' |
Furniture, fixtures and equipment | $404,871 | $397,049 |
Leasehold improvements | 97,618 | 57,833 |
Property and equipment, cost | 502,489 | 454,882 |
Less accumulated depreciation and amortization | -372,502 | -316,108 |
Property and equipment, net.. | $129,987 | $138,774 |
Summary_of_Accrued_expenses_an
Summary of Accrued expenses and other current liabilities (Details) (USD $) | Sep. 30, 2013 | Sep. 30, 2012 |
Summary of Accrued expenses and other current liabilities | ' | ' |
Warrants, net of unamortized transaction costs of $29,452 | $463,671 | $0 |
Personnel costs. | 372,766 | 507,269 |
Taxes | 44,128 | 47,256 |
Professional fees | 11,000 | 297,060 |
Due to customers | 0 | 581,343 |
Other current liabilities | 378,892 | 292,257 |
Accrued expenses and other current liabilities | $1,270,457 | $1,725,185 |
6_Senior_Convertible_Preferred
6% Senior Convertible Preferred Stock with Warrants (Details) (USD $) | Sep. 30, 2013 | Aug. 14, 2013 | Aug. 07, 2013 | Jun. 28, 2013 |
6% Senior Convertible Preferred Stock with Warrants | ' | ' | ' | ' |
Sale of shares of newly authorized 6% Senior Convertible Preferred Stock | 648,846 | ' | ' | 381,674 |
Per share value of 6% Senior Convertible Preferred Stock | ' | ' | ' | $0.01 |
Issue of warrants to purchase a total of shares of the Company's common stock | 648,846 | ' | ' | 381,674 |
The total purchase price paid by Investors for each share of Convertible Preferred Stock and Warrant purchased | ' | ' | ' | $1.97 |
Fair value of each share in respect of the Convertible Preferred Stock | ' | ' | ' | $1.15 |
Fair value of each share in respect of the Warrant | ' | ' | ' | $0.82 |
Warrants initial exercise price per share | ' | ' | ' | $1.84 |
Each share of Convertible Preferred Stock is convertible into shares of Common Stock at an initial conversion price per share | ' | ' | ' | $1.84 |
Gross proceeds of the Private Placement | 1,275,000 | ' | ' | ' |
Sale of additional shares of of its Convertible Preferred Stock | ' | 50,890 | 216,282 | ' |
Issue of warrants to purchase a total of additional shares of the Company's common stock | ' | 50,890 | 216,282 | ' |
Net of issuance costs of private placement | ' | ' | ' | 69,000 |
Proceeds allocated to the Convertible Preferred Stock based upon their fair values | ' | ' | ' | 693,000 |
Proceeds allocated to the the Warrants based upon their fair values | ' | ' | ' | 513,000 |
Shares of Convertible Preferred Stock issued in the Private Placement as of the date of the Closing are convertible into an aggregate of shares of Common Stock | 692,919 | ' | ' | ' |
Carrying value of the Convertible Preferred Stock reflecting as temporary equity | 717,000 | ' | ' | ' |
Company recorded a preferred stock dividend in the amount | 24,000 | ' | ' | ' |
Preferred Stock containing a beneficial conversion feature | 508,000 | ' | ' | ' |
Dividends on the Convertible Preferred Stock payable, on a cumulative basis, in cash, at the rate per annum of the Liquidation Preference | ' | ' | ' | 6.00% |
Dividends on the Convertible Preferred Stock totaled approximately | 15,000 | ' | ' | ' |
In addition to the accretion and beneficial conversion feature, total of Convertible Preferred Stock | 546,888 | ' | ' | ' |
Liability associated with the Warrants included in the "Accrued expenses and other current liabilities" | $464,000 | ' | ' | ' |
BlackScholes_closedform_call_o
Black-Scholes closed-form call option pricing model assumptions (Details) | Sep. 30, 2013 |
Black-Scholes closed-form call option pricing model assumptions | ' |
Risk-free interest rate | 2.60% |
Dividend yield | 0.00% |
Volatility | 30.00% |
Expected term (in years) | 10.3 |
Change_in_the_fair_value_of_th
Change in the fair value of the convertible preferred stock warrant liability (details) (USD $) | 12 Months Ended |
Sep. 30, 2013 | |
Change in the fair value of the convertible preferred stock warrant liability | ' |
Opening balance | $0 |
Issuance of convertible preferred stock warrant | 542,741 |
Decrease in fair value | -49,618 |
Closing balance | $493,123 |
Companys_fair_value_hierarchy_
Company's fair value hierarchy for liabilties (details) (Warranty liability, USD $) | Sep. 30, 2013 |
Warranty liability | ' |
Level 1 warrant liability | $0 |
Level 1 warrant liability | 0 |
Level 2 warrant liability | 0 |
Level 3 warrant liability | 493,123 |
Total warrant liability | $493,123 |
Stock_repurchase_Details
Stock repurchase (Details) (USD $) | Sep. 30, 2013 |
Stock repurchase | ' |
Authorized shares of "blank check" preferred stock | 4,000,000 |
Authorized shares of 6% Senior Convertible Preferred Stock | 1,500,000 |
Authorized shares of Series A Participating Preferred Stock | 100,000 |
Company had repurchased an aggregate of shares | 172,603 |
Company had repurchased an aggregate value of shares | $403,000 |
Board authorized the repurchase of up to an aggregate of shares of outstanding common stock | 486,200 |
2011_Long_Term_Incentive_Plan_
2011 Long Term Incentive Plan (Details) | Sep. 30, 2013 |
2011 Long Term Incentive Plan | ' |
Authorized shares of common stock for grants of various types of equity awards to officers, directors, employees, consultants, and independent contractors | 850,000 |
Compensation Committee approved awards of stock options to purchase shares of common stock to certain of the Company's executive officers and employees | 1,020,000 |
Company's Board of Directors (the "Compensation Committee") has approved awards of restricted common stock and stock options of shares of common stock | 1,315,000 |
Compensation Committee approved awards of stock options to purchase shares of common stock to a consultant | 160,000 |
Compensation Committee approved awards of stock options to purchase shares of common stock to non-employee directors | 130,000 |
Compensation Committee approved awards of stock options to purchase shares of common stock to to a non-employee executive officer | 5,000 |
Number of shares were forfeited and reverted to, and are eligible for re-grant | 530,500 |
The total shares of common stock available for grants of equity awards under the 2011 Plan | 65,500 |
Expiry period of options in years | 10 |
Expiry period of options in years for Options granted under a consulting agreement | 3 |
2007_Equity_Incentive_Plan_Det
2007 Equity Incentive Plan (Details) | Sep. 30, 2013 |
2007 Equity Incentive Plan | ' |
Authorized shares of common stock for grants of restricted common stock and stock options to officers, employees, and non-employee directors of the Company | 800,000 |
Compensation Committee approved awards of restricted common stock and stock options | 977,375 |
Number of shares were forfeited and reverted to, and are eligible for re-grant under, the 2007 Plan | 278,366 |
The total shares of common stock available for grants of equity awards under the 2007 Plan | 100,991 |
Expiry period of options in years under the 2007 Plan | 10 |
1996_Stock_Incentive_Plan_Deta
1996 Stock Incentive Plan (Details) | Sep. 30, 2013 |
1996 Stock Incentive Plan | ' |
Fully vested common stock options outstanding and unexercised under the plan | 30,000 |
Stock_Option_Awards_Details
Stock Option Awards (Details) (USD $) | Sep. 30, 2013 |
Stock Option Awards | ' |
Compensation Committee has approved awards of stock options to purchase Under the 2011 and 2007 Plans | 1,737,500 |
Awards covering shares from the 2007 Plan of common stock were forfeited | 278,366 |
Awards covering shares from the 2011 Plan of common stock were forfeited | 530,500 |
Total unrecognized compensation cost related to unvested stock option awards granted under the 2007 and 2011 Plans expected to be recognized | $144,000 |
Number of shares related to unvested stock option awards granted under the 2007 and 2011 Plans expected to be recognized | 414,834 |
Recognized_compensation_cost_D
Recognized compensation cost (Details) (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Recognized compensation cost | ' | ' |
Company recognized approximately an expense of compensation in continuing operations for stock option awards | $220,000 | $225,000 |
Recovery of compensation in discontinued operations for stock option awards | ' | ($49,000) |
Stock options granted during the period by the Company | 120,000 | 420,000 |
weighted average grant date fair value of options | $0.61 | $0.96 |
Summary_of_stock_option_activi
Summary of stock option activity under 2011 Plan and 2007 Plan (Details) | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value |
Outstanding at Sep. 30, 2012 | 1,142,000 | 3.31 | 4.7 | 0 |
Granted | 120,000 | 1.14 | 9 | 0 |
Exercised | 0 | 0 | 0 | 0 |
Forfeited | -365,000 | 3.43 | 0 | 0 |
Expired | 0 | 0 | 0 | 0 |
Options vested and exercisable at Sep. 30, 2013 | 482,166 | 3.03 | 4.5 | 0 |
Options expected to vest at Sep. 30, 2013 | 375,151 | 2.88 | 8.2 | 0 |
Outstanding , at Sep. 30, 2013 | 897,000 | 2.98 | 6.1 | 0 |
The_fair_value_of_stock_option
The fair value of stock options estimated assumptions (Details) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
The fair value of stock options estimated assumptions | ' | ' |
Expected term (in years) minimum | 5 | 3 |
Expected term (in years) maximum | 5 | 5 |
Risk-free interest rate. Minimum | 0.06% | 0.04% |
Risk-free interest rate. Maximum | 0.70% | 0.83% |
Expected volatility. Minimum | 70.00% | 63.00% |
Expected volatility. Maximum | 70.40% | 69.00% |
Expected dividend yield. | 0.00% | 0.00% |
Forfeiture rate. | 5.00% | 13.00% |
Summary_of_stock_option_awards
Summary of stock option awards outstanding and exercisable (Details) | Outstanding Options | Weighted Average Remaining Contractual Term (Years), | Weighted Average Exercise Price, |
Total of options at Sep. 30, 2012 | 0 | ' | ' |
Range of Exercise Prices $1.80 | 20,000 | 5.4 | 1.8 |
Range of Exercise Prices $2.02 to $2.85 | 272,500 | 3.1 | 2.21 |
Range of Exercise Prices $3.00 to $3.79 | 159,666 | 7.8 | 3.43 |
Range of Exercise Prices $6.02 | 20,000 | 3.6 | 6.02 |
Range of Exercise Prices $15.91 | 10,000 | 2.6 | 15.91 |
Total of options, at Sep. 30, 2013 | 482,166 | 4.5 | 3.03 |
Restricted_Stock_Awards_Detail
Restricted Stock Awards (Details) (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Restricted Stock Awards | ' | ' |
Under the 2011 Plan and 2007 Plan, the Compensation Committee has approved and granted awards of shares of restricted stock, in the aggregate, to certain key employees. | 554,875 | ' |
Vested awards of stock options | 160,134 | ' |
Restricted stock forfeited and reverted and are eligible for regrant under 2007 plan | 23,366 | ' |
Compensation expense recognized in continuing operations | $217,000 | ' |
Unrecognized compnesation expneses related to unvested restriceted stock awards under 2011 and 2007 plans | 171,000 | ' |
Total grant date fair value of restricted stock vested | $15,000 | $35,000 |
Warrants issued at an exercise price of $1.75 per share were outstanding | 75,000 | ' |
Expiration of warrants number of days | 90 | ' |
Restricted_stock_activity_unde
Restricted stock activity under the 2011 Plan and 2007 (Details) | Shares. | Weighted Average Grant Date Fair Value |
Non-vested balance at Sep. 30, 2012 | 7,500 | 2.02 |
Shares granted | 371,375 | 1.16 |
Shares vested | -7,500 | 2.02 |
Shares forfeited | 0 | 0 |
Non-vested balance, at Sep. 30, 2013 | 371,375 | 1.16 |
Companys_provision_benefit_for
Company's provision (benefit) for income taxes consists of the following (Details) (USD $) | 12 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2011 | |
Current: | ' | ' | ' |
Federal | $0 | $0 | ' |
State | 75 | 15,110 | ' |
Foreign | -5,570 | 0 | ' |
Deferred: | ' | ' | ' |
Federal. | 89,832 | -1,996,931 | ' |
State. | -107,296 | -114,149 | ' |
Foreign. | -5,598 | -326,047 | ' |
Change in valuation allowance. | 23,062 | 2,437,127 | ' |
Income tax (benefit) expense..... | -5,495 | 15,110 | 15,000 |
Income tax benefit from discontinued operations attributable to Forward UK. | ($6,000) | ' | ' |
Deferred_tax_assets_and_Liabil
Deferred tax assets and Liabilities (Details) (USD $) | Sep. 30, 2013 | Sep. 30, 2012 |
Deferred tax assets and Liabilities | ' | ' |
Unrecognized income tax benefits | $0 | $0 |
Available total net operating loss carryforwards for U.S. Federal and state income tax | 7,597,000 | 6,714,000 |
Deferred tax assets in respect of U.S. Federal and state income taxes | 2,454,000 | 325,000 |
Company had total available net operating loss carryforwards for foreign income tax purposes | 4,929,000 | 0 |
Deferred tax assets in respect of for foreign income tax purposes | 434,000 | 0 |
Deferred tax assets in total | 3,841,000 | 3,818,000 |
valuation allowances ; | 3,841,000 | 3,818,000 |
Deferred tax assets net | 0 | 0 |
Accrued interest and penalties related to uncertain tax positions | $0 | $0 |
Deferred_tax_expense_benefit_D
Deferred tax expense (benefit) (Details) (USD $) | Sep. 30, 2013 | Sep. 30, 2012 |
Deferred tax assets: | ' | ' |
Net operating losses; | $3,213,001 | $3,485,217 |
Realized loss on investments in marketable securities | 304,586 | 0 |
Share-based compensation; | 303,164 | 195,315 |
Alternative minimum tax credit | 99,757 | 99,757 |
Excess tax over book basis in inventory | 87,381 | 132,525 |
Reserve for obsolete inventory | 0 | 73,798 |
Allowance for accounts receivable | 2,369 | 20,237 |
Gross deferred tax assets | 4,010,258 | 4,006,849 |
Valuation allowance; | -3,840,958 | -3,817,896 |
Net deferred tax assets | 169,300 | 188,953 |
Deferred tax liabilities: | ' | ' |
Prepaid insurance; | -92,602 | -142,756 |
Unrealized gains on investments in marketable securities | -44,950 | 0 |
Depreciation; | -31,748 | -46,197 |
Net deferred tax liabilities | -169,300 | -188,953 |
Total; | $0 | $0 |
Dilutive_commonequivalent_shar
Dilutive common-equivalent shares (Details) (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Dilutive common-equivalent shares | ' | ' |
Anti Dilutive common-equivalent shares | 1,992,221 | 1,224,500 |
Numerator: | ' | ' |
Net loss' | ($206,886) | ($9,634,056) |
Preferred stock dividend, | -546,888 | 0 |
Net loss to common shareholders, | -753,774 | -9,634,056 |
Denominator: | ' | ' |
Weighted average basic common shares | 8,111,226 | 8,101,661 |
Effect of dilutive securities (1) | $0 | $0 |
Weighted average diluted common shares | 8,111,226 | 8,101,661 |
Basic loss per share | ($0.09) | ($1.19) |
Diluted loss per share (1) | ($0.09) | ($1.19) |
Employment_and_Agreements_Chie
Employment and Agreements - Chief Executive Officer (Details) (USD $) | Sep. 30, 2013 | Mar. 01, 2012 |
Employment and Agreements Chief Executive Officer | ' | ' |
Under his employment agreement Mr. Robert Garrett Jr should receive an annual salary in the amount | ' | $250,000 |
Signing bonus received by Mr. Robert Garrett Jr | ' | 9,167 |
In the first year of employment Mr. Garrett received a bonus | ' | 50,000 |
Mr. Garrett's employment agreement also entitles him to awards of stock options to purchase an aggregate of shares of the Company's common stock pursuant to the 2011 Plan | ' | 200,000 |
Written notice period of intention not to renew the agreement | ' | 90 |
Company recorded an estimated bonus expense for Mr. Garrett in continuing operations | $100,000 | ' |
Employment_and_Agreements_Chie1
Employment and Agreements Chief Financial Officer (Details) (USD $) | Nov. 08, 2012 | Apr. 01, 2011 |
Employment and Agreements Chief Financial Officer | ' | ' |
Base salary of McKenna as per employment agreement per annum | ' | $225,000 |
Base salary of McKenna as per employment agreement per annum after reduction | 210,000 | ' |
Eliminated housing allowance per annum which was paid pursuant to the Employment Agreement | 90,000 | ' |
Provision for a bonus payment in the amount less applicable withholdings and deductions payable to McKenna | 172,456 | ' |
Bonus payment attributed as a bonus to Mr. McKenna in Fiscal 2012, with the remainder to be attributed to future periods | $86,000 | ' |
Guarantee_Obligation_Details
Guarantee Obligation (Details) (USD $) | Sep. 30, 2013 |
Guarantee Obligation | ' |
Repayment of any amount up to €75,000 paid by such bank to the logistics provider in order to satisfy such undertaking pursuant to the bank letter of guarantee | $101,000 |
Forward Switzerland has granted the Swiss bank a security interest in all of its assets of value | $1,443,000 |
Summary_of_Future_minimum_leas
Summary of Future minimum lease payments (Details) (USD $) | Sep. 30, 2013 |
Summary of Future minimum lease payments | ' |
Future minimum lease payments 2014 | $261,000 |
Future minimum lease payments 2015 | 259,000 |
Future minimum lease payments 2016 | 267,000 |
Future minimum lease payments 2017 | 85,000 |
Future minimum lease payments 2018 | 87,000 |
Thereafter future minimum lease payments | 183,000 |
Total lease commitments | $1,142,000 |
Rent_expense_included_in_conti
Rent expense included in continuing operations (Details) (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Rent expense included in continuing operations | ' | ' |
Rental income from a sub-lease | $46,000 | ' |
Future minimum sublease rental receipts due under non-cancelable subleases | ' | 556,000 |
Total rent expense included in continuing operations | $252,000 | $456,000 |
Recovered_Sheet1
Buying Agency and Supply Agreement with Forward Industries Asia-Pacific Corporation (Details) (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Buying Agency and Supply Agreement with Forward Industries Asia-Pacific Corporation | ' | ' |
Forward China service fees included as a component of costs of goods sold in continuing operations | $1,292,000 | $691,000 |
Recovered_Sheet2
Investment Management Agreement with LaGrange Capital Administration, L.L.C (Details) (USD $) | Sep. 30, 2013 | Apr. 16, 2013 | Sep. 30, 2012 |
Investment Management Agreement with LaGrange Capital Administration, L.L.C | ' | ' | ' |
Asset-based fee payable per annum of the average Account Net Asset Value Pursuant to the Agreement | ' | 1.00% | ' |
Performance fee payableof the increase (if any) in the Account NAV over an annual period. | ' | 20.00% | ' |
Number of days of notice to be given Under the Agreement, the Company or its designees to make cash withdrawals from the Account | ' | 45 | ' |
Company recognized expense in continuing operations related to asset based advisory fees | $13,000 | ' | ' |
Company recognized expense related to performance based advisory fees | 0 | ' | ' |
Amount of funds invested with LCA | 1,200,000 | ' | 444,000 |
Company purchased marketable securities in the value approximately | 88,600,000 | ' | 444,000 |
Company sold marketable securities in the value approximately | 87,300,000 | ' | 0 |
The Company recognized approximately of net investment losses | $722,000 | ' | $0 |
LongLived_Assets_Net_of_Accumu
Long-Lived Assets (Net of Accumulated Depreciation and Amortization) (Details) (dollars in thousands) (USD $) | Sep. 30, 2013 | Sep. 30, 2012 |
Identifiable long-lived assets | ' | ' |
Americas | $170 | $178 |
EMEA Region | 0 | 1 |
APAC Region. | 0 | 0 |
Total Long-Lived Assets (net) | $170 | $179 |
Revenues_from_External_Custome
Revenues from External Customers (Details) (dollars in thousands) (USD $) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Americas: | ' | ' |
United States | $9,424 | $8,843 |
Other Americas | 1,538 | 1,483 |
Total Americas | 10,962 | 10,326 |
APAC: | ' | ' |
Hong Kong | 7,491 | 9,510 |
Other APAC | 3,273 | 2,055 |
Total APAC | 10,764 | 11,565 |
Europe: | ' | ' |
Germany | 5,097 | 4,071 |
Poland | 3,525 | 2,596 |
Other Europe | 563 | 845 |
Total Europe | 9,185 | 7,512 |
Total net sales* | $30,911 | $29,403 |
Supplier_Concentration_Details
Supplier Concentration (Details) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Supplier Concentration | ' | ' |
OEM Supplier A | 50.00% | 54.00% |
OEM Supplier B | 19.00% | 17.00% |
OEM Supplier C | 14.00% | 9.00% |
OEM Supplier D | 9.00% | 10.00% |
Totals* | 92.00% | 90.00% |
Major_Customers_percent_of_the
Major Customers percent of the Company's net sales, by geographic region (Details) | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Diabetic Customer A | ' | ' |
Americas; | 0.00% | 2.00% |
APAC Region; | 70.00% | 82.00% |
EMEA Region; | 1.00% | 0.00% |
Total Company | 24.00% | 33.00% |
Diabetic Customer B | ' | ' |
Americas | 21.00% | 21.00% |
APAC Region | 3.00% | 2.00% |
EMEA Region | 15.00% | 18.00% |
Total Company | 13.00% | 13.00% |
Diabetic Customer C | ' | ' |
Americas | 24.00% | 12.00% |
APAC Region | 0.00% | 0.00% |
EMEA Region | 51.00% | 46.00% |
Total Company | 24.00% | 16.00% |
Diabetic Customer D | ' | ' |
Americas | 18.00% | 9.00% |
APAC Region | 2.00% | 1.00% |
EMEA Region | 24.00% | 19.00% |
Total Company | 14.00% | 8.00% |
Other Customer C | ' | ' |
Americas | 18.00% | 14.00% |
APAC Region | 0.00% | 0.00% |
EMEA Region | 1.00% | 0.00% |
Total Company | 7.00% | 5.00% |
Other Customer D | ' | ' |
Americas | 0.00% | 11.00% |
APAC Region | 0.00% | 0.00% |
EMEA Region | 0.00% | 0.00% |
Total Company | 0.00% | 4.00% |
Four customers (including their affiliates or contract manufacturers) accounted for Company's accounts receivable | 73.00% | 76.00% |
Subsequent_transactions_Detail
Subsequent transactions (Details) (USD $) | Jul. 03, 2013 |
Subsequent transactions | ' |
G-Form is required to make a settlement payment to the Company in the approximate amount | $280,000 |