What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-12 compared with 2022-02-10 · 310 added, 212 removed, 416 unchanged (56% of the section changed)

32 unchanged sentences

40,000,000 shares authorized;

10,061,185 shares issued and outstanding at December 31, 2021 and September 30, 2021

10,061,185 shares issued and outstanding at March 31, 2022 and September 30, 2021

Additional paid-in capital

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended December 31,

For the Three Months Ended

For the Six Months Ended

Revenues, net

2 unchanged sentences

General and administrative expenses

Income/(loss) from operations

Loss from operations

Gain on forgiveness of note payable

3 unchanged sentences

Interest expense

Other expense/(income), net

Income before income taxes

Other expense, net

(Loss)/income before income taxes

Provision for income taxes

Earnings per share:

Net (loss)/income

$ ( 356,335 )

$ ( 834,728 )

$ ( 176,311 )

(Loss)/earnings per share:

Weighted average common shares outstanding:

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Three Month Ended December 31, 2021

For the Three and Six Months Ended March 31, 2022

Balance at September 30, 2021

3 unchanged sentences

( 12,391,621 )

For the Three Month Ended December 31, 2020

Share-based compensation

Balance at March 31, 2022

$ ( 12,747,956 )

For the Three and Six Months Ended March 31, 2021

Balance at September 30, 2020

4 unchanged sentences

( 11,896,414 )

Share-based compensation

Stock options exercised

Balance at March 31, 2021

$ ( 12,731,142 )

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended December 31,

For the Six Months Ended March 31,

Operating Activities:

Adjustments to reconcile net income to net cash provided by/(used in) operating

Net (loss)/income

$ ( 176,311 )

Adjustments to reconcile net (loss)/income to net cash provided by/(used in) operating activities:

Share-based compensation

6 unchanged sentences

Accounts receivable

( 1,834,922 )

Prepaid expenses and other current assets

8 unchanged sentences

Financing Activities:

Proceeds from line of credit borrowings

Repayment of line of credit borrowings

( 1,150,000 )

Repayment of notes payable

4 unchanged sentences

Net increase/(decrease) in cash

( 1,395,462 )

Cash at beginning of period

4 unchanged sentences

Supplemental Disclosures of Non-Cash Information:

Lease assets recorded

Lease liabilities recorded

Operating lease right of use assets recorded

Operating lease liabilities recorded

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

7 unchanged sentences

from concepts brought to us from a number of different sources, both inside and outside the Company.

For the three months

ended December 31, 2021, the Company generated net income of $ 180,000 , and $ 1,138,000 of cash flows from operating activities.

We believe our existing cash balance and working capital will be sufficient to meet

our liquidity needs through at least February 28, 2023.

For the six months ended

March 31, 2022, the Company generated a net loss of $ 176,000,

and $ 360,000

of cash flows from operating activities.

We believe our existing cash balance and working capital will be sufficient to meet our

liquidity needs through at least May 31, 2023.

Impact of COVID-19

The COVID-19 pandemic continues

to impact our business.

The increase in global consumer demand, coupled with the global shipping container shortage, dramatically increased

demand for both ocean freight and ground transportation.

These factors led to a significant increase in freight costs, particularly from

the Asia-Pacific region.

Labor shortages at US 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.

These factors caused an increase in the demand and cost of ground

transportation and delayed consumer availability for many of our products in the first quarter of fiscal 2022.

The timing and extent of

these COVID-19 related transportation disruptions is still largely unknown but are expected to continue throughout fiscal 2022.

COVID-19 may further impact

our business in ways we cannot predict, and such impacts could be significant.

The current and economic impact 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 services and to choose to allocate their budgets to new or existing projects which may or may not require our services.

effects of the COVID-19 pandemic continue to impact the retail and OEM distribution segments of our business.

The increase in global consumer

demand, coupled with the global shipping container shortage, dramatically increased demand for both ocean freight and ground transportation.

These factors led to a significant increase in freight costs, particularly from the Asia-Pacific region and most notably in the second

quarter of the fiscal year ending September 30, 2022 (“Fiscal 2022”).

Labor shortages at U.S.

ports and in ground transportation

services caused container ships to spend a significant amount of time waiting for goods to be unloaded and to arrive at our warehouses.

These factors caused an increase in the demand for and cost of ground transportation and delayed consumer availability for many of our

products in the first half of Fiscal 2022.

The timing and extent of these COVID-19 related transportation disruptions is still largely

unknown but are expected to continue throughout Fiscal 2022.

The effects of the pandemic

had a lesser impact on the design segment of our business.

Rising inflation caused an increase in the cost of acquiring and maintaining

our employees.

The timing and extent of future inflation is difficult to predict, but we expect these rising costs to have a more significant

impact in the second half of Fiscal 2022.

The effects of COVID-19 may

further impact our business in ways we cannot predict, and such impacts could be significant.

The current economic impact 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 services and to choose to allocate their budgets to new or existing projects which may or may not

require our 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.

Until the pandemic is fully

controlled, we expect business conditions to remain challenging.

In response to these challenges, we will continue to focus on those

factors that we can control:

As a result, the effects

of COVID-19 may not be fully reflected in our financial results until future periods.

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;

aligning our design and development schedules with demand

in a proactive manner as there are changes in market conditions 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.

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.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING POLICIES

4 unchanged sentences

Forward Industries (IN),

Inc., (“Forward US”), Forward Industries (Switzerland) GmbH, (“Forward Switzerland”), Forward Industries UK Limited,

(“Forward UK”), Intelligent Product Solutions, Inc., (“IPS”) and Kablooe, Inc., (“Kablooe”).

(“Forward US”), Forward Industries (Switzerland) GmbH (“Forward Switzerland”), Forward Industries UK Limited

(“Forward UK”), Intelligent Product Solutions, Inc.

(“IPS”) and Kablooe, Inc.

“Forward”, “we”, “our” or the “Company” as used throughout this document are used to indicate

2 unchanged sentences

All significant intercompany transactions and balances have been eliminated in consolidation.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of management,

33 unchanged sentences

The Company maintains an allowance for doubtful accounts, which is recorded as a reduction

to accounts receivable on the condensed consolidated financial statements.

to accounts receivable on the condensed consolidated balance sheets.

Collectability of accounts receivable is estimated by evaluating

1 unchanged sentence

as necessary based on specific customer situations.

At December 31, 2021, September 30, 2021 and September 30, 2020, the Company had allowances

At March 31, 2022, September 30, 2021 and September 30, 2020, the Company had allowances

for doubtful accounts of $ 90,000 , $ 90,000 and $ 249,000 , respectively, for the OEM distribution segment and $ 824,000 , $ 706,000 and $ 347,000 ,

1 unchanged sentence

The Company did not have any allowances for doubtful accounts related to its retail distribution

segment at December 31, 2021, September 30, 2021 or September 30, 2020.

The Company has sales

agreements with various retailers which contain different terms for trade discounts, promotional and other allowances.

31, 2021, September 30, 2021 and September 30, 2020, the Company recorded accounts receivable allowances of

$ 0 and $ 0 ,

respectively, for the retail distribution segment.

segment at March 31, 2022, September 30, 2021 or September 30, 2020.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company has sales agreements with various retailers which contain different terms for trade discounts, promotional and other allowances.

At March 31, 2022, September 30, 2021 and September 30, 2020, the Company recorded accounts receivable allowances of $ 25,000 , $ 0 and $ 0 ,

respectively, for the retail distribution segment.

Revenue Recognition

Distribution Segment

Distribution Segments

The Company generally recognizes

9 unchanged sentences

The retail distribution

segment had contract liabilities of $ 0 , $ 0 and $ 75,000 at December 31, 2021, September 30, 2021 and September 30, 2020, respectively.

The OEM distribution segment had no contract liabilities at December 31, 2021, September 30, 2021 or September 30, 2020.

segment had contract liabilities of $ 0 , $ 0 and $ 75,000 at March 31, 2022, September 30, 2021 and September 30, 2020, respectively.

OEM distribution segment had no contract liabilities at March 31, 2022, September 30, 2021 or September 30, 2020.

Design Segment

15 unchanged sentences

The design segment had contract assets of $ 607,000 , $ 693,000 and $ 649,000 at

December 31, 2021, September 30, 2021 and September 30, 2020, respectively.

March 31, 2022, September 30, 2021 and September 30, 2020, respectively.

Contracts where collections to date have exceeded recognized

1 unchanged sentence

consolidated balance sheets.

The design segment had contract liabilities of $ 753,000 , $ 188,000 and $ 410,000 at December 31, 2021, September

The design segment had contract liabilities of $ 621,000 , $ 188,000 and $ 410,000 at March 31, 2022, September

30, 2021 and September 30, 2020, respectively.

The Company reviews

goodwill for impairment at least annually, or more often if triggering events occur.

The Company has two reporting units with

goodwill (the IPS and Kablooe operating segments) and we perform our annual goodwill impairment test on September 30, the end of the fiscal

year, or upon the occurrence of a triggering event.

The Company has the option to perform a qualitative assessment to determine if

an impairment is more likely than not to have occurred.

If the Company can support the conclusion that it is not more likely than

not that the fair value of a reporting unit is less than its carrying amount, then the Company would not need to perform a

quantitative impairment test for the reporting unit.

If the Company cannot support such a conclusion or does not elect to perform

the qualitative assessment, then the Company will perform the quantitative assessment by comparing the fair value of the reporting

unit with its carrying amount, including goodwill.

If the fair value of the reporting unit exceeds its carrying value, no impairment

charge is recognized.

If the fair value of the reporting unit is less than its carrying value, an impairment charge will be

recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value.

A significant amount of

judgment is required in performing goodwill impairment tests including estimating the fair value of a reporting unit.

evaluated and concluded that there were no indications goodwill was impaired at December 31, 2021.

The Company reviews goodwill

for impairment at least annually, or more often if triggering events occur.

The Company has two reporting

units with goodwill (the IPS and Kablooe operating segments) and we perform our annual goodwill impairment test on September 30, the end

of the fiscal year, or upon the occurrence of a triggering event.

The Company has the option to perform a qualitative assessment to determine

if an impairment is more likely than not to have occurred.

If the Company can support the conclusion that it is not more likely than not

that the fair value of a reporting unit is less than its carrying amount, then the Company would not need to perform a quantitative impairment

test for the reporting unit.

If the Company cannot support such a conclusion or does not elect to perform the qualitative assessment,

then the Company will perform the quantitative assessment by comparing the fair value of the reporting unit with its carrying amount,

including goodwill.

If the fair value of the reporting unit exceeds its carrying value, no impairment charge is recognized.

value of the reporting unit is less than its carrying value, an impairment charge will be recognized for the amount by which the reporting

unit’s carrying amount exceeds its fair value.

A significant amount of judgment is required in performing goodwill impairment tests

including estimating the fair value of a reporting unit.

Management evaluated and concluded that there were no indications goodwill was

impaired at March 31, 2022.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

17 unchanged sentences

Management evaluated

and concluded that there were no impairments of intangible assets at December 31, 2021.

and concluded that there were no impairments of intangible assets at March 31, 2022.

The Company recognizes future

1 unchanged sentence

bases of assets and liabilities and to net tax operating loss carryforwards to the extent that realization of these benefits is more likely

At December 31, 2021, there was no change to our assessment that a full valuation allowance was required against all net deferred

At March 31, 2022, there was no change to our assessment that a full valuation allowance was required against all net deferred

tax assets as it is not probable that such deferred tax assets will be realized.

4 unchanged sentences

Fair Value Measurements

We perform fair value measurements

in accordance with the guidance provided by Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement.”

ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

When determining the fair value measurements for assets and liabilities required

to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions

that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions, and risk of nonperformance.

We perform fair

value measurements in accordance with the guidance provided by Accounting Standards Codification (“ASC”) 820, “Fair

Value Measurement.” ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date.

When determining the fair value measurements for assets

and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would

transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer

restrictions, and risk of nonperformance.

ASC 820 establishes a fair

3 unchanged sentences

ASC 820 establishes three levels of inputs that may be used to measure fair value:

quoted prices in active markets for identical assets

or liabilities;

inputs other than Level 1 that are observable, either

directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar

assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market

data for substantially the full term of the assets or liabilities;

unobservable inputs that are supported by little or

no market activity and that are significant to the fair values of the assets or liabilities.

quoted prices in active markets for identical assets or liabilities;

inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;

unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14 unchanged sentences

Certain amounts in the accompanying

financial statements at and for the three months ended December 31, 2020 have been reclassified to conform to the current year presentation.

financial statements at and for the three and six months ended March 31, 2021 have been reclassified to conform to the current year presentation.

Recent Accounting Pronouncements

22 unchanged sentences

Intangible Assets

December 31, 2021

March 31, 2022

September 30, 2021

7 unchanged sentences

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4 unchanged sentences

years for the customer relationships.

During the three months ended December 31, 2021 and 2020, the Company recorded amortization expense

related to intangible assets of $ 54,000 , which is included in general and administrative expenses in the Company’s condensedconsolidated

statements of operations.

At December 31, 2021, estimated

Amortization expense related to intangible assets was $ 53,000 for the three months ended March 31,

2022 and 2021 and $ 106,000 for the six months ended March 31, 2022 and 2021, which is included in general and administrative expenses

on the condensed consolidated statements of operations.

At March 31, 2022, estimated

amortization expense for the Company’s intangible assets for each of the next five years and thereafter is as follows:

10 unchanged sentences

The earnout consideration

of $ 70,000 at December 31, 2021 and September 30, 2021 represents the fair value of the contingent earnout consideration related to the

acquisition of Kablooe.

The fair value of the earnout liability is measured on a recurring basis at each reporting date using a Black-Scholes

valuation model with inputs categorized within level three of the fair value hierarchy.

The current and non-current portions of this liability

are shown in the corresponding categories on the condensed consolidated balance sheets in each period presented.

During the three months

ended December 31, 2021, there were no changes to the fair value of this earnout liability.

of $ 70,000 at March 31, 2022 and September 30, 2021 represents the fair value of the contingent earnout consideration related to the acquisition

The fair value of the earnout liability is measured on a recurring basis at each reporting date using a Black-Scholes valuation

model with inputs categorized within level three of the fair value hierarchy.

The current and non-current portions of this liability are

shown in the corresponding categories on the condensed consolidated balance sheets in each period presented.

During the three and six

months ended March 31, 2022, there were no changes to the fair value of this earnout liability.

SEGMENTS AND CONCENTRATIONS

17 unchanged sentences

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The results of operations

for the three months ended December 31, 2020 for each segment discussed below have been reformatted from what was previously disclosed

for the three and six months ended March 31, 2021 for each segment discussed below have been reformatted from what was previously disclosed

to segregate the retail distribution segment and exclude general corporate expenses from segment operating income to show them as a reconciling

3 unchanged sentences

Segment operating income (loss)

For the Three Months Ended December 31,

For the Three Months Ended March 31,

For the Six Months Ended March 31,

OEM distribution

4 unchanged sentences

Retail distribution

Total segment operating income

Total segment operating income/(loss)

General corporate expenses

Total income/(loss) from operations

( 1,322,000 )

( 1,202,000 )

Total loss from operations

Other expense/(income), net

( 1,348,000 )

Income before income taxes

(Loss)/income before income taxes

$ ( 356,000 )

$ ( 835,000 )

$ ( 176,000 )

Depreciation and amortization:

1 unchanged sentence

Total depreciation and amortization

Schedule of Operating Assets and Liabilities

December 31, 2021

Schedule of segment assets

March 31, 2022

September 30, 2021

4 unchanged sentences

General corporate assets

For the three months ended

December 31, 2021 and 2020, the Company had two significant customers in the OEM distribution segment whose individual percentage of the

Company’s consolidated revenues was 10 % or greater.

Revenues from these customers or their affiliates or contract manufacturers

were $ 1,566,000 and $ 1,357,000 for the three months ended December 31, 2021 and $ 1,574,000 and $ 1,280,000 for the three months ended December

At December 31, 2021 and

September 30, 2021, 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 these customers or their affiliates or contract manufacturers

were $ 1,386,000 and $ 891,000 at December 31, 2021 and $ 1,454,000 , $ 1,259,000 and $ 1,138,000 at September 30, 2021.

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 26.2 % and 25.7 %, respectively,

of the Company’s consolidated revenues for the three and six months ended March 31, 2022.

Revenues from three customers or their

affiliates or contract manufacturers represented 40.4 % of the Company’s consolidated revenues for the three months ended March 31,

2021 and revenues from two customers or their affiliates or contract manufacturers represented 29.7 % of the Company’s consolidated

revenues for the six months ended March 31, 2021.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months

ended March 31, 2022, 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 11.7 % and 10.2 %, respectively, of the Company’s consolidated

revenues for the three and six months ended March 31, 2022.

There were no customers in the design segment whose individual percentage

of the Company’s consolidated revenues was 10% or greater during the three or six months ended March 31, 2021.

At March 31, 2022 and September

30, 2021, 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 two customers or their affiliates or contract manufacturers

represented 34.8 % of the Company’s consolidated accounts receivable at March 31, 2022 and revenues from three customers or their

contract manufacturers represented 44.0 % of the Company’s consolidated accounts receivable at September 30, 2021.

SHARE-BASED COMPENSATION

Stock Options

In October 2021, the Company

granted options to non-employee directors to purchase an aggregate of 58,000 shares of its common stock at an exercise price of $ 2.39

The options expire five years from the date of grant, approximately half vested immediately and approximately half vest one

year from the date of grant.

The options have a weighted average grant-date fair value of $ 1.03 per share and an aggregate grant-date

fair value of $ 60,000 , which will be recognized ratably over the vesting period.

There were no options granted during the three months

ended December 31, 2020.

In October 2021 and January

2022, the Company granted options to non-employee directors to purchase an aggregate of 58,000 and 83,000 shares, respectively, of its

common stock at an exercise price of $ 2.39 and $ 1.56 per share, respectively.

The options expire five years from the date of grant, approximately

half vested immediately and approximately half vest one year from the date of grant.

The options have a weighted average grant-date fair

value of $ 1.03 and $ 0.72 per share, respectively, and each grant has an aggregate grant-date fair value of $ 60,000 , which will be recognized

ratably over the vesting period.

In January 2022, the Company

granted options to one of its employees to purchase an aggregate of 14,000 shares of its common stock at an exercise price of $ 1.56 per

The options expire five years from the date of grant, approximately one-third vested immediately, approximately one-third vest

one year from the date of grant and approximately one-third vest two years from the date of grant.

The options have a weighted average

grant-date fair value of $ 0.73 per share and an aggregate grant-date fair value of $ 10,000 , which will be recognized ratably over the

vesting period.

In February 2022, the Company

granted options to one of its non-employee directors to purchase an aggregate of 31,000 shares of its common stock at an exercise price

of $ 1.68 per share.

The options vest one year from the date of grant and expire five years from the date of grant.

The options have a

weighted average grant-date fair value of $ 0.80 per share and an aggregate grant-date fair value of $ 25,000 , which will be recognized

ratably over the vesting period.

In February 2022, the Company

granted options to one of its former non-employee directors to purchase an aggregate of 19,000 shares of its common stock at an exercise

price of $ 1.68 per share.

The options vested immediately and expire ten years from the date of grant.

The options have a weighted average

grant-date fair value of $ 1.07 per share and an aggregate grant-date fair value of $ 20,000 , which was fully recognized on the grant date.

There were no options exercised

during the three months ended December 31, 2021.

During the three months ended December 31, 2020, the Company issued 2,500 shares of its

common stock pursuant to the exercise of stock options for aggregate cash proceeds of $ 2,000 , which had an aggregate intrinsic value of

during the six months ended March 31, 2022.

During the six months ended March 31, 2021, the Company issued 69,000 shares of its common

stock pursuant to the exercise of stock options for aggregate cash proceeds of $ 144,000 , which had an aggregate intrinsic value of $ 122,000 .

The Company recognized compensation

expense for stock option awards of $ 39,000 and $ 41,000 during the three months ended December 31, 2021 and 2020, respectively, in its

condensed consolidated statements of operations.

At December 31, 2021, there was $ 25,000 of total unrecognized compensation cost related

to nonvested stock option awards that is expected to be recognized over a weighted average period of 0.7 years.

expense for stock option awards of $ 66,000 and $ 21,000 during the three months ended March 31, 2022 and 2021, respectively, and $ 105,000

and $ 63,000 during the six months ended March 31, 2022 and 2021, respectively, which was recorded as a component of general and administrative

expenses in its condensed consolidated statements of operations.

At March 31, 2022, there was $ 54,000 of total unrecognized compensation

cost related to nonvested stock option awards that is expected to be recognized over a weighted average period of 0.8 years.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

7 unchanged sentences

Schedule of Earnings Per Share, Basic and Diluted

For the Three Months Ended

For the Three Months Ended March 31,

For the Six Months Ended March 31,

Net (loss)/income

$ ( 356,000 )

$ ( 835,000 )

$ ( 176,000 )

Weighted average common shares outstanding

1 unchanged sentence

Weighted average diluted shares outstanding

Earnings per share:

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Loss)/earnings per share:

The following securities

1 unchanged sentence

Schedule of antidilutive securities excluded

For the Three Months Ended

For the Three Months Ended March 31,

For the Six Months Ended March 31,

Total potentially dilutive shares

1 unchanged sentence

Buying Agency and Supply

The Company has a Buying

Agency and Supply Agreement (the “Supply Agreement”) with Forward Industries Asia-Pacific Corporation, (“Forward China”).

The Supply Agreement provides that, upon the terms and subject to the conditions set forth therein, Forward China will act as the Company’s

exclusive buying agent and supplier of Products (as defined in the Supply Agreement) in the Asia-Pacific region.

purchases products at Forward China’s cost and pays Forward China a monthly service fee equal to the sum of:

(i) $100,000 and (ii)

4% of “Adjusted Gross Profit”, which is defined as the selling price less the cost from Forward China.

The Supply Agreement

expires October 22, 2023.

Terence Wise, Chief Executive Officer and Chairman of the Company, is the owner of Forward China.

Yu, a Managing Director of Forward China, beneficially owns more than 5% of the Company’s common stock.

The Company recorded

service fees to Forward China of $ 362,000 and $ 343,000 during the three months ended December 31, 2021 and 2020, respectively, which are

included as a component of cost of sales upon sales of the related products.

The Company has a

Buying Agency and Supply Agreement (the “Supply Agreement”) with Forward Industries Asia-Pacific Corporation

(“Forward China”).

The Supply Agreement provides that, upon the terms and subject to the conditions set forth therein,

Forward China will act as the Company’s exclusive buying agent and supplier of Products (as defined in the Supply Agreement)

in the Asia-Pacific region.

The Company purchases products at Forward China’s cost and pays Forward China a

monthly service fee equal to the sum of:

(i) $100,000 and (ii) 4% of “Adjusted Gross Profit”, which is defined as the

selling price less the cost from Forward China.

The Supply Agreement expires October 22, 2023.

Terence Wise, Chief Executive Officer

and Chairman of the Company, is the owner of Forward China.

In addition, Jenny P.

Yu, a Managing Director of Forward China,

beneficially owns more than 5% of the Company’s common stock.

The Company recorded service fees to Forward China of $ 350,000

and $ 340,000

during the three months ended March 31, 2022 and 2021, respectively, and $ 712,000

and $ 683,000

during the six months ended March 31, 2022 and 2021, respectively, which are included as a component of cost of sales upon sales of

the related products.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company made prepayments

to Forward China for inventory purchases of $ 327,000 and $ 317,000 at December 31, 2021 and September 30, 2021, respectively, which is

included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

to Forward China for inventory purchases of $ 418,000 and $ 317,000 at March 31, 2022 and September 30, 2021, respectively, which is included

in prepaid expenses and other current assets on the condensed consolidated balance sheets.

Promissory Note

On January 18, 2018, the

Company issued a $ 1,600,000 promissory note payable to Forward China to fund the acquisition of IPS.

The promissory note bears an interest

rate of 8 % per annum and had an original maturity date of January 18, 2019 .

Monthly interest payments commenced on February 18, 2018 with

the principal due at maturity.

The Company incurred and paid $ 32,000 in interest expense associated with this note in the three months

ended December 31, 2021 and 2020.

Company issued a $ 1,600,000 unsecured promissory note payable to Forward China to fund the acquisition of IPS.

The promissory note bears

an interest rate of 8 % per annum and had an original maturity date of January 18, 2019 .

Monthly interest payments commenced on February

18, 2018, with the principal due at maturity.

The Company incurred and paid interest associated with this note of $ 31,000 and $ 32,000 ,

respectively, in the three months ended March 31, 2022 and 2021 and $ 63,000 and $ 64,000 , respectively, in the six months ended March

31, 2022 and 2021.

The maturity date of this note was extended to December 31, 2022.

The maturity date of this note has

been extended on several occasions to assist the Company with liquidity.

The Company made principal payments of $ 50,000 on this note during

the three months ended December 31, 2021.

Related Party Activity

In October 2020, the Company

began selling smart-enabled furniture, which is sourced by Forward China and sold in the U.S under the Koble brand name.

The Koble brand

is owned by The Justwise Group Ltd., a company owned by Terence Wise, Chief Executive Officer and Chairman of the Company.

recognized revenues from the sale of Koble products of $ 540,000 and $ 186,000 in the three months ended December 31, 2021 and 2020, respectively.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The maturity date of this note has been extended

on several occasions to assist the Company with liquidity.

The Company made principal payments of $ 100,000 on this note during the six

months ended March 31, 2022.

Other Related Party Activity

In October 2020, the

Company began selling smart-enabled furniture, which is sourced by Forward China and sold in the U.S.

under the Koble brand name.

The Koble brand is owned by The Justwise Group Ltd.

(“JustWise”), a company owned by Terence Wise, Chief Executive

Officer and Chairman of the Company.

The Company recognized revenues from the sale of Koble products of $ 441,000

and $ 154,000

in the three months ended March 31, 2022 and 2021, respectively, and $ 981,000

and $ 339,000

in the six months ended March 31, 2022 and 2021, respectively.

The Company entered into an agreement with JustWise effective March

1, 2022 under which (i) JustWise will perform design and marketing services related to the Koble products sold by the Company and

(ii) the Company was granted a license to sell Koble products.

In exchange for such services, the Company will pay JustWise $10,000

per month plus 1% of the cost of Koble products purchased from Forward China.

This agreement is effective until August 31, 2022,

will be extended thereafter for a mutually agreed upon term and can be terminated thereafter by either party giving three

months’ notice.

The Company incurred costs of $ 10,000

under this agreement for the three and six months ended March 31, 2022, which were included in selling and marketing expenses on the

condensed consolidated statement of operations.

LEGAL PROCEEDINGS

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may become a party to other legal actions or proceedings in the ordinary course of its business.

At December 31, 2021, there were no such

At March 31, 2022, there were no such

actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company

believes would be material to its operation or cash flow.

believes would be material to its operations or cash flows.

LINE OF CREDIT

The Company, specifically

IPS, has a $ 1,300,000 revolving line of credit which was renewed in May 2021.

IPS, has a $ 1,300,000 revolving line of credit which was renewed in February 2022.

The line of credit has a maturity date of May 31, 2023 ,

is guaranteed by the Company and is secured by all of IPS’ assets.

The interest rate on the line of credit is 0.75% above The Wall Street Journal prime rate.

The effective interest rate was 4.0 % at both December 31, 2021 and September 30, 2021.

31, 2021, the Company had $ 1,300,000 available under the line of credit.

The Company is subject to certain debt-service ratio requirements

which are measured annually.

The interest rate on the line of credit is 0.75% above The

Wall Street Journal prime rate .

The effective interest rate was 4.25 % and 4.0 % at March 31, 2022 and September 30, 2021, respectively.

At March 31, 2022, the Company had $ 1,300,000 available under the line of credit.

The Company is subject to certain debt-service ratio

requirements which are measured annually.

At September 30, 2021, the Company was in compliance with such covenants.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On April 18, 2020, the Company

8 unchanged sentences

accounted for as an extinguishment of debt and the resulting gain has been recorded as forgiveness of note payable on the condensed consolidated

financial statements for the three months ended December 31, 2020.

statement of operations for the six months ended March 31, 2021.

There is a six-year period during which the SBA can review the Company’s

In connection with the acquisition

of Kablooe, the Company assumed a loan payable with a principal amount of $ 170,000 .

The loan matured in August 2021, bore interest at

a rate of 6.0 % per annum and was secured by all of Kablooe’s assets.

Interest and principal payments of $ 15,000 were made monthly

until maturity.

The Company’s operating

leases are primarily for corporate, sales and administrative office space.

Total operating lease expense for the three months ended December

31, 2021 was $ 156,000 , of which $ 14,000 was recorded in sales and marketing expenses and $ 142,000 was recorded in general and administrative

expenses on the condensed consolidated statements of operations.

Total operating lease expense for the three months ended December 31,

2020 was $ 153,000 , of which $ 14,000 was recorded in sales and marketing expenses and $ 139,000 was recorded in general and administrative

expenses on the condensed consolidated statements of operations.

Cash paid for amounts included in operating lease liabilities for the

three months ended December 31, 2021 and 2020, which have been included in cash flows from operating activities, was $ 149,000 and $ 111,000 ,

Cash paid for amounts included in operating lease liabilities

for the six months ended March 31, 2022 and 2021, which have been included in cash flows from operating activities, was $ 294,000

and $ 226,000 ,

respectively.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2021, the

Company’s operating leases had a weighted average remaining lease term of 8.8 years and a weighted average discount rate of 5.6 %.

At December 31, 2021, future

Details of operating lease expense are as follows:

Schedule of operating lease expense

For the Three Months Ended March 31,

For the Six Months Ended March 31,

Operating lease expense included in:

Sales and marketing expense

General and administrative expense

At March 31, 2022, the Company’s

operating leases had a weighted average remaining lease term of 8.6 years and a weighted average discount rate of 5.6 %.

At March 31, 2022, future

minimum payments under non-cancellable operating leases were as follows:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements