Company: FWDI
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001683168-25-006141
Chunk: 40

Company: Forward Industries, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Item 1
Chunk 40
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25 

We review goodwill for impairment
annually, or more often if events or changes in circumstances indicate the carrying value of a reporting unit may exceed its fair value.
Evaluating goodwill for impairment requires a significant amount of judgment, including the estimation of future cash flows, future growth
rates and profitability. Changes in our business strategy or adverse changes in market conditions could impact impairment analyses and
require the recognition of an impairment charge. Although we base our estimates on historical experience and various other assumptions
that we believe to be reasonable under the circumstances at the time of evaluation, actual results could differ from these estimates.

In
December 2024, the Company was notified by its largest design customer of its plan to discontinue their insulin patch pump program, on
which IPS was working, and was beginning to wind down all activities related to it. Revenue from this customer (all of which related to
this program) represented more than 30% of the Company’s consolidated net revenues in fiscal 2024. Due to the historically high
concentration of revenue with this customer, the loss of its business was considered a triggering event which prompted the Company to
evaluate the goodwill of the IPS reporting unit. Management performed quantitative testing on this reporting unit, which indicated its
carrying amount exceeded its fair value, resulting in a goodwill impairment charge of $225,000 in December 2024, primarily driven by a
reduction in its expected future performance at that time.

In
the second and third quarters of fiscal 2025, the IPS reporting unit continued to experience low levels of staff utilization due in part
to the loss of the aforementioned major customer, which was anticipated. In addition, due to the uncertainty in the global markets related
to tariffs on imports, many IPS customers were slow to commit funds to projects, primarily in the second quarter of fiscal 2025, as they
were unsure how tariffs and other macroeconomic factors would impact their business. The combination of these events resulted in negative
gross profit for the IPS reporting unit in the second and third quarters, which the Company considered triggering events to evaluate the
goodwill of the IPS reporting unit for impairment. Management performed a quantitative goodwill impairment analysis for the IPS reporting
unit at March 31, 2025 and June 30, 2025, both of which indicated the fair value of the IPS reporting unit exceeded its carrying amount,
resulting in no further goodwill impairment in the three months ended March 31, 2025 or June 30, 202