SEGMENTS AND CONCENTRATIONS

9 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

SEGMENTS AND CONCENTRATIONS

NOTE 5                  SEGMENTS AND CONCENTRATIONS

The Company has three reportable segments: OEM distribution, retail distribution and design. See Note 2 for more information on the composition and accounting policies of our reportable segments.

Our chief operating decision maker (“CODM”) regularly reviews revenue and operating income for each segment to assess financial results and allocate resources. For our OEM and retail distribution segments, we exclude general and administrative and general corporate expenses from their measure of profitability as these expenses are not allocated to the segments and therefore not included in the measure of profitability used by the CODM. For the design segment, general and administrative expenses directly attributable to that segment are included in its measure of profitability as these expenses are included in the measure of its profitability reviewed by the CODM. We do not include intercompany activity in our segment results shown below to be consistent with the information that is presented to the CODM. Segment assets consist of accounts receivable and inventory, which are regularly reviewed by the CODM, as well as goodwill and intangible assets resulting from design segment acquisitions.

Information by segment and related reconciliations are shown in tables below:

	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2023			2022			2023			2022
Revenues:
OEM distribution	$	2,930,000		$	4,775,000		$	11,364,000		$	14,692,000
Retail distribution		1,420,000			878,000			3,396,000			2,919,000
Design		5,777,000			4,936,000			16,835,000			14,906,000
Total segment revenues	$	10,127,000		$	10,589,000		$	31,595,000		$	32,517,000
Operating income/(loss):
OEM distribution	$	163,000		$	179,000		$	303,000		$	1,002,000
Retail distribution		(680,000	)		(397,000	)		(1,742,000	)		(981,000	)
Design		576,000			447,000			1,539,000			1,422,000
Total segment operating (loss)/income		59,000			229,000			100,000			1,443,000
General corporate expenses		(581,000	)		(615,000	)		(1,933,000	)		(1,937,000	)
Total loss from operations		(522,000	)		(386,000	)		(1,833,000	)		(494,000	)
Other expense, net		15,000			33,000			5,000			101,000
Loss before income taxes	$	(537,000	)	$	(419,000	)	$	(1,838,000	)	$	(595,000	)
Depreciation and amortization:
OEM distribution	$	1,000		$	2,000		$	3,000		$	6,000
Design		78,000			75,000			232,000			228,000
Total depreciation and amortization	$	79,000		$	77,000		$	235,000		$	234,000

	June 30, 2023		September 30, 2022
Segment Assets:
OEM distribution	$	3,117,000	$	4,276,000
Retail distribution		2,661,000		3,816,000
Design		6,479,000		6,116,000
Total segment assets		12,257,000		14,208,000
General corporate assets		6,987,000		6,731,000
Total assets	$	19,244,000	$	20,939,000

The Company had certain customers in the OEM distribution segment whose individual percentage of the Company’s consolidated revenues was 10% or greater. Revenues from two customers or their affiliates or contract manufacturers represented 24.2% and 24.1% of the Company’s consolidated net revenues for the three and nine months ended June 30, 2022, respectively. There were no customers in the OEM distribution segment whose individual percentage of the Company’s consolidated revenues was 10% or greater during the three or nine months ended June 30, 2023.

For the three and nine months ended June 30, 2023, the Company had one customer in the design segment whose individual percentage of the Company’s consolidated revenues was 10% or greater. Revenues from this customer represented 30.1% and 10.8% of the Company’s consolidated net revenues for the three months ended June 30, 2023 and 2022, respectively, and 22.7% and 10.4% of the Company’s consolidated net revenues for the nine months ended June 30, 2023 and 2022, respectively.

At June 30, 2023 and September 30, 2022, the Company had customers in the OEM distribution segment whose accounts receivable balance accounted for 10% or more of the Company’s consolidated accounts receivable. Accounts receivable from one customer or their affiliates or contract manufacturers represented 13.3% of the Company’s consolidated accounts receivable at June 30, 2023 and accounts receivable from two customers or their affiliates or contract manufacturers represented 28.1% of the Company’s consolidated accounts receivable at September 30, 2022.

At June 30, 2023, the Company had one customer in the design segment whose accounts receivable balance accounted for 10% or more of the Company’s consolidated accounts receivable. Accounts receivable from this customer represented 26.3% of the Company’s consolidated accounts receivable at June 30, 2023. There were no customers in the design segment whose individual percentage of the Company’s consolidated accounts receivable was 10% or greater at September 30, 2022.

In March 2023, the Company’s contract with one of its major diabetic customers in the OEM distribution segment expired. Due to increased pricing pressures, the Company did not extend its contract with this customer. Revenue from this customer represented approximately 12% of our consolidated net revenues for the nine months ended June 30, 2022. The Company expects the loss of this customer to cause a significant decline in OEM distribution segment revenues in future periods.

On July 21, 2023, the Company decided to cease its retail distribution operations. The exit from the retail distribution operations will have no effect on the operations of the Company’s design or OEM distribution businesses. The Company is working on a plan that will ensure the transition out of the retail business is done in an orderly manner while also satisfying existing customer obligations. At the time of this filing, the Company does not know the extent, or a range, of the costs that it will incur as a result of the exit.