Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Mar. 31, 2018 | May 16, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
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 | 9,516,554 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2018 | Sep. 30, 2017 |
Current assets: | ||
Cash | $ 3,326,266 | $ 4,622,981 |
Accounts receivable | 9,247,065 | 6,218,563 |
Inventories | 1,447,676 | 2,120,971 |
Prepaid expenses and other current assets | 201,768 | 157,930 |
Total current assets | 14,222,775 | 13,120,445 |
Property and equipment, net | 360,230 | 20,658 |
Intangible assets, net | 1,492,863 | 0 |
Goodwill | 2,182,427 | 0 |
Other assets | 63,547 | 12,843 |
Total Assets | 18,321,842 | 13,153,946 |
Current liabilities: | ||
Line of credit | 800,000 | 0 |
Accounts payable | 314,951 | 67,351 |
Due to Forward China | 2,295,668 | 3,736,451 |
Deferred Income | 271,758 | 169,642 |
Deferred consideration, short-term portion | 492,000 | 0 |
Notes payable - short-term portion | 1,876,889 | 0 |
Capital leases payable - short-term portion | 44,652 | 0 |
Accrued expenses and other current liabilities | 527,942 | 213,117 |
Total current liabilities | 6,623,860 | 4,186,561 |
Other liabilities | ||
Notes payable - long-term portion | 102,336 | 0 |
Capital leases payable - long-term portion | 47,030 | 0 |
Deferred rent | 37,849 | 36,963 |
Deferred consideration - long-term portion | 1,044,000 | 0 |
Total other liabilities | 1,231,215 | 36,963 |
Total Liabilities | 7,855,075 | 4,223,524 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Common stock, par value $0.01 per share; 40,000,000 shares authorized; 9,516,554 and 8,920,830 shares issued and outstanding, respectively | 95,165 | 89,208 |
Additional paid-in capital | 18,471,943 | 17,936,673 |
Accumulated deficit | (8,100,341) | (9,095,459) |
Total shareholders' equity | 10,466,767 | 8,930,422 |
Total liabilities and shareholders' equity | $ 18,321,842 | $ 13,153,946 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2018 | Sep. 30, 2017 |
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) | 9,516,554 | 8,920,830 |
Common stock, shares outstanding (in shares) | 9,516,554 | 8,920,830 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||||
Net Revenues | $ 9,012,427 | $ 4,532,876 | $ 15,348,894 | $ 11,124,124 |
Cost of Sales | 7,181,662 | 3,816,790 | 12,515,533 | 9,249,209 |
Gross profit | 1,830,765 | 716,086 | 2,833,361 | 1,874,915 |
Operating expenses | ||||
Sales and marketing | 519,966 | 389,694 | 798,028 | 807,221 |
General and administrative | 1,078,735 | 563,479 | 1,752,196 | 1,156,659 |
Total operating expenses | 1,598,701 | 953,173 | 2,550,224 | 1,963,880 |
Income (loss) from operations | 232,064 | (237,087) | 283,137 | (88,965) |
Interest expense | (30,907) | 0 | (30,907) | 0 |
Other income (expense) | 310 | (443) | (4,112) | 2,927 |
Other income (expense), net | (30,597) | (443) | (35,019) | 2,927 |
Income (loss) before income taxes | 201,467 | (237,530) | 248,118 | (86,038) |
Benefit from income taxes | 747,000 | 0 | 747,000 | 0 |
Net income (loss) | $ 948,467 | $ (237,530) | $ 995,118 | $ (86,038) |
Net income (loss) per basic common share | $ 0.10 | $ (0.03) | $ 0.11 | $ (0.01) |
Net income (loss) per diluted common share | $ 0.10 | $ (0.03) | $ 0.11 | $ (0.01) |
Weighted average number of common and common equivalent shares outstanding: Basic | 9,291,334 | 8,671,240 | 9,023,166 | 8,646,103 |
Weighted average number of common and common equivalent shares outstanding: Diluted | 9,398,054 | 8,671,240 | 9,146,218 | 8,646,103 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) - 6 months ended Mar. 31, 2018 - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, shares at Sep. 30, 2017 | 8,920,830 | |||
Beginning balance, value at Sep. 30, 2017 | $ 89,208 | $ 17,936,673 | $ (9,095,459) | $ 8,930,422 |
Restricted stock award forfeitures, shares | (70,000) | |||
Restricted stock award forfeitures, value | $ (700) | 700 | ||
Share-based compensation | 41,226 | 41,226 | ||
Stock issuance for IPS purchase, shares | 401,836 | |||
Stock issuance for IPS purchase, value | $ 4,018 | 495,982 | 500,000 | |
Restricted stock award issuance, shares | 40,184 | |||
Restricted stock award issuance, value | $ 402 | (402) | ||
Cashless warrant exercise, shares | 223,704 | |||
Cashless warrant exercise, value | $ 2,237 | (2,237) | ||
Net income | 995,118 | 995,118 | ||
Ending balance, shares at Mar. 31, 2018 | 9,516,554 | |||
Ending balance, value at Mar. 31, 2018 | $ 95,165 | $ 18,471,943 | $ (8,100,341) | $ 10,466,767 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash Flows From Operating Activities: | ||
Net income (loss) | $ 995,118 | $ (86,038) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Share-based compensation | 41,226 | 79,458 |
Depreciation and amortization | 70,919 | 11,454 |
Deferred rent | 886 | (5,360) |
Deferred tax asset | (747,000) | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (539,003) | 439,484 |
Inventories | 673,295 | (156,239) |
Prepaid expenses and other current assets | 7,791 | (14,426) |
Other assets | 0 | 0 |
Accounts payable and due to Forward China | (1,341,846) | (1,083,276) |
Deferred income | (165,216) | (105,869) |
Accrued expenses and other current liabilities | (233,162) | (190,524) |
Net cash used in operating activities | (1,236,993) | (1,111,336) |
Cash Flows From Investing Activities: | ||
Purchases of property and equipment | (32,737) | 0 |
Acquisition of IPS, net of cash acquired | (1,329,565) | 0 |
Net cash used in investing activities | (1,362,302) | 0 |
Cash Flows From Financing Activities: | ||
Proceeds from Note issued to Forward China | 1,600,000 | 0 |
Proceeds from Line of Credit borrowings | 400,000 | 0 |
Repayment of Line of Credit borrowings | (550,000) | 0 |
Repayment of notes payable | (143,011) | 0 |
Repayments on capital equipment leases | (4,410) | 0 |
Net cash provided by financing activities | 1,302,579 | 0 |
Net decrease in cash | (1,296,716) | (1,111,336) |
Cash at beginning of period | 4,622,981 | 4,760,620 |
Cash at end of period | 3,326,266 | 3,649,284 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid for interest | 30,907 | 0 |
Cash paid for taxes | 1,077 | 0 |
Supplemental Schedule of Non-Cash Investing and Financing Activities: | ||
Shares issued to Purchase IPS | $ 500,000 | $ 0 |
1. OVERVIEW
1. OVERVIEW | 6 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
OVERVIEW | NOTE 1 OVERVIEW Forward Industries, Inc. (“Forward” or the “Company”) designs 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 their 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 and recreational products, bar code scanners, smartphones, GPS location devices, tablets, and firearms). The Company’s 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 9 – Buying Agency and Supply Agreement). On January 18, 2018, the Company acquired Intelligent Product Solutions, Inc. (“IPS”), a single source solution for the full spectrum of hardware and software product design and engineering services. The acquisition gives Forward the opportunity to introduce proprietary product to the market from concepts brought to them from a number of different sources. The Forward/IPS combination provides clients, both big and small, a true, authentic “one-stop-shop” for product design, development, manufacturing, and distribution. 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, 2018. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2017, and with the disclosures and risk factors presented therein. The September 30, 2017 condensed consolidated balance sheet has been derived from the audited consolidated financial statements. |
2. ACCOUNTING POLICIES
2. ACCOUNTING POLICIES | 6 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
ACCOUNTING POLICIES | NOTE 2 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, Forward Switzerland and recently acquired IPS from the date of acquisition). All significant intercompany transactions and balances have been eliminated in consolidation. Segment Reporting Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly evaluated by a chief operating decision maker, or Forward management in deciding how to allocate resources and in assessing performance. As a result of the acquisition of IPS, management will conduct business through two distinct operating segments, which are also our reportable segments: distribution and design Organizing our business through two operating segments allows us to align our resources and manage the operations. Our management team regularly reviews operating segment revenue and operating income (loss) when assessing financial results of operating segments and allocating resources. We measure the performance of our operating segments based upon operating segment revenue and operating income (loss). Segment operating income (loss) includes revenue and expenses incurred directly by the operating segment, including cost of sales and selling, marketing, and general and administrative costs. 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 March 31, 2018, 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. However, a deferred income tax benefit was recorded due to the acquisition of IPS and related deferred tax liabilities created upon acquisition of the subsidiary on January 18, 2018. This resulted in a reduction in the Company’s valuation allowance for the existing deferred tax asset to offset the newly recorded deferred tax liability and accordingly a tax benefit has been recognized of $747,000. No current book income tax provision was recorded against book net income due to the existence of significant net operating loss carryforwards. On December 20, 2017, Congress passed the Tax Cuts and Jobs Act. This bill includes, among other things, a reduction of the U.S. corporate tax rate from 35% to 21%. The change in the tax rates will result in a decrease in the deferred tax assets. However, Forward maintains a full valuation allowance and the decrease in the deferred tax assets are offset by an equal adjustment to the valuation allowance. As a result of the 2017 Tax Cuts and Jobs Act, we expect no tax impact to the financial statements stemming from: (i) the mandatory deemed repatriation of cumulative earnings and profits for a controlled foreign corporation; or (ii) the change in the corporate income tax rate. Revenue Recognition Distribution Segment The Company generally recognizes revenue from its distribution segment 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. Design Segment The Company generally recognizes revenue from design segment sales to customers based on: (i) time and material incurred; (ii) the performance of services as per the agreement; (iii) persuasive evidence that an arrangement exists and (iv) collection of the related accounts receivable is reasonably assured. The Company defers revenue when it receives consideration before achieving the criterion previously mentioned. Reclassifications We have reclassified deferred income of approximately $170,000 from accrued expenses and other current liabilities to deferred income within the current liabilities section of the balance sheet in the accompanying fiscal 2017 financial statements to conform to the fiscal 2018 presentation. These reclassifications did not affect total liabilities, net income (loss) or accumulated deficit. Share-Based Compensation Expense The Company recognizes employee and director share-based compensation in its condensed consolidated statements of operations 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 6 - 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 August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” providing additional guidance on several cash flow classification issues, with the goal of the update to reduce the current and potential future diversity in practice. The amendments in this update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company early adopted ASU No. 2016-15 and the adoption did not have any impact on the Company’s consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The amendment allows an entity to elect to reclassify the stranded tax effects resulting from the change in income tax rate from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. The amendments in this update are effective for periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements. In May 2014, FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605-Revenue Recognition and most industry-specific guidance throughout the ASC. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). The Company will adopt ASU 2014-09 in the first quarter of fiscal 2019. Because the Company's Distribution Segment's primary source of revenues is from the sale of finished goods, the Company does not anticipate that the adoption of ASU 2014-09 will have a material impact on this segment. However, the Company is evaluating the potential impact of the acquired IPS business and the resulting Design Segment and ultimately the Company's consolidated financial statements, disclosures and internal processes and controls. In February 2017, the FASB issued ASU 2017-02, “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 May 2017, the FASB issued ASU No. 2017-09, “Scope of Modification Accounting”, to provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. This ASU is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. Adoption of this ASU is prospective. The Company does not believe the adoption of this ASU will have a significant impact on its consolidated financial statements. Business Combinations The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, the Company makes significant estimates and assumptions, especially with respect to intangible assets. The Company recognizes the purchase of assets and the assumption of liabilities as an asset acquisition, if the transaction does not constitute a business combination. The excess of the fair value of the purchase price is allocated on a relative fair value basis to the identifiable assets and liabilities. No goodwill is recorded in an asset acquisition. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from customer relationships and developed technology, discount rates and terminal values. Our estimate of fair value is based upon assumptions believed to be reasonable, but actual results may differ from estimates. Other estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. |
3. ACQUISITION
3. ACQUISITION | 6 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
ACQUISITION | NOTE 3 ACQUISITION On January 18, 2018 the Company entered into a Stock Purchase Agreement (the “Agreement”) by and among the Company, IPS, the holders of all of the common stock of IPS, Inc. (the “Sellers”) and Mitchell Maiman, President of IPS, representing the Sellers. In consideration for the acquisition of all of IPS’ outstanding securities, the Company: (i) paid approximately $1.9 million in cash; (ii) assumed approximately $1.5 million of outstanding debt; (iii) issued a total of 401,836 shares of the Company’s common stock to the two owners of IPS; (iv) agreed to pay $1,000,000 of deferred cash consideration (with the first payment of $500,000 due on May 31, 2018, the second payment of $200,000 due on September 30, 2019, and third payment of $300,000 due on September 30, 2020); and (v) agreed to pay up to $2.2 million of earnout payments based upon IPS meeting certain EBITDA milestones (as defined in the Agreement) over a three-year period. Additionally, the Company entered into three-year employment agreements with both Mitchell Maiman and Paul Severino (Chief Operating Officer of IPS), and agreed to pay them each $256,000 per year. In order to fund the acquisition of IPS, the Company issued a $1.6 million promissory note payable to Forward China Industries (Asia-Pacific) Corporation ("Forward China") due January 18, 2019. The promissory note bears an interest rate of 8% per annum and requires monthly interest payments commencing February 18, 2018. Forward China is an entity which is principally owned by the Company’s Chairman and Chief Executive Officer. As part of the Agreement, IPS entered into at-will employment agreements with two additional key employees. Pursuant to the employment agreements, the employees were issued a total of 40,184 shares of the Company’s common stock of which 40% vested immediately with the remainder vesting in two equal increments on the six-month and twelve-month anniversary of the grant date, subject to continued employment on such vesting dates. At the date of acquisition, the purchase consideration consists of cash, equity in Forward’s (“Buyer’s”) stock, deferred cash and contingent consideration based on earn-out performance over a three year period. Acquisition-related costs were expensed as incurred and are included in the condensed consolidated statement of operations and income (loss). The purchase consideration components are summarized in the table below: Cash at closing (1) $ 1,930 Value of Equity in Buyer Common Stock (2) 500 Fair Value of Earn-Out Consideration (3) 600 Fair Value of Deferred Cash Consideration (4) 936 Total Purchase Consideration $ 3,966 (1) Cash paid by Forward at closing funded, in part, by a $1.6 million promissory note issued to Forward China, a related party of Forward. The remainder of the cash was funded by Forward’s operating cash account. (2) Forward issued 401,835 shares of common stock valued at the January 18, 2018 closing price of $1.24 per share for an aggregated value of approximately $500,000. (3) Fair Value of the Earn-Out consideration is measured using the Black-Scholes option pricing method. Earn-Out is to be paid in cash only upon meeting certain EBITDA milestones over a three-year period. (4) Fair value of the Deferred Cash consideration is the present value of the $1,000,000 payable in three increments with an applied discount rate ranging between 4.73% and 5.33%. The following table summarizes the allocation of the assets acquired and liabilities assumed based on their estimated fair values on the acquisition date and the related estimated useful lives of the amortizable intangible assets acquired (in thousands, except for estimated useful life): Estimated useful life Current Assets: Cash and Equivalents $ 600 Accounts Receivable 2,489 Other Current Assets 52 Total Current Assets 3,142 Current Liabilities: Accounts Payable (149) Deferred Revenue (267) Accrued and Other Current Liabilities (548) Total Current Liabilities (964) Property and Equipment 346 Other Long-Term Assets 51 Deferred Tax Liability (747) Assumed Debt (1,568) Finite-Lived Intangible Assets: Trademark 475 15 years Customer Relationships 1,050 8 years Total Intangible Assets 1,525 Goodwill 2,182 Total $ 3,966 (amounts may not add due to rounding) Pro Forma Impact The following unaudited pro forma condensed consolidated financial information has been prepared to illustrate the effects of the acquisition of IPS as if the acquisition occurred on October 1, 2017 and 2016. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are directly attributable to the acquisition, factually supportable and, with respect to the condensed consolidated statements of operations and comprehensive income (loss), expected to have a continuing impact on the results of operations. The unaudited pro forma condensed consolidated statements of operations and comprehensive income (loss) does not reflect future events that may occur after the completion of the acquisitions, including, but not limited to, the anticipated realization of ongoing savings from operating synergies and certain one-time charges the Company expects to incur in connection with the acquisition, including, but not limited to, costs in connection with integrating the operations of IPS. These unaudited pro forma condensed consolidated financial statements are for informational purposes only. They do not purport to indicate the results that would actually have been obtained had the acquisition been completed on October 1, 2017 and 2016 or which may be realized in the future. There can be no assurance that such finalization will not result in material changes from the preliminary accounting for the IPS Acquisition included in the below pro forma condensed consolidated financial information. For the Three Months Ended March 31, For the Six Months Ended March 31, 2018 2017 2018 2017 Net revenues $ 12,663,467 $ 7,934,280 $ 22,572,330 $ 17,665,379 Gross profit 2,757,927 1,581,334 4,783,883 3,479,142 Operating expenses 2,637,832 2,217,846 4,451,418 4,044,460 Operating income (loss) 120,095 (636,512 ) 332,465 (565,318 ) Other (expense), net (60,837 ) (70,333 ) (134,219 ) (126,400 ) Income before income taxes 59,258 (706,845 ) 198,246 (691,718 ) Benefit from income taxes (expense) 745,991 (4,121 ) 744,874 (8,664 ) Net income $ 805,249 $ (710,966 ) $ 943,120 $ (700,382 ) Earnings per share: Basic $ 0.09 $ (0.08 ) $ 0.10 $ (0.08 ) Diluted $ 0.09 $ (0.08 ) $ 0.10 $ (0.08 ) |
4. FAIR VALUE MEASUREMENTS
4. FAIR VALUE MEASUREMENTS | 6 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 4 FAIR VALUE MEASUREMENTS We perform fair value measurements in accordance with the guidance provided by ASC 820. ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value: · Level 1: quoted prices in active markets for identical assets or liabilities; · Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or · Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities. The long-term portion of deferred cash consideration of $1.044 million on our balance sheet includes an earn-out consideration component with a fair value of $600,000 measured using the Black-Scholes option pricing method, a Level 3 valuation technique. The following table presents the placement in the fair value hierarchy of the deferred cash consideration at fair value at March 31, 2018. The fair value of the deferred cash consideration will be measure on a recurring basis at each reporting period. Fair value measurement at reporting date using Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs Balance (Level 1) (Level 2) (Level 3) Earn-out consideration $ 600,000 $ – $ – $ 600,000 March 31, 2018: $ 600,000 $ – $ – $ 600,000 The fair value of the deferred cash consideration will be measured on a recurring basis at each reporting date. The following table provides the unobservable inputs and assumptions used to measure the deferred cash consideration at March 31, 2018: Description Valuation technique Unobservable Inputs Range Earn-out consideration Black-Scholes Volatility 35% - 45% Risk free interest rate 1.75% - 2.15% Expected term, in years 0.86 - 2.87 Dividend yield 0.00% |
5. SEGMENT INFORMATION
5. SEGMENT INFORMATION | 6 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | NOTE 5 SEGMENT INFORMATION The Company, post IPS acquisition, conducts its business through two operating segments, which are also its reportable segments: · Distribution and · Design Segment operating income (loss) reflects results before shared corporate and unallocated administrative expenses and income taxes. Shared corporate and unallocated administrative expenses principally consist of costs for corporate and administrative support functions. For the Three Months Ended March 31, For the Six Months Ended March 31, 2018 2017 2018 2017 Revenue Distribution $ 6,194,429 $ 4,532,876 $ 12,530,896 $ 11,124,124 Design 2,817,998 - 2,817,998 - Total Revenue 9,012,427 4,532,876 15,348,894 11,124,124 Cost of Sales Distribution 5,149,455 3,816,790 10,483,326 9,249,209 Design 2,032,207 - 2,032,207 - Total Cost of Sales 7,181,662 3,816,790 12,515,633 9,249,209 Segment Operating Income (loss) Distribution 92,505 (237,087) 143,578 (88,965) Design 139,559 - 139,559 - Total Income (loss) from operations 232,064 (237,087) 283,137 (88,965) Other Income (expenses) Distribution (21,024) (443) (25,446) 2,927 Design (9,573) - (9,573) - Total Other income (expense) (30,597) (443) (35,019) 2,927 Income (loss) before income taxes $ 201,467 $ (237,530) $ 248,118 $ (86,038) The following table presents assets by operating segment: March 31, September 30, 2018 2017 Distribution $ 10,907,888 $ 13,153,946 Design 7,413,954 – Total assets $ 18,321,842 $ 13,153,946 |
6. SHARE-BASED COMPENSATION
6. SHARE-BASED COMPENSATION | 6 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | NOTE 6 SHARE-BASED COMPENSATION Stock Options 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 below. 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. In applying the Black-Scholes option pricing model to options granted, the Company used the following assumptions: For the Three Months Ended March 31, For the Six Months Ended March 31, 2018 2017 2018 2017 Expected term (years) 3.50 n/a 3.50 n/a Expected volatility 103.1% n/a 103.1% n/a Risk free interest rate 2.45% n/a 2.45% n/a Expected dividends 0.00% n/a 0.00% n/a Estimated annual forfeiture rate 10% n/a 10% n/a On February 23, 2018, the Company granted five-year options to employees to purchase an aggregate of 68,000 shares of common stock at an exercise price of $1.67 per share. The shares vest ratably over three years on the grant date anniversaries. The options had had an aggregate grant date fair value of $77,128 which is being amortized over the vesting period of the options. There were no options granted during the six months ended March 31, 2017. The options granted during the three and six months ended March 31, 2018 had a weighted average grant date value per share of $1.13. The following table summarizes stock option activity during the six months ended March 31, 2018: Weighted Weighted Average Average Remaining Number of Exercise Life Intrinsic Options Price In Years Value Outstanding, September 30, 2017 246,000 $ 2.19 Granted 68,000 1.67 Exercised – – Forfeited (20,750 ) 2.18 Expired – – Outstanding, March 31, 2018 293,250 $ 2.07 2.9 $ 48,425 Exercisable, March 31, 2018 203,498 $ 2.36 3.3 $ 30,949 The Company recognized compensation expense of approximately $4,000 and $1,000 during the three months ended March 31, 2018 and 2017, respectively, and approximately $5,000 and $3,000 during the six months ended March 31, 2018 and 2017, respectively, for stock option awards in its condensed consolidated statements of operations and comprehensive income (loss). As of March 31, 2018, there was approximately $74,000 of total unrecognized compensation cost related to nonvested stock option awards that is expected to be recognized over a weighted average period of 1.9 years. The following table provides additional information regarding stock option awards that were outstanding and exercisable at March 31, 2018: 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 $1.80 $ 1.27 164,750 $ 1.11 4.8 74,998 $2.20 to $2.85 2.48 66,000 2.48 2.1 66,000 $3.73 to $3.79 3.74 62,500 3.74 2.9 62,500 293,250 3.3 203,498 Restricted Stock Awards On January 18, 2018, the Company granted 40,184 shares of restricted stock to two employees. The shares vest as follows: 16,072 shares vested immediately, 12,056 shares vest on July 18, 2018 and 12,056 shares vest on January 18, 2019. The awards had an aggregate grant date value of $49,828 which is been recognized over the vesting period of the awards. The Company recognized compensation expense of approximately $41,000 and $29,000 during the three months ended March 31, 2018 and 2017, respectively, and approximately $36,000 and $77,000 during the six months ended March 31, 2018 and 2017, respectively, for restricted stock awards in its condensed consolidated statements of operations and comprehensive income (loss). As of March 31, 2018, there was approximately $24,000 of total unrecognized compensation cost related to nonvested restricted stock awards that is expected to be recognized over a weighted average period of 0.6 years. The following table summarizes restricted stock activity during the six months ended March 31, 2018: Weighted Average Total Number of Grant Date Grant Date Shares Fair Value Fair Value Non-vested, September 30, 2017 160,000 $ 1.02 162,600 Granted 40,184 1.24 49,828 Vested (86,072) 1.10 (94,829) Forfeited (70,000) 1.07 (74,900) Non-vested, March 31, 2018 44,112 $ 0.97 $ 42,699 |
7. EARNINGS (LOSS) PER SHARE
7. EARNINGS (LOSS) PER SHARE | 6 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
EARNINGS (LOSS) PER SHARE | NOTE 7 EARNINGS (LOSS) PER SHARE Basic earnings (loss) 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 earnings (loss) 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 March 31, For the Six Months Ended March 31, 2018 2017 2018 2017 Numerator: Net income (loss) (numerator for basic and diluted earnings per share) $ 948,467 $ (237,530 ) $ 995,118 $ (86,038 ) Weighted average shares outstanding (denominator for basic earnings per share) 9,291,334 8,671,420 9,023,166 8,646,103 Effects of dilutive securities: Assumed exercise of stock options, treasury stock method 41,133 – 34,976 – Assumed vesting of restricted stock, treasury stock method 65,587 – 88,076 – Dilutive potential common shares 106,720 – 123,052 – Denominator for diluted earnings per share - weighted average shares and assumed potential common shares 9,398,054 8,671,240 9,146,218 8,646,103 Basic earnings (loss) per share $ 0.10 $ (0.03 ) $ 0.11 $ (0.01 ) Diluted earnings (loss) per share $ 0.10 $ (0.03 ) $ 0.11 $ (0.01 ) The following securities were excluded from the calculation of diluted earnings (loss) per share because their inclusion would have been anti-dilutive: As of March 31, 2018 2017 Options 215,750 256,000 Warrants 202,225 723,846 Total potentially dilutive shares 417,975 979,846 |
8. CONCENTRATIONS
8. CONCENTRATIONS | 6 Months Ended |
Mar. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | NOTE 8 CONCENTRATIONS Concentration of Revenues and Accounts Receivable For the three and six months ended March 31, 2018 and 2017, the Company had significant customers with individual percentage of total segment revenues equaling 10% or greater as follows: Distribution Segment For the Three Months Ended March 31, For the Six Months Ended March 31, 2018 2017 2018 2017 Customer 1 25.5% 25.1% 21.4% 26.6% Customer 2 28.2% 23.4% 29.7% 21.6% Customer 3 20.7% 22.0% 24.2% 22.6% Customer 4 8.5% 10.4% 9.6% 11.8% Totals 82.9% 80.9% 84.9% 82.6% Design Segment For the Three Months Ended March 31, 2018 Customer 1 14.5% Customer 2 11.9% Customer 3 11.0% Totals 37.4% At March 31, 2018 and September 30, 2017, concentration of accounts receivable with significant customers representing 10% or greater of segment accounts receivable was as follows: Distribution Segment March 31, 2018 September 30, 2017 Customer 1 31.2% 35.5% Customer 2 18.8% 13.3% Customer 3 23.2% 18.0% Customer 4 12.1% 14.1% Totals 85.3% 80.9% Design Segment March 31, 2018 Customer 1 14.4% Customer 2 38.9% Totals 53.3% |
9. RELATED PARTY TRANSACTIONS
9. RELATED PARTY TRANSACTIONS | 6 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 9 RELATED PARTY TRANSACTIONS Buying Agency and Supply Agreement On March 12, 2012, the Company entered into a Buying Agency and Supply Agreement with 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 March 8, 2019, subject to renewal. Terence Bernard Wise, Chief Executive Officer and Chairman of the Company, is a principal of Forward China. In addition, Jenny P. Yu, Managing Director of Forward China, beneficially owns more than 5% of the Company’s shares of common stock. The Company recognized approximately $359,000 and $344,000 during the three months ended March 31, 2018 and 2017, respectively, and approximately $719,000 and $707,000 during the six months ended March 31, 2018 and 2017, respectively, in service fees paid to Forward China, which are included as a component of cost of goods sold in the accompanying condensed consolidated statements of operations and comprehensive income. During the six months ended March 31, 2018 and 2017, the Company received commissions from Forward China of $0 and $12,904, respectively, which is included in net revenues. The Company did not receive commissions from Forward China for the three months ended March 31, 2018 and 2017. Promissory Note On January 18, 2018, the Company issued a $1.6 million promissory note payable to Forward China in order to fund the acquisition of IPS. The note is due and payable in full on January 18, 2019. The promissory note bears an interest rate of 8% per annum. Monthly interest payments commenced on February 18, 2018. For the 3 months ended March 31, 2018, the Company made $21,334 in interest payments associated with the note. |
10. LEGAL PROCEEDINGS
10. LEGAL PROCEEDINGS | 6 Months Ended |
Mar. 31, 2018 | |
Legal Matters and Contingencies [Abstract] | |
LEGAL PROCEEDINGS | NOTE 10 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 March 31, 2018, 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. |
11. WARRANT EXERCISE
11. WARRANT EXERCISE | 6 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
WARRANT EXERCISE | NOTE 11 WARRANT EXERCISE Effective January 22, 2018 through January 24, 2018, nine warrant holders exercised (via cashless exercises) an aggregate of 521,621 warrants with an exercise price of $1.84 per share and were issued an aggregate of 223,704 shares of the Company’s common stock. |
12. SUBSEQUENT EVENTS
12. SUBSEQUENT EVENTS | 6 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12 SUBSEQUENT EVENTS On April 25, 2018, the Company’s compensation committee approved the entrance into new Employment Agreements with Terry Wise, the Company’s Chief Executive Officer and Michael Matte, the Company’s Chief Financial Officer. The terms of the new Employment Agreements will provide for (i) identical salaries as the executives’ prior employment agreements - $300,000 per annum for Mr. Wise and $225,000 for Mr. Matte effective February 1, 2018, (ii) bonuses up to 25% of their salaries to be paid in cash or equity for Mr. Matte and equity for Mr. Wise, (iii) six months’ severance for termination without cause and (iv) bonuses at the discretion of the Board and/or Compensation Committee. On May 16, 2018, the Company and Messrs. Wise and Matte and the Company executed the Employment Agreements. Additionally, effective February 1, 2018, Mr. Matte’s salary reverted back to $225,000 which he had previously agreed to reduce to $150,000 per annum. On April 25, 2018, the Company granted 214,000 five-year fully-vested stock options exercisable at $1.44 per share to a director of the Company. Additionally, the Company granted a total of 20,832 shares of common stock and 40,816 10-year fully vested stock options at an exercise price of $1.44 to two former board members. On May 9, 2018, the Board of Directors formed two new committees: (i) the Business Development Committee and (ii) the Acquisition Committee. The Board approved annual compensation of $20,000 to these committees' chairpersons and $15,000 to each member. |
2. ACCOUNTING POLICIES (Policie
2. ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Mar. 31, 2018 | |
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, Forward Switzerland and recently acquired IPS from the date of acquisition). All significant intercompany transactions and balances have been eliminated in consolidation. |
Segment Reporting | Segment Reporting Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly evaluated by a chief operating decision maker, or Forward management in deciding how to allocate resources and in assessing performance. As a result of the acquisition of IPS, management will conduct business through two distinct operating segments, which are also our reportable segments: distribution and design Organizing our business through two operating segments allows us to align our resources and manage the operations. Our management team regularly reviews operating segment revenue and operating income (loss) when assessing financial results of operating segments and allocating resources. We measure the performance of our operating segments based upon operating segment revenue and operating income (loss). Segment operating income (loss) includes revenue and expenses incurred directly by the operating segment, including cost of sales and selling, marketing, and general and administrative costs. |
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 March 31, 2018, 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. However, a deferred income tax benefit was recorded due to the acquisition of IPS and related deferred tax liabilities created upon acquisition of the subsidiary on January 18, 2018. This resulted in a reduction in the Company’s valuation allowance for the existing deferred tax asset to offset the newly recorded deferred tax liability and accordingly a tax benefit has been recognized of $747,000. No current book income tax provision was recorded against book net income due to the existence of significant net operating loss carryforwards. On December 20, 2017, Congress passed the Tax Cuts and Jobs Act. This bill includes, among other things, a reduction of the U.S. corporate tax rate from 35% to 21%. The change in the tax rates will result in a decrease in the deferred tax assets. However, Forward maintains a full valuation allowance and the decrease in the deferred tax assets are offset by an equal adjustment to the valuation allowance. As a result of the 2017 Tax Cuts and Jobs Act, we expect no tax impact to the financial statements stemming from: (i) the mandatory deemed repatriation of cumulative earnings and profits for a controlled foreign corporation; or (ii) the change in the corporate income tax rate. |
Revenue Recognition | Revenue Recognition Distribution Segment The Company generally recognizes revenue from its distribution segment 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. Design Segment The Company generally recognizes revenue from design segment sales to customers based on: (i) time and material incurred; (ii) the performance of services as per the agreement; (iii) persuasive evidence that an arrangement exists and (iv) collection of the related accounts receivable is reasonably assured. The Company defers revenue when it receives consideration before achieving the criterion previously mentioned. |
Reclassifications | Reclassifications We have reclassified deferred income of approximately $170,000 from accrued expenses and other current liabilities to deferred income within the current liabilities section of the balance sheet in the accompanying fiscal 2017 financial statements to conform to the fiscal 2018 presentation. These reclassifications did not affect total liabilities, net income (loss) or accumulated deficit. |
Share-Based Compensation Expense | Share-Based Compensation Expense The Company recognizes employee and director share-based compensation in its condensed consolidated statements of operations 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 6 - 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 August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” providing additional guidance on several cash flow classification issues, with the goal of the update to reduce the current and potential future diversity in practice. The amendments in this update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company early adopted ASU No. 2016-15 and the adoption did not have any impact on the Company’s consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The amendment allows an entity to elect to reclassify the stranded tax effects resulting from the change in income tax rate from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. The amendments in this update are effective for periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements. In May 2014, FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605-Revenue Recognition and most industry-specific guidance throughout the ASC. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). The Company will adopt ASU 2014-09 in the first quarter of fiscal 2019. Because the Company's Distribution Segment's primary source of revenues is from the sale of finished goods, the Company does not anticipate that the adoption of ASU 2014-09 will have a material impact on this segment. However, the Company is evaluating the potential impact of the acquired IPS business and the resulting Design Segment and ultimately the Company's consolidated financial statements, disclosures and internal processes and controls. In February 2017, the FASB issued ASU 2017-02, “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 May 2017, the FASB issued ASU No. 2017-09, “Scope of Modification Accounting”, to provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. This ASU is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. Adoption of this ASU is prospective. The Company does not believe the adoption of this ASU will have a significant impact on its consolidated financial statements. |
Business Combinations | Business Combinations The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, the Company makes significant estimates and assumptions, especially with respect to intangible assets. The Company recognizes the purchase of assets and the assumption of liabilities as an asset acquisition, if the transaction does not constitute a business combination. The excess of the fair value of the purchase price is allocated on a relative fair value basis to the identifiable assets and liabilities. No goodwill is recorded in an asset acquisition. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from customer relationships and developed technology, discount rates and terminal values. Our estimate of fair value is based upon assumptions believed to be reasonable, but actual results may differ from estimates. Other estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. |
3. ACQUISITION (Tables)
3. ACQUISITION (Tables) | 6 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Total purchase consideration | Cash at closing (1) $ 1,930 Value of Equity in Buyer Common Stock (2) 500 Fair Value of Earn-Out Consideration (3) 600 Fair Value of Deferred Cash Consideration (4) 936 Total Purchase Consideration $ 3,966 (1) Cash paid by Forward at closing funded, in part, by a $1.6 million promissory note issued to Forward China, a related party of Forward. The remainder of the cash was funded by Forward’s operating cash account. (2) Forward issued 401,835 shares of common stock valued at the January 18, 2018 closing price of $1.24 per share for an aggregated value of approximately $500,000. (3) Fair Value of the Earn-Out consideration is measured using the Black-Scholes option pricing method. Earn-Out is to be paid in cash only upon meeting certain EBITDA milestones over a three-year period. (4) Fair value of the Deferred Cash consideration is the present value of the $1,000,000 payable in three increments with an applied discount rate ranging between 4.73% and 5.33%. |
Assets acquired and liabilities assumed | Estimated useful life Current Assets: Cash and Equivalents $ 600 Accounts Receivable 2,489 Other Current Assets 52 Total Current Assets 3,142 Current Liabilities: Accounts Payable (149) Deferred Revenue (267) Accrued and Other Current Liabilities (548) Total Current Liabilities (964) Property and Equipment 346 Other Long-Term Assets 51 Deferred TaxLiability (747) Assumed Debt (1,568) Finite-Lived Intangible Assets: Trademark 475 15 years Customer Relationships 1,050 8 years Total Intangible Assets 1,525 Goodwill 2,182 Total $ 3,966 (amounts may not add due to rounding) |
Business acquisition pro forma information | For the Three Months Ended March 31, For the Six Months Ended March 31, 2018 2017 2018 2017 Net revenues $ 12,663,467 $ 7,934,280 $ 22,572,330 $ 17,665,379 Gross profit 2,757,927 1,581,334 4,783,883 3,479,142 Operating expenses 2,637,832 2,217,846 4,451,418 4,044,460 Operating income (loss) 120,095 (636,512 ) 332,465 (565,318 ) Other (expense), net (60,837 ) (70,333 ) (134,219 ) (126,400 ) Income before income taxes 59,258 (706,845 ) 198,246 (691,718 ) Benefit from income taxes (expense) 745,991 (4,121 ) 744,874 (8,664 ) Net income $ 805,249 $ (710,966 ) $ 943,120 $ (700,382 ) Earnings per share: Basic $ 0.09 $ (0.08 ) $ 0.10 $ (0.08 ) Diluted $ 0.09 $ (0.08 ) $ 0.10 $ (0.08 ) |
4. FAIR VALUE MEASUREMENTS (Tab
4. FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Table of fair value liability measured on recurring basis | Fair value measurement at reporting date using Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs Balance (Level 1) (Level 2) (Level 3) Earn-out consideration $ 600,000 $ – $ – $ 600,000 March 31, 2018: $ 600,000 $ – $ – $ 600,000 |
Fair value assumptions | Description Valuation technique Unobservable Inputs Range Earn-out consideration Black-Scholes Volatility 35% - 45% Risk free interest rate 1.75% - 2.15% Expected term, in years 0.86 - 2.87 Dividend yield 0.00% |
5. SEGMENT INFORMATION (Tables)
5. SEGMENT INFORMATION (Tables) | 6 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment operating income (loss) | For the Three Months Ended March 31, For the Six Months Ended March 31, 2018 2017 2018 2017 Revenue Distribution $ 6,194,429 $ 4,532,876 $ 12,530,896 $ 11,124,124 Design 2,817,998 - 2,817,998 - Total Revenue 9,012,427 4,532,876 15,348,894 11,124,124 Cost of Sales Distribution 5,149,455 3,816,790 10,483,326 9,249,209 Design 2,032,207 - 2,032,207 - Total Cost of Sales 7,181,662 3,816,790 12,515,633 9,249,209 Segment Operating Income (loss) Distribution 92,505 (237,087) 143,578 (88,965) Design 139,559 - 139,559 - Total Income (loss) from operations 232,064 (237,087) 283,137 (88,965) Other Income (expenses) Distribution (21,024) (443) (25,446) 2,927 Design (9,573) - (9,573) - Total Other income (expense) (30,597) (443) (35,019) 2,927 Income (loss) before income taxes $ 201,467 $ (237,530) $ 248,118 $ (86,038) The following table presents assets by operating segment: March 31, September 30, 2018 2017 Distribution $ 10,907,888 $ 13,153,946 Design 7,413,954 – Total assets $ 18,321,842 $ 13,153,946 |
6. SHARE-BASED COMPENSATION (Ta
6. SHARE-BASED COMPENSATION (Tables) | 6 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Assumptions used | For the Three Months Ended March 31, For the Six Months Ended March 31, 2018 2017 2018 2017 Expected term (years) 3.50 n/a 3.50 n/a Expected volatility 103.1% n/a 103.1% n/a Risk free interest rate 2.45% n/a 2.45% n/a Expected dividends 0.00% n/a 0.00% n/a Estimated annual forfeiture rate 10% n/a 10% n/a |
Schedule of stock option activity | Weighted Weighted Average Average Remaining Number of Exercise Life Intrinsic Options Price In Years Value Outstanding, September 30, 2017 246,000 $ 2.19 Granted 68,000 1.67 Exercised – – Forfeited (20,750 ) 2.18 Expired – – Outstanding, March 31, 2018 293,250 $ 2.07 2.9 $ 48,425 Exercisable, March 31, 2018 203,498 $ 2.36 3.3 $ 30,949 |
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 $1.80 $ 1.27 164,750 $ 1.11 4.8 74,998 $2.20 to $2.85 2.48 66,000 2.48 2.1 66,000 $3.73 to $3.79 3.74 62,500 3.74 2.9 62,500 293,250 3.3 203,498 |
Schedule restricted stock option activity | Weighted Average Total Number of Grant Date Grant Date Shares Fair Value Fair Value Non-vested, September 30, 2017 160,000 $ 1.02 162,600 Granted 40,184 1.24 49,828 Vested (86,072) 1.10 (94,829) Forfeited (70,000) 1.07 (74,900) Non-vested, March 31, 2018 44,112 $ 0.97 $ 42,699 |
7. EARNINGS (LOSS) PER SHARE (T
7. EARNINGS (LOSS) PER SHARE (Tables) | 6 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of earnings (loss) per share | For the Three Months Ended March 31, For the Six Months Ended March 31, 2018 2017 2018 2017 Numerator: Net income (loss) (numerator for basic and diluted earnings per share) $ 948,467 $ (237,530 ) $ 995,118 $ (86,038 ) Weighted average shares outstanding (denominator for basic earnings per share) 9,291,334 8,671,420 9,023,166 8,646,103 Effects of dilutive securities: Assumed exercise of stock options, treasury stock method 41,133 – 34,976 – Assumed vesting of restricted stock, treasury stock method 65,587 – 88,076 – Dilutive potential common shares 106,720 – 123,052 – Denominator for diluted earnings per share - weighted average shares and assumed potential common shares 9,398,054 8,671,240 9,146,218 8,646,103 Basic earnings (loss) per share $ 0.10 $ (0.03 ) $ 0.11 $ (0.01 ) Diluted earnings (loss) per share $ 0.10 $ (0.03 ) $ 0.11 $ (0.01 ) |
Schedule of antidilutive securities | As of March 31, 2018 2017 Options 215,750 256,000 Warrants 202,225 723,846 Total potentially dilutive shares 417,975 979,846 |
8. CONCENTRATIONS (Tables)
8. CONCENTRATIONS (Tables) | 6 Months Ended |
Mar. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
Significant customers with revenue concentrations | For the three and six months ended March 31, 2018 and 2017, the Company had significant customers with individual percentage of total segment revenues equaling 10% or greater as follows: Distribution Segment For the Three Months Ended March 31, For the Six Months Ended March 31, 2018 2017 2018 2017 Customer 1 25.5% 25.1% 21.4% 26.6% Customer 2 28.2% 23.4% 29.7% 21.6% Customer 3 20.7% 22.0% 24.2% 22.6% Customer 4 8.5% 10.4% 9.6% 11.8% Totals 82.9% 80.9% 84.9% 82.6% Design Segment For the Three Months Ended March 31, 2018 Customer 1 14.5% Customer 2 11.9% Customer 3 11.0% Totals 37.4% At March 31, 2018 and September 30, 2017, concentration of accounts receivable with significant customers representing 10% or greater of segment accounts receivable was as follows: Distribution Segment March 31, 2018 September 30, 2017 Customer 1 31.2% 35.5% Customer 2 18.8% 13.3% Customer 3 23.2% 18.0% Customer 4 12.1% 14.1% Totals 85.3% 80.9% Design Segment March 31, 2018 Customer 1 14.4% Customer 2 38.9% Totals 53.3% |
2. ACCOUNTING POLICIES (Details
2. ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Accounting Policies [Abstract] | ||||
Income tax benefit | $ 747,000 | $ 0 | $ 747,000 | $ 0 |
Effective tax rate | 21.00% | |||
Reclassified deferred income | $ 170,000 | $ 170,000 |
3. ACQUISITION (Details - Purch
3. ACQUISITION (Details - Purchase consideration) - Intelligent Product Solutions [Member] $ in Thousands | 6 Months Ended | |
Mar. 31, 2018USD ($) | ||
Cash at closing (1) | $ 1,930 | [1] |
Value of Equity in Buyer Common Stock (2) | 500 | [2] |
Fair Value of Earn-Out Consideration (3) | 600 | [3] |
Fair Value of Deferred Cash Consideration (4) | 936 | [4] |
Total Purchase Consideration | $ 3,966 | |
[1] | Cash paid by Forward at closing funded, in part, by a $1.6 million promissory note issued to Forward China, a related party of Forward. The remainder of the cash was funded by Forward?s operating cash account. | |
[2] | Forward issued 401,835 shares of common stock valued at the January 18, 2018 closing price of $1.24 per share for an aggregated value of approximately $500,000. | |
[3] | Fair Value of the Earn-Out consideration is measured using the Black-Scholes option pricing method. Earn-Out is to be paid in cash only upon meeting certain EBITDA milestones over a three-year period. | |
[4] | Fair value of the Deferred Cash consideration is the present value of the $1,000,000 payable in three increments with an applied discount rate ranging between 4.73% and 5.33%. |
3. ACQUISITION (Details - Alloc
3. ACQUISITION (Details - Allocation of purchase consideration) - USD ($) | 6 Months Ended | |
Mar. 31, 2018 | Sep. 30, 2017 | |
Finite-Lived Intangible Assets: | ||
Goodwill | $ 2,182,427 | $ 0 |
Intelligent Product Solutions [Member] | ||
Current Assets: | ||
Cash and Equivalents | 600,000 | |
Accounts Receivable | 2,489,000 | |
Other Current Assets | 52,000 | |
Total Current Assets | 3,142,000 | |
Current Liabilities: | ||
Accounts Payable | (149,000) | |
Deferred Revenue | (267,000) | |
Accrued and Other Current Liabilities | (548,000) | |
Total Current Liabilities | (964,000) | |
Property and Equipment | 346,000 | |
Other Long-Term Assets | 51,000 | |
Deferred Tax Liability | (747,000) | |
Assumed Debt | (1,568,000) | |
Finite-Lived Intangible Assets: | ||
Total Intangible Assets | 1,525,000 | |
Goodwill | 2,182,000 | |
Total | 3,966,000 | |
Intelligent Product Solutions [Member] | Trademarks [Member] | ||
Finite-Lived Intangible Assets: | ||
Finite lived intangible assets | $ 475,000 | |
Estimated useful life | 15 years | |
Intelligent Product Solutions [Member] | Customer Relationships [Member] | ||
Finite-Lived Intangible Assets: | ||
Finite lived intangible assets | $ 1,050,000 | |
Estimated useful life | 8 years |
3. ACQUISITION (Details - Pro f
3. ACQUISITION (Details - Pro forma information) - Intelligent Product Solutions [Member] - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Net revenues | $ 12,663,467 | $ 7,934,280 | $ 22,572,330 | $ 17,665,379 |
Gross profit | 2,757,927 | 1,581,334 | 4,783,883 | 3,479,142 |
Operating expenses | 2,637,832 | 2,217,846 | 4,451,418 | 4,044,460 |
Operating income (loss) | 120,095 | (636,512) | 332,465 | (565,318) |
Other (expense), net | (60,837) | (70,333) | (134,219) | (126,400) |
Income before income taxes | 59,258 | (706,845) | 198,246 | (691,718) |
Benefit from income taxes (expense) | 745,991 | (4,121) | 744,874 | (8,664) |
Net income | $ 805,249 | $ (710,966) | $ 943,120 | $ (700,382) |
Earnings per share: Basic | $ 0.09 | $ (0.08) | $ 0.10 | $ (0.08) |
Earnings per share: Diluted | $ 0.09 | $ (0.08) | $ 0.10 | $ (0.08) |
3. ACQUISITION (Details Narrati
3. ACQUISITION (Details Narrative) | 6 Months Ended | |
Mar. 31, 2018USD ($)shares | ||
Stock issued for acquisition, value | $ 500,000 | |
Intelligent Product Solutions [Member] | ||
Cash paid for acquisition, gross | 1,930,000 | [1] |
Debt assumed | $ 1,500,000 | |
Stock issued for acquisition, shares | shares | 401,836 | |
Stock issued for acquisition, value | $ 500,000 | |
Deferred compensation assumed | 1,000,000 | |
Earnout payment liability | 2,200,000 | |
Intelligent Product Solutions [Member] | Promissory Note [Member] | ||
Debt face amount | $ 1,600,000 | |
Debt maturity date | Jan. 18, 2019 | |
Debt stated interest rate | 8.00% | |
[1] | Cash paid by Forward at closing funded, in part, by a $1.6 million promissory note issued to Forward China, a related party of Forward. The remainder of the cash was funded by Forward?s operating cash account. |
4. FAIR VALUE MEASUREMENTS (Det
4. FAIR VALUE MEASUREMENTS (Details - Fair Value) - Earnout Consideration [Member] | Mar. 31, 2018USD ($) |
Deferred consideration | $ 600,000 |
Fair Value, Inputs, Level 1 [Member] | |
Deferred consideration | 0 |
Fair Value, Inputs, Level 2 [Member] | |
Deferred consideration | 0 |
Fair Value, Inputs, Level 3 [Member] | |
Deferred consideration | $ 600,000 |
4. FAIR VALUE MEASUREMENTS (D32
4. FAIR VALUE MEASUREMENTS (Details - Assumptions) | 6 Months Ended | 8 Months Ended |
Mar. 31, 2018 | May 31, 2018 | |
Measurement Input, Price Volatility [Member] | ||
Fair value assumptions | 35% - 45% | |
Measurement Input Risk Free Interest Rate [Member] | ||
Fair value assumptions | 1.75% - 2.15% | |
Measurement Input, Expected Term [Member] | ||
Fair value assumptions | 0.86-2.87 years | |
Measurement Input, Expected Dividend Rate [Member] | ||
Fair value assumptions | 0.00% | |
Fair Value Measurements Recurring [Member] | ||
Fair value assumptions | Black-Scholes method |
5. SEGMENT INFORMATION (Details
5. SEGMENT INFORMATION (Details - Income Statement) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Revenue | $ 9,012,427 | $ 4,532,876 | $ 15,348,894 | $ 11,124,124 |
Cost of Sales | 7,181,662 | 3,816,790 | 12,515,533 | 9,249,209 |
Segment Operating Income (loss) | 232,064 | (237,087) | 283,137 | (88,965) |
Other income (expenses) | (30,597) | (443) | (35,019) | 2,927 |
Income (loss) before income taxes | 201,467 | (237,530) | 248,118 | (86,038) |
Distribution [Member] | ||||
Revenue | 6,194,429 | 4,532,876 | 12,530,896 | 11,124,124 |
Cost of Sales | 5,149,455 | 3,816,790 | 10,483,326 | 9,249,209 |
Segment Operating Income (loss) | 92,505 | (237,087) | 143,578 | (88,965) |
Other income (expenses) | (21,024) | (443) | (25,446) | 2,927 |
Design [Member] | ||||
Revenue | 2,817,998 | 0 | 2,817,998 | 0 |
Cost of Sales | 2,032,207 | 0 | 2,032,207 | 0 |
Segment Operating Income (loss) | 139,559 | 0 | 139,559 | 0 |
Other income (expenses) | $ (9,573) | $ 0 | $ (9,573) | $ 0 |
5. SEGMENT INFORMATION (Detai34
5. SEGMENT INFORMATION (Details - Balance sheet) - USD ($) | Mar. 31, 2018 | Sep. 30, 2017 |
Assets | $ 18,321,842 | $ 13,153,946 |
Distribution [Member] | ||
Assets | 10,907,888 | 13,153,946 |
Design [Member] | ||
Assets | $ 7,413,954 | $ 0 |
6. SHARE-BASED COMPENSATION (De
6. SHARE-BASED COMPENSATION (Details - Assumptions) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Expected term (years) | 3 years 6 months | 3 years 6 months | ||
Expected volatility | 103.10% | 103.10% | ||
Risk free interest rate | 2.45% | 2.45% | ||
Expected dividends | 0.00% | 0.00% | ||
Estimated annual forfeiture rate | 10.00% | 10.00% |
6. SHARE-BASED COMPENSATION (36
6. SHARE-BASED COMPENSATION (Details - Option activity) - Options [Member] | 6 Months Ended |
Mar. 31, 2018USD ($)$ / sharesshares | |
Number of Options | |
Shares, Outstanding at Beginning | shares | 246,000 |
Shares, Granted | shares | 68,000 |
Shares, Exercised | shares | 0 |
Shares, Forfeited | shares | (20,750) |
Shares, Expired | shares | 0 |
Shares, Outstanding at Ending | shares | 293,250 |
Shares, Exercisable | shares | 203,498 |
Weighted Average Exercise Price | |
Weighted average exercise price, Outstanding at Beginning | $ / shares | $ 2.19 |
Weighted average exercise price, Granted | $ / shares | 1.67 |
Weighted average exercise price, Exercised | $ / shares | |
Weighted average exercise price, Forfeited | $ / shares | 2.18 |
Weighted average exercise price, Expired | $ / shares | |
Weighted average exercise price, Outstanding at Ending | $ / shares | 2.07 |
Weighted average exercise price, Exercisable | $ / shares | $ 2.36 |
Weighted Average Remaining life In Years | |
Weighted average remaining contractual term (Years), Outstanding | 2 years 10 months 24 days |
Weighted average remaining contractual term (Years), Exercisable | 3 years 3 months 18 days |
Intrinsic Value | |
Aggregate intrinsic value, Outstanding | $ | $ 48,425 |
Aggregate intrinsic value, Exercisable | $ | $ 30,949 |
6. SHARE-BASED COMPENSATION (37
6. SHARE-BASED COMPENSATION (Details - Options by exercise price) - $ / shares | 6 Months Ended | |
Mar. 31, 2018 | Sep. 30, 2017 | |
$0.64 to $1.80 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Exercise price lower limit | $ 0.64 | |
Exercise price upper limit | 1.80 | |
Options Outstanding, Weighted average exercise price | $ 1.27 | |
Options Outstanding, Outstanding Number of Options | 164,750 | |
Options Exercisable, Weighted average exercise price | $ 1.11 | |
Options Exercisable, Weighted Average Remaining Life In Years | 4 years 9 months 18 days | |
Options Exercisable, Exercisable Number of Options | 74,998 | |
$2.20 to $2.85 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Exercise price lower limit | $ 2.20 | |
Exercise price upper limit | 2.85 | |
Options Outstanding, Weighted average exercise price | $ 2.48 | |
Options Outstanding, Outstanding Number of Options | 66,000 | |
Options Exercisable, Weighted average exercise price | $ 2.48 | |
Options Exercisable, Weighted Average Remaining Life In Years | 2 years 1 month 6 days | |
Options Exercisable, Exercisable Number of Options | 66,000 | |
$3.73 to $3.79 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Exercise price lower limit | $ 3.73 | |
Exercise price upper limit | 3.79 | |
Options Outstanding, Weighted average exercise price | $ 3.74 | |
Options Outstanding, Outstanding Number of Options | 62,500 | |
Options Exercisable, Weighted average exercise price | $ 3.74 | |
Options Exercisable, Weighted Average Remaining Life In Years | 2 years 10 months 24 days | |
Options Exercisable, Exercisable Number of Options | 62,500 | |
Options [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options Outstanding, Weighted average exercise price | $ 2.07 | $ 2.19 |
Options Outstanding, Outstanding Number of Options | 293,250 | |
Options Exercisable, Exercisable Number of Options | 203,498 |
6. SHARE-BASED COMPENSATION (38
6. SHARE-BASED COMPENSATION (Details - Restricted stock activity) - Restricted Stock [Member] | 6 Months Ended |
Mar. 31, 2018USD ($)$ / sharesshares | |
Number of Shares | |
Shares, Non-vested balance | shares | 160,000 |
Shares granted | shares | 40,184 |
Shares vested | shares | (86,072) |
Shares forfeited | shares | (70,000) |
Shares, Non-vested balance | shares | 44,112 |
Weighted Average Grant Date Fair Value | |
Weighted average grant date fair value, Non-vested balance | $ / shares | $ 1.02 |
Weighted average grant date fair value, granted | $ / shares | 1.24 |
Weighted average grant date fair value, vested | $ / shares | 1.10 |
Weighted average grant date fair value, forfeited | $ / shares | 1.07 |
Weighted average grant date fair value, Non-vested balance | $ / shares | $ 0.97 |
Total Grant Date Fair Value | |
Total grant date fair value, Non-vested balance | $ | $ 162,600 |
Total grant date fair value, granted | $ | 49,828 |
Total grant date fair value, vested | $ | (94,829) |
Total grant date fair value, forfeited | $ | (74,900) |
Total grant date fair value, Non-vested balance | $ | $ 42,699 |
6. SHARE-BASED COMPENSATION (39
6. SHARE-BASED COMPENSATION (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share based compensation expense | $ 41,226 | $ 79,458 | ||
Options [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options granted | 68,000 | |||
Options vesting period | Shares vest ratably over three years | |||
Options grant date fair value | $ 77,128 | |||
Options grant date fair value per share | $ 1.13 | |||
Share based compensation expense | $ 4,000 | $ 1,000 | $ 5,000 | 3,000 |
Options [Member] | Nonvested Stock Option Awards [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Unrecognized compensation cost | 74,000 | $ 74,000 | ||
Unrecognized compensation cost weighted average vesting period | 1 year 10 months 24 days | |||
Restricted Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options vesting period | 16,072 shares vested immediately, 12,056 shares vest on July 18, 2018 and 12,056 shares vest on January 18, 2019 | |||
Options grant date fair value | $ 49,828 | |||
Restricted stock granted | 40,184 | |||
Share based compensation expense | 41,000 | $ 29,000 | $ 36,000 | $ 77,000 |
Unrecognized compensation cost | $ 24,000 | $ 24,000 | ||
Unrecognized compensation cost weighted average vesting period | 7 months 6 days |
7. EARNINGS PER SHARE (Details
7. EARNINGS PER SHARE (Details - Earnings per share) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Numerator: | ||||
Net income (loss) | $ 948,467 | $ (237,530) | $ 995,118 | $ (86,038) |
Denominator: | ||||
Weighted average shares outstanding - basic | 9,291,334 | 8,671,240 | 9,023,166 | 8,646,103 |
Effect of dilutive securities | ||||
Assumed exercise of stock options, treasury stock method | 41,133 | 0 | 34,976 | 0 |
Assumed vesting of restricted stock, treasury stock method | 65,587 | 0 | 88,076 | 0 |
Dilutive potential common shares | 106,720 | 0 | 123,052 | 0 |
Weighted average shares outstanding - diluted | 9,398,054 | 8,671,240 | 9,146,218 | 8,646,103 |
Basic earnings per share | $ 0.10 | $ (0.03) | $ 0.11 | $ (0.01) |
Diluted earnings per share | $ 0.10 | $ (0.03) | $ 0.11 | $ (0.01) |
7. EARNINGS PER SHARE (Detail41
7. EARNINGS PER SHARE (Details - Antidilutive shares) - shares | 6 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 417,975 | 979,846 |
Options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 215,750 | 256,000 |
Warrants [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 202,225 | 723,846 |
8. CONCENTRATIONS (Details - Co
8. CONCENTRATIONS (Details - Concentration sales) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Sep. 30, 2017 | |
Sales Revenue, Net [Member] | Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 82.90% | 80.90% | 84.90% | 82.60% | |
Sales Revenue, Net [Member] | Design [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 37.40% | ||||
Sales Revenue, Net [Member] | Customer 1 [Member] | Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 25.50% | 25.10% | 21.40% | 26.60% | |
Sales Revenue, Net [Member] | Customer 1 [Member] | Design [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 14.50% | ||||
Sales Revenue, Net [Member] | Customer 2 [Member] | Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 28.20% | 23.40% | 29.70% | 21.60% | |
Sales Revenue, Net [Member] | Customer 2 [Member] | Design [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 11.90% | ||||
Sales Revenue, Net [Member] | Customer 3 [Member] | Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 20.70% | 22.00% | 24.20% | 22.60% | |
Sales Revenue, Net [Member] | Customer 3 [Member] | Design [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 11.00% | ||||
Sales Revenue, Net [Member] | Customer 4 [Member] | Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 8.50% | 10.40% | 9.60% | 11.80% | |
Accounts Receivable [Member] | Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 85.30% | 80.90% | |||
Accounts Receivable [Member] | Design [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 53.30% | ||||
Accounts Receivable [Member] | Customer 1 [Member] | Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 31.20% | 35.50% | |||
Accounts Receivable [Member] | Customer 1 [Member] | Design [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 14.40% | ||||
Accounts Receivable [Member] | Customer 2 [Member] | Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 18.80% | 13.30% | |||
Accounts Receivable [Member] | Customer 2 [Member] | Design [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 38.90% | ||||
Accounts Receivable [Member] | Customer 3 [Member] | Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 23.20% | 18.00% | |||
Accounts Receivable [Member] | Customer 4 [Member] | Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk | 12.10% | 14.10% |
9. RELATED PARTY TRANSACTIONS (
9. RELATED PARTY TRANSACTIONS (Details Narrative) - Forward China [Member] - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Related Party Transaction [Line Items] | ||||
Service fees paid | $ 359,000 | $ 344,000 | $ 719,000 | $ 707,000 |
Commissions earned | 0 | $ 0 | 0 | $ 12,904 |
Debt face amount | $ 1,600,000 | $ 1,600,000 | ||
Debt maturity date | Jan. 18, 2019 | |||
Debt stated interest rate | 8.00% | 8.00% | ||
Interest expense | $ 21,334 |
11. WARRANT EXERCISE (Details N
11. WARRANT EXERCISE (Details Narrative) - $ / shares | 6 Months Ended | |
Mar. 31, 2018 | Jan. 22, 2018 | |
Warrants [Member] | ||
Warrants converted, warrants | 521,621 | |
Conversion price | $ 1.84 | |
Common Stock [Member] | ||
Warrants converted, common shares issued | 223,704 |