Forward Industries (FWDI) risk factors, FY2024 10-K

Risks Relating to Our Business, Liquidity and Operations

1. 01We have experienced recurring losses and our ability to continue as a going concern is in doubt
2. 02The COVID-19 pandemic, or any other future pandemic, has had, and may continue to have, a material and adverse effect on our business and results of operations
3. 03During Fiscal 2024, we generated a net loss. We cannot assure you that we will regain profitability in the future
4. 04Our OEM distribution business remains highly concentrated in our diabetic products line. If our diabetic products line were to suffer the loss of a principal customer or a material decline in revenues from any such large customer, our business would be materially and adversely affected
5. 05The loss of any of, or a material reduction in orders from, our largest customers would materially and adversely affect our results of operations and financial condition
6. 06If any one or more of our OEM distribution customers elect to reduce or discontinue inclusion of cases “in box”, our results of operations and financial condition would be materially and adversely affected
7. 07Rising threats of international tariffs, including tariffs applied to goods between the U.S. and China, may materially and adversely affect our business
8. 08We continue to encounter pressure from our largest customers to maintain or even decrease prices, or to provide lower priced solutions, and expect such pressure to persist. The effects of such price constraints on our business may be exacerbated by inflationary pressures that affect our costs of supply and labor
9. 09Increasingly, our OEM distribution customers are requesting that we enter into supply agreements with them that have restrictive terms and conditions. These agreements typically include provisions that increase our financial exposure, which could result in significant costs to us
10. 10Our distribution business depends on a single exclusive buying agent who, in turn, depends on a limited number of key suppliers
11. 11Our business has benefited from customers deciding to outsource their carry and protective solutions assembly needs, as well as product development and design functions, to us. If our customers choose to provide these services in-house or select other providers, our business could suffer
12. 12If we are unable to provide our customers with high-quality products and services or if we are unable to deliver our products and/or services to our customers in a timely manner, our business, financial condition, and results of operations may be materially adversely affected
13. 13If our design teams fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, then we may incur a loss on that project
14. 14Our results of operations could suffer if we are not able to maintain adequate utilization of our workforce
15. 15Employee or agent misconduct, or our failure to comply with anti-bribery and other laws or regulations, could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions
16. 16If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results. As a result, current and potential stockholders could lose confidence in our financial reporting, which could harm our business and the trading price of our stock
17. 17Our results of operations are subject to the risks of fluctuations in the values of foreign currencies relative to the U.S. dollar
18. 18Future revenues are difficult to predict and are likely to show significant variability as a consequence of customer concentration and operating in more than one segment
19. 19Our gross margins, and therefore our potential profitability, vary considerably by customer and by product and service offering, and if the revenue contribution from one or more customers or products or project changes materially, relative to total revenues, our gross profit percentage may fluctuate
20. 20Product manufacture is often outsourced by our distribution customers to contract manufacturing firms and in these cases, it is the contract manufacturer to which we must look for payment
21. 21Our dependence on foreign manufacturers creates quality control and other risks to our business. From time to time, we may experience certain quality control, on-time delivery, cost, or other issues that may jeopardize customer relationships
22. 22Our shipments of products may become subject to delays or cancellation due to work stoppages or slowdowns, piracy, damage to port facilities, and congestion due to inadequacy of port terminal equipment and other causes
23. 23The product distribution and design businesses are highly competitive and do not pose significant barriers to entry
24. 24If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer
25. 25If a third party asserts that we are infringing on its intellectual property, whether successful or not, it could subject us to costly and time-consuming litigation or require us to obtain expensive licenses, and our business may be adversely affected
26. 26If we experience system interruptions, it may cause us to lose customers and may harm our business
27. 27Because our networks and IT systems may be vulnerable to unauthorized persons hacking our systems, it could disrupt our operations and result in the theft of our proprietary information
28. 28Our design business uses software that is highly technical, and undetected errors, if any, could adversely affect our business
29. 29We maintain cash balances in our bank accounts that exceed the FDIC insurance limitation
30. 30Our Chairman and Chief Executive Officer is a significant shareholder, which makes it possible for him to have significant influence over the outcome of all matters submitted to our shareholders for approval and which influence may be alleged to conflict with our interests and the interests of our other shareholders

Risks Related to Our Common Stock

1. 31Due to factors beyond our control, our stock price may be volatile
2. 32Our common stock is listed on Nasdaq. As part of being listed on Nasdaq, we are required to meet certain continued listing requirements
3. 33If we become subject to a regulatory investigation, it could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business
4. 34We do not expect to pay dividends in the future, which means that investors may not be able to realize the value of their shares except through a sale
5. 35We have incurred, and may in the future incur, impairment charges related to our goodwill, which could have a material adverse effect on our business, results of operations and financial condition