Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Dec. 31, 2016 | Feb. 10, 2017 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2016 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | FORWARD INDUSTRIES INC | |
Entity Central Index Key | 38,264 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Smaller Reporting Company | |
Trading Symbol | FORD | |
Entity Common Stock, Shares Outstanding | 8,780,830 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Dec. 31, 2016 | Sep. 30, 2016 |
Current assets: | ||
Cash | $ 4,240,810 | $ 4,760,620 |
Accounts receivable | 5,766,740 | 4,864,423 |
Inventories | 2,550,153 | 2,572,980 |
Prepaid expenses and other current assets | 129,454 | 141,421 |
Total current assets | 12,687,157 | 12,339,444 |
Property and equipment, net | 37,035 | 43,030 |
Other assets | 12,843 | 12,843 |
Total Assets | 12,737,035 | 12,395,317 |
Current liabilities: | ||
Accounts payable | 145,429 | 62,136 |
Due to Forward China | 3,825,428 | 3,519,676 |
Accrued expenses and other current liabilities | 342,700 | 587,741 |
Total current liabilities | 4,313,557 | 4,169,553 |
Other liabilities | 48,179 | 51,486 |
Total Liabilities | 4,361,736 | 4,221,039 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Common stock, par value $0.01 per share; 40,000,000 shares authorized; 8,780,830 shares issued and outstanding | 87,808 | 87,808 |
Additional paid-in capital | 17,832,589 | 17,783,060 |
Accumulated deficit | (9,523,313) | (9,674,805) |
Accumulated other comprehensive loss | (21,785) | (21,785) |
Total shareholders' equity | 8,375,299 | 8,174,278 |
Total liabilities and shareholders' equity | $ 12,737,035 | $ 12,395,317 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Dec. 31, 2016 | Sep. 30, 2016 |
Statement of Financial Position [Abstract] | ||
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) | 8,780,830 | 8,780,830 |
Common stock, shares outstanding (in shares) | 8,780,830 | 8,780,830 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
Net revenues | $ 6,591,248 | $ 7,137,883 |
Cost of goods sold | 5,432,419 | 5,615,518 |
Gross profit | 1,158,829 | 1,522,365 |
Operating expenses | ||
Sales and marketing | 417,527 | 432,888 |
General and administrative | 593,180 | 841,666 |
Total operating expenses | 1,010,707 | 1,274,554 |
Income from operations | 148,122 | 247,811 |
Other income (expense): | ||
Other income (expense), net | 3,370 | (3,731) |
Total other income (expense), net | 3,370 | (3,731) |
Net income | 151,492 | 244,080 |
Net income | 151,492 | 244,080 |
Other comprehensive loss: | ||
Translation adjustments | 0 | (436) |
Comprehensive income | $ 151,492 | $ 243,644 |
Net income per basic common share | $ .02 | $ .03 |
Net income per diluted common share | $ .02 | $ .03 |
Weighted average number of common and common equivalent shares outstanding | ||
Basic | 8,621,513 | 8,387,501 |
Diluted | 8,757,728 | 8,621,524 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) - 3 months ended Dec. 31, 2016 - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total |
Beginning balance, shares at Sep. 30, 2016 | 8,780,830 | ||||
Beginning balance, value at Sep. 30, 2016 | $ 87,808 | $ 17,783,060 | $ (9,674,805) | $ (21,785) | $ 8,174,278 |
Share-based compensation | 49,529 | 49,529 | |||
Net income | 151,492 | 151,492 | |||
Ending balance, shares at Dec. 31, 2016 | 8,780,830 | ||||
Ending balance, value at Dec. 31, 2016 | $ 87,808 | $ 17,832,589 | $ (9,523,313) | $ (21,785) | $ 8,375,299 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash Flows From Operating Activities: | ||
Net income | $ 151,492 | $ 244,080 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Share-based compensation | 49,529 | 81,593 |
Depreciation and amortization | 5,995 | 13,085 |
Deferred rent | (2,680) | (4,029) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (902,317) | (1,069,450) |
Inventories | 22,827 | (17,835) |
Prepaid expenses and other current assets | 11,967 | (81,024) |
Accrued expenses and other current liabilities | 143,377 | 161,532 |
Net cash used in operating activities | (519,810) | (672,048) |
Cash Flows From Investing Activities: | ||
Purchases of property and equipment | 0 | (43,844) |
Net cash used in investing activities | 0 | (43,844) |
Cash Flows From Financing Activities: | ||
Restricted stock repurchased and retired | 0 | (1,667) |
Net cash used in financing activities | 0 | (1,667) |
Net decrease in cash | (519,810) | (717,559) |
Cash at beginning of period | 4,760,620 | 4,042,124 |
Cash at end of period | 4,240,810 | 3,324,565 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid for interest | 0 | 0 |
Cash paid for taxes | $ 0 | $ 0 |
1. OVERVIEW
1. OVERVIEW | 3 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
OVERVIEW | Forward Industries, Inc. (Forward or the Company) designs and distributes carry and protective solutions, primarily for hand held electronic devices. The Companys principal customer market is original equipment manufacturers, or OEMs (or the contract manufacturing firms of these OEM customers), that either package their products as accessories in box together with their branded product offerings, or sell them through their retail distribution channels. The Companys 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 and recreational products, bar code scanners, smartphones, GPS location devices, tablets, and firearms). The Companys OEM customers are located in: (i) the Asia-Pacific Region, which we refer to as the APAC Region; (ii) Europe, the Middle East, and Africa, which we refer to as the EMEA Region; and (iii) the Americas. The Company does not manufacture any of its OEM products and sources substantially all of its OEM products from independent suppliers in China, through Forward China (refer to Note 7 Buying Agency and Supply Agreement). In the opinion of management, the accompanying condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q reflect all normal recurring adjustments necessary to present fairly the financial position and results of operations and cash flows for the interim periods presented herein, but are not necessarily indicative of the results of operations for the year ending September 30, 2017. These condensed consolidated financial statements should be read in conjunction with the Companys audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2016, and with the disclosures and risk factors presented therein. The September 30, 2016 condensed consolidated balance sheet has been derived from the audited consolidated financial statements. |
2. ACCOUNTING POLICIES
2. ACCOUNTING POLICIES | 3 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
ACCOUNTING POLICIES | Accounting Estimates The preparation of the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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 condensed consolidated financial statements include the accounts of Forward Industries, Inc. and its wholly owned subsidiaries (Forward US and Forward Switzerland). All significant intercompany transactions and balances have been eliminated in consolidation. Income Taxes The Company recognizes future tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax bases of assets and liabilities and to net tax operating loss carryforwards to the extent that realization of these benefits is more likely than not. As of December 31, 2016, there was no change to our assessment that a full valuation allowance was required against all net deferred tax assets. Accordingly, any deferred tax provision or benefit was offset by an equal and opposite change to the valuation allowance. No current book income tax provision was recorded against book net income due to the existence of significant net operating loss carryforwards. Revenue Recognition The Company generally recognizes revenue from product sales to its customers when: (i) 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); (ii) persuasive evidence of an arrangement exists; (iii) the Company has no continuing obligations to the customer; and (iv) collection of the related accounts receivable is reasonably assured. The Company defers revenue when it receives consideration before achieving the criteria previously mentioned. Share-Based Compensation Expense The Company recognizes employee and director share-based compensation in its condensed consolidated income statements and comprehensive income at the grant-date fair value of stock options and other equity-based compensation. The determination of stock option 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 4 - 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 May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605-Revenue Recognition and most industry-specific guidance throughout the ASC. The standard requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 was further amended and is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out (“LIFO”). This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company does not anticipate that the adoption of ASU 2015-11 will have a material impact on its consolidated financial statements. In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which applies to the classification of deferred tax assets and liabilities. The update eliminates the requirement to classify deferred tax assets and liabilities as noncurrent or current within a classified statement of financial position. This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company does not anticipate that the adoption of ASU 2015-17 will have a material impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. This ASU requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented. The new standard is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. The Company does not anticipate that the adoption of ASU 2016-09 will have a material impact on its consolidated financial statements. |
3. SHAREHOLDERS' EQUITY
3. SHAREHOLDERS' EQUITY | 3 Months Ended |
Dec. 31, 2016 | |
Stockholders' Equity Note [Abstract] | |
SHAREHOLDERS' EQUITY | 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, through December 31, 2016, the Company repurchased an aggregate of 224,690 shares at a cost of approximately $487,000. During the three months ended December 31, 2016, the Company did not repurchase or retire any shares of its outstanding restricted common stock. |
4. SHARE-BASED COMPENSATION
4. SHARE-BASED COMPENSATION | 3 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. The expected term represents the period over which the stock option awards are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The expected volatility used is based on the historical price of the Company’s stock over the most recent period commensurate with the expected term of the award. The risk-free interest rate used is based on the implied yield of U.S. Treasury zero-coupon issues with a remaining term equivalent to the award’s expected term. 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. The estimated annual forfeiture rate is based on management’s expectations and will reduce expense ratably over the vesting period. The forfeiture rate will be adjusted periodically based on the extent to which actual option forfeitures differ, or are expected to differ, from the previous estimate, when it is material. There were no options granted during the three months ended December 31, 2016 and 2015. The following table summarizes stock option activity during the three months ended December 31, 2016: Weighted Weighted Average Average Remaining Number of Exercise Life Intrinsic Options Price In Years Value Outstanding, September 30, 2016 266,000 $ 2.27 Granted - Exercised - Forfeited (10,000 ) 3.73 Expired - Outstanding, December 31, 2016 256,000 $ 2.22 4.5 $ 35,250 Exercisable, December 31, 2016 215,999 $ 2.51 3.8 $ 10,999 The Company recognized compensation expense of approximately $2,000 and $4,000 during the three months ended December 31, 2016 and 2015, respectively, for stock option awards in its condensed consolidated income statements and comprehensive income. As of December 31, 2016, there was approximately $7,000 of total unrecognized compensation cost related to nonvested stock option awards. That cost is expected to be recognized over a weighted average period of 1.2 years. The following table provides additional information regarding stock option awards that were outstanding and exercisable at December 31, 2016: Options Outstanding Options Exercisable Weighted Weighted Weighted Average Outstanding Average Average Exercisable Exercise Exercise Number of Exercise Remaining Life Number of Price Price Options Price In Years Options $0.64 to $1.99 $ 1.00 97,500 $ 1.25 5.3 57,499 $2.00 to $2.99 2.46 96,000 2.46 2.6 96,000 $3.00 to $3.79 3.74 62,500 3.74 4.1 62,500 256,000 3.8 215,999 Restricted Stock Awards The Company recognized compensation expense of approximately $48,000 and $78,000 during the three months ended December 31, 2016 and 2015, respectively, for restricted stock awards in its condensed consolidated income statements and comprehensive income. As of December 31, 2016, there was approximately $37,000 of total unrecognized compensation cost related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted average period of 0.4 years. The following table summarizes restricted stock activity during the three months ended December 31, 2016: Weighted Average Total Number of Grant Date Grant Date Shares Fair Value Fair Value Non-vested, September 30, 2016 159,317 $ 1.29 $ 205,146 Granted - Vested - Forfeited - Non-vested, December 31, 2016 159,317 $ 1.29 $ 205,146 |
5. INCOME PER SHARE
5. INCOME PER SHARE | 3 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
INCOME PER SHARE | Basic income 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 income 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: (i) shares that would be issued upon the exercise of stock options and warrants, computed using the treasury stock method; and (ii) shares of nonvested restricted stock. The Company calculated the potential diluted earnings per share in accordance with ASC 260, as follows: For the Three Months Ended December 31, 2016 2015 Numerator: Net income (numerator for basic and diluted earnings per share) $ 151,492 $ 244,080 Weighted average shares outstanding (denominator for basic earnings per share) 8,621,513 8,387,501 Effects of dilutive securities: Assumed exercise of stock options, treasury stock method 23,859 30,271 Assumed vesting of restricted stock, treasury stock method 112,356 203,752 Dilutive potential common shares 136,215 234,023 Denominator for diluted earnings per share - weighted average shares and assumed potential common shares 8,757,728 8,621,524 Basic earnings per share $ 0.02 $ 0.03 Diluted earnings per share $ 0.02 $ 0.03 The following securities were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive: As of December 31, 2016 2015 Options 178,500 208,500 Warrants 723,846 723,846 Total potentially dilutive shares 902,346 932,346 |
6. CONCENTRATIONS
6. CONCENTRATIONS | 3 Months Ended |
Dec. 31, 2016 | |
Risks and Uncertainties [Abstract] | |
6. CONCENTRATIONS | Concentration of Revenues and Accounts Receivable For the three months ended December 31, 2016 and 2015, the Company had significant customers with individual percentage of total revenues equaling 10% or greater as follows: For the Three Months Ended December 31, 2016 2015 Customer 1 27.7% 19.1% Customer 2 23.0% 33.8% Customer 3 20.3% 21.2% Customer 4 12.7% 13.0% Totals 83.7% 87.1% At December 31, 2016 and September 30, 2016, concentration of accounts receivable with significant customers representing 10% or greater of accounts receivable was as follows: December 31, 2016 September 30, 2016 Customer 1 39.6 % 33.0 % Customer 2 27.3 % 19.6 % Customer 3 9.2 % 16.0 % Customer 4 12.2 % 14.7 % Totals 88.3 % 83.3 % |
7. RELATED PARTY TRANSACTIONS
7. RELATED PARTY TRANSACTIONS | 3 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Buying Agency and Supply Agreement On March 12, 2012, the Company entered into a Buying Agency and Supply Agreement (the “Supply Agreement”) with Forward Industries Asia-Pacific Corporation, a British Virgin Islands corporation (“Forward China”). The Supply Agreement, as amended, 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 Supply Agreement) in the Asia Pacific region. The Company purchases products at Forward China’s cost and also pays to Forward China a monthly service fee equal to the sum of: (i) $100,000; and (ii) 4% of “Adjusted Gross Profit”, which is defined as the selling price less the cost from Forward China. The amended Supply Agreement expires on September 8, 2018, subject to renewal. Terence Bernard Wise, Chief Executive Officer and a director of the Company, is a principal of Forward China. In addition, Jenny P. Yu, a Managing Director of Forward China, beneficially owns more than 5% of the Company’s shares of common stock. The Company recognized approximately $363,000 and $373,000 during the three months ended December 31, 2016 and 2015, respectively, in service fees paid to Forward China, which are included as a component of costs of goods sold in the accompanying condensed consolidated income statements and comprehensive income. During the three months ended December 31, 2016, the Company received commissions of $12,904, which is included in net revenues. |
8. LEGAL PROCEEDINGS
8. LEGAL PROCEEDINGS | 3 Months Ended |
Dec. 31, 2016 | |
Legal Matters and Contingencies [Abstract] | |
LEGAL PROCEEDINGS | From time to time, the Company may become a party to legal actions or proceedings in the ordinary course of its business. As of December 31, 2016, 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. |
2. ACCOUNTING POLICIES (Policie
2. ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Accounting Estimates | Accounting Estimates The preparation of the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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 condensed consolidated financial statements include the accounts of Forward Industries, Inc. and its wholly owned subsidiaries (Forward US and Forward Switzerland). All significant intercompany transactions and balances have been eliminated in consolidation. |
Income Taxes | Income Taxes The Company recognizes future tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax bases of assets and liabilities and to net tax operating loss carryforwards to the extent that realization of these benefits is more likely than not. As of December 31, 2016, there was no change to our assessment that a full valuation allowance was required against all net deferred tax assets. Accordingly, any deferred tax provision or benefit was offset by an equal and opposite change to the valuation allowance. No current book income tax provision was recorded against book net income due to the existence of significant net operating loss carryforwards. |
Revenue Recognition | Revenue Recognition The Company generally recognizes revenue from product sales to its customers when: (i) 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); (ii) persuasive evidence of an arrangement exists; (iii) the Company has no continuing obligations to the customer; and (iv) collection of the related accounts receivable is reasonably assured. The Company defers revenue when it receives consideration before achieving the criteria previously mentioned. |
Share-Based Compensation Expense | Share-Based Compensation Expense The Company recognizes employee and director share-based compensation in its condensed consolidated income statements and comprehensive income at the grant-date fair value of stock options and other equity-based compensation. The determination of stock option 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 4 - 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 May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605-Revenue Recognition and most industry-specific guidance throughout the ASC. The standard requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 was further amended and is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out (“LIFO”). This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company does not anticipate that the adoption of ASU 2015-11 will have a material impact on its consolidated financial statements. In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which applies to the classification of deferred tax assets and liabilities. The update eliminates the requirement to classify deferred tax assets and liabilities as noncurrent or current within a classified statement of financial position. This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company does not anticipate that the adoption of ASU 2015-17 will have a material impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. This ASU requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented. The new standard is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. The Company does not anticipate that the adoption of ASU 2016-09 will have a material impact on its consolidated financial statements. |
4. SHARE-BASED COMPENSATION (Ta
4. SHARE-BASED COMPENSATION (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock option activity | Weighted Weighted Average Average Remaining Number of Exercise Life Intrinsic Options Price In Years Value Outstanding, September 30, 2016 266,000 $ 2.27 Granted - Exercised - Forfeited (10,000 ) 3.73 Expired - Outstanding, December 31, 2016 256,000 $ 2.22 4.5 $ 35,250 Exercisable, December 31, 2016 215,999 $ 2.51 3.8 $ 10,999 |
Schedule of option activity by exericse price | Options Outstanding Options Exercisable Weighted Weighted Weighted Average Outstanding Average Average Exercisable Exercise Exercise Number of Exercise Remaining Life Number of Price Price Options Price In Years Options $0.64 to $1.99 $ 1.00 97,500 $ 1.25 5.3 57,499 $2.00 to $2.99 2.46 96,000 2.46 2.6 96,000 $3.00 to $3.79 3.74 62,500 3.74 4.1 62,500 256,000 3.8 215,999 |
Schedule restricted stock option activity | Weighted Average Total Number of Grant Date Grant Date Shares Fair Value Fair Value Non-vested, September 30, 2016 159,317 $ 1.29 $ 205,146 Granted - Vested - Forfeited - Non-vested, December 31, 2016 159,317 $ 1.29 $ 205,146 |
5. INCOME PER SHARE (Tables)
5. INCOME PER SHARE (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share | For the Three Months Ended December 31, 2016 2015 Numerator: Net income (numerator for basic and diluted earnings per share) $ 151,492 $ 244,080 Weighted average shares outstanding (denominator for basic earnings per share) 8,621,513 8,387,501 Effects of dilutive securities: Assumed exercise of stock options, treasury stock method 23,859 30,271 Assumed vesting of restricted stock, treasury stock method 112,356 203,752 Dilutive potential common shares 136,215 234,023 Denominator for diluted earnings per share - weighted average shares and assumed potential common shares 8,757,728 8,621,524 Basic earnings per share $ 0.02 $ 0.03 Diluted earnings per share $ 0.02 $ 0.03 |
Schedule of antidilutive securities excluded | As of December 31, 2016 2015 Options 178,500 208,500 Warrants 723,846 723,846 Total potentially dilutive shares 902,346 932,346 |
6. CONCENTRATIONS (Tables)
6. CONCENTRATIONS (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Risks and Uncertainties [Abstract] | |
Significant customers with revenue concentrations | For the Three Months Ended December 31, 2016 2015 Customer 1 27.7% 19.1% Customer 2 23.0% 33.8% Customer 3 20.3% 21.2% Customer 4 12.7% 13.0% Totals 83.7% 87.1% At December 31, 2016 and September 30, 2016, concentration of accounts receivable with significant customers representing 10% or greater of accounts receivable was as follows: December 31, 2016 September 30, 2016 Customer 1 39.6 % 33.0 % Customer 2 27.3 % 19.6 % Customer 3 9.2 % 16.0 % Customer 4 12.2 % 14.7 % Totals 88.3 % 83.3 % |
3. SHAREHOLDERS' EQUITY (Detail
3. SHAREHOLDERS' EQUITY (Details Narrative) - Common Stock - USD ($) | 3 Months Ended | 172 Months Ended |
Dec. 31, 2016 | Dec. 31, 2016 | |
Temporary Equity [Line Items] | ||
Stock repurchased, shares | 0 | 224,690 |
Stock repurchased, amount | $ 0 | $ 487,000 |
4. SHARE-BASED COMPENSATION (De
4. SHARE-BASED COMPENSATION (Details - Option activity) - Options [Member] | 3 Months Ended |
Dec. 31, 2016USD ($)$ / sharesshares | |
Number of Options | |
Shares, Outstanding at Beginning | 266,000 |
Shares, Granted | 0 |
Shares, Exercised | 0 |
Shares, Forfeited | (10,000) |
Shares, Expired | 0 |
Shares, Outstanding at Ending | 256,000 |
Shares, Exercisable | 215,999 |
Weighted Average Exercise Price | |
Weighted average exercise price, Granted | $ / shares | |
Weighted average exercise price, Exercised | $ / shares | |
Weighted average exercise price, Forfeited | $ / shares | 3.73 |
Weighted average exercise price, Expired | $ / shares | |
Weighted average exercise price, Outstanding at Ending | $ / shares | 2.22 |
Weighted average exercise price, Exercisable | $ / shares | $ 2.51 |
Weighted Average Remaining life In Years | |
Weighted average remaining contractual term (Years), Outstanding | 4 years 6 months |
Weighted average remaining contractual term (Years), Exercisable | 3 years 9 months 18 days |
Intrinsic Value | |
Aggregate intrinsic value, Outstanding | $ | $ 35,250 |
Aggregate intrinsic value, Exercisable | $ | $ 10,999 |
4. SHARE-BASED COMPENSATION (21
4. SHARE-BASED COMPENSATION (Details - Options by exercise price) | 3 Months Ended |
Dec. 31, 2016$ / sharesshares | |
$0.64 to $1.99 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Exercise price lower limit | $ 0.64 |
Exercise price upper limit | 1.99 |
Options Outstanding, Weighted average exercise price | $ 1 |
Options Outstanding, Outstanding Number of Options | shares | 97,500 |
Options Exercisable, Weighted average exercise price | $ 1.25 |
Options Exercisable, Weighted Average Remaining Life In Years | 5 years 3 months 18 days |
Options Exercisable, Exercisable Number of Options | shares | 57,499 |
$2.00 to $2.99 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Exercise price lower limit | $ 2 |
Exercise price upper limit | 2.99 |
Options Outstanding, Weighted average exercise price | $ 2.46 |
Options Outstanding, Outstanding Number of Options | shares | 96,000 |
Options Exercisable, Weighted average exercise price | $ 2.46 |
Options Exercisable, Weighted Average Remaining Life In Years | 2 years 7 months 6 days |
Options Exercisable, Exercisable Number of Options | shares | 96,000 |
$3.00 to $3.79 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Exercise price lower limit | $ 3 |
Exercise price upper limit | 3.79 |
Options Outstanding, Weighted average exercise price | $ 3.74 |
Options Outstanding, Outstanding Number of Options | shares | 62,500 |
Options Exercisable, Weighted average exercise price | $ 3.74 |
Options Exercisable, Weighted Average Remaining Life In Years | 4 years 1 month 6 days |
Options Exercisable, Exercisable Number of Options | shares | 62,500 |
Options [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options Outstanding, Weighted average exercise price | $ 2.22 |
Options Outstanding, Outstanding Number of Options | shares | 256,000 |
Options Exercisable, Exercisable Number of Options | shares | 215,999 |
4. SHARE-BASED COMPENSATION (22
4. SHARE-BASED COMPENSATION (Details - Restricted stock activity) - Restricted Stock [Member] | 3 Months Ended |
Dec. 31, 2016USD ($)$ / sharesshares | |
Number of Shares | |
Shares, Non-vested balance | 159,317 |
Shares granted | |
Shares vested | |
Shares forfeited | |
Shares, Non-vested balance | 159,317 |
Weighted Average Grant Date Fair Value | |
Weighted average grant date fair value, Non-vested balance | $ / shares | $ 1.29 |
Weighted average grant date fair value, Non-vested balance | $ / shares | $ 1.29 |
Total Grant Date Fair Value | |
Total grant date fair value, Non-vested balance | $ | $ 205,146 |
Total grant date fair value, Non-vested balance | $ | $ 205,146 |
4. SHARE-BASED COMPENSATION (23
4. SHARE-BASED COMPENSATION (Details Narrative) - USD ($) | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share based compensation expense | $ 49,529 | $ 81,593 |
Options [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share based compensation expense | 2,000 | 4,000 |
Options [Member] | Nonvested Stock Option Awards [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unrecognized compensation cost | $ 7,000 | |
Unrecognized compensation cost weighted average vesting period | 1 year 2 months 12 days | |
Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share based compensation expense | $ 48,000 | $ 78,000 |
Unrecognized compensation cost | $ 37,000 | |
Unrecognized compensation cost weighted average vesting period | 4 months 24 days |
5. INCOME PER SHARE (Details -
5. INCOME PER SHARE (Details - Diluted loss per share) - USD ($) | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Numerator: | ||
Net income | $ 151,492 | $ 244,080 |
Denominator: | ||
Weighted average shares outstanding - basic | 8,621,513 | 8,387,501 |
Effect of dilutive securities | ||
Assumed exercise of stock options, treasury stock method | 23,859 | 30,271 |
Assumed vesting of restricted stock, treasury stock method | 112,356 | 203,752 |
Dilutive potential common shares | 136,215 | 234,023 |
Weighted average shares outstanding - diluted | 8,757,728 | 8,621,524 |
Basic earnings per share | $ .02 | $ .03 |
Diluted earnings per share | $ .02 | $ .03 |
5. INCOME PER SHARE (Details 25
5. INCOME PER SHARE (Details - Antidilutive shares) - shares | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 902,346 | 932,346 |
Options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 178,500 | 208,500 |
Warrants [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 723,846 | 723,846 |
6. CONCENTRATIONS (Details - Co
6. CONCENTRATIONS (Details - Concentration sales) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | |
Sales Revenue, Net [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk | 83.70% | 87.10% | |
Sales Revenue, Net [Member] | Customer 1 [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk | 27.70% | 19.10% | |
Sales Revenue, Net [Member] | Customer 2 [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk | 23.00% | 33.80% | |
Sales Revenue, Net [Member] | Customer 3 [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk | 20.30% | 21.20% | |
Sales Revenue, Net [Member] | Customer 4 [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk | 12.70% | 13.00% | |
Accounts Receivable [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk | 88.30% | 83.30% | |
Accounts Receivable [Member] | Customer 1 [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk | 39.60% | 33.00% | |
Accounts Receivable [Member] | Customer 2 [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk | 27.30% | 19.60% | |
Accounts Receivable [Member] | Customer 3 [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk | 9.20% | 16.00% | |
Accounts Receivable [Member] | Customer 4 [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk | 12.20% | 14.70% |
7. RELATED PARTY TRANSACTIONS (
7. RELATED PARTY TRANSACTIONS (Details Narrative) - Forward China [Member] - USD ($) | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Related Party Transaction [Line Items] | ||
Service fees paid | $ 363,000 | $ 373,000 |
Commissions earned | $ 12,904 |