Cover
Cover - shares | 3 Months Ended | |
Dec. 31, 2022 | Jan. 31, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Dec. 31, 2022 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2023 | |
Current Fiscal Year End Date | --09-30 | |
Entity File Number | 001-34780 | |
Entity Registrant Name | FORWARD INDUSTRIES, INC. | |
Entity Central Index Key | 0000038264 | |
Entity Tax Identification Number | 13-1950672 | |
Entity Incorporation, State or Country Code | NY | |
Entity Address, Address Line One | 700 Veterans Memorial Highway | |
Entity Address, Address Line Two | Suite 100 | |
Entity Address, City or Town | Hauppauge | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 11788 | |
City Area Code | (631) | |
Local Phone Number | 547-3041 | |
Title of 12(b) Security | Common Stock, par value $0.01 | |
Trading Symbol | FORD | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 10,061,185 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Dec. 31, 2022 | Sep. 30, 2022 |
Current assets: | ||
Cash | $ 2,331,806 | $ 2,575,522 |
Accounts receivable, net | 8,523,079 | 7,542,666 |
Inventories, net | 4,138,879 | 3,801,030 |
Prepaid expenses and other current assets | 394,343 | 417,605 |
Total current assets | 15,388,107 | 14,336,823 |
Property and equipment, net | 261,917 | 241,146 |
Intangible assets, net | 1,052,711 | 1,105,901 |
Goodwill | 1,758,682 | 1,758,682 |
Operating lease right of use assets, net | 3,328,047 | 3,427,726 |
Other assets | 68,737 | 68,737 |
Total assets | 21,858,201 | 20,939,015 |
Current liabilities: | ||
Accounts payable | 576,449 | 268,160 |
Due to Forward China | 9,475,932 | 7,713,880 |
Deferred income | 334,588 | 438,878 |
Current portion of earnout consideration | 0 | 25,000 |
Current portion of operating lease liability | 387,222 | 377,940 |
Accrued expenses and other current liabilities | 694,644 | 1,153,906 |
Total current liabilities | 11,468,835 | 9,977,764 |
Other liabilities: | ||
Note payable to Forward China | 1,350,000 | 1,400,000 |
Operating lease liability, less current portion | 3,149,279 | 3,249,824 |
Earnout consideration, less current portion | 30,000 | 45,000 |
Total other liabilities | 4,529,279 | 4,694,824 |
Total liabilities | 15,998,114 | 14,672,588 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Common stock, par value $0.01 per share; 40,000,000 shares authorized; 10,061,185 shares issued and outstanding at December 31, 2022 and September 30, 2022 | 100,612 | 100,612 |
Additional paid-in capital | 20,139,646 | 20,115,711 |
Accumulated deficit | (14,380,171) | (13,949,896) |
Total shareholders' equity | 5,860,087 | 6,266,427 |
Total liabilities and shareholders' equity | $ 21,858,201 | $ 20,939,015 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Dec. 31, 2022 | Sep. 30, 2022 |
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) | 10,061,185 | 10,061,185 |
Common stock, shares outstanding (in shares) | 10,061,185 | 10,061,185 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Income Statement [Abstract] | ||
Revenues, net | $ 10,809,679 | $ 11,613,741 |
Cost of sales | 8,890,978 | 8,994,973 |
Gross profit | 1,918,701 | 2,618,768 |
Sales and marketing expenses | 690,300 | 737,677 |
General and administrative expenses | 1,695,278 | 1,666,877 |
(Loss)/income from operations | (466,877) | 214,214 |
Fair value adjustment of earnout consideration | (40,000) | 0 |
Interest expense | 27,958 | 32,828 |
Other (income)/expense, net | (24,560) | 1,362 |
(Loss)/income before income taxes | (430,275) | 180,024 |
Provision for income taxes | 0 | 0 |
Net (loss)/income | $ (430,275) | $ 180,024 |
(Loss)/earnings per share: | ||
Basic | $ (0.04) | $ 0.02 |
Diluted | $ (0.04) | $ 0.02 |
Weighted average common shares outstanding: | ||
Basic | 10,061,185 | 10,061,185 |
Diluted | 10,061,185 | 10,337,113 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Sep. 30, 2021 | $ 100,612 | $ 19,914,476 | $ (12,571,645) | $ 7,443,443 |
Beginning balance, shares at Sep. 30, 2021 | 10,061,185 | |||
Share-based compensation | 38,800 | 38,800 | ||
Net income | 180,024 | 180,024 | ||
Ending balance, value at Dec. 31, 2021 | $ 100,612 | 19,953,276 | (12,391,621) | 7,662,267 |
Ending balance, shares at Dec. 31, 2021 | 10,061,185 | |||
Beginning balance, value at Sep. 30, 2022 | $ 100,612 | 20,115,711 | (13,949,896) | 6,266,427 |
Beginning balance, shares at Sep. 30, 2022 | 10,061,185 | |||
Share-based compensation | 23,935 | 23,935 | ||
Net income | (430,275) | (430,275) | ||
Ending balance, value at Dec. 31, 2022 | $ 100,612 | $ 20,139,646 | $ (14,380,171) | $ 5,860,087 |
Ending balance, shares at Dec. 31, 2022 | 10,061,185 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Operating Activities: | ||
Net (loss)/income | $ (430,275) | $ 180,024 |
Adjustments to reconcile net (loss)/income to net cash (used in)/provided by operating activities: | ||
Share-based compensation | 23,935 | 38,800 |
Depreciation and amortization | 77,530 | 73,384 |
Bad debt expense | 13,109 | 393 |
Change in fair value of earnout consideration | (40,000) | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (993,522) | (27,719) |
Inventories | (337,849) | (909,577) |
Prepaid expenses and other current assets | 23,262 | (69,577) |
Other assets | 0 | 0 |
Accounts payable and due to Forward China | 2,070,341 | 1,143,407 |
Deferred income | (104,290) | 565,183 |
Net changes in operating lease liabilities | 8,416 | 10,544 |
Accrued expenses and other current liabilities | (459,262) | 133,022 |
Net cash (used in)/provided by operating activities | (148,605) | 1,137,884 |
Investing Activities: | ||
Purchases of property and equipment | (45,111) | (66,024) |
Net cash used in investing activities | (45,111) | (66,024) |
Financing Activities: | ||
Repayment of note payable to Forward China | (50,000) | (50,000) |
Net cash used in financing activities | (50,000) | (50,000) |
Net (decrease)/increase in cash | (243,716) | 1,021,860 |
Cash at beginning of period | 2,575,522 | 1,410,365 |
Cash at end of period | 2,331,806 | 2,432,225 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | 27,958 | 32,828 |
Supplemental Disclosures of Non-Cash Information: | ||
Operating lease assets obtained in exchange for operating lease liabilities | $ 0 | $ 204,881 |
OVERVIEW
OVERVIEW | 3 Months Ended |
Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
OVERVIEW | NOTE 1 OVERVIEW Business Forward Industries, Inc. (“Forward”, “we”, “our” or the “Company”) is a global design, manufacturing, sourcing and distribution company serving top tier medical and technology customers worldwide. As a result of the continued expansion of our design development capabilities through our wholly-owned subsidiaries, the Company is able to introduce proprietary products to the market from concepts brought to it from a number of different sources, both inside and outside the Company. Liquidity For the three months ended December 31, 2022, the Company generated a net loss of $ 430,000 149,000 1,300,000 May 31, 2023 Impact of COVID-19 The effects of the COVID-19 pandemic continue to impact our business with higher historical costs for ocean freight and ground transportation, particularly from the Asia-Pacific region. We expect to see the benefits of declining ocean freight costs in future periods. Inflation, in part associated with the pandemic, continues to increase the cost of acquiring and retaining our employees and acquiring inventory. The instability of transportation costs and future inflation are still largely unknown but are expected to continue throughout the fiscal year ended September 30, 2023 (“Fiscal 2023”). The effects of COVID-19 may further impact our business in ways we cannot predict, and such impacts could be significant. The current economic conditions may continue to negatively impact our results of operations, cash flows and financial position in future periods as well as that of our customers, including their ability to pay for our services and to choose to allocate their budgets to new or existing projects which may or may not require our services. The long-term financial impact on our business cannot be reasonably estimated at this time. As a result, the effects of COVID-19 may not be fully reflected in our financial results until future periods. Until the effects of the pandemic and associated inflationary impact have fully receded, we expect business conditions to remain challenging. In response to these challenges, we will continue to focus on those factors that we can control: closely managing and controlling our expenses and inventory levels; aligning our design and development schedules with demand in a proactive manner to minimize our cash operating costs; pursuing further improvements in the productivity and effectiveness of our development, selling and administrative activities and, where appropriate, taking advantage of opportunities to enhance our business growth and strategy. |
ACCOUNTING POLICIES
ACCOUNTING POLICIES | 3 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
ACCOUNTING POLICIES | NOTE 2 ACCOUNTING POLICIES Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of Forward Industries, Inc. and all of its wholly-owned subsidiaries: Forward Industries (IN), Inc. (“Forward US”), Forward Industries (Switzerland) GmbH (“Forward Switzerland”), Forward Industries UK Limited (“Forward UK”), Intelligent Product Solutions, Inc. (“IPS”) and Kablooe, Inc. (“Kablooe”). The terms “Forward”, “we”, “our” or the “Company” as used throughout this document are used to indicate Forward Industries, Inc. and all of its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. 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, 2023. 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, 2022, and with the disclosures and risk factors presented therein. The September 30, 2022 condensed consolidated balance sheet has been derived from the audited consolidated financial statements. 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. Throughout this document, certain dollar amounts and percentages have been rounded to their approximate values. Segment Reporting The Company has three reportable segments: Original Equipment Manufacturing (“OEM”) distribution, retail distribution and design. The OEM distribution segment sources and sells carrying cases and other accessories for medical monitoring and diagnostic kits and a variety of other portable electronic and non-electronic devices directly to OEMs or their contract manufacturers worldwide. The retail distribution segment sources and sells smart-enabled furniture, hot tubs and a variety of other products through various online retailer websites to customers predominantly located in the U.S. The design segment consists of two operating segments (IPS and Kablooe, which have been aggregated into one reportable segment) that provide a full spectrum of hardware and software product design and engineering services to customers predominantly located in the U.S. See Note 5 for more information on segments. Accounts Receivable Accounts receivable consist of unsecured trade accounts with customers in amounts that have been invoiced ($ 8,900,000 7,861,000 no 32,000 20,000 837,000 852,000 The Company has agreements with various retailers which contain different terms for trade discounts, promotional and other sales allowances. At December 31, 2022 and September 30, 2022, the Company recorded accounts receivable allowances of $ 110,000 55,000 Inventories Inventories consist primarily of finished goods and are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. Based on management’s estimates, an allowance is made to reduce excess, obsolete, or otherwise unsellable inventories to net realizable value. The allowance is established through charges to cost of sales in the Company’s condensed consolidated statements of operations. In determining the adequacy of the allowance, management’s estimates are based upon several factors, including analyses of inventory levels, historical loss trends, sales history and projections of future sales demand. The Company’s estimates of the allowance may change from time to time based on management’s assessments, and such changes could be material. At December 31, 2022 and September 30, 2022, the allowance for slow-moving inventory, which relates entirely to our retail segment, was $ 460,000 535,000 Revenue Recognition OEM Distribution Segment The OEM distribution segment recognizes revenue when: (i) finished goods are shipped to its customers (in general, these conditions occur at either point of shipment or point of destination, depending on the terms of sale and transfer of control); (ii) there are no other deliverables or performance obligations; and (iii) there are no further obligations to the customer after the title of the goods has transferred. If the Company receives consideration before achieving the criteria previously mentioned, it records a contract liability, which is classified as a component of deferred income in the accompanying condensed consolidated balance sheets. The OEM distribution segment had no Retail Distribution Segment The retail distribution segment sells products primarily through online websites operated by authorized third-party retailers. Revenue is recognized when control (as defined in Accounting Standards Codification, “ASC” 606, “Revenue from Contracts with Customers”) of the related goods is transferred to the retailer, which generally occurs upon shipment to the end customer. Other than product delivery, the retail distribution segment does not typically have other deliverables or performance obligations associated with its products. Revenue is measured as the amount of consideration expected to be received in exchange for the products provided, net of allowances taken by retailers for product returns and any taxes collected from customers that will be remitted to governmental authorities. When the Company receives consideration before achieving the criteria previously mentioned, it records a contract liability, which is classified as a component of deferred income in the accompanying condensed consolidated balance sheets. The retail distribution segment had no Design Segment The Company applies the “cost to cost” and “right to invoice” methods of revenue recognition to the contracts with customers in the design segment. The design segment typically engages in two types of contracts: (i) time and material and (ii) fixed price. The Company recognizes revenue over time on its time and material contracts utilizing a “right to invoice” method. Revenues from fixed price contracts that require performance of services that are not related to the production of tangible assets are recognized by using cost inputs to measure progress toward the completion of its performance obligations, or the “cost to cost” method. Revenues from fixed price contracts that contain specific deliverables are recognized when the performance obligation has been satisfied or the transfer of goods to the customer has been completed and accepted. Recognized revenues that will not be billed until a later date, or contract assets, are recorded as an asset and classified as a component of accounts receivable in the accompanying condensed consolidated balance sheets. The design segment had contract assets of $ 602,000 609,000 693,000 335,000 439,000 188,000 Goodwill The Company reviews goodwill for impairment at least annually, or more often if triggering events occur. The Company has two reporting units with goodwill (the IPS and Kablooe operating segments) and we perform our annual goodwill impairment test on September 30, the end of the fiscal year, or upon the occurrence of a triggering event. The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company would not need to perform a quantitative impairment test for the reporting unit. If the Company cannot support such a conclusion or does not elect to perform the qualitative assessment, then the Company will perform the quantitative assessment by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying value, no impairment charge is recognized. If the fair value of the reporting unit is less than its carrying value, an impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value. A significant amount of judgment is required in performing goodwill impairment tests including estimating the fair value of a reporting unit. Management evaluated and concluded that there were no indications goodwill was impaired at December 31, 2022. Intangible Assets Intangible assets include trademarks and customer relationships, which were acquired as part of the acquisitions of IPS in Fiscal 2018 and Kablooe in Fiscal 2020 and are amortized over their estimated useful lives, which are periodically evaluated for reasonableness. Our intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In assessing the recoverability of our intangible assets, we must make estimates and assumptions regarding future cash flows and other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is recognized and the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. If these estimates or material related assumptions change in the future, we may be required to record impairment charges related to our intangible assets. Management evaluated and concluded that there were no indications of impairments of intangible assets at December 31, 2022. 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. At December 31, 2022, there was no change to our assessment that a full valuation allowance was required against all net deferred tax assets as it is not probable that such deferred tax assets will be realized. Accordingly, any deferred tax provision or benefit was offset by an equal and opposite change to the valuation allowance. Our income tax provision or benefit is generally not significant due to the existence of significant net operating loss carryforwards. Fair Value Measurements We perform fair value measurements in accordance with the guidance provided by ASC 820, “Fair Value Measurement.” 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. Leases Lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, using the Company’s incremental borrowing rate commensurate with the lease term, since the Company’s lessors do not provide an implicit rate, nor is one readily available. The Company has certain leases that may include an option to renew and when it is reasonably probable to exercise such option, the Company will include the renewal option terms in determining the lease asset and lease liability. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Operating lease assets are shown as right of use assets on the condensed consolidated balance sheets. The current and long-term portions of operating lease liabilities are shown separately as such on the condensed consolidated balance sheets. Recent Accounting Pronouncements In November 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU 2019-11 is an accounting pronouncement that provides clarity to and amends earlier guidance on this topic and would be effective concurrently with the adoption of such earlier guidance. This pronouncement is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. The Company is currently evaluating the effects of this pronouncement on its condensed consolidated financial statements. |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 3 Months Ended |
Dec. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS AND GOODWILL | NOTE 3 INTANGIBLE ASSETS AND GOODWILL Intangible Assets The Company’s intangible assets consist of the following: Intangible Assets December 31, 2022 September 30, 2022 Trademarks Customer Relationships Total Intangible Assets Trademarks Customer Relationships Total Intangible Assets Gross carrying amount $ 585,000 $ 1,390,000 $ 1,975,000 $ 585,000 $ 1,390,000 $ 1,975,000 Less accumulated amortization (174,000 ) (748,000 ) (922,000 ) (164,000 ) (705,000 ) (869,000 ) Net carrying amount $ 411,000 $ 642,000 $ 1,053,000 $ 421,000 $ 685,000 $ 1,106,000 The Company’s intangible assets resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively, and relate to the design segment of our business. Intangible assets are amortized over their expected useful lives of 15 8 53,000 At December 31, 2022, estimated amortization expense for the Company’s intangible assets is as follows: Estimated amortization expense Remainder of Fiscal 2023 $ 160,000 Fiscal 2024 213,000 Fiscal 2025 213,000 Fiscal 2026 121,000 Fiscal 2027 82,000 Fiscal 2028 78,000 Thereafter 186,000 Total $ 1,053,000 Goodwill Goodwill represents the future economic benefits of assets acquired in a business combination that are not individually identified or separately recognized. The Company’s goodwill resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively. The goodwill associated with the IPS acquisition is not deductible for tax purposes, but the goodwill associated with the Kablooe acquisition is deductible for tax purposes. All of the Company’s goodwill is held under the design segment of our business. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Dec. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 4 FAIR VALUE MEASUREMENTS The earnout consideration of $ 30,000 70,000 |
SEGMENTS AND CONCENTRATIONS
SEGMENTS AND CONCENTRATIONS | 3 Months Ended |
Dec. 31, 2022 | |
Segment Reporting [Abstract] | |
SEGMENTS AND CONCENTRATIONS | NOTE 5 SEGMENTS AND CONCENTRATIONS The Company has three reportable segments: OEM distribution, retail distribution and design. See Note 2 for more information on the composition and accounting policies of our reportable segments. Our chief operating decision maker (“CODM”) regularly reviews revenue and operating income for each segment to assess financial results and allocate resources. For our OEM and retail distribution segments, we exclude general and administrative and general corporate expenses from their measure of profitability as these expenses are not allocated to the segments and therefore not included in the measure of profitability used by the CODM. For the design segment, general and administrative expenses directly attributable to that segment are included in its measure of profitability as these expenses are included in the measure of its profitability reviewed by the CODM. We do not include intercompany activity in our segment results shown below to be consistent with the information that is presented to the CODM. Segment assets consist of accounts receivable and inventory, which are regularly reviewed by the CODM, as well as goodwill and intangible assets resulting from design segment acquisitions. Information by segment and related reconciliations are shown in the tables below: Segment operating income (loss) For the Three Months Ended December 31, 2022 2021 Revenues: OEM distribution $ 4,377,000 $ 5,242,000 Retail distribution 1,057,000 1,392,000 Design 5,376,000 4,980,000 Total segment revenues $ 10,810,000 $ 11,614,000 Operating income/(loss): OEM distribution $ 112,000 $ 497,000 Retail distribution (326,000 ) (228,000 ) Design 433,000 585,000 Total segment operating income 219,000 854,000 General corporate expenses (686,000 ) (640,000 ) Total (loss)/income from operations (467,000 ) 214,000 Other (income)/expense, net (37,000 ) 34,000 (Loss)/income before income taxes $ (430,000 ) $ 180,000 Depreciation and amortization: OEM distribution $ 2,000 $ 2,000 Design 76,000 71,000 Total depreciation and amortization $ 78,000 $ 73,000 Schedule of segment assets December 31, 2022 September 30, 2022 Segment Assets: OEM distribution $ 5,262,000 $ 4,276,000 Retail distribution 3,865,000 3,816,000 Design 6,346,000 6,116,000 Total segment assets 15,473,000 14,208,000 General corporate assets 6,385,000 6,731,000 Total assets $ 21,858,000 $ 20,939,000 The Company had certain customers in the OEM distribution segment whose individual percentage of the Company’s consolidated revenues was 10% or greater. Revenues from two customers or their affiliates or contract manufacturers represented 25.0 25.2 For the three months ended December 31, 2022, the Company had one customer in the design segment whose individual percentage of the Company’s consolidated revenues was 10% or greater. Revenues from this customer represented 14.4 At December 31, 2022 and September 30, 2022, the Company had customers in the OEM distribution segment whose accounts receivable balance accounted for 10% or more of the Company’s consolidated accounts receivable. Accounts receivable from two customers or their affiliates or contract manufacturers represented 37.0 28.1 At December 31, 2022, the Company had one customer in the design segment whose accounts receivable balance accounted for 10% or more of the Company’s consolidated accounts receivable. Accounts receivable from this customer represented 11.5 In March 2023, the Company’s contract with one of its major diabetic customers in the OEM distribution segment will expire. Due to increased pricing pressures, the Company will not be extending its contract with this customer. Revenue from this customer represented 12 |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended |
Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | NOTE 6 SHARE-BASED COMPENSATION Stock Options No 58,000 2.39 1.03 60,000 There were no The Company recognized compensation expense for stock option awards of $ 24,000 39,000 24,000 0.5 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Dec. 31, 2022 | |
(Loss)/earnings per share: | |
EARNINGS PER SHARE | NOTE 7 EARNINGS PER SHARE Basic earnings 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 per share data is computed using the weighted average number of common and dilutive common equivalent shares outstanding during each period. Dilutive common-equivalent shares consist of shares that would be issued upon the exercise of stock options and warrants, computed using the treasury stock method. A reconciliation of basic and diluted earnings per share is as follows: Schedule of earnings (loss) per share For the Three Months Ended December 31, 2022 2021 Numerator: Net (loss)/income $ (430,000 ) $ 180,000 Denominator: Weighted average common shares outstanding 10,061,000 10,061,000 Dilutive common share equivalents – 276,000 Weighted average diluted shares outstanding 10,061,000 10,337,000 (Loss)/earnings per share: Basic $ (0.04 ) $ 0.02 Diluted $ (0.04 ) $ 0.02 The following securities were excluded from the calculation of diluted earnings per share in each period because their inclusion would have been anti-dilutive: Schedule of antidilutive securities excluded For the Three Months Ended December 31, 2022 2021 Options 1,075,000 58,000 Warrants 151,000 – Total potentially dilutive shares 1,226,000 58,000 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Dec. 31, 2022 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 8 RELATED PARTY TRANSACTIONS Buying Agency and Supply Agreement The Company has a Buying Agency and Supply Agreement (the “Supply Agreement”) with Forward China. The Supply Agreement provides that, upon the terms and subject to the conditions set forth therein, Forward China will act as the Company’s exclusive buying agent and supplier of Products (as defined in the Supply Agreement) in the Asia-Pacific region. The Company purchases products at Forward China’s cost and pays 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 Supply Agreement expires October 22, 2023. Terence Wise, Chief Executive Officer and Chairman of the Company, is the owner of Forward China. In addition, Jenny P. Yu, a Managing Director of Forward China, beneficially owns more than 5% of the Company’s common stock. The Company recorded service fees to Forward China of $ 344,000 362,000 The Company has prepayments to Forward China for inventory purchases of $ 20,000 Promissory Note On January 18, 2018, the Company issued a $ 1,600,000 8 28,000 32,000 December 31, 2024 50,000 1,350,000 Other Related Party Activity In October 2020, the Company began selling smart-enabled furniture, which is sourced by Forward China and sold in the U.S. under the Koble brand name. The Koble brand is owned by The Justwise Group Ltd. (“Justwise”), a company owned by Terence Wise, Chief Executive Officer and Chairman of the Company. The Company recognized revenues from the sale of Koble products of $ 497,000 540,000 33,000 30,000 3,000 1,000 15,000 The Company recorded revenue from a customer whose principal owner is an immediate family member of Jenny P. Yu, a shareholder of the Company and managing director of Forward China. The Company recognized revenue from this customer of $ 134,000 266,000 |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 3 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS | NOTE 9 LEGAL PROCEEDINGS From time to time, the Company may become a party to legal actions or proceedings in the ordinary course of its business. At December 31, 2022, 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. |
LINE OF CREDIT
LINE OF CREDIT | 3 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
LINE OF CREDIT | NOTE 10 LINE OF CREDIT The Company, specifically IPS, has a $ 1,300,000 May 31, 2023 0.75% above The Wall Street Journal 8.25 7.0 1,300,000 |
LEASES
LEASES | 3 Months Ended |
Dec. 31, 2022 | |
Leases | |
LEASES | NOTE 11 LEASES The Company’s operating leases are primarily for corporate, sales and administrative office space. Total operating lease expense for the three months ended December 31, 2022 was $ 148,000 156,000 143,000 149,000 At December 31, 2022, the Company’s operating leases had a weighted average remaining lease term of 8.2 5.7 At December 31, 2022, future minimum payments under non-cancellable operating leases were as follows: Schedule of future minimum payments under operating leases Remainder of Fiscal 2023 $ 433,000 Fiscal 2024 592,000 Fiscal 2025 556,000 Fiscal 2026 510,000 Fiscal 2027 419,000 Thereafter 1,979,000 Total future minimum lease payments 4,489,000 Less imputed interest (953,000 ) Present value of lease liabilities 3,536,000 Less current portion of lease liabilities (387,000 ) Long-term portion of lease liabilities $ 3,149,000 |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 3 Months Ended |
Dec. 31, 2022 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | NOTE 12 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities at December 31, 2022 and September 30, 2022 are as follows: Schedule of accrued expenses and other accrued liabilities December 31, September 30, 2022 2022 Accrued commissions/bonuses $ 258,000 $ 722,000 Paid time off 199,000 228,000 Other 238,000 204,000 Total $ 695,000 $ 1,154,000 |
ACCOUNTING POLICIES (Policies)
ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of Forward Industries, Inc. and all of its wholly-owned subsidiaries: Forward Industries (IN), Inc. (“Forward US”), Forward Industries (Switzerland) GmbH (“Forward Switzerland”), Forward Industries UK Limited (“Forward UK”), Intelligent Product Solutions, Inc. (“IPS”) and Kablooe, Inc. (“Kablooe”). The terms “Forward”, “we”, “our” or the “Company” as used throughout this document are used to indicate Forward Industries, Inc. and all of its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. 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, 2023. 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, 2022, and with the disclosures and risk factors presented therein. The September 30, 2022 condensed consolidated balance sheet has been derived from the audited consolidated financial statements. |
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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. Throughout this document, certain dollar amounts and percentages have been rounded to their approximate values. |
Segment Reporting | Segment Reporting The Company has three reportable segments: Original Equipment Manufacturing (“OEM”) distribution, retail distribution and design. The OEM distribution segment sources and sells carrying cases and other accessories for medical monitoring and diagnostic kits and a variety of other portable electronic and non-electronic devices directly to OEMs or their contract manufacturers worldwide. The retail distribution segment sources and sells smart-enabled furniture, hot tubs and a variety of other products through various online retailer websites to customers predominantly located in the U.S. The design segment consists of two operating segments (IPS and Kablooe, which have been aggregated into one reportable segment) that provide a full spectrum of hardware and software product design and engineering services to customers predominantly located in the U.S. See Note 5 for more information on segments. |
Accounts Receivable | Accounts Receivable Accounts receivable consist of unsecured trade accounts with customers in amounts that have been invoiced ($ 8,900,000 7,861,000 no 32,000 20,000 837,000 852,000 The Company has agreements with various retailers which contain different terms for trade discounts, promotional and other sales allowances. At December 31, 2022 and September 30, 2022, the Company recorded accounts receivable allowances of $ 110,000 55,000 |
Inventories | Inventories Inventories consist primarily of finished goods and are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. Based on management’s estimates, an allowance is made to reduce excess, obsolete, or otherwise unsellable inventories to net realizable value. The allowance is established through charges to cost of sales in the Company’s condensed consolidated statements of operations. In determining the adequacy of the allowance, management’s estimates are based upon several factors, including analyses of inventory levels, historical loss trends, sales history and projections of future sales demand. The Company’s estimates of the allowance may change from time to time based on management’s assessments, and such changes could be material. At December 31, 2022 and September 30, 2022, the allowance for slow-moving inventory, which relates entirely to our retail segment, was $ 460,000 535,000 |
Revenue Recognition | Revenue Recognition OEM Distribution Segment The OEM distribution segment recognizes revenue when: (i) finished goods are shipped to its customers (in general, these conditions occur at either point of shipment or point of destination, depending on the terms of sale and transfer of control); (ii) there are no other deliverables or performance obligations; and (iii) there are no further obligations to the customer after the title of the goods has transferred. If the Company receives consideration before achieving the criteria previously mentioned, it records a contract liability, which is classified as a component of deferred income in the accompanying condensed consolidated balance sheets. The OEM distribution segment had no Retail Distribution Segment The retail distribution segment sells products primarily through online websites operated by authorized third-party retailers. Revenue is recognized when control (as defined in Accounting Standards Codification, “ASC” 606, “Revenue from Contracts with Customers”) of the related goods is transferred to the retailer, which generally occurs upon shipment to the end customer. Other than product delivery, the retail distribution segment does not typically have other deliverables or performance obligations associated with its products. Revenue is measured as the amount of consideration expected to be received in exchange for the products provided, net of allowances taken by retailers for product returns and any taxes collected from customers that will be remitted to governmental authorities. When the Company receives consideration before achieving the criteria previously mentioned, it records a contract liability, which is classified as a component of deferred income in the accompanying condensed consolidated balance sheets. The retail distribution segment had no Design Segment The Company applies the “cost to cost” and “right to invoice” methods of revenue recognition to the contracts with customers in the design segment. The design segment typically engages in two types of contracts: (i) time and material and (ii) fixed price. The Company recognizes revenue over time on its time and material contracts utilizing a “right to invoice” method. Revenues from fixed price contracts that require performance of services that are not related to the production of tangible assets are recognized by using cost inputs to measure progress toward the completion of its performance obligations, or the “cost to cost” method. Revenues from fixed price contracts that contain specific deliverables are recognized when the performance obligation has been satisfied or the transfer of goods to the customer has been completed and accepted. Recognized revenues that will not be billed until a later date, or contract assets, are recorded as an asset and classified as a component of accounts receivable in the accompanying condensed consolidated balance sheets. The design segment had contract assets of $ 602,000 609,000 693,000 335,000 439,000 188,000 |
Goodwill | Goodwill The Company reviews goodwill for impairment at least annually, or more often if triggering events occur. The Company has two reporting units with goodwill (the IPS and Kablooe operating segments) and we perform our annual goodwill impairment test on September 30, the end of the fiscal year, or upon the occurrence of a triggering event. The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company would not need to perform a quantitative impairment test for the reporting unit. If the Company cannot support such a conclusion or does not elect to perform the qualitative assessment, then the Company will perform the quantitative assessment by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying value, no impairment charge is recognized. If the fair value of the reporting unit is less than its carrying value, an impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value. A significant amount of judgment is required in performing goodwill impairment tests including estimating the fair value of a reporting unit. Management evaluated and concluded that there were no indications goodwill was impaired at December 31, 2022. |
Intangible Assets | Intangible Assets Intangible assets include trademarks and customer relationships, which were acquired as part of the acquisitions of IPS in Fiscal 2018 and Kablooe in Fiscal 2020 and are amortized over their estimated useful lives, which are periodically evaluated for reasonableness. Our intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In assessing the recoverability of our intangible assets, we must make estimates and assumptions regarding future cash flows and other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is recognized and the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. If these estimates or material related assumptions change in the future, we may be required to record impairment charges related to our intangible assets. Management evaluated and concluded that there were no indications of impairments of intangible assets at December 31, 2022. |
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. At December 31, 2022, there was no change to our assessment that a full valuation allowance was required against all net deferred tax assets as it is not probable that such deferred tax assets will be realized. Accordingly, any deferred tax provision or benefit was offset by an equal and opposite change to the valuation allowance. Our income tax provision or benefit is generally not significant due to the existence of significant net operating loss carryforwards. |
Fair Value Measurements | Fair Value Measurements We perform fair value measurements in accordance with the guidance provided by ASC 820, “Fair Value Measurement.” 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. |
Leases | Leases Lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, using the Company’s incremental borrowing rate commensurate with the lease term, since the Company’s lessors do not provide an implicit rate, nor is one readily available. The Company has certain leases that may include an option to renew and when it is reasonably probable to exercise such option, the Company will include the renewal option terms in determining the lease asset and lease liability. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Operating lease assets are shown as right of use assets on the condensed consolidated balance sheets. The current and long-term portions of operating lease liabilities are shown separately as such on the condensed consolidated balance sheets. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In November 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU 2019-11 is an accounting pronouncement that provides clarity to and amends earlier guidance on this topic and would be effective concurrently with the adoption of such earlier guidance. This pronouncement is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. The Company is currently evaluating the effects of this pronouncement on its condensed consolidated financial statements. |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible Assets December 31, 2022 September 30, 2022 Trademarks Customer Relationships Total Intangible Assets Trademarks Customer Relationships Total Intangible Assets Gross carrying amount $ 585,000 $ 1,390,000 $ 1,975,000 $ 585,000 $ 1,390,000 $ 1,975,000 Less accumulated amortization (174,000 ) (748,000 ) (922,000 ) (164,000 ) (705,000 ) (869,000 ) Net carrying amount $ 411,000 $ 642,000 $ 1,053,000 $ 421,000 $ 685,000 $ 1,106,000 |
Estimated amortization expense | Estimated amortization expense Remainder of Fiscal 2023 $ 160,000 Fiscal 2024 213,000 Fiscal 2025 213,000 Fiscal 2026 121,000 Fiscal 2027 82,000 Fiscal 2028 78,000 Thereafter 186,000 Total $ 1,053,000 |
SEGMENTS AND CONCENTRATIONS (Ta
SEGMENTS AND CONCENTRATIONS (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Segment Reporting [Abstract] | |
Segment operating income (loss) | Segment operating income (loss) For the Three Months Ended December 31, 2022 2021 Revenues: OEM distribution $ 4,377,000 $ 5,242,000 Retail distribution 1,057,000 1,392,000 Design 5,376,000 4,980,000 Total segment revenues $ 10,810,000 $ 11,614,000 Operating income/(loss): OEM distribution $ 112,000 $ 497,000 Retail distribution (326,000 ) (228,000 ) Design 433,000 585,000 Total segment operating income 219,000 854,000 General corporate expenses (686,000 ) (640,000 ) Total (loss)/income from operations (467,000 ) 214,000 Other (income)/expense, net (37,000 ) 34,000 (Loss)/income before income taxes $ (430,000 ) $ 180,000 Depreciation and amortization: OEM distribution $ 2,000 $ 2,000 Design 76,000 71,000 Total depreciation and amortization $ 78,000 $ 73,000 |
Schedule of segment assets | Schedule of segment assets December 31, 2022 September 30, 2022 Segment Assets: OEM distribution $ 5,262,000 $ 4,276,000 Retail distribution 3,865,000 3,816,000 Design 6,346,000 6,116,000 Total segment assets 15,473,000 14,208,000 General corporate assets 6,385,000 6,731,000 Total assets $ 21,858,000 $ 20,939,000 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
(Loss)/earnings per share: | |
Schedule of earnings (loss) per share | Schedule of earnings (loss) per share For the Three Months Ended December 31, 2022 2021 Numerator: Net (loss)/income $ (430,000 ) $ 180,000 Denominator: Weighted average common shares outstanding 10,061,000 10,061,000 Dilutive common share equivalents – 276,000 Weighted average diluted shares outstanding 10,061,000 10,337,000 (Loss)/earnings per share: Basic $ (0.04 ) $ 0.02 Diluted $ (0.04 ) $ 0.02 |
Schedule of antidilutive securities excluded | Schedule of antidilutive securities excluded For the Three Months Ended December 31, 2022 2021 Options 1,075,000 58,000 Warrants 151,000 – Total potentially dilutive shares 1,226,000 58,000 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Leases | |
Schedule of future minimum payments under operating leases | Schedule of future minimum payments under operating leases Remainder of Fiscal 2023 $ 433,000 Fiscal 2024 592,000 Fiscal 2025 556,000 Fiscal 2026 510,000 Fiscal 2027 419,000 Thereafter 1,979,000 Total future minimum lease payments 4,489,000 Less imputed interest (953,000 ) Present value of lease liabilities 3,536,000 Less current portion of lease liabilities (387,000 ) Long-term portion of lease liabilities $ 3,149,000 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Payables and Accruals [Abstract] | |
Schedule of accrued expenses and other accrued liabilities | Schedule of accrued expenses and other accrued liabilities December 31, September 30, 2022 2022 Accrued commissions/bonuses $ 258,000 $ 722,000 Paid time off 199,000 228,000 Other 238,000 204,000 Total $ 695,000 $ 1,154,000 |
OVERVIEW (Details Narrative)
OVERVIEW (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | |
Line of Credit Facility [Line Items] | |||
Net Income (Loss) Attributable to Parent | $ 430,275 | $ (180,024) | |
Net Cash Provided by (Used in) Operating Activities | 148,605 | $ (1,137,884) | |
Bank Line Of Credit [Member] | |||
Line of Credit Facility [Line Items] | |||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,300,000 | $ 1,300,000 | |
Debt Instrument, Maturity Date | May 31, 2023 |
ACCOUNTING POLICIES (Details Na
ACCOUNTING POLICIES (Details Narrative) - USD ($) | Dec. 31, 2022 | Sep. 30, 2022 | Sep. 30, 2021 |
Accounts receivable | $ 8,900,000 | $ 7,861,000 | |
Inventory reserve | 460,000 | 535,000 | |
OEM Distribution [Member] | |||
Accounts Receivable, Allowance for Credit Loss | 0 | 0 | |
Contract liabilities | 0 | 0 | $ 0 |
Retail Distribution [Member] | |||
Accounts Receivable, Allowance for Credit Loss | 32,000 | 20,000 | |
Allowances for trade discounts, promotional and other sales allowances | 110,000 | 55,000 | |
Contract liabilities | 0 | 0 | 0 |
Design Segment [Member] | |||
Accounts Receivable, Allowance for Credit Loss | 837,000 | 852,000 | |
Design [Member] | |||
Contract liabilities | 335,000 | 439,000 | 188,000 |
Contract assets | $ 602,000 | $ 609,000 | $ 693,000 |
INTANGIBLE ASSETS AND GOODWIL_2
INTANGIBLE ASSETS AND GOODWILL (Details - Intangible Assets) - USD ($) | Dec. 31, 2022 | Sep. 30, 2022 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 1,975,000 | $ 1,975,000 |
Accumulated Amortization | (922,000) | (869,000) |
Net Carrying Amount | 1,053,000 | 1,106,000 |
Trademarks [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 585,000 | 585,000 |
Accumulated Amortization | (174,000) | (164,000) |
Net Carrying Amount | 411,000 | 421,000 |
Customer Relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 1,390,000 | 1,390,000 |
Accumulated Amortization | (748,000) | (705,000) |
Net Carrying Amount | $ 642,000 | $ 685,000 |
INTANGIBLE ASSETS AND GOODWIL_3
INTANGIBLE ASSETS AND GOODWILL (Details - Estimated amortization expense) - USD ($) | Dec. 31, 2022 | Sep. 30, 2022 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Remainder of Fiscal 2023 | $ 160,000 | |
Fiscal 2024 | 213,000 | |
Fiscal 2025 | 213,000 | |
Fiscal 2026 | 121,000 | |
Fiscal 2027 | 82,000 | |
Fiscal 2028 | 78,000 | |
Thereafter | 186,000 | |
Total | $ 1,053,000 | $ 1,106,000 |
INTANGIBLE ASSETS AND GOODWIL_4
INTANGIBLE ASSETS AND GOODWILL (Details Narrative) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of Intangible Assets | $ 53,000 | $ 53,000 |
Trademarks [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful lives | 15 years | |
Customer Relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful lives | 8 years |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details Narrative) - USD ($) | Dec. 31, 2022 | Sep. 30, 2022 |
Kablooe [Member] | ||
Offsetting Assets [Line Items] | ||
Earnout liability | $ 30,000 | $ 70,000 |
SEGMENTS AND CONCENTRATIONS (De
SEGMENTS AND CONCENTRATIONS (Details - Operations) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 10,809,679 | $ 11,613,741 |
Total (loss)/income from operations | (466,877) | 214,214 |
Other expense/(income), net | (24,560) | 1,362 |
(Loss)/income before income taxes | (430,000) | 180,000 |
Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | 10,810,000 | 11,614,000 |
Total (loss)/income from operations | (467,000) | 214,000 |
Total segment operating income | 219,000 | 854,000 |
General corporate expenses | (686,000) | (640,000) |
Other expense/(income), net | (37,000) | 34,000 |
(Loss)/income before income taxes | (430,000) | 180,000 |
Depreciation and amortization | 78,000 | 73,000 |
Operating Segments [Member] | OEM Distribution [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | 4,377,000 | 5,242,000 |
Total (loss)/income from operations | 112,000 | 497,000 |
Depreciation and amortization | 2,000 | 2,000 |
Operating Segments [Member] | Retail Distribution [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | 1,057,000 | 1,392,000 |
Total (loss)/income from operations | (326,000) | (228,000) |
Operating Segments [Member] | Design [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | 5,376,000 | 4,980,000 |
Total (loss)/income from operations | 433,000 | 585,000 |
Depreciation and amortization | $ 76,000 | $ 71,000 |
SEGMENTS AND CONCENTRATIONS (_2
SEGMENTS AND CONCENTRATIONS (Details - Segment Assets) - USD ($) | Dec. 31, 2022 | Sep. 30, 2022 |
Revenue, Major Customer [Line Items] | ||
Assets | $ 21,858,201 | $ 20,939,015 |
Net Assets, Segment [Member] | ||
Revenue, Major Customer [Line Items] | ||
Total segment assets | 15,473,000 | 14,208,000 |
General corporate assets | 6,385,000 | 6,731,000 |
Assets | 21,858,000 | 20,939,000 |
Net Assets, Segment [Member] | OEM Distribution [Member] | ||
Revenue, Major Customer [Line Items] | ||
Other Assets | 5,262,000 | 4,276,000 |
Net Assets, Segment [Member] | Retail Distribution [Member] | ||
Revenue, Major Customer [Line Items] | ||
Other Assets | 3,865,000 | 3,816,000 |
Net Assets, Segment [Member] | Design [Member] | ||
Revenue, Major Customer [Line Items] | ||
Other Assets | $ 6,346,000 | $ 6,116,000 |
SEGMENTS AND CONCENTRATIONS (_3
SEGMENTS AND CONCENTRATIONS (Details Narrative) - Customer Concentration Risk [Member] | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2022 | |
Revenue Benchmark [Member] | Two Customers [Member] | OEM Distribution [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk, Percentage | 25% | 25.20% | |
Revenue Benchmark [Member] | One Customer [Member] | OEM Distribution [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk, Percentage | 12% | 12% | |
Revenue Benchmark [Member] | One Customer [Member] | Design [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk, Percentage | 14.40% | ||
Accounts Receivable [Member] | Two Customers [Member] | OEM Distribution [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk, Percentage | 37% | 28.10% | |
Accounts Receivable [Member] | One Customer [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration Risk, Percentage | 11.50% |
SHARE-BASED COMPENSATION (Detai
SHARE-BASED COMPENSATION (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | |
Oct. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Options granted | 0 | ||
Stock options exercised, shares | 0 | 0 | |
Share based compensation expense | $ 23,935 | $ 38,800 | |
Equity Option [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Share based compensation expense | 24,000 | $ 39,000 | |
Unrecognized compensation cost | $ 24,000 | ||
Unrecognized compensation cost weighted average vesting period | 6 months | ||
Non Employee Directors [Member] | Equity Option [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Options granted | 58,000 | ||
Options granted, exercise price of options granted | $ 2.39 | ||
Option grant-date fair value per share | $ 1.03 | ||
Fair value of options granted | $ 60,000 |
EARNINGS PER SHARE (Details - D
EARNINGS PER SHARE (Details - Diluted loss per share) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Numerator: | ||
Net (loss)/income | $ (430,000) | $ 180,000 |
Denominator: | ||
Weighted average common shares outstanding | 10,061,000 | 10,061,000 |
Dilutive common share equivalents | 0 | 276,000 |
Weighted average diluted shares outstanding | 10,061,000 | 10,337,000 |
(Loss)/earnings per share: | ||
Basic | $ (0.04) | $ 0.02 |
Diluted | $ (0.04) | $ 0.02 |
EARNINGS PER SHARE (Details - A
EARNINGS PER SHARE (Details - Antidilutive shares) - shares | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 1,226,000 | 58,000 |
Equity Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 1,075,000 | 58,000 |
Warrant [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 151,000 | 0 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | 4 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Jan. 18, 2018 | Sep. 30, 2022 | |
Related Party Transaction [Line Items] | ||||
Prepaid expenses and other current assets | $ 394,343 | $ 417,605 | ||
Note payable outstanding balance | 1,350,000 | 1,400,000 | ||
Forward China [Member] | ||||
Related Party Transaction [Line Items] | ||||
Repayment of debt | 50,000 | |||
Forward China [Member] | Promissory Note [Member] | ||||
Related Party Transaction [Line Items] | ||||
Debt face amount | $ 1,600,000 | |||
Debt interest rate | 8% | |||
Interest expense | 28,000 | $ 32,000 | ||
Debt Instrument, Maturity Date | Dec. 31, 2024 | |||
Forward China [Member] | Inventory Purchases [Member] | ||||
Related Party Transaction [Line Items] | ||||
Prepaid expenses and other current assets | 20,000 | 20,000 | ||
Forward China [Member] | Service Fees [Member] | ||||
Related Party Transaction [Line Items] | ||||
Costs and Expenses, Related Party | 344,000 | 362,000 | ||
Justwise Group [Member] | ||||
Related Party Transaction [Line Items] | ||||
Accounts payable to related party | 1,000 | $ 15,000 | ||
Justwise Group [Member] | Koble [Member] | ||||
Related Party Transaction [Line Items] | ||||
Revenue from related party | 497,000 | 540,000 | ||
Related party costs | 33,000 | |||
Justwise Group [Member] | Koble [Member] | Selling And Marketing [Member] | ||||
Related Party Transaction [Line Items] | ||||
Related party costs | 30,000 | |||
Justwise Group [Member] | Koble [Member] | Cost of Sales [Member] | ||||
Related Party Transaction [Line Items] | ||||
Related party costs | 3,000 | |||
Board [Member] | Jenny P Yu [Member] | ||||
Related Party Transaction [Line Items] | ||||
Revenue from related party | $ 134,000 | $ 266,000 |
LINE OF CREDIT (Details Narrati
LINE OF CREDIT (Details Narrative) - I P S [Member] - USD ($) | 3 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Sep. 30, 2022 | |
Line of Credit Facility [Line Items] | ||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,300,000 | |
Line of credit expiration date | May 31, 2023 | |
Line of credit interest rate | 0.75% above The Wall Street Journal prime rate. | |
Line of credit effective interest rate | 8.25% | 7% |
Line of Credit Facility, Remaining Borrowing Capacity | $ 1,300,000 |
LEASES (Details)
LEASES (Details) | Dec. 31, 2022 USD ($) |
Leases | |
Remainder of Fiscal 2023 | $ 433,000 |
Fiscal 2024 | 592,000 |
Fiscal 2025 | 556,000 |
Fiscal 2026 | 510,000 |
Fiscal 2027 | 419,000 |
Thereafter | 1,979,000 |
Total future minimum lease payments | 4,489,000 |
Less imputed interest | (953,000) |
Present value of lease liabilities | 3,536,000 |
Less current portion of lease liabilities | (387,000) |
Long-term portion of lease liabilities | $ 3,149,000 |
LEASES (Details Narrative)
LEASES (Details Narrative) - USD ($) | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Leases | ||
Rent expense | $ 148,000 | $ 156,000 |
Cash paid for amounts included in operating lease liabilities | $ 143,000 | $ 149,000 |
Operating leases term | 8 years 2 months 12 days | |
Operating leases | 5.70% |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) | Dec. 31, 2022 | Sep. 30, 2022 |
Payables and Accruals [Abstract] | ||
Accrued commissions/bonuses | $ 258,000 | $ 722,000 |
Paid time off | 199,000 | 228,000 |
Other | 238,000 | 204,000 |
Total | $ 695,000 | $ 1,154,000 |