Financial Performance - Consolidated revenues for the 2023 Quarter were $10,127,000, a decrease of 4.4% compared to $10,589,000 in the 2022 Quarter[102]. - The net loss for the 2023 Quarter was $537,000, compared to a net loss of $419,000 in the 2022 Quarter, representing an increase of 28.2%[108]. - Net revenues for the consolidated results decreased by $922,000, or 2.8%, from $32,517,000 in 2022 to $31,595,000 in 2023[124]. - Operating loss increased from $494,000 in 2022 to $1,833,000 in 2023, representing a change of $1,339,000, or 271.1%[124]. - The operating loss margin for the retail distribution segment increased from 33.6% in 2022 to 51.3% in 2023[143]. Revenue Decline - The OEM distribution segment experienced a significant revenue decline of 38.6%, from $4,775,000 in the 2022 Quarter to $2,930,000 in the 2023 Quarter, primarily due to the loss of a major diabetic customer[112]. - Revenues from diabetic products in the OEM distribution segment decreased by 41.2%, from $4,087,000 in the 2022 Quarter to $2,402,000 in the 2023 Quarter[113]. - The OEM distribution segment revenues fell by $3,328,000, or 22.7%, from $14,692,000 in 2022 to $11,364,000 in 2023, primarily due to the loss of a significant diabetic customer[135]. Cost and Expenses - Gross profit decreased to $1,823,000 in the 2023 Quarter, with a slight decrease in gross margin from 18.1% in the 2022 Quarter to 18.0% in the 2023 Quarter[104]. - Sales and marketing expenses increased to 7.0% of revenues in the 2023 Quarter, up from 6.3% in the 2022 Quarter, driven by higher commission expenses[105]. - General and administrative expenses decreased slightly in the 2023 Quarter, primarily due to lower corporate expenses[106]. - Gross profit decreased by $1,535,000, or 22.6%, from $6,789,000 in 2022 to $5,254,000 in 2023, with gross margin declining from 20.9% to 16.6%[124][126]. - Sales and marketing expenses increased by $69,000, or 3.3%, from $2,106,000 in 2022 to $2,175,000 in 2023[124]. Future Outlook - The company plans to exit its retail operations, which is expected to lead to a decline in consolidated revenues in future periods[103]. - The company expects consolidated revenues to decline in future periods due to the Retail Exit[125]. - The company anticipates continued volatility in OEM and retail distribution cost of sales for the remainder of fiscal 2023[104]. - The company plans to evaluate its OEM cost structure and implement additional cost-cutting initiatives due to ongoing operating losses in the retail distribution segment[147]. - The company anticipates that its liquidity and financial resources will be adequate for the next 12 months, but may require additional capital for strategic acquisitions or investments[149]. Cash Flow and Liquidity - Cash provided by operating activities for the 2023 Period was $562,000, resulting from a decrease in inventories of $1,908,000 and an increase in accounts payable of $651,000, despite a net loss of $1,838,000[151]. - As of June 30, 2023, the company's working capital decreased to $2,476,000 from $4,359,000 at September 30, 2022, primarily due to lower inventory balances[147]. - The company had approximately $3,000,000 in cash on hand and $1,300,000 available under a renewed line of credit as of July 31, 2023[147]. - The balance of the promissory note held by Forward China was reduced to $1,200,000 after principal payments of $400,000 through June 30, 2023[148]. - As of June 30, 2023, accounts payable due to Forward China was approximately $8,000,000, with no assurance of continued favorable payment terms[148]. Strategic Initiatives - The company is working on a plan to exit the retail business in an orderly manner while satisfying existing customer obligations[147]. - Cash savings of $50,000 were realized in the third quarter of fiscal 2023 from a reduction in the sourcing fee with Forward China[141]. - The company plans to further evaluate the OEM distribution segment cost structure and implement additional cost-cutting initiatives as necessary[141]. - Cash used in investing activities for the 2023 Period was $117,000, compared to $140,000 in the 2022 Period, primarily for purchases of property and equipment[153]. - Cash used in financing activities for the 2023 Period was $200,000, consisting of principal payments on the promissory note held by Forward China[154].
Forward Industries(FORD) - 2023 Q3 - Quarterly Report