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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 2/14/24 Forward Industries, Inc. 10-Q 12/31/23 59:3.5M GlobalOne Filings Inc/FA |
Document/Exhibit Description Pages Size
1: 10-Q Form 10-Q for 12/31/23 HTML 561K
2: EX-31.1 Certification of Principal Executive Officer HTML 19K
3: EX-31.2 Certification of Principal Financial Officer HTML 19K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 18K
10: R1 Cover HTML 71K
11: R2 Condensed Consolidated Balance Sheets (Unaudited) HTML 127K
12: R3 Condensed Consolidated Balance Sheets (Unaudited) HTML 27K
(Parenthetical)
13: R4 Condensed Consolidated Statements of Operations HTML 129K
(Unaudited)
14: R5 Condensed Consolidated Statements of Shareholders' HTML 41K
Equity (Unaudited)
15: R6 Condensed Consolidated Statements of Cash Flows HTML 82K
(Unaudited)
16: R7 Overview HTML 27K
17: R8 Accounting Policies HTML 54K
18: R9 Discontinued Operations and Assets Held for Sale HTML 34K
19: R10 Intangible Assets and Goodwill HTML 42K
20: R11 Fair Value Measurements HTML 22K
21: R12 Segments and Concentrations HTML 68K
22: R13 Shareholders? Equity HTML 34K
23: R14 Earnings Per Share HTML 41K
24: R15 Related Party Transactions HTML 41K
25: R16 Legal Proceedings HTML 20K
26: R17 Line of Credit HTML 22K
27: R18 Leases HTML 29K
28: R19 Accrued Expenses and Other Current Liabilities HTML 24K
29: R20 Accounting Policies (Policies) HTML 85K
30: R21 Discontinued Operations and Assets Held for Sale HTML 31K
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31: R22 Intangible Assets and Goodwill (Tables) HTML 39K
32: R23 Segments and Concentrations (Tables) HTML 53K
33: R24 Earnings Per Share (Tables) HTML 41K
34: R25 Leases (Tables) HTML 25K
35: R26 Accrued Expenses and Other Current Liabilities HTML 24K
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37: R28 Accounting Policies (Details Narrative) HTML 35K
38: R29 Discontinued Operations and Assets Held for Sale HTML 38K
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(Details Narrative)
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41: R32 Intangible Assets and Goodwill (Details - HTML 35K
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45: R36 Segments and Concentrations (Details - Segment HTML 43K
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47: R38 Shareholders? Equity (Details Narrative) HTML 51K
48: R39 Earnings Per Share (Details - Diluted loss per HTML 63K
share)
49: R40 Earnings Per Share (Details - Antidilutive shares) HTML 25K
50: R41 Related Party Transactions (Details Narrative) HTML 61K
51: R42 Line of Credit (Details Narrative) HTML 29K
52: R43 Leases (Details - Future minimum payments HTML 39K
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54: R45 Accrued Expenses and Other Current Liabilities HTML 26K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
| i ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i December 31, 2023
OR
| i ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________________ to ________________
Commission file number i 001-34780
(Exact name of registrant as specified in its charter)
| i New York | i 13-1950672 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
| i 700 Veterans Memorial Highway, i Suite 100, i Hauppauge, i NY | i 11788 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: i (631) i 547-3055
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| i Common Stock, par value $0.01 | i FORD |
(The Nasdaq Capital Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ¨ | Accelerated filer ¨ | |
| i Non-accelerated filer x | Smaller reporting company i x | |
| Emerging growth company i ¨ |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No i x
There were shares of the registrant’s common stock outstanding as of January 31, 2024.
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
| 2 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, | September 30, | |||||||
| 2023 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | i 3,026,786 | $ | i 3,180,468 | ||||
| Accounts receivable, net | i 6,534,702 | i 6,968,778 | ||||||
| Inventories, net | i 405,229 | i 334,384 | ||||||
| Discontinued assets held for sale | i 135,604 | i 508,077 | ||||||
| Prepaid expenses and other current assets | i 392,282 | i 378,512 | ||||||
| Total current assets | i 10,494,603 | i 11,370,219 | ||||||
| Property and equipment, net | i 265,346 | i 274,046 | ||||||
| Intangible assets, net | i 839,954 | i 893,143 | ||||||
| Goodwill | i 1,758,682 | i 1,758,682 | ||||||
| Operating lease right-of-use assets, net | i 2,916,385 | i 3,021,315 | ||||||
| Other assets | i 68,737 | i 68,737 | ||||||
| Total assets | $ | i 16,343,707 | $ | i 17,386,142 | ||||
| Liabilities and shareholders' equity | ||||||||
| Current liabilities: | ||||||||
| Note payable to Forward China | $ | i 850,000 | $ | i – | ||||
| Accounts payable | i 392,202 | i 518,892 | ||||||
| Due to Forward China | i 8,894,245 | i 8,246,015 | ||||||
| Deferred income | i 250,405 | i 297,407 | ||||||
| Current portion of operating lease liability | i 425,998 | i 416,042 | ||||||
| Accrued expenses and other current liabilities | i 494,724 | i 1,357,743 | ||||||
| Total current liabilities | i 11,307,574 | i 10,836,099 | ||||||
| Other liabilities: | ||||||||
| Note payable to Forward China | i – | i 1,100,000 | ||||||
| Operating lease liability, less current portion | i 2,723,281 | i 2,833,782 | ||||||
| Total other liabilities | i 2,723,281 | i 3,933,782 | ||||||
| Total liabilities | i 14,030,855 | i 14,769,881 | ||||||
| Commitments and contingencies | – | – | ||||||
| Shareholders' equity: | ||||||||
| Common stock, par value $ per share; shares authorized; shares issued and outstanding at December 31, 2023 and September 30, 2023 | i 100,612 | i 100,612 | ||||||
| Additional paid-in capital | i 20,253,013 | i 20,202,202 | ||||||
| Accumulated deficit | ( i 18,040,773 | ) | ( i 17,686,553 | ) | ||||
| Total shareholders' equity | i 2,312,852 | i 2,616,261 | ||||||
| Total liabilities and shareholders' equity | $ | i 16,343,707 | $ | i 17,386,142 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 3 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended | ||||||||
| 2023 | 2022 | |||||||
| Revenues, net | $ | i 7,151,951 | $ | i 9,752,684 | ||||
| Cost of sales | i 5,509,465 | i 7,786,614 | ||||||
| Gross profit | i 1,642,486 | i 1,966,070 | ||||||
| Sales and marketing expenses | i 368,736 | i 411,174 | ||||||
| General and administrative expenses | i 1,654,071 | i 1,682,812 | ||||||
| Operating loss | ( i 380,321 | ) | ( i 127,916 | ) | ||||
| Fair value adjustment of earnout consideration | i – | ( i 40,000 | ) | |||||
| Interest income | ( i 17,469 | ) | i – | |||||
| Interest expense | i 19,010 | i 27,958 | ||||||
| Other income, net | ( i 687 | ) | ( i 24,560 | ) | ||||
| Loss from continuing operations before income taxes | ( i 381,175 | ) | ( i 91,314 | ) | ||||
| Provision for income taxes | i – | i – | ||||||
| Loss from continuing operations | ( i 381,175 | ) | ( i 91,314 | ) | ||||
| Income / (loss) from discontinued operations, net of tax | i 26,955 | ( i 338,961 | ) | |||||
| Net loss | $ | ( i 354,220 | ) | $ | ( i 430,275 | ) | ||
| Basic earnings/(loss) per share: | ||||||||
| Basic loss per share from continuing operations | $ | ( i 0.04 | ) | $ | ( i 0.01 | ) | ||
| Basic earnings/(loss) per share from discontinued operations | i 0.00 | ( i 0.03 | ) | |||||
| Basic loss per share | $ | ( i 0.04 | ) | $ | ( i 0.04 | ) | ||
| Diluted earnings/(loss) per share: | ||||||||
| Diluted loss per share from continuing operations | $ | ( i 0.04 | ) | $ | ( i 0.01 | ) | ||
| Diluted earnings/(loss) per share from discontinued operations | i 0.00 | ( i 0.03 | ) | |||||
| Diluted loss per share | $ | ( i 0.04 | ) | $ | ( i 0.04 | ) | ||
| Weighted average common shares outstanding: | ||||||||
| Basic | i 10,061,185 | i 10,061,185 | ||||||
| Diluted | i 10,061,185 | i 10,061,185 | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 4 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
| For the Three Months Ended December 31, 2023 | ||||||||||||||||||||
| Additional | ||||||||||||||||||||
| Common Stock | Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at September 30, 2023 | i 10,061,185 | $ | i 100,612 | $ | i 20,202,202 | $ | ( i 17,686,553 | ) | $ | i 2,616,261 | ||||||||||
| Share-based compensation | – | – | i 50,811 | – | i 50,811 | |||||||||||||||
| Net loss | – | – | – | ( i 354,220 | ) | ( i 354,220 | ) | |||||||||||||
| Balance at December 31, 2023 | i 10,061,185 | $ | i 100,612 | $ | i 20,253,013 | $ | ( i 18,040,773 | ) | $ | i 2,312,852 | ||||||||||
| For the Three Months Ended December 31, 2022 | ||||||||||||||||||||
| Additional | ||||||||||||||||||||
| Common Stock | Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at September 30, 2022 | i 10,061,185 | $ | i 100,612 | $ | i 20,115,711 | $ | ( i 13,949,896 | ) | $ | i 6,266,427 | ||||||||||
| Share-based compensation | – | – | i 23,935 | – | i 23,935 | |||||||||||||||
| Net loss | – | – | – | ( i 430,275 | ) | ( i 430,275 | ) | |||||||||||||
| Balance at December 31, 2022 | i 10,061,185 | $ | i 100,612 | $ | i 20,139,646 | $ | ( i 14,380,171 | ) | $ | i 5,860,087 | ||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 5 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended | ||||||||
| 2023 | 2022 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | ( i 354,220 | ) | $ | ( i 430,275 | ) | ||
| Adjustments to reconcile net loss to net cash provided by/(used in) operating activities: | ||||||||
| Share-based compensation | i 50,811 | i 23,935 | ||||||
| Depreciation and amortization | i 81,403 | i 77,530 | ||||||
| Bad debt (recoveries) expense | ( i 10,991 | ) | i 13,109 | |||||
| Change in fair value of earnout consideration | i – | ( i 40,000 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | i 445,067 | ( i 993,522 | ) | |||||
| Inventories | ( i 70,845 | ) | ( i 288,509 | ) | ||||
| Discontinued assets held for sale | i 372,473 | ( i 49,340 | ) | |||||
| Prepaid expenses and other current assets | ( i 13,770 | ) | i 23,262 | |||||
| Accounts payable and due to Forward China | i 521,540 | i 2,070,341 | ||||||
| Deferred income | ( i 47,002 | ) | ( i 104,290 | ) | ||||
| Net changes in operating lease liabilities | i 4,385 | i 8,416 | ||||||
| Accrued expenses and other current liabilities | ( i 863,019 | ) | ( i 459,262 | ) | ||||
| Net cash provided by / (used in) operating activities | i 115,832 | ( i 148,605 | ) | |||||
| Investing Activities: | ||||||||
| Purchases of property and equipment | ( i 19,514 | ) | ( i 45,111 | ) | ||||
| Net cash used in investing activities | ( i 19,514 | ) | ( i 45,111 | ) | ||||
| Financing Activities: | ||||||||
| Repayment of note payable to Forward China | ( i 250,000 | ) | ( i 50,000 | ) | ||||
| Net cash used in financing activities | ( i 250,000 | ) | ( i 50,000 | ) | ||||
| Net decrease in cash | ( i 153,682 | ) | ( i 243,716 | ) | ||||
| Cash at beginning of period | i 3,180,468 | i 2,575,522 | ||||||
| Cash at end of period | $ | i 3,026,786 | $ | i 2,331,806 | ||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid for interest | $ | i 19,010 | $ | i 27,958 | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 6 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
i
Business
Forward Industries, Inc. (“Forward”, “we”, “our” or the “Company”) is a global design, sourcing and distribution company serving top tier medical and technology customers worldwide.
The Company’s design division provides hardware and software product design and engineering services to customers predominantly located in the U.S. The Company’s original equipment manufacturing (“OEM”) distribution division sources and sells carrying cases and other accessories for medical monitoring and diagnostic kits as well as a variety of other portable electronic and non-electronic devices to original equipment manufacturers (“OEM”s), or their contract manufacturers worldwide, that either package our products as accessories “in box” together with their branded product offerings or sell them through their retail distribution channels. The Company does not manufacture any of its OEM products and sources substantially all of these products from independent suppliers in China, through Forward Industries Asia-Pacific Corporation, a British Virgin Islands corporation (“Forward China”). See Note 9.
Discontinued Operations
In July 2023, the Company decided to cease operations of its retail distribution segment (“Retail Exit”) and is presenting the results of operations for this segment within discontinued operations in the current and prior periods presented herein. Our retail distribution business sources and sells smart-enabled furniture, hot tubs and saunas and a variety of other products through various online retailer websites to customers predominantly located in the U.S. and Canada. The inventory of the retail segment is presented as discontinued assets held for sale on the balance sheets at December 31, 2023 and September 30, 2023. Where applicable, certain footnotes exclude the discontinued operations unless otherwise noted. See Note 3 for additional information on discontinued operations.
Liquidity
For the three months ended December 31, 2023, the Company generated a net loss of $354,000, loss from continuing operations of $381,000 and cash flows from operating activities of $116,000. At December 31, 2023, the Company had $ i 1,300,000 of borrowing available under its line of credit with a bank that was renewed in March 2023 and has a maturity date of i May 31, 2024 (see Note 11). By discontinuing the retail segment, which incurred significant losses, the Company expects improved performance in future periods. The Company’s OEM distribution segment procures substantially all its products through independent suppliers in China through Forward China. In connection with the new sourcing agreement and in order to preserve future liquidity, in November 2023, the Company and Forward China entered into an agreement whereby Forward China agreed to limit the amount of outstanding payables it would seek to collect from the Company to $500,000 in any 12-month period, which the Company agreed to pay within 30 days of any such request (see Note 9). This agreement pertains only to payables that were outstanding at October 30, 2023 of approximately $7,365,000. Purchases from Forward China made after October 30, 2023 are not covered by this agreement and are expected to be paid according to normal payment terms. Based on our forecasted cash flows, discontinuing our retail segment and the agreement with Forward China, we believe our existing cash balance and working capital will be sufficient to meet our liquidity needs through at least February 28, 2025. The condensed consolidated financial statements do not include any adjustments that might result if the Company is unable to continue as a going concern.
| 7 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Impact of COVID-19
On May 11, 2023, the U.S. Department of Health and Human Services declared the end of the Public Health Emergency for COVID-19; however, the effects of COVID-19 continue to linger throughout the global economy and our businesses. Though the severity of COVID-19 has subsided, new variants, or the outbreak of a new pathogen, could interrupt our business, cause renewed labor and supply chain disruptions, and negatively impact the global and US economy, which could materially and adversely impact our business.
/ i
i
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, 2024. 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, 2023, and with the disclosures and risk factors presented therein. The September 30, 2023 condensed consolidated balance sheet has been derived from the audited consolidated financial statements.
i
The preparation of the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. Within this report, certain dollar amounts and percentages have been rounded to their approximate values.
i
As a result of the discontinued retail segment, as disclosed in Note 3, the Company now has two reportable segments: OEM 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 (such as sporting and recreational products, bar code scanners, GPS location devices, tablets and firearms) on a made-to-order basis that are customized to fit the products sold by our OEM customers worldwide. 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 6 for more information on segments.
| 8 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
i
Accounts receivable consist of unsecured trade accounts with customers in amounts that have been invoiced ($ i 6,183,000 and $ i 6,949,000 at December 31, 2023 and September 30, 2023, respectively) and contract assets as described further below under the heading “Revenue Recognition.” 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 December 31, 2023 and September 30, 2023, the Company had i i no / allowances for doubtful accounts for the OEM distribution segment, allowances for doubtful accounts of $ i 35,000 and $ i 46,000, respectively, for the discontinued retail distribution segment and $ i 760,000 and $ i 771,000, respectively, for the design segment.
The Company has agreements with various retailers which contain different terms for trade discounts, promotional and other sales allowances. At December 31, 2023 and September 30, 2023, the Company recorded accounts receivable allowances of $ i 193,000 and $ i 139,000, respectively, for the discontinued retail distribution segment.
/ i
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.
i
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 i i i no / / contract liabilities at December 31, 2023, September 30, 2023 or September 30, 2022.
Discontinued Retail Distribution Segment
The discontinued 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 i i i no / / contract liabilities at December 31, 2023, September 30, 2023 or 2022. The results of operations of the retail segment are reported as discontinued operations for the three months ended December 31, 2023 and 2022. See Note 3.
| 9 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 $ i 1,340,000, $ i 976,000 and $ i 609,000 at December 31, 2023, September 30, 2023 and September 30, 2022, respectively. Contracts where collections to date have exceeded recognized revenues, or contract liabilities, are recorded as a liability and classified as a component of deferred income in the accompanying condensed consolidated balance sheets. The design segment had contract liabilities of $ i 250,000, $ i 297,000, and $ i 439,000 at December 31, 2023, September 30, 2023 and September 30, 2022, respectively.
/ i
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, 2023.
i
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, 2023.
| 10 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
i
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, 2023, 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.
i
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. |
i
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.
| 11 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
i
Recent Accounting Pronouncements
In November 2019, the 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 the Company for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company adopted this guidance in the first quarter of fiscal 2024 with no material impact on its condensed consolidated financial statements.
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NOTE 3 DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Considering the recurring losses incurred by the retail segment, in July 2023, the Company decided to cease operations of its retail distribution segment (“Retail Exit”). The primary assets of the retail segment are inventory and accounts receivable. The Company expects to sell, liquidate, or otherwise dispose of remaining retail inventory by June 30, 2024, and to collect remaining retail accounts receivable by the end of Fiscal 2024. After this time, we expect to have no further significant continuing involvement with the retail distribution segment. The Retail Exit is considered a strategic shift that will have a significant impact on the Company’s operations and financial results. The inventory of the retail segment meets the criteria to be considered “held-for-sale” in accordance with ASC 205-20, “Discontinued Operations.” Accordingly, the retail inventory is classified on our condensed consolidated balance sheets as “discontinued assets held for sale” at December 31, 2023 and September 30, 2023, and the results of operations for the retail segment have been classified as “Discontinued Operations” on the condensed consolidated statements of operations for the three months ended December 31, 2023 and 2022. The condensed consolidated balance sheets and results of operations for comparable prior periods have been reclassified to conform to this presentation in accordance with the accounting guidance.
The total amount related to the discontinued retail segment included in Due to Forward China on the condensed consolidated balance sheets was approximately $ i 905,000 and $ i 1,002,000 (which includes the $723,000 due on canceled purchase orders) at December 31, 2023 and September 30, 2023, respectively.
The following table presents the major classes of the “Income / loss from discontinued operations, net of tax” in our condensed consolidated statements of operations.
i| Schedule of discontinued operations | ||||||||
| For the Three Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues, net | $ | i 665,000 | $ | i 1,057,000 | ||||
| Cost of sales | i 470,000 | i 1,104,000 | ||||||
| Gross profit | i 195,000 | ( i 47,000 | ) | |||||
| Sales and marketing expenses | i 145,000 | i 279,000 | ||||||
| General and administrative expenses | i 23,000 | i 13,000 | ||||||
| Income / (loss) from discontinued operations before income taxes | i 27,000 | ( i 339,000 | ) | |||||
| Provision for income taxes | i – | i – | ||||||
| Income / (loss) from discontinued operations | $ | i 27,000 | $ | ( i 339,000 | ) | |||
| 12 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2023 and September 30, 2023, discontinued assets held for sale of $ i 136,000 and $ i 508,000, respectively, consist of the net inventory of the retail segment. These numbers include an allowance of $ i 834,000 and $ i 1,464,000, respectively to reduce excess or otherwise unsellable inventory to its estimated net realizable value.
There was no depreciation, amortization, investing or financing cash flow activities, or other significant noncash operating cash flow activities for the retail segment in the three months ended December 31, 2023 and 2022.
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NOTE 4 INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The Company’s intangible assets consist of the following:
i| Schedule of intangible assets | ||||||||||||||||||||||||
| December 31, 2023 | September 30, 2023 | |||||||||||||||||||||||
| Trademarks | Customer Relationships | Total Intangible Assets | Trademarks | Customer Relationships | Total Intangible Assets | |||||||||||||||||||
| Gross carrying amount | $ | i 585,000 | $ | i 1,390,000 | $ | i 1,975,000 | $ | i 585,000 | $ | i 1,390,000 | $ | i 1,975,000 | ||||||||||||
| Less accumulated amortization | ( i 213,000 | ) | ( i 922,000 | ) | ( i 1,135,000 | ) | ( i 203,000 | ) | ( i 879,000 | ) | ( i 1,082,000 | ) | ||||||||||||
| Net carrying amount | $ | i 372,000 | $ | i 468,000 | $ | i 840,000 | $ | i 382,000 | $ | i 511,000 | $ | i 893,000 | ||||||||||||
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 i 15 years for the trademarks and eight i 8 years for the customer relationships. Amortization expense related to intangible assets was $ i i 53,000 / for the three months ended December 31, 2023 and 2022, which is included in general and administrative expenses on the condensed consolidated statements of operations.
At December 31, 2023, estimated amortization expense for the Company’s intangible assets is as follows:
i /
| 13 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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NOTE 5 FAIR VALUE MEASUREMENTS
The acquisition of Kablooe provides annual contingent earnout payments based on their results of operations through August 2025. The fair value of the earnout liability is measured on a recurring basis at each reporting date using a Black-Scholes valuation model with inputs categorized within level three of the fair value hierarchy. During the three months ended December 31, 2022, the Company reduced this liability from $70,000 to $30,000 based on changes to the expected likelihood of Kablooe reaching the specified earnings targets. In September 2023, the Company further reduced this liability from $30,000 to $0 due to the low likelihood of Kablooe reaching the specified earnings target. The fair value of this earnout liability remained $ i 0 at December 31, 2023. The resulting gains have been recorded as a component of other income on the condensed consolidated statements of operations.
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NOTE 6 SEGMENTS AND CONCENTRATIONS
As a result of discontinuing the retail segment, see Note 3, the Company now has two reportable segments: OEM distribution and design. The results of the retail segment were classified as discontinued operations as discussed in Note 3. Segment information presented herein excludes the results of the retail segment for all periods presented.
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 distribution segment, we exclude general and administrative and general corporate expenses from its 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.
| 14 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Information by segment and related reconciliations are shown in tables below:
i| Schedule of segment and related reconciliations | ||||||||
For the Three Months Ended | ||||||||
| 2023 | 2022 | |||||||
| Revenues: | ||||||||
| OEM distribution | $ | i 2,010,000 | $ | i 4,377,000 | ||||
| Design | i 5,142,000 | i 5,376,000 | ||||||
| Total segment revenues | $ | i 7,152,000 | $ | i 9,753,000 | ||||
| Operating income/(loss): | ||||||||
| OEM distribution | $ | i 41,000 | $ | i 112,000 | ||||
| Design | i 266,000 | i 433,000 | ||||||
| Total segment operating income | i 307,000 | i 545,000 | ||||||
| General corporate expenses | ( i 687,000 | ) | ( i 673,000 | ) | ||||
| Operating loss from continuing operations before income taxes | ( i 380,000 | ) | ( i 128,000 | ) | ||||
| Other expense (income), net | i 1,000 | ( i 37,000 | ) | |||||
| Loss from continuing operations before income taxes | $ | ( i 381,000 | ) | $ | ( i 91,000 | ) | ||
| Depreciation and amortization: | ||||||||
| OEM distribution | $ | i 1,000 | $ | i 2,000 | ||||
| Design | i 80,000 | i 76,000 | ||||||
| Total depreciation and amortization | $ | i 81,000 | $ | i 78,000 | ||||
i
| Schedule of segment assets | ||||||||
| December 31, 2023 | September 30, 2023 | |||||||
| Segment Assets: | ||||||||
| OEM distribution | $ | i 2,321,000 | $ | i 2,478,000 | ||||
| Design | i 6,823,000 | i 6,721,000 | ||||||
| Total segment assets | i 9,144,000 | i 9,199,000 | ||||||
| General corporate assets | i 6,669,000 | i 6,924,000 | ||||||
| Discontinued assets held for sale | i 136,000 | i 508,000 | ||||||
| Other assets of discontinued retail segment | i 395,000 | i 755,000 | ||||||
| Total assets | $ | i 16,344,000 | $ | i 17,386,000 | ||||
The Company had certain customers in the OEM distribution segment whose individual percentage of the Company’s consolidated revenues was 10% or greater. There were no customers in the OEM distribution segment whose individual percentage of the Company’s consolidated revenues was 10% or greater during the three months ended December 31, 2023. Revenues from two customers or their affiliates or contract manufacturers represented i 27.7% of the Company’s consolidated net revenues for the three months ended December 31, 2022.
| 15 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended December 31, 2023 and 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 i 27.5% and i 15.9%, respectively, of the Company’s consolidated net revenues for the three months ended December 31, 2023 and 2022.
At December 31, 2023 and September 30, 2023, 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. One customer or its affiliate or contract manufacturer represented i 13.5% and i 12.0% of the Company’s consolidated accounts receivable at December 31, 2023 and September 30, 2023, respectively.
At December 31, 2023 and September 30, 2023, 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 i 28.4% and i 31.1%, respectively, of the Company’s consolidated accounts receivable at December 31, 2023 and September 30, 2023.
In March 2023, the Company’s contract with one of its major diabetic customers in the OEM distribution segment expired. Due to increased pricing pressures, the Company did not extend its contract with this customer. Revenue from this customer represented i 13.4% of our consolidated net revenues for the three months ended December 31, 2022. The Company expects the loss of this customer to cause a significant decline in OEM distribution segment revenues in future periods.
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Stock Options
On October 1, 2023, the Company granted options to three of its non-employee directors to purchase an aggregate of shares of its common stock at an exercise price of $ per share. The options vest one year from the date of grant and expire five years from the date of the grant. The options have a weighted average grant-date fair value of $ per share and an aggregate grant-date fair value of $ i 120,000, which will be recognized ratably over the vesting period. options were granted during the three months ended December 31, 2022. There were options exercised during the three months ended December 31, 2023 or 2022.
The Company recognized compensation expense for stock option awards of $ and $ during the three months ended December 31, 2023 and 2022, respectively, which was recorded as a component of general and administrative expenses in its condensed consolidated statements of operations. At December 31, 2023, there was $ of total unrecognized compensation cost related to nonvested stock option awards that is expected to be recognized over a weighted average period of years.
Nasdaq
On July 31, 2023, the Company was notified by Nasdaq that it was not compliant with its closing bid price requirement because the closing bid price of our common stock was below $1.00 per share for 30 consecutive trading days. The Company had 180 days, or until January 29, 2024, to regain compliance with this requirement. On January 30, 2024, we were notified by Nasdaq that based on our continued non-compliance with this requirement, it had determined that the Company’s common stock would be scheduled for delisting from Nasdaq. The Company requested a hearing on this matter with the Nasdaq Hearings Panel (“Panel”) and a hearing has been scheduled for April 9, 2024. This request stayed any trading suspension or delisting of the Company’s common stock until the completion of the hearings process. The Company has received shareholder approval for a reverse stock split (see below), on February 6, 2024, and is considering its options. We can provide no assurances that we will regain compliance with the requirements to remain listed on Nasdaq or that the Panel will approve our plans to regain compliance.
| 16 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Reverse Stock Split
On February 6, 2024, the Company's shareholders approved an amendment to our Restated Certificate of Incorporation (the "Amendment") to effect a reverse stock split at a ratio in the range of i 1-for-2 to i 1-for-3, with such ratio to be determined at the discretion of the Company's board of directors and with such reverse stock split to be effected at such time and date, if at all, as determined by the Company's board of directors in its sole discretion. The Company’s board of directors intends to determine whether to proceed with the reverse stock split, the effective time and ratio of the reverse stock split at a future date. We can provide no assurances that it will be implemented or that it will result in our stock price increasing to meet the bid price requirement for a period of time sufficient to regain compliance with Nasdaq listing requirements.
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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:
i| Schedule of basic and diluted earnings per share | ||||||||
| For the Three Months Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Numerator: | ||||||||
| Loss from continuing operations | $ | ( i 381,000 | ) | $ | ( i 91,000 | ) | ||
| Income / (loss) from discontinued operations, net of tax | i 27,000 | ( i 339,000 | ) | |||||
| Net loss | $ | ( i 354,000 | ) | $ | ( i 430,000 | ) | ||
| Denominator: | ||||||||
| Weighted average common shares outstanding | i 10,061,000 | i 10,061,000 | ||||||
| Dilutive common share equivalents | i – | i – | ||||||
| Weighted average dilutive shares outstanding | i 10,061,000 | i 10,061,000 | ||||||
| Basic (loss)/earnings per share: | ||||||||
| Basic loss per share from continuing operations | $ | ( i 0.04 | ) | $ | ( i 0.01 | ) | ||
| Basic earnings/(loss) per share from discontinued operations | i 0.00 | ( i 0.03 | ) | |||||
| Basic loss per share | $ | ( i 0.04 | ) | $ | ( i 0.04 | ) | ||
| Diluted (loss)/earnings per share: | ||||||||
| Diluted loss per share from continuing operations | $ | ( i 0.04 | ) | $ | ( i 0.01 | ) | ||
| Diluted earnings/(loss) per share from discontinued operations | i 0.00 | ( i 0.03 | ) | |||||
| Diluted loss per share | $ | ( i 0.04 | ) | $ | ( i 0.04 | ) | ||
| 17 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following securities were excluded from the calculation of diluted earnings per share in each period because their inclusion would have been anti-dilutive:
i| Schedule of anti-dilutive securities | ||||||||
For the Three Months Ended | ||||||||
| 2023 | 2022 | |||||||
| Options | i 1,255,000 | i 1,075,000 | ||||||
| Warrants | i 75,000 | i 151,000 | ||||||
| Total potentially dilutive shares | i 1,330,000 | i 1,226,000 | ||||||
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NOTE 9 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 through March 2023 paid 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. Considering the loss of a significant OEM distribution customer (see Note 6), effective April 1, 2023, the Company and Forward China agreed to reduce the fixed portion of the sourcing fee from $100,000 to $83,333 per month for the remaining term of the Supply Agreement, which expired in October 2023. Effective October 2023, the Company and Forward China entered into a new sourcing agreement under which the fixed portion of the sourcing fee was further reduced to $65,833 per month. Other terms in the agreement are substantially the same as the prior agreement. The new sourcing agreement expires October 31, 2024. The Company recorded service fees to Forward China of $ i 234,000 and $ i 344,000 during the three months ended December 31, 2023 and 2022, respectively, which are included as a component of cost of sales upon sales of the related products. The Company had purchases from Forward China during the three months ended December 31, 2023 and 2022 of approximately $ i 1,516,000 and $ i 4,412,000, respectively.
In order to preserve the Company’s current and future liquidity, in November 2023, the Company and Forward China entered into an agreement whereby Forward China agreed to limit the amount of outstanding payables it would seek to collect from the Company to $500,000 in any 12-month period, which the Company agreed to pay within 30 days of any such request. This agreement pertains only to payables that were outstanding at October 30, 2023 of approximately $ i 7,365,000. Purchases from Forward China made after October 30, 2023 are not covered by this agreement and are expected to be paid according to normal payment terms. At December 31, 2023, the remaining balance covered by this agreement was approximately $ i 7,365,000.
Promissory Note
On January 18, 2018, the Company issued a $ i 1,600,000 unsecured promissory note payable to Forward China to fund the acquisition of IPS. The promissory note bears an interest rate of i 8% per annum and had an original maturity date of January 18, 2019. Monthly interest payments commenced on February 18, 2018, with the principal due at maturity. The Company incurred and paid interest associated with this note of $ i 19,000 and $ i 28,000 in the three months ended December 31, 2023 and 2022, respectively. The maturity date of this note was extended to i December 31, 2024. The maturity date of this note has been extended on several occasions to assist the Company with liquidity. The Company made principal payments of $ i 250,000 and $ i 50,000 on this note during the three months ended December 31, 2023 and 2022, respectively, and this note has a remaining balance of $ i 850,000 at December 31, 2023.
| 18 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 $ i 273,000 and $ i 497,000 in the three months ended December 31, 2023 and 2022, respectively. Due to the Retail Exit, these revenues are included in the income / (loss) from discontinued operations for the three months ended December 31, 2023 and 2022. The Company had an agreement with Justwise, under which (i) Justwise performed design, marketing and inventory management services related to the Koble products sold by the Company and (ii) the Company was granted a license to sell Koble products. In exchange for such services, the Company paid Justwise $10,000 per month plus 1% of the cost of Koble products purchased from Forward China. This agreement existed on a month-to-month basis until November 30, 2023. The Company incurred costs under this agreement of $ i 20,000 and $ i 33,000 for the three months ended December 31, 2023 and 2022, respectively. Due to the Retail Exit, these costs are included in the income / (loss) from discontinued operations for the three months ended December 31, 2023 and 2022. The Company had accounts payable to Justwise of $ i 0 and $ i 10,000 at December 31, 2023 and September 30, 2023, respectively.
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 $ i 120,000 and $ i 134,000 for the three months ended December 31, 2023 and 2022, respectively. The Company had no accounts receivable from this customer at December 31, 2023 or September 30, 2023.
The Company recorded revenue from a customer who employs an immediate family member of a former member of our Audit, Governance and Compensation committees of our Board of Directors. The Company recognized revenue from this customer of $ i 16,000 and $ i 0 for the three months ended December 31, 2023 and 2022, respectively. The Company had no accounts receivable from this customer at December 31, 2023 or September 30, 2023.
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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, 2023, and through the date of this filing, 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.
i
The Company, specifically IPS, has a $ i 1,300,000 revolving line of credit with a bank which was renewed in March 2023. The line of credit has a maturity date of i May 31, 2024, is guaranteed by the Company and is secured by all of IPS’ assets. The interest rate on the line of credit is i 0.75% above The Wall Street Journal prime rate. The effective interest rate was i i 9.25 / % at December 31, 2023 and September 30, 2023. At December 31, 2023, the Company had $ i 1,300,000 available under the line of credit. The Company is subject to certain debt-service ratio requirements which are measured annually. At September 30, 2023, the Company was in compliance with such covenants.
| 19 |
FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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The Company’s operating leases are primarily for corporate, engineering, and administrative office space. Total operating lease expense for the three months ended December 31, 2023, was $ i 155,000, of which $ i 4,000 was recorded in sales and marketing expenses and $ i 151,000 was recorded in general and administrative expenses on the condensed consolidated statement of operations. Total operating lease expense for the three months ended December 31, 2022, was $ i 148,000, of which $ i 1,000 was recorded in sales and marketing expenses and $ i 147,000 was recorded in general and administrative expenses on the condensed consolidated statement of operations. Cash paid for amounts included in operating lease liabilities for the three months ended December 31, 2023 and 2022, which have been included in cash flows from operating activities, was $ i 147,000 and $ i 143,000, respectively.
At December 31, 2023, the Company’s operating leases had a weighted average remaining lease term of i 7.4 years and a weighted average discount rate of i 5.7%.
At December 31, 2023, future minimum payments under non-cancellable operating leases were as follows:
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NOTE 13 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at December 31, 2023 and September 30, 2023 are as follows:
i| Schedule of accrued expenses and other accrued liabilities | ||||||||
| December 31, | September 30, | |||||||
| 2023 | 2023 | |||||||
| Accrued commissions/bonuses | $ | i 117,000 | $ | i 872,000 | ||||
| Paid time off | i 219,000 | i 285,000 | ||||||
| Other | i 159,000 | i 201,000 | ||||||
| Total | $ | i 495,000 | $ | i 1,358,000 | ||||
/
| 20 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements, and the notes thereto, and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. The following discussion and analysis compares our condensed consolidated results of operations for the three months ended December 31, 2023 (the “2024 Quarter”) with those for the three months ended December 31, 2022 (the “2023 Quarter”). All dollar amounts and percentages presented herein have been rounded to approximate values.
Cautionary Note Regarding Forward-Looking Statements
This report contains “forward-looking statements”, as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding our liquidity, plans on repaying outstanding debt obligations, our beliefs and our plans regarding gaining Nasdaq compliance, as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements generally can be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "will be," "will continue," "will likely result," and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking statements. These risks include the inability to expand our customer base, loss of additional customers, pricing pressures, lack of success of our sales people, failure to develop products at a profit, failure to commercialize products that we develop, continued supply chain issues, a significant decrease in our stock price upon effectuating a reverse stock split, inability of our design division’s customers to pay for our services, unanticipated issues with our affiliated sourcing agent, issues at Chinese factories that source our products, and failure to obtain acceptance of our products. No assurance can be given that the actual results will be consistent with the forward-looking statements. Investors should read carefully the factors described in the “Risk Factors” section of the Company’s filings with the SEC, including the Company’s Form 10-K for the year ended September 30, 2023 for information regarding risk factors that could affect the Company’s results. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Business Overview
Forward Industries, Inc. is a global design, sourcing and distribution company serving top tier medical and technology customers worldwide.
The Company’s design division provides hardware and software product design and engineering services to customers predominantly located in the U.S. The Company’s original equipment manufacturing (“OEM”) distribution division sources and sells carrying cases and other accessories for medical monitoring and diagnostic kits as well as a variety of other portable electronic and non-electronic devices to OEMs, or their contract manufacturers worldwide, that either package our products as accessories “in box” together with their branded product offerings or sell them through their retail distribution channels. The Company does not manufacture any of its OEM products and sources substantially all of these products from independent suppliers in China, through Forward Industries Asia-Pacific Corporation, a British Virgin Islands corporation (“Forward China”).
Discontinued Operations
Considering the recurring losses incurred by the retail distribution segment, in July 2023, the Company decided to cease operations of our retail distribution segment (“Retail Exit”) and we are presenting the results of operations for this segment within discontinued operations in the current and prior periods presented herein. The discontinuation of the retail segment represents a strategic shift in the Company’s business. The primary assets of the retail segment are inventory and accounts receivable. The Company expects to sell, liquidate, or otherwise dispose of remaining retail inventory by June 30, 2024, and to collect remaining retail accounts receivable by the end of fiscal 2024. After this time, we expect to have no further significant continuing involvement with the retail distribution segment. The inventory of the retail segment is presented as discontinued assets held for sale on the balance sheets at December 31, 2023 and September 30, 2023 and the results of operations for the retail segment have been classified as discontinued operations on the condensed consolidated statements of operations for the three months ended December 31, 2023 and 2022.
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COVID-19
On May 11, 2023, the U.S. Department of Health and Human Services declared the end of the Public Health Emergency for COVID-19; however, the effects of COVID-19 continue to linger throughout the global economy and our businesses. Though the severity of COVID-19 has subsided, new variants, or the outbreak of a new pathogen, could interrupt business, cause renewed labor and supply chain disruptions, and negatively impact the global and US economy, which could materially and adversely impact our businesses.
Variability of Revenues and Results of Operations
A significant portion of our revenue is concentrated with several large customers, some of which are the same and some of which change over time. Orders from some of these customers can be highly variable, with short lead times, which can cause our quarterly revenues, and consequently our results of operations, to vary over a relatively short period of time.
Critical Accounting Policies and Estimates
We discussed the material accounting policies that are critical in making the estimates and judgments in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates”. There has been no material change in critical accounting policies or estimates during the period covered by this report.
Recent Accounting Pronouncements
For information on recent accounting pronouncements and impacts, see Note 2 to the unaudited condensed consolidated financial statements.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2023 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2022
Consolidated Results
The table below summarizes our consolidated results from continuing operations for the 2024 Quarter as compared to the 2023 Quarter:
| Consolidated Results of Operations | ||||||||||||||||
2024 Quarter | 2023 Quarter | Change ($) | Change (%) | |||||||||||||
| Revenues, net | $ | 7,152,000 | $ | 9,753,000 | $ | (2,601,000 | ) | (26.7 | %) | |||||||
| Cost of sales | 5,509,000 | 7,787,000 | (2,278,000 | ) | (29.3 | %) | ||||||||||
| Gross profit | 1,643,000 | 1,966,000 | (323,000 | ) | (16.4 | %) | ||||||||||
| Sales and marketing expenses | 369,000 | 411,000 | (42,000 | ) | (10.2 | %) | ||||||||||
| General and administrative expenses | 1,654,000 | 1,683,000 | (29,000 | ) | (1.7 | %) | ||||||||||
| Loss from operations | (380,000 | ) | (128,000 | ) | (252,000 | ) | 196.9 | % | ||||||||
| Other (income)/expense, net | 1,000 | (37,000 | ) | 38,000 | (102.7 | %) | ||||||||||
| Provision for income taxes | – | – | – | – | ||||||||||||
| Loss from continuing operations | $ | (381,000 | ) | $ | (91,000 | ) | $ | (290,000 | ) | 318.7 | % | |||||
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The discussion that follows below provides further details about our results from continuing operations for the 2024 Quarter as compared to the 2023 Quarter.
Net revenues declined significantly in the OEM distribution segment and, to a lesser extent, in the design segment.
Our gross profit decreased across both segments, but our gross margin increased from 20.2% in the 2023 Quarter to 23.0% in the 2024 Quarter. The gross margin increase was driven by our OEM distribution segment due to a change in the mix of revenue and a reduction in our sourcing fee with Forward China, partially offset by lower utilization rates in our design segment.
Sales and marketing expenses decreased primarily due to lower marketing related overhead in our OEM distribution segment. Sales and marketing as a percentage of revenues increased from 4.2% in the 2023 Quarter to 5.2% in the 2024 Quarter.
General and administrative expenses decreased in the 2024 Quarter, primarily related to a decline in design segment and corporate expenses. These decreases were primarily driven by lower payroll costs. Management continues to monitor the various components of general and administrative expenses and how these costs are affected by inflationary and other factors. We intend to adjust these costs as needed based on the overall needs of the business.
We recorded net other expense of $1,000 in the 2024 Quarter compared to net other income of $37,000 in the 2023 Quarter. The variance is due to fair value adjustments of $40,000 in the 2023 Quarter to reduce to the fair value of the earnout consideration related to the Kablooe acquisition, $18,000 of net duty drawback income received in the 2023 Quarter, offset by interest income from interest bearing deposits in the 2024 Quarter and a decrease in interest expense resulting from a reduction in the amount of debt outstanding.
We generated a loss from continuing operations of $381,000 and $91,000 in the 2024 Quarter and 2023 Quarter, respectively. We maintain significant net operating loss carryforwards and do not recognize a significant income tax expense or benefit as our deferred tax provision is typically offset by a full valuation allowance on our net deferred tax asset.
Consolidated basic and diluted loss per share from continuing operations were $0.04 and $0.01 for the 2024 Quarter and the 2023 Quarter, respectively.
Segment Results
The discussion that follows below provides further details about the results of operations for each segment as compared to the prior year quarter.
| Segment Results of Operations | ||||||||||||||||
| OEM Distribution | Design | Corporate Expenses | Consolidated | |||||||||||||
| 2024 Quarter revenues | $ | 2,010,000 | $ | 5,142,000 | $ | – | $ | 7,152,000 | ||||||||
| 2023 Quarter revenues | 4,377,000 | 5,376,000 | – | 9,753,000 | ||||||||||||
| Change | $ | (2,367,000 | ) | $ | (234,000 | ) | $ | – | $ | (2,601,000 | ) | |||||
| 2024 Quarter operating income/(loss) | $ | 41,000 | $ | 266,000 | $ | (687,000 | ) | $ | (380,000 | ) | ||||||
| 2023 Quarter operating income/(loss) | 112,000 | 433,000 | (673,000 | ) | (128,000 | ) | ||||||||||
| Change | $ | (71,000 | ) | $ | (167,000 | ) | $ | (14,000 | ) | $ | (252,000 | ) | ||||
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OEM Distribution Segment
Net revenues in the OEM distribution segment decreased from lower sales volume from diabetic customers, partially offset by increased volumes with other OEM customers. As consumer demand increases for diabetic testing products which require no carrying case, we expect diabetic product sales to continue to represent a smaller portion of our OEM distribution revenue. In March 2023, a contract with one of our major diabetic customers expired. Due to increased pricing pressures, we did not extend our contract with this customer. Revenue from this customer represented 13% of our consolidated net revenues in the 2023 Quarter. We expect the loss of this customer to continue to cause a significant decline in OEM distribution segment revenues in future periods.
The following tables set forth revenues by product line of our OEM distribution segment customers for the periods indicated:
| OEM Revenues by Product Line | ||||||||||||||||
2024 Quarter | 2023 Quarter | Change ($) | Change (%) | |||||||||||||
| Diabetic products | $ | 1,424,000 | $ | 3,985,000 | $ | (2,561,000 | ) | (64.3 | %) | |||||||
| Other products | 586,000 | 392,000 | 194,000 | 49.5 | % | |||||||||||
| Total net revenues | $ | 2,010,000 | $ | 4,377,000 | $ | (2,367,000 | ) | (54.1 | %) | |||||||
Diabetic Product Revenues
Our OEM distribution segment sources to the order of, and sells carrying cases for, blood glucose diagnostic kits directly to OEMs (or their contract manufacturers). The OEM customer or its contract manufacturer packages our carry cases “in box” as a custom accessory for the OEM’s blood glucose testing and monitoring kits or, to a lesser extent, sells them through their retail distribution channels.
Revenues from diabetic products decreased primarily due to the loss of one of our major diabetic customers whose contract expired, lower volumes in the 2024 Quarter related to timing of orders relative to our fiscal quarters and the loss of one product to a competitor. As mentioned above, management believes that revenues from diabetic customers will decline in future periods. Revenues from diabetic products represented 71% of net revenues for the OEM distribution segment in the 2024 Quarter compared to 91% in the 2023 Quarter.
Other Product Revenues
Our OEM distribution segment also sources and sells cases and protective solutions for a diverse array of portable electronic and non-electronic products (such as sporting and recreational products, bar code scanners, GPS devices, tablets and firearms) on a made-to-order basis that are customized to fit the products sold by our OEM customers.
Revenues from other products increased due to new customers and higher sales volume with several existing customers, partially offset by reduced demand from other customers. We will continue to focus on our sales and sales support teams in our continued efforts to expand and diversify our other products customer base.
Operating Income
Operating income for the OEM distribution segment decreased and operating income margin decreased from 2.6% in the 2023 Quarter to 2.0% in the 2024 Quarter, driven by lower revenues and lower gross profit. Operating expenses decreased, but at a lower rate than revenue. This was partially offset by higher gross margins driven by a decrease in revenues from lower margin diabetic customers.
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Considering the loss of a significant diabetic customer, management reduced its OEM distribution segment sales and marketing personnel in March 2023 and reduced its sourcing fee with Forward China. Effective April 1, 2023, the Company and Forward China agreed to reduce the fixed portion of the sourcing fee from $100,000 to $83,333 per month for the remaining term of the sourcing agreement. The Company and Forward China signed a new Supply Agreement effective October 2023, which further reduced the fixed portion of the sourcing fee to $65,833 per month. See Note 9 to the condensed consolidated financial statements for more information on the sourcing agreement with Forward China.
Design Segment
The decrease in net revenues in the design segment was driven by declines in revenues from certain prior year customers, a shift in timing of projects with some customers, partially offset by projects from new customers.
Operating income for the design segment decreased and operating income margin decreased from 8.1% in the 2023 Quarter to 5.2% in 2024 Quarter. This decrease was driven by lower utilization rates and higher direct labor costs driven by inflationary pressures, partially offset by lower sales and marketing expenses and increased billing rates on some projects.
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of liquidity is our operations. The primary demand on our working capital has historically been (i) operating losses, (ii) repayment of debt obligations, and (iii) any increases in accounts receivable and inventories arising in the ordinary course of business. Historically, our sources of liquidity have been adequate to satisfy working capital requirements arising in the ordinary course of business. At December 31, 2023, our working capital deficit, which excludes discontinued assets held for sale, was $949,000 compared to working capital of $26,000 at September 30, 2023. The decrease was primarily due to the Forward China promissory note of $850,000, which matures on December 31, 2024 and is now included in current liabilities, an increase in payables due Forward China and lower accounts receivable balances. At January 31, 2024, we had approximately $3,200,000 cash on hand and $1,300,000 available under our line of credit with a bank which matures May 31, 2024. There are no assurances this line of credit will extend beyond May 31, 2024.
Forward China, our largest vendor and an entity owned by our Chairman of the Board and Chief Executive Officer, holds a $1,600,000 promissory note (the “FC Note”) issued by us which matures on December 31, 2024 (see Note 9 to the condensed consolidated financial statements). The balance of the FC Note was reduced to $850,000 after we made principal payments of $750,000 through December 31, 2023. Although the FC Note has been extended on multiple occasions to assist us with our liquidity position, we plan on funding the repayment at maturity using existing cash balances and/or obtaining additional extensions as deemed necessary. Additionally, Forward China has extended payment terms on our outstanding payables due to them when necessary. At December 31, 2023, our accounts payable due to Forward China was approximately $8,894,000. In order to preserve our current and future liquidity, Forward China agreed to limit the amount of outstanding payables it would seek to collect from us to $500,000 in any 12-month period, which we agreed to pay within 30 days of any such request. This agreement pertains only to payables that were outstanding at October 30, 2023 of $7,365,000. Purchases from Forward China made after October 30, 2023, are not covered by this agreement and are expected to be paid according to normal payment terms. We can provide no assurance that (i) Forward China will extend the FC Note again if we request an extension, (ii) Forward China will extend additional payment terms on any payables not covered by the agreement, if needed, or (iii) any additional credit facility will be available on terms acceptable to us or at all.
We anticipate that our liquidity and financial resources for the 12 months following the date of this report will be adequate to manage our operating and financial requirements. If we have the opportunity to make a strategic acquisition (as we have in the past with the acquisitions of IPS and Kablooe) or an investment in a product or partnership, we may require additional capital beyond our current cash balance to fund the opportunity. If we seek to raise additional capital, there is no assurance that we will be able to raise funds on terms that are acceptable to us or at all. In the current environment of rising interest rates, any future borrowing is expected to result in higher interest expense.
Although we do not anticipate the need to purchase additional material capital assets in order to carry out our business, it may be necessary for us to purchase equipment and other capital assets in the future, depending on need.
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Cash Flows
During the 2024 Quarter and 2023 Quarter, our sources and uses of cash were as follows:
Operating Activities
During the 2024 Quarter, cash provided by operating activities of $116,000 resulted from an increase in accounts payable and amounts due to Forward China of $522,000, a decrease in accounts receivable of $445,000, a decrease in discontinued assets held for sale $372,000 and non-cash expenses of $121,000 related to depreciation, amortization, share-based compensation and bad debt expense, partially offset by a decrease in accrued expenses and other current liabilities of $863,000, a net loss of $354,000 and the net change in other operating assets and liabilities of $127,000.
During the 2023 Quarter, cash used in operating activities of $149,000 resulted from a net loss of $430,000, an increase in accounts receivable of $994,000, an increase in inventories of $289,000, an increase in discontinued assets held for sale $49,000, a decrease in accrued expenses and other current liabilities of $459,000 and the net change in other operating assets and liabilities of $73,000, partially offset by an increase in accounts payable and amounts due to Forward China of $2,070,000 and non-cash expenses of $75,000 related to fair value adjustments, depreciation, amortization, share-based compensation and bad debt expense.
Investing Activities
Cash used in investing activities in the 2024 Quarter and the 2023 Quarter of $20,000 and $45,000, respectively, resulted from purchases of property and equipment.
Financing Activities
Cash used in financing activities in the 2024 Quarter and the 2023 Quarter of $250,000 and $50,000, respectively, consisted of principal payments on the promissory note held by Forward China.
Related Party Transactions
For information on related party transactions and their financial impact, see Note 9 to the unaudited condensed consolidated financial statements contained herein.
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| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable.
| ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures. Our management carried out an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, required by Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act. Based on their evaluation, our management has concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations of the Effectiveness of Controls and Procedures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations of any control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
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| ITEM 1. | 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, 2023, 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.
| ITEM 1A. | RISK FACTORS |
While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. Item 1A - “Risk Factors” in the Form 10-K for the fiscal year ended September 30, 2023 describes some of the risks and uncertainties associated with our business, which we strongly encourage you to review. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects. There have been no material changes in our risk factors from those disclosed in the Form 10-K for the fiscal year ended September 30, 2023.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
There were no unregistered sales of the Company’s equity securities during the three months ended December 31, 2023, that were not previously disclosed in a Current Report on Form 8-K.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not Applicable.
| ITEM 5. | OTHER INFORMATION |
None.
| ITEM 6. | EXHIBITS |
The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-Q.
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Dated: February 14, 2024
| FORWARD INDUSTRIES, INC. |
|
By: /s/ Terence Wise Chief Executive Officer (Principal Executive Officer)
By: /s/ Kathleen Weisberg Chief Financial Officer (Principal Financial and Accounting Officer) |
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| Incorporated by Reference | ||||||||||
| Exhibit No. |
Exhibit Description | Form | Date | Number | Filed or Furnished Herewith | |||||
| 2.1 | Stock Purchase Agreement dated January 18, 2018 - Intelligent Product Solutions, Inc.+ | 8-K | 1/18/18 | 2.1 | ||||||
| 2.2 | Asset Purchase Agreement dated August 17, 2020 - Kablooe, Inc.+ | 8-K | 8/17/20 | 2.1 | ||||||
| 3.1 | Restated Certificate of Incorporation | 10-K | 12/8/10 | 3(i) | ||||||
| 3.2 | Certificate of Amendment of the Certificate of Incorporation, April 26, 2013 | 8-K | 4/26/13 | 3.1 | ||||||
| 3.3 | Certificate of Amendment of the Certificate of Incorporation, June 28, 2013 | 8-K | 7/3/13 | 3.1 | ||||||
| 3.4 | Third Amended and Restated Bylaws, as of May 28, 2014 | 10-K | 12/10/14 | 3(ii) | ||||||
| 10.1 | Summary of Employment Arrangement - Terence Wise* | 10-K | 12/21/23 | 10.4 | ||||||
| 10.2 | Consultancy Agreement dated March 1, 2022 - Justwise Group Ltd. | 10-Q | 5/12/22 | 10.1 | ||||||
| 10.3 | Consultancy Agreement dated September 1, 2022 - Justwise Group Ltd. | 10-K | 12/16/22 | 10.11 | ||||||
| 10.3(a) | Extension to the Consultancy Agreement – Justwise Group Ltd. | 8-K | 11/8/23 | 10.4 | ||||||
| 10.4 | Buying Agency and Supply Agreement dated November 2, 2023 – Forward Industries (Asia-Pacific) Corporation+ | 8-K | 11/8/23 | 10.1 | ||||||
| 10.5 | Deferred Payment Agreement | 8-K | 11/8/23 | 10.2 | ||||||
| 31.1 | CEO Certifications (302) | Filed | ||||||||
| 31.2 | CFO Certification (302) | Filed | ||||||||
| 32.1 | CEO and CFO Certifications (906) | Furnished | ||||||||
| 101.INS | Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | Filed | ||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed | ||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed | ||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed | ||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||||
______________________
* Management compensatory agreement or arrangement.
+ Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601 of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission staff upon request.
Copies of this filing (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Forward Industries, Inc.; 700 Veterans Memorial Hwy, Suite 100, Hauppauge, NY 11788; Attention: Corporate Secretary.
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| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
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| 2/28/25 | ||||
| 12/31/24 | ||||
| 10/31/24 | ||||
| 9/30/24 | ||||
| 6/30/24 | ||||
| 5/31/24 | ||||
| 4/9/24 | ||||
| Filed on: | 2/14/24 | 8-K | ||
| 2/6/24 | 8-K, DEF 14A, PRE 14A | |||
| 1/31/24 | ||||
| 1/30/24 | 8-K | |||
| 1/29/24 | ||||
| For Period end: | 12/31/23 | |||
| 11/30/23 | ||||
| 10/30/23 | ||||
| 10/1/23 | 4 | |||
| 9/30/23 | 10-K | |||
| 7/31/23 | 8-K | |||
| 5/11/23 | 8-K | |||
| 4/1/23 | ||||
| 12/31/22 | 10-Q | |||
| 12/15/22 | ||||
| 9/30/22 | 10-K | |||
| 1/18/19 | 8-K | |||
| 2/18/18 | ||||
| 1/18/18 | 8-K | |||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 12/21/23 Forward Industries, Inc. 10-K 9/30/23 81:5.4M GlobalOne Filings Inc/FA 11/08/23 Forward Industries, Inc. 8-K:1,9 11/02/23 13:333K GlobalOne Filings Inc/FA 12/16/22 Forward Industries, Inc. 10-K 9/30/22 82:5.4M GlobalOne Filings Inc/FA 5/12/22 Forward Industries, Inc. 10-Q 3/31/22 52:3.5M GlobalOne Filings Inc/FA 8/17/20 Forward Industries, Inc. 8-K:1,2,3,5 8/17/20 2:321K GlobalOne Filings Inc/FA 1/18/18 Forward Industries, Inc. 8-K:2,3,9 1/18/18 4:725K EDGARX.com, LLC/FA 12/10/14 Forward Industries, Inc. 10-K 9/30/14 94:9.2M EDGARX.com, LLC/FA 7/03/13 Forward Industries, Inc. 8-K:1,3,5,9 6/28/13 6:424K EDGARX.com, LLC/FA 4/26/13 Forward Industries, Inc. 8-K:1,3,5,8 4/26/13 4:570K EDGARX.com, LLC/FA 12/08/10 Forward Industries, Inc. 10-K 9/30/10 8:982K EDGARX.com, LLC/FA |