What changed in Forward Industries, Inc.'s 10-K — 2022 vs 2023

(“Kablooe”), is a global design, manufacturing, sourcing and distribution group serving top tier medical and technology customers worldwide.

As a result of the continued expansion of our design development capabilities through our wholly-owned subsidiaries, IPS and Kablooe, we are able to introduce proprietary products to the market from concepts brought to us from a number of different sources, both inside and outside the Company.

Our retail distribution business, which we began in 2019, sources and sells smart-enabled furniture, hot tubs and a variety of other products through various online retailer websites to customers predominantly located in the U.S. The rollout of many of these products was delayed by COVID-19 as discussed below.

As we expanded our retail distribution network, we have been able to sell a variety of products through retailers such as Best Buy, Wayfair, Walmart, Costco, and Amazon. The manufacturer representative model allows us to engage and support a large sales team and cover a larger territory with a variable cost model as these representatives work on commission only.

Our design business provides a full spectrum of hardware and software product design and engineering services to customers predominantly located in the U.S.

In Fiscal 2020, the business shutdowns resulting from the pandemic disrupted our supply chain and the manufacture and shipment of our OEM products and delayed the rollout of our retail products. Demand for our design and development services was reduced or delayed because of the pandemic as certain customers reduced discretionary spending.

In Fiscal 2021, the economy began to open across the world, and consumer demand grew much faster than manufacturers could satisfy, leading to extensive shipping delays, a global shipping container shortage and higher ocean freight costs. This continued to reduce the availability of many of our products and increased their cost of importation.

The increase in consumer demand continued in Fiscal 2022, which dramatically increased demand for ocean freight, particularly from the Asia-Pacific region.

Labor shortages at U.S. ports and in ground transportation services caused container ships to spend a significant amount of time waiting to be unloaded and to arrive at our warehouses, which caused an increase in the demand for and cost of ground transportation. These factors resulted in further cost increases and delayed consumer availability for many of our products.

The impact of inflation in Fiscal 2022 caused an increase in the cost of acquiring and retaining employees in our design business. The effects of COVID-19 may further impact our business in ways we cannot predict, and such impacts could be significant.

The current economic conditions may continue to negatively impact our results of operations, cash flows and financial position in future periods as well as that of our customers, including their ability to pay for our products and services and to choose to allocate their budgets to new or existing projects which may or may not require our products and services.

The long-term financial impact on our business cannot be reasonably estimated at this time. As a result, the effects of COVID-19 may not be fully reflected in our financial results until future periods. 1 Until the effects of the pandemic have fully receded, we expect business conditions to remain challenging.

In response to these challenges, we will continue to focus on those factors that we can control: closely managing and controlling our expenses and inventory levels; aligning our design and development schedules with demand in a proactive manner to minimize our cash operating costs; pursuing further improvements in the productivity and effectiveness of our development, selling and administrative activities and, where appropriate, taking advantage of opportunities to enhance our business growth and strategy.

The carrying case business became our predominant business, and in September 1997, we sold the assets relating to the production of advertising specialty and promotional products, ceasing to operate in that segment.

Retail Products In Fiscal 2020, as a result of the build out and growth of our retail distribution network, we began selling smart-enabled products, such as speakers and lamps that provide lighting and sound with Bluetooth® connectivity.

In Fiscal 2021, we began expanding our retail product offerings to include additional smart-enabled furniture, such as desks and side tables, as well as hot tubs and various other products that are sold through retailer websites.

In the retail division, we work with various retailers to understand their product requirements and specifications and consumer demand and utilize our sourcing resources to obtain products that meet these needs. Additionally, we have a portfolio of retail products that we share with retailers to gauge the level of consumer interest.

We receive design and marketing services for some retail products from The Justwise Group Ltd., a company owned by Terence Wise, our Chairman, Chief Executive Officer and largest shareholder.

Services Services offered in our design business vary from full development utilizing a wide range of in-house design and engineering functions, to targeted design and engineering support for clients with in-house development teams.

We continue to evaluate our strategy for the retail distribution business in an effort to increase profitability and match our product offerings with consumer demand. Distribution Hubs for Customers We have arrangements with certain customers’ distribution hubs.

Third-Party and Consignment Warehouses We also have arrangements with third-party warehouses and consignment warehouses of major retailers in the U.S. and Canada to store, manage and ship our retail products. We do not recognize revenue for retail products shipped to any of these warehouses until the product has been shipped to the end customer and our performance obligation is complete.

The manufacture of smart furniture consists of laser cutting, punching, welding and powder coating the various parts and finished product, including lamination, board cutting and drilling for certain products. The main materials used include particle board, engineered wood composite, tempered glass and metal.

Since that time, our employees have demonstrated resilience, wisdom, commitment, and compassion in working with our customers. As conditions improved, employees in the U.S. were encouraged to return to their offices. We encourage all employees to follow Centers for Disease Control and Prevention and local guidelines and recommendations.