Company: FWDI
Filing Date: 2025-02-13
Form Type: 10-Q
Source: 0001683168-25-000993
Chunk: 35

Company: Forward Industries, Inc.
Filing Date: 2025-02-13
Form: 10-Q
Item: Item 1
Chunk 35
---
 2024, our largest
design customer notified us of its plan to discontinue their insulin patch pump program, on which the Company was working. We expect this
to cause a material decrease in our revenues beginning in the second quarter of fiscal 2025. We are working on cost reduction efforts
to mitigate the reduction in revenue.

Operating income for the
design segment decreased and operating income/(loss) margin decreased from 5.2% in the 2024 Quarter to (5.6%) in 2025 Quarter, primarily
driven by a decline in billable project hours and the goodwill impairment charge, partially offset by an increase in the average bill
rate.

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, 2024,
our working capital deficit was $162,000 compared to working capital of $273,000 at September 30, 2024. The decrease was primarily due
to lower cash and accounts receivable balances and was partially offset by the reduction in amounts due to Forward China.

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 June 30, 2005 (see Note 8 to the condensed consolidated financial statements). The balance
of the FC Note was reduced to $600,000 after we made principal payments of $1,000,000 through December 31, 2024. 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, 2024, our accounts payable due to Forward China was approximately $6,771,000.
In connection with the sourcing agreement entered into in October 2023 (see Note 8 to the condensed consolidated financial statements)
and in order to preserve our current and