Cover
Cover - shares | 6 Months Ended | |
Mar. 31, 2022 | Apr. 30, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2022 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2022 | |
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 $0.01 | |
Trading Symbol | FORD | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 10,061,185 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2022 | Sep. 30, 2021 |
Current assets: | ||
Cash | $ 1,541,192 | $ 1,410,365 |
Accounts receivable, net | 8,685,896 | 8,760,715 |
Inventories, net | 3,897,479 | 2,062,557 |
Prepaid expenses and other current assets | 816,250 | 561,072 |
Total current assets | 14,940,817 | 12,794,709 |
Property and equipment, net | 247,345 | 167,997 |
Intangible assets, net | 1,212,279 | 1,318,658 |
Goodwill | 1,758,682 | 1,758,682 |
Operating lease right of use assets, net | 3,741,813 | 3,743,242 |
Other assets | 72,251 | 72,251 |
Total assets | 21,973,187 | 19,855,539 |
Current liabilities: | ||
Note payable to Forward China | 1,500,000 | 0 |
Accounts payable | 463,901 | 391,992 |
Due to Forward China | 7,239,885 | 5,733,708 |
Deferred income | 620,572 | 187,695 |
Current portion of earnout consideration | 25,000 | 25,000 |
Current portion of operating lease liability | 405,811 | 340,151 |
Accrued expenses and other current liabilities | 787,010 | 529,497 |
Total current liabilities | 11,042,179 | 7,208,043 |
Other liabilities: | ||
Note payable to Forward China | 0 | 1,600,000 |
Operating lease liability, less current portion | 3,514,064 | 3,559,053 |
Earnout consideration, less current portion | 45,000 | 45,000 |
Total other liabilities | 3,559,064 | 5,204,053 |
Total liabilities | 14,601,243 | 12,412,096 |
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 March 31, 2022 and September 30, 2021 | 100,612 | 100,612 |
Additional paid-in capital | 20,019,288 | 19,914,476 |
Accumulated deficit | (12,747,956) | (12,571,645) |
Total shareholders' equity | 7,371,944 | 7,443,443 |
Total liabilities and shareholders' equity | $ 21,973,187 | $ 19,855,539 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2022 | Sep. 30, 2021 |
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 | 6 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Mar. 31, 2022 | Mar. 31, 2021 | |
Income Statement [Abstract] | ||||
Revenues, net | $ 10,314,563 | $ 8,395,379 | $ 21,928,304 | $ 18,112,982 |
Cost of sales | 8,061,889 | 6,651,933 | 17,056,861 | 14,106,650 |
Gross profit | 2,252,674 | 1,743,446 | 4,871,443 | 4,006,332 |
Sales and marketing expenses | 704,102 | 578,436 | 1,441,780 | 1,181,397 |
General and administrative expenses | 1,871,311 | 1,981,186 | 3,538,188 | 3,808,604 |
Loss from operations | (322,739) | (816,176) | (108,525) | (983,669) |
Gain on forgiveness of note payable | 0 | 0 | 0 | (1,356,570) |
Fair value adjustment of earn-out consideration | 0 | 0 | 0 | (30,000) |
Interest income | 0 | (33,554) | 0 | (56,301) |
Interest expense | 30,864 | 46,714 | 63,691 | 93,106 |
Other expense, net | 2,732 | 5,392 | 4,095 | 1,788 |
(Loss)/income before income taxes | (356,335) | (834,728) | (176,311) | 364,308 |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net (loss)/income | $ (356,335) | $ (834,728) | $ (176,311) | $ 364,308 |
(Loss)/earnings per share: | ||||
Basic | $ (0.04) | $ (0.08) | $ (0.02) | $ 0.04 |
Diluted | $ (0.04) | $ (0.08) | $ (0.02) | $ 0.04 |
Weighted average common shares outstanding: | ||||
Basic | 10,061,185 | 9,909,497 | 10,061,185 | 9,897,385 |
Diluted | 10,061,185 | 9,909,497 | 10,061,185 | 10,378,733 |
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, 2020 | $ 98,838 | $ 19,579,684 | $ (13,095,450) | $ 6,583,072 |
Beginning balance, shares at Sep. 30, 2020 | 9,883,851 | |||
Share-based compensation | 41,457 | 41,457 | ||
Stock options exercised | $ 25 | 1,650 | 1,675 | |
Stock options exercised, shares | 2,500 | |||
Net loss | 1,199,036 | 1,199,036 | ||
Ending balance, value at Dec. 31, 2020 | $ 98,863 | 19,622,791 | (11,896,414) | 7,825,240 |
Ending balance, shares at Dec. 31, 2020 | 9,886,351 | |||
Beginning balance, value at Sep. 30, 2020 | $ 98,838 | 19,579,684 | (13,095,450) | 6,583,072 |
Beginning balance, shares at Sep. 30, 2020 | 9,883,851 | |||
Ending balance, value at Mar. 31, 2021 | $ 99,528 | 19,785,936 | (12,731,142) | 7,154,322 |
Ending balance, shares at Mar. 31, 2021 | 9,952,766 | |||
Beginning balance, value at Dec. 31, 2020 | $ 98,863 | 19,622,791 | (11,896,414) | 7,825,240 |
Beginning balance, shares at Dec. 31, 2020 | 9,886,351 | |||
Share-based compensation | 21,287 | 21,287 | ||
Stock options exercised | $ 665 | 141,858 | 142,523 | |
Stock options exercised, shares | 66,415 | |||
Net loss | (834,728) | (834,728) | ||
Ending balance, value at Mar. 31, 2021 | $ 99,528 | 19,785,936 | (12,731,142) | 7,154,322 |
Ending balance, shares at Mar. 31, 2021 | 9,952,766 | |||
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 loss | 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, 2021 | $ 100,612 | 19,914,476 | (12,571,645) | 7,443,443 |
Beginning balance, shares at Sep. 30, 2021 | 10,061,185 | |||
Ending balance, value at Mar. 31, 2022 | $ 100,612 | 20,019,288 | (12,747,956) | 7,371,944 |
Ending balance, shares at Mar. 31, 2022 | 10,061,185 | |||
Beginning balance, value at Dec. 31, 2021 | $ 100,612 | 19,953,276 | (12,391,621) | 7,662,267 |
Beginning balance, shares at Dec. 31, 2021 | 10,061,185 | |||
Share-based compensation | 66,012 | 66,012 | ||
Net loss | (356,335) | (356,335) | ||
Ending balance, value at Mar. 31, 2022 | $ 100,612 | $ 20,019,288 | $ (12,747,956) | $ 7,371,944 |
Ending balance, shares at Mar. 31, 2022 | 10,061,185 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 6 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Operating Activities: | ||
Net (loss)/income | $ (176,311) | $ 364,308 |
Adjustments to reconcile net (loss)/income to net cash provided by/(used in) operating activities: | ||
Share-based compensation | 104,812 | 62,744 |
Depreciation and amortization | 156,531 | 171,836 |
Bad debt expense | 59,635 | 513,691 |
Gain on forgiveness of note payable | 0 | (1,356,570) |
Change in fair value of earn-out consideration | 0 | (30,000) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 15,184 | 756,793 |
Inventories | (1,834,922) | (873,760) |
Prepaid expenses and other current assets | (255,178) | 34,227 |
Other assets | 0 | 44,446 |
Accounts payable and due to Forward China | 1,578,086 | 395,469 |
Deferred income | 432,877 | (347,632) |
Net changes in operating lease liabilities | 22,100 | 27,055 |
Accrued expenses and other current liabilities | 257,513 | (160,525) |
Net cash provided by/(used in) operating activities | 360,327 | (397,918) |
Investing Activities: | ||
Purchases of property and equipment | (129,500) | (37,878) |
Net cash used in investing activities | (129,500) | (37,878) |
Financing Activities: | ||
Proceeds from line of credit borrowings | 0 | 150,000 |
Repayment of line of credit borrowings | 0 | (1,150,000) |
Repayment of notes payable | 0 | (84,457) |
Repayment of note payable to Forward China | (100,000) | 0 |
Proceeds from stock options exercised | 0 | 144,198 |
Repayments of finance leases | 0 | (19,407) |
Net cash used in financing activities | (100,000) | (959,666) |
Net increase/(decrease) in cash | 130,827 | (1,395,462) |
Cash at beginning of period | 1,410,365 | 2,924,627 |
Cash at end of period | 1,541,192 | 1,529,165 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | 63,669 | 88,479 |
Cash paid for taxes | 6,795 | 5,636 |
Supplemental Disclosures of Non-Cash Information: | ||
Operating lease right of use assets recorded | 204,881 | 0 |
Operating lease liabilities recorded | $ 204,881 | $ 0 |
OVERVIEW
OVERVIEW | 6 Months Ended |
Mar. 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 fully integrated design, development and manufacturing solution provider for top tier medical and technology customers worldwide. As a result of the continued expansion of our design and development capabilities through our wholly-owned subsidiaries, we are now able to introduce proprietary products to the market from concepts brought to us from a number of different sources, both inside and outside the Company. Liquidity For the six months ended March 31, 2022, the Company generated a net loss of $ 176,000, 360,000 Impact of COVID-19 The effects of the COVID-19 pandemic continue to impact the retail and OEM distribution segments of our business. The increase in global consumer demand, coupled with the global shipping container shortage, dramatically increased demand for both ocean freight and ground transportation. These factors led to a significant increase in freight costs, particularly from the Asia-Pacific region and most notably in the second quarter of the fiscal year ending September 30, 2022 (“Fiscal 2022”). Labor shortages at U.S. ports and in ground transportation services caused container ships to spend a significant amount of time waiting for goods to be unloaded and to arrive at our warehouses. These factors caused an increase in the demand for and cost of ground transportation and delayed consumer availability for many of our products in the first half of Fiscal 2022. The timing and extent of these COVID-19 related transportation disruptions is still largely unknown but are expected to continue throughout Fiscal 2022. The effects of the pandemic had a lesser impact on the design segment of our business. Rising inflation caused an increase in the cost of acquiring and maintaining our employees. The timing and extent of future inflation is difficult to predict, but we expect these rising costs to have a more significant impact in the second half of Fiscal 2022. The effects of COVID-19 may further impact our business in ways we cannot predict, and such impacts could be significant. The current economic impact 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 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; 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 | 6 Months Ended |
Mar. 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 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 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, 2022. 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, 2021, and with the disclosures and risk factors presented therein. The September 30, 2021 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: OEM distribution, retail distribution and design. The OEM distribution segment sources and distributes 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 and a variety of other products to customers predominantly located in the U.S. through agreements with various retailers, both in stores and through online retailer websites. 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. The Company maintains an allowance for doubtful accounts, which is recorded as a reduction to accounts receivable on the condensed consolidated balance sheets. Collectability of accounts receivable is estimated by evaluating the number of days accounts are outstanding, customer payment history, recent payment trends and perceived creditworthiness, adjusted as necessary based on specific customer situations. At March 31, 2022, September 30, 2021 and September 30, 2020, the Company had allowances for doubtful accounts of $ 90,000 90,000 249,000 824,000 706,000 347,000 The Company has sales agreements with various retailers which contain different terms for trade discounts, promotional and other allowances. At March 31, 2022, September 30, 2021 and September 30, 2020, the Company recorded accounts receivable allowances of $ 25,000 0 0 Revenue Recognition Distribution Segments The Company generally recognizes revenue in its OEM and retail distribution segments 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. 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 contract liabilities of $ 0 0 75,000 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 $ 607,000 693,000 649,000 621,000 188,000 410,000 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 March 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 impairments of intangible assets at March 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 March 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. No current book income tax provision was recorded against book net income 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 Accounting Standards Codification (“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 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 and financing lease assets are a component of property and equipment on the condensed consolidated balance sheets. The current and long-term portions of operating and financing lease liabilities are shown separately as such on the condensed consolidated balance sheets. Reclassifications Certain amounts in the accompanying financial statements at and for the three and six months ended March 31, 2021 have been reclassified to conform to the current year presentation. Recent Accounting Pronouncements In November 2019, the Financial Accounting Standards Board (“FASB”) issued 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. In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This guidance removes certain exceptions to the general principles in Topic 740 and provides consistent application of U.S. GAAP by clarifying and amending existing guidance. The effective date of the new guidance for public companies is for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance in the first quarter of fiscal 2022 with no material impact to its condensed consolidated financial statements. |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 6 Months Ended |
Mar. 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 March 31, 2022 September 30, 2021 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 (145,000 ) (618,000 ) (763,000 ) (125,000 ) (531,000 ) (656,000 ) Net carrying amount $ 440,000 $ 772,000 $ 1,212,000 $ 460,000 $ 859,000 $ 1,319,000 The Company’s intangible assets were acquired as a result of 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 years for the trademarks and 8 years for the customer relationships. Amortization expense related to intangible assets was $ 53,000 106,000 At March 31, 2022, estimated amortization expense for the Company’s intangible assets for each of the next five years and thereafter is as follows: Estimated amortization expense Remainder of Fiscal 2022 $ 106,000 Fiscal 2023 213,000 Fiscal 2024 213,000 Fiscal 2025 213,000 Fiscal 2026 121,000 Thereafter 346,000 Total $ 1,212,000 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 | 6 Months Ended |
Mar. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 4 FAIR VALUE MEASUREMENTS The earnout consideration of $ 70,000 |
SEGMENTS AND CONCENTRATIONS
SEGMENTS AND CONCENTRATIONS | 6 Months Ended |
Mar. 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. In Fiscal 2021, due to the growth of our retail division, we determined it to be a separate reportable segment. 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. The results of operations for the three and six months ended March 31, 2021 for each segment discussed below have been reformatted from what was previously disclosed to segregate the retail distribution segment and exclude general corporate expenses from segment operating income to show them as a reconciling item so that results are comparable to the current period presentation. Information by segment and related reconciliations are shown in tables below: Segment operating income (loss) For the Three Months Ended March 31, For the Six Months Ended March 31, 2022 2021 2022 2021 Revenues: OEM distribution $ 4,676,000 $ 4,254,000 $ 9,917,000 $ 9,467,000 Retail distribution 649,000 229,000 2,041,000 621,000 Design 4,990,000 3,912,000 9,970,000 8,025,000 Total segment revenues $ 10,315,000 $ 8,395,000 $ 21,928,000 $ 18,113,000 Operating income/(loss): OEM distribution $ 326,000 $ 302,000 $ 823,000 $ 719,000 Retail distribution (356,000 ) (210,000 ) (584,000 ) (389,000 ) Design 389,000 (288,000 ) 974,000 (112,000 ) Total segment operating income/(loss) 359,000 (196,000 ) 1,213,000 218,000 General corporate expenses (682,000 ) (620,000 ) (1,322,000 ) (1,202,000 ) Total loss from operations (323,000 ) (816,000 ) (109,000 ) (984,000 ) Other expense/(income), net 33,000 19,000 67,000 (1,348,000 ) (Loss)/income before income taxes $ (356,000 ) $ (835,000 ) $ (176,000 ) $ 364,000 Depreciation and amortization: OEM distribution $ 3,000 $ 2,000 $ 4,000 $ 4,000 Design 80,000 77,000 153,000 168,000 Total depreciation and amortization $ 83,000 $ 79,000 $ 157,000 $ 172,000 Schedule of segment assets March 31, 2022 September 30, 2021 Segment Assets: OEM distribution $ 5,577,000 $ 5,898,000 Retail distribution 3,662,000 2,178,000 Design 6,316,000 5,824,000 Total segment assets 15,555,000 13,900,000 General corporate assets 6,418,000 5,956,000 Total assets $ 21,973,000 $ 19,856,000 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 26.2 25.7 40.4 29.7 For the three and six months ended March 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 11.7 10.2 At March 31, 2022 and September 30, 2021, 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 34.8 44.0 |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 6 Months Ended |
Mar. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | NOTE 6 SHARE-BASED COMPENSATION Stock Options In October 2021 and January 2022, the Company granted options to non-employee directors to purchase an aggregate of 58,000 83,000 2.39 1.56 1.03 0.72 60,000 In January 2022, the Company granted options to one of its employees to purchase an aggregate of 14,000 1.56 0.73 10,000 In February 2022, the Company granted options to one of its non-employee directors to purchase an aggregate of 31,000 1.68 0.80 25,000 In February 2022, the Company granted options to one of its former non-employee directors to purchase an aggregate of 19,000 1.68 1.07 20,000 There were no 69,000 144,000 122,000 The Company recognized compensation expense for stock option awards of $ 66,000 21,000 105,000 63,000 54,000 0.8 |
EARNINGS PER SHARE
EARNINGS PER SHARE - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Mar. 31, 2022 | Mar. 31, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
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 Per Share, Basic and Diluted For the Three Months Ended March 31, For the Six Months Ended March 31, 2022 2021 2022 2021 Numerator: Net (loss)/income $ (356,000 ) $ (835,000 ) $ (176,000 ) $ 364,000 Denominator: Weighted average common shares outstanding 10,061,000 9,909,000 10,061,000 9,897,000 Dilutive common share equivalents – – – 482,000 Weighted average diluted shares outstanding 10,061,000 9,909,000 10,061,000 10,379,000 (Loss)/earnings per share: Basic $ (0.04 ) $ (0.08 ) $ (0.02 ) $ 0.04 Diluted $ (0.04 ) $ (0.08 ) $ (0.02 ) $ 0.04 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 March 31, For the Six Months Ended March 31, 2022 2021 2022 2021 Options 1,110,000 1,049,000 1,110,000 10,000 Warrants 151,000 151,000 151,000 – Total potentially dilutive shares 1,261,000 1,200,000 1,261,000 10,000 | |||
Numerator: | ||||
Net (loss)/income | $ (356,000) | $ (835,000) | $ (176,000) | $ 364,000 |
Denominator: | ||||
Weighted average common shares outstanding | 10,061,000 | 9,909,000 | 10,061,000 | 9,897,000 |
Dilutive common share equivalents | 0 | 0 | 0 | 482,000 |
Weighted average diluted shares outstanding | 10,061,000 | 9,909,000 | 10,061,000 | 10,379,000 |
(Loss)/earnings per share: | ||||
Basic | $ (0.04) | $ (0.08) | $ (0.02) | $ 0.04 |
Diluted | $ (0.04) | $ (0.08) | $ (0.02) | $ 0.04 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,261,000 | 1,200,000 | 1,261,000 | 10,000 |
Sales and marketing expense | $ 13,000 | $ 14,000 | $ 27,000 | $ 28,000 |
General and administrative expense | 141,000 | 138,000 | 283,000 | 276,000 |
Total | $ 154,000 | $ 152,000 | $ 310,000 | $ 304,000 |
Stock Options [Member] | ||||
(Loss)/earnings per share: | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,110,000 | 1,049,000 | 1,110,000 | 10,000 |
Warrant [Member] | ||||
(Loss)/earnings per share: | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 151,000 | 151,000 | 151,000 | 0 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Mar. 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 Industries Asia-Pacific Corporation (“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 $ 350,000 340,000 712,000 683,000 The Company made prepayments to Forward China for inventory purchases of $ 418,000 317,000 Promissory Note On January 18, 2018, the Company issued a $ 1,600,000 8 January 18, 2019 31,000 32,000 63,000 64,000 100,000 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 $ 441,000 154,000 981,000 339,000 10,000 |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 6 Months Ended |
Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS | NOTE 9 LEGAL PROCEEDINGS As previously disclosed, on August 21, 2020, IPS was named a third-party defendant in a patent dispute claim in the U.S. District Court for the Eastern District of New York. The complaint, which contains no specific amount of monetary damages, asserts that certain intellectual property was misappropriated by IPS and one of its former employees. In October 2021, the Court ruled that the misappropriation claim was invalid. The remaining allegation was that IPS breached a non-disclosure agreement with a party to the case. In January 2022, all claims in this matter were dismissed without prejudice. From time to time, the Company may become a party to other legal actions or proceedings in the ordinary course of its business. At March 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 operations or cash flows. |
LINE OF CREDIT
LINE OF CREDIT | 6 Months Ended |
Mar. 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 4.25 4.0 1,300,000 |
DEBT
DEBT | 6 Months Ended |
Mar. 31, 2022 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 11 DEBT On April 18, 2020, the Company entered into a loan in an aggregate principal amount of $ 1,357,000 1 April 18, 2022 |
LEASES
LEASES | 6 Months Ended |
Mar. 31, 2022 | |
Leases | |
LEASES | NOTE 12 LEASES The Company’s operating leases are primarily for corporate, sales and administrative office space. Cash paid for amounts included in operating lease liabilities for the six months ended March 31, 2022 and 2021, which have been included in cash flows from operating activities, was $ 294,000 226,000 Schedule of operating lease expense For the Three Months Ended March 31, For the Six Months Ended March 31, 2022 2021 2022 2021 Operating lease expense included in: Sales and marketing expense $ 13,000 $ 14,000 $ 27,000 $ 28,000 General and administrative expense 141,000 138,000 283,000 276,000 Total $ 154,000 $ 152,000 $ 310,000 $ 304,000 At March 31, 2022, the Company’s operating leases had a weighted average remaining lease term of 8.6 5.6 At March 31, 2022, future minimum payments under non-cancellable operating leases were as follows: Schedule of future minimum payments under operating & financial leases Remainder of Fiscal 2022 $ 306,000 Fiscal 2023 626,000 Fiscal 2024 639,000 Fiscal 2025 556,000 Fiscal 2026 510,000 Thereafter 2,398,000 Total future minimum lease payments 5,035,000 Less imputed interest (1,115,000 ) Present value of lease liabilities $ 3,920,000 |
ACCOUNTING POLICIES (Policies)
ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Mar. 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 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 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, 2022. 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, 2021, and with the disclosures and risk factors presented therein. The September 30, 2021 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: OEM distribution, retail distribution and design. The OEM distribution segment sources and distributes 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 and a variety of other products to customers predominantly located in the U.S. through agreements with various retailers, both in stores and through online retailer websites. 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. The Company maintains an allowance for doubtful accounts, which is recorded as a reduction to accounts receivable on the condensed consolidated balance sheets. Collectability of accounts receivable is estimated by evaluating the number of days accounts are outstanding, customer payment history, recent payment trends and perceived creditworthiness, adjusted as necessary based on specific customer situations. At March 31, 2022, September 30, 2021 and September 30, 2020, the Company had allowances for doubtful accounts of $ 90,000 90,000 249,000 824,000 706,000 347,000 The Company has sales agreements with various retailers which contain different terms for trade discounts, promotional and other allowances. At March 31, 2022, September 30, 2021 and September 30, 2020, the Company recorded accounts receivable allowances of $ 25,000 0 0 |
Revenue Recognition | Revenue Recognition Distribution Segments The Company generally recognizes revenue in its OEM and retail distribution segments 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. 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 contract liabilities of $ 0 0 75,000 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 $ 607,000 693,000 649,000 621,000 188,000 410,000 |
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 March 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 impairments of intangible assets at March 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 March 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. No current book income tax provision was recorded against book net income 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 Accounting Standards Codification (“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 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 and financing lease assets are a component of property and equipment on the condensed consolidated balance sheets. The current and long-term portions of operating and financing lease liabilities are shown separately as such on the condensed consolidated balance sheets. |
Reclassifications | Reclassifications Certain amounts in the accompanying financial statements at and for the three and six months ended March 31, 2021 have been reclassified to conform to the current year presentation. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In November 2019, the Financial Accounting Standards Board (“FASB”) issued 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. In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This guidance removes certain exceptions to the general principles in Topic 740 and provides consistent application of U.S. GAAP by clarifying and amending existing guidance. The effective date of the new guidance for public companies is for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance in the first quarter of fiscal 2022 with no material impact to its condensed consolidated financial statements. |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 6 Months Ended |
Mar. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible Assets March 31, 2022 September 30, 2021 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 (145,000 ) (618,000 ) (763,000 ) (125,000 ) (531,000 ) (656,000 ) Net carrying amount $ 440,000 $ 772,000 $ 1,212,000 $ 460,000 $ 859,000 $ 1,319,000 |
Estimated amortization expense | Estimated amortization expense Remainder of Fiscal 2022 $ 106,000 Fiscal 2023 213,000 Fiscal 2024 213,000 Fiscal 2025 213,000 Fiscal 2026 121,000 Thereafter 346,000 Total $ 1,212,000 |
SEGMENTS AND CONCENTRATIONS (Ta
SEGMENTS AND CONCENTRATIONS (Tables) | 6 Months Ended |
Mar. 31, 2022 | |
Segment Reporting [Abstract] | |
Segment operating income (loss) | Segment operating income (loss) For the Three Months Ended March 31, For the Six Months Ended March 31, 2022 2021 2022 2021 Revenues: OEM distribution $ 4,676,000 $ 4,254,000 $ 9,917,000 $ 9,467,000 Retail distribution 649,000 229,000 2,041,000 621,000 Design 4,990,000 3,912,000 9,970,000 8,025,000 Total segment revenues $ 10,315,000 $ 8,395,000 $ 21,928,000 $ 18,113,000 Operating income/(loss): OEM distribution $ 326,000 $ 302,000 $ 823,000 $ 719,000 Retail distribution (356,000 ) (210,000 ) (584,000 ) (389,000 ) Design 389,000 (288,000 ) 974,000 (112,000 ) Total segment operating income/(loss) 359,000 (196,000 ) 1,213,000 218,000 General corporate expenses (682,000 ) (620,000 ) (1,322,000 ) (1,202,000 ) Total loss from operations (323,000 ) (816,000 ) (109,000 ) (984,000 ) Other expense/(income), net 33,000 19,000 67,000 (1,348,000 ) (Loss)/income before income taxes $ (356,000 ) $ (835,000 ) $ (176,000 ) $ 364,000 Depreciation and amortization: OEM distribution $ 3,000 $ 2,000 $ 4,000 $ 4,000 Design 80,000 77,000 153,000 168,000 Total depreciation and amortization $ 83,000 $ 79,000 $ 157,000 $ 172,000 |
Schedule of segment assets | Schedule of segment assets March 31, 2022 September 30, 2021 Segment Assets: OEM distribution $ 5,577,000 $ 5,898,000 Retail distribution 3,662,000 2,178,000 Design 6,316,000 5,824,000 Total segment assets 15,555,000 13,900,000 General corporate assets 6,418,000 5,956,000 Total assets $ 21,973,000 $ 19,856,000 |
LEASES (Tables)
LEASES (Tables) | 6 Months Ended |
Mar. 31, 2022 | |
Leases | |
Schedule of future minimum payments under operating & financial leases | Schedule of future minimum payments under operating & financial leases Remainder of Fiscal 2022 $ 306,000 Fiscal 2023 626,000 Fiscal 2024 639,000 Fiscal 2025 556,000 Fiscal 2026 510,000 Thereafter 2,398,000 Total future minimum lease payments 5,035,000 Less imputed interest (1,115,000 ) Present value of lease liabilities $ 3,920,000 |
OVERVIEW (Details Narrative)
OVERVIEW (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Mar. 31, 2022 | Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Net Income (Loss) Attributable to Parent | $ (356,335) | $ (834,728) | $ (176,311) | $ 364,308 |
Net Cash Provided by (Used in) Operating Activities | $ 360,327 | $ (397,918) |
ACCOUNTING POLICIES (Details Na
ACCOUNTING POLICIES (Details Narrative) - USD ($) | Mar. 31, 2022 | Sep. 30, 2021 | Sep. 30, 2020 |
Allowances for the provisions | $ 25,000 | $ 0 | $ 0 |
OEM Distribution [Member] | |||
Allowances for doubtful accounts | 90,000 | 90,000 | 249,000 |
Contract liabilities | 0 | 0 | 0 |
Design [Member] | |||
Allowances for doubtful accounts | 824,000 | 706,000 | 347,000 |
Contract liabilities | 621,000 | 188,000 | 410,000 |
Contract assets | 607,000 | 693,000 | 649,000 |
Retail Distribution [Member] | |||
Contract liabilities | $ 0 | $ 0 | $ 75,000 |
INTANGIBLE ASSETS AND GOODWIL_2
INTANGIBLE ASSETS AND GOODWILL (Details - Intangible Assets) - USD ($) | Mar. 31, 2022 | Sep. 30, 2021 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 1,975,000 | $ 1,975,000 |
Accumulated Amortization | (763,000) | (656,000) |
Net Carrying Amount | 1,212,000 | 1,319,000 |
Trademarks [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 585,000 | 585,000 |
Accumulated Amortization | (145,000) | (125,000) |
Net Carrying Amount | 440,000 | 460,000 |
Customer Relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 1,390,000 | 1,390,000 |
Accumulated Amortization | (618,000) | (531,000) |
Net Carrying Amount | $ 772,000 | $ 859,000 |
INTANGIBLE ASSETS AND GOODWIL_3
INTANGIBLE ASSETS AND GOODWILL (Details - Estimated amortization expense) - USD ($) | Mar. 31, 2022 | Sep. 30, 2021 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Remainder of Fiscal 2022 | $ 106,000 | |
Fiscal 2023 | 213,000 | |
Fiscal 2024 | 213,000 | |
Fiscal 2025 | 213,000 | |
Fiscal 2026 | 121,000 | |
Thereafter | 346,000 | |
Total | $ 1,212,000 | $ 1,319,000 |
INTANGIBLE ASSETS AND GOODWIL_4
INTANGIBLE ASSETS AND GOODWILL (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Mar. 31, 2022 | Mar. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of Intangible Assets | $ 53,000 | $ 53,000 | $ 106,000 | $ 106,000 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details Narrative) - USD ($) | Mar. 31, 2022 | Sep. 30, 2021 |
Kablooe [Member] | ||
Offsetting Assets [Line Items] | ||
Earnout liability | $ 70,000 | $ 70,000 |
SEGMENTS AND CONCENTRATIONS (De
SEGMENTS AND CONCENTRATIONS (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Mar. 31, 2022 | Mar. 31, 2021 | |
Segment Reporting Information [Line Items] | ||||
Revenues | $ 10,314,563 | $ 8,395,379 | $ 21,928,304 | $ 18,112,982 |
Total loss from operations | (322,739) | (816,176) | (108,525) | (983,669) |
Other expense/(income), net | (2,732) | (5,392) | (4,095) | (1,788) |
(Loss)/income before income taxes | (356,335) | (834,728) | (176,311) | 364,308 |
Operating Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 10,315,000 | 8,395,000 | 21,928,000 | 18,113,000 |
Total loss from operations | (323,000) | (816,000) | (109,000) | (984,000) |
Segment operating income/(loss) | 359,000 | (196,000) | 1,213,000 | 218,000 |
General corporate expenses | (682,000) | (620,000) | (1,322,000) | (1,202,000) |
Other expense/(income), net | 33,000 | 19,000 | 67,000 | (1,348,000) |
(Loss)/income before income taxes | (356,000) | (835,000) | (176,000) | 364,000 |
Depreciation and amortization | 83,000 | 79,000 | 157,000 | 172,000 |
OEM Distribution [Member] | Operating Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 4,676,000 | 4,254,000 | 9,917,000 | 9,467,000 |
Total loss from operations | 326,000 | 302,000 | 823,000 | 719,000 |
Depreciation and amortization | 3,000 | 2,000 | 4,000 | 4,000 |
Retail Distribution [Member] | Operating Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 649,000 | 229,000 | 2,041,000 | 621,000 |
Total loss from operations | (356,000) | (210,000) | (584,000) | (389,000) |
Design [Member] | Operating Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 4,990,000 | 3,912,000 | 9,970,000 | 8,025,000 |
Total loss from operations | 389,000 | (288,000) | 974,000 | (112,000) |
Depreciation and amortization | $ 80,000 | $ 77,000 | $ 153,000 | $ 168,000 |
SEGMENTS AND CONCENTRATIONS (_2
SEGMENTS AND CONCENTRATIONS (Details - Segment Assets) - USD ($) | Mar. 31, 2022 | Sep. 30, 2021 |
Segment Reporting Information [Line Items] | ||
Assets | $ 21,973,187 | $ 19,855,539 |
Net Assets, Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Other Assets | 15,555,000 | 13,900,000 |
General corporate assets | 6,418,000 | 5,956,000 |
Assets | 21,973,000 | 19,856,000 |
OEM Distribution [Member] | Net Assets, Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Other Assets | 5,577,000 | 5,898,000 |
Retail Distribution [Member] | Net Assets, Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Other Assets | 3,662,000 | 2,178,000 |
Design [Member] | Net Assets, Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Other Assets | $ 6,316,000 | $ 5,824,000 |
SEGMENTS AND CONCENTRATIONS (_3
SEGMENTS AND CONCENTRATIONS (Details Narrative) - Customer Concentration Risk [Member] | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Mar. 31, 2022 | Mar. 31, 2021 | Sep. 30, 2021 | |
Revenue Benchmark [Member] | Two Customers [Member] | OEM Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk, Percentage | 26.20% | 25.70% | 29.70% | ||
Revenue Benchmark [Member] | Three Customers [Member] | OEM Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk, Percentage | 40.40% | ||||
Revenue Benchmark [Member] | One Customer [Member] | Design [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk, Percentage | 11.70% | 10.20% | |||
Accounts Receivable [Member] | Two Customers [Member] | OEM Distribution [Member] | |||||
Revenue, Major Customer [Line Items] | |||||
Concentration Risk, Percentage | 34.80% | 44.00% |
SHARE-BASED COMPENSATION (Detai
SHARE-BASED COMPENSATION (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
Feb. 28, 2022 | Jan. 31, 2022 | Oct. 31, 2021 | Mar. 31, 2022 | Mar. 31, 2021 | Mar. 31, 2022 | Mar. 31, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Proceeds from options exercised | $ 0 | $ 144,198 | |||||
Share based compensation expense | $ 104,812 | $ 62,744 | |||||
Equity Option [Member] | |||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Options granted | 14,000 | ||||||
Options granted, exercise price of options granted | $ 1.56 | ||||||
Option grant-date fair value per share | $ 0.73 | ||||||
Fair value of options granted | $ 10,000 | ||||||
Stock issued from exercise of stock options | 0 | 69,000 | |||||
Proceeds from options exercised | $ 144,000 | ||||||
Stock option intrinsic value | $ 122,000 | 122,000 | |||||
Share based compensation expense | 66,000 | $ 21,000 | 105,000 | $ 63,000 | |||
Unrecognized compensation cost | $ 54,000 | $ 54,000 | |||||
Unrecognized compensation cost weighted average vesting period | 9 months 18 days | ||||||
Equity Option [Member] | Non Employee Directors [Member] | |||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Options granted | 31,000 | 83,000 | 58,000 | ||||
Options granted, exercise price of options granted | $ 1.68 | $ 1.56 | $ 2.39 | ||||
Option grant-date fair value per share | $ 0.80 | $ 0.72 | $ 1.03 | ||||
Fair value of options granted | $ 25,000 | $ 60,000 | $ 60,000 | ||||
Equity Option [Member] | Former Non Employee Directors [Member] | |||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Options granted | 19,000 | ||||||
Options granted, exercise price of options granted | $ 1.68 | ||||||
Option grant-date fair value per share | $ 1.07 | ||||||
Fair value of options granted | $ 20,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | 4 Months Ended | 6 Months Ended | |||
Mar. 31, 2022 | Mar. 31, 2021 | Jan. 18, 2018 | Mar. 31, 2022 | Mar. 31, 2021 | Sep. 30, 2021 | |
Related Party Transaction [Line Items] | ||||||
Prepaid expenses and other current assets | $ 816,250 | $ 816,250 | $ 561,072 | |||
Related party cost | 704,102 | $ 578,436 | 1,441,780 | $ 1,181,397 | ||
JustWise [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Related party cost | 10,000 | 10,000 | ||||
Forward China [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Principal repayments | 100,000 | |||||
Forward China [Member] | Promissory Note [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Debt face amount | $ 1,600,000 | |||||
Debt interest rate | 8.00% | |||||
Debt maturity date | Jan. 18, 2019 | |||||
Interest expense | 31,000 | 32,000 | 63,000 | 64,000 | ||
Forward China [Member] | Inventory Purchases [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Prepaid expenses and other current assets | 418,000 | 418,000 | $ 317,000 | |||
Forward China [Member] | Service Fees [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Service fees paid | 350,000 | 340,000 | 712,000 | 683,000 | ||
Chief Executive Officer [Member] | Koble [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Revenue from related party | $ 441,000 | $ 154,000 | $ 981,000 | $ 339,000 |
LINE OF CREDIT (Details Narrati
LINE OF CREDIT (Details Narrative) - I P S [Member] - USD ($) | 6 Months Ended | 12 Months Ended |
Mar. 31, 2022 | Sep. 30, 2021 | |
Line of Credit Facility [Line Items] | ||
Line of credit maximum amount | $ 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 | 4.25% | 4.00% |
Line of credit amount available | $ 1,300,000 |
DEBT (Details Narrative)
DEBT (Details Narrative) | 6 Months Ended |
Mar. 31, 2022USD ($) | |
Paycheck Protection Program [Member] | |
Debt Instrument [Line Items] | |
Debt interest rate | 1.00% |
Paycheck Protection Program [Member] | |
Debt Instrument [Line Items] | |
Loan received | $ 1,357,000 |
Debt maturity date | Apr. 18, 2022 |
LEASES (Details - Future minimu
LEASES (Details - Future minimum payments Operating lease) | Mar. 31, 2022USD ($) |
Leases | |
Remainder of Fiscal 2022 | $ 306,000 |
Fiscal 2023 | 626,000 |
Fiscal 2024 | 639,000 |
Fiscal 2025 | 556,000 |
Fiscal 2026 | 510,000 |
Thereafter | 2,398,000 |
Total future minimum lease payments | 5,035,000 |
Less imputed interest | (1,115,000) |
Present value of lease liabilities | $ 3,920,000 |
LEASES (Details Narrative)
LEASES (Details Narrative) - USD ($) | 6 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Leases | ||
[custom:CashPaidForAmountsIncludedInOperatingLeaseLiabilities] | $ 294,000 | $ 226,000 |
Operating leases term | 8 years 7 months 6 days | |
Operating leases | 5.60% |