What changed in this filing

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Item 1. Financial Statements

2024-05-10 compared with 2024-02-14 · 402 added, 353 removed, 418 unchanged (64% of the section changed)

5 unchanged sentences

Current assets:

Accounts receivable, net

Accounts receivable, net of allowances for credit losses of

$ 771,189 and $ 955,965 as of March 31, 2024 and September 30, 2023, respectively

Inventories, net

23 unchanged sentences

40,000,000 shares authorized;

10,061,185 shares issued and outstanding at December 31, 2023 and September 30, 2023

shares issued and outstanding at March 31, 2024 and September 30, 2023

Additional paid-in capital

7 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Six Months Ended

Revenues, net

10 unchanged sentences

Loss from continuing operations

Income / (loss) from discontinued operations, net of tax

(Loss) / income from discontinued operations, net of tax

( 1,091,199 )

$ ( 553,214 )

Basic earnings/(loss) per share:

$ ( 870,948 )

$ ( 907,434 )

$ ( 1,301,223 )

Basic loss per share :

Basic loss per share from continuing operations

Basic earnings/(loss) per share from discontinued operations

Basic loss per share from discontinued operations

Basic loss per share

Diluted earnings/(loss) per share:

Diluted loss per share:

Diluted loss per share from continuing operations

Diluted earnings/(loss) per share from discontinued operations

Diluted loss per share from discontinued operations

Diluted loss per share

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Three Months Ended December 31, 2023

For the Three and Six Months Ended March 31, 2024

Balance at September 30, 2023

3 unchanged sentences

( 18,040,773 )

For the Three Months Ended December 31, 2022

Share-based compensation

Balance at March 31, 2024

$ ( 18,593,987 )

For the Three and Six Months Ended March 31, 2023

Balance at September 30, 2022

3 unchanged sentences

( 14,380,171 )

Share-based compensation

Balance at March 31, 2023

$ ( 15,251,119 )

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

For the Six Months

Ended March 31,

Operating Activities:

1 unchanged sentence

$ ( 1,301,223 )

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

Adjustments to reconcile net loss to net cash used in operating

Share-based compensation

Depreciation and amortization

Bad debt (recoveries) expense

Credit loss expense

Change in fair value of earnout consideration

7 unchanged sentences

Accrued expenses and other current liabilities

Net cash provided by / (used in) operating activities

Net cash used in operating activities

Investing Activities:

9 unchanged sentences

Cash paid for interest

Cash paid for taxes

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

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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cases and other accessories for medical monitoring and diagnostic kits as well as a variety of other portable electronic and non-electronic

devices to original equipment manufacturers (“OEM”s), or their contract manufacturers worldwide, that either package our products

as accessories “in box” together with their branded product offerings or sell them through their retail distribution channels.

The Company does not manufacture any of its OEM products and sources substantially all of these products from independent suppliers in

China, through Forward Industries Asia-Pacific Corporation, a British Virgin Islands corporation (“Forward China”).

devices to OEMs or their contract manufacturers worldwide, that either package our products as accessories “in box” together

with their branded product offerings or sell them through their retail distribution channels.

The Company does not manufacture any of

its OEM products and sources substantially all of these products from independent suppliers in China, through Forward Industries Asia-Pacific

Corporation, a British Virgin Islands corporation (“Forward China”).

Discontinued Operations

In July 2023, the

Company decided to cease operations of its retail distribution segment (“Retail Exit”) and is presenting the results of

operations for this segment within discontinued operations in the current and prior periods presented herein.

distribution business sources and sells smart-enabled furniture, hot tubs and saunas and a variety of other products through various

online retailer websites to customers predominantly located in the U.S.

The inventory of the retail segment is presented

as discontinued assets held for sale on the balance sheets at December 31, 2023 and September 30, 2023.

Where applicable, certain

footnotes exclude the discontinued operations unless otherwise noted.

See Note 3 for additional information on discontinued

For the three months ended December

31, 2023, the Company generated a net loss of $354,000, loss from continuing operations of $381,000 and cash flows from operating activities

At December 31, 2023, the Company had $ 1,300,000 of borrowing available under its line of credit with a bank that was renewed

in March 2023 and has a maturity date of May 31, 2024 (see Note 11).

By discontinuing the retail segment, which incurred significant losses,

the Company expects improved performance in future periods.

The Company’s

OEM distribution segment procures substantially all its products through independent suppliers in China through Forward China.

In connection

with the new sourcing agreement and in order to preserve future liquidity, in November 2023, the Company and Forward China entered into

an agreement whereby Forward China agreed to limit the amount of outstanding payables it would seek to collect from the Company to $500,000

in any 12-month period, which the Company agreed to pay within 30 days of any such request (see Note 9).

This agreement pertains only

to payables that were outstanding at October 30, 2023 of approximately $7,365,000.

Purchases from Forward China made after October 30,

2023 are not covered by this agreement and are expected to be paid according to normal payment terms.

Based on our forecasted cash flows,

discontinuing our retail segment and the agreement with Forward China, we believe our existing cash balance and working capital will be

sufficient to meet our liquidity needs through at least February 28, 2025.

The condensed consolidated financial statements do not include

any adjustments that might result if the Company is unable to continue as a going concern.

In July 2023, the Company

decided to cease operations of its retail distribution segment (“Retail Exit”) and is presenting the results of operations

for this segment within discontinued operations in the current and prior periods presented herein.

Our retail distribution business sourced

and sold smart-enabled furniture, hot tubs and saunas and a variety of other products through various online retailer websites to customers

predominantly located in the U.S.

The inventory of the retail segment is presented as discontinued assets held for sale on

the balance sheets at March 31, 2024 and September 30, 2023.

Where applicable, certain footnotes exclude the discontinued operations unless

otherwise noted.

See Note 3 for additional information on discontinued operations.

For the six months

ended March 31, 2024, the Company generated a net loss of $ 907,000 ,

loss from continuing operations of $ 927,000

and used cash flows from operating activities of $ 528,000 .

By discontinuing the retail segment, which incurred significant losses, the Company expects improved performance in future periods.

The Company’s OEM distribution segment procures substantially all its products through independent suppliers in China through

Forward China.

In connection with the new sourcing agreement and in order to preserve future liquidity, in November 2023, the

Company and Forward China entered into an agreement whereby Forward China agreed to limit the amount of outstanding payables it

would seek to collect from the Company to $500,000 in any 12-month period, which the Company agreed to pay within 30 days of any

such request (see Note 9).

This agreement pertains only to payables that were outstanding at October 30, 2023 of approximately

Purchases from Forward China made after October 30, 2023 are not covered by this agreement and are expected to be paid

according to normal payment terms.

Based on our forecasted cash flows, discontinuing our retail segment and the agreement with

Forward China, we believe our existing cash balance and working capital will be sufficient to meet our liquidity needs through at

least May 31, 2025.

If necessary to preserve future cash flow and liquidity, we have the ability to implement cost-cutting measures

in a timely manner as we have done in prior periods, which may include a reduction in labor force and/or salary reductions for

existing personnel as deemed necessary.

The condensed consolidated financial statements do not include any adjustments that might

result if the Company is unable to continue as a going concern.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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On May 11, 2023, the U.S.

of Health and Human Services declared the end of the Public Health Emergency for COVID-19;

however, the effects of COVID-19 continue to

linger throughout the global economy and our businesses.

Though the severity of COVID-19 has subsided, new variants, or the outbreak of

a new pathogen, could interrupt our business, cause renewed labor and supply chain disruptions, and negatively impact the global and US

economy, which could materially and adversely impact our business.

NOTE 2 ACCOUNTING

Department of Health and Human Services declared the end of the Public Health Emergency for COVID-19;

however, the effects of COVID-19

continue to linger throughout the global economy and our businesses.

Though the severity of COVID-19 has subsided, new variants, or the

outbreak of a new pathogen, could interrupt our business, cause renewed labor and supply chain disruptions, and negatively impact the

global and US economy, which could materially and adversely impact our business.

ACCOUNTING POLICIES

Basis of Presentation

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FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable

Accounts receivable consist of

unsecured trade accounts with customers in amounts that have been invoiced ($ 6,183,000 and $ 6,949,000 at December 31, 2023 and September

Accounts receivable consist

of unsecured trade accounts with customers in amounts that have been invoiced ($ 6,015,000 and $ 6,949,000 at March 31, 2024 and September

30, 2023, respectively) and contract assets as described further below under the heading “Revenue Recognition.” The Company

maintains an allowance for doubtful accounts, which is recorded as a reduction to accounts receivable on the condensed consolidated balance

maintains an allowance for credit losses, which is recorded as a reduction to accounts receivable on the condensed consolidated balance

Collectability of accounts receivable is estimated by evaluating the number of days accounts are outstanding, customer payment

history, recent payment trends and perceived creditworthiness, adjusted as necessary based on specific customer situations.

31, 2023 and September 30, 2023, the Company had no allowances for doubtful accounts for the OEM distribution segment, allowances for

doubtful accounts of $ 35,000 and $ 46,000 , respectively, for the discontinued retail distribution segment and $ 760,000 and $ 771,000 , respectively,

for the design segment.

The Company has agreements with

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

At December 31, 2023 and

2024 and September 30, 2023, the Company had no allowances for credit losses for the OEM distribution segment, allowances for credit losses

of $ 0 and $ 46,000 , respectively, for the discontinued retail distribution segment and $ 731,000 and $ 771,000 , respectively, for the design

The Company has agreements

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

At March 31, 2024 and

September 30, 2023, the Company recorded accounts receivable allowances of $ 40,000 and $ 139,000 , respectively, for the discontinued retail

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The OEM distribution segment had no contract liabilities

at December 31, 2023, September 30, 2023 or September 30, 2022.

at March 31, 2024, September 30, 2023 or September 30, 2022.

Discontinued Retail Distribution Segment

The discontinued retail distribution

segment sells products primarily through online websites operated by authorized third-party retailers.

segment sold products primarily through online websites operated by authorized third-party retailers.

Revenue is recognized when control

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The retail distribution segment had no contract liabilities

at December 31, 2023, September 30, 2023 or 2022.

at March 31, 2024, September 30, 2023 or 2022.

The results of operations of the retail segment are reported as discontinued operations

for the three months ended December 31, 2023 and 2022.

for the three and six months ended March 31, 2024 and 2023.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Design Segment

The Company applies the

“cost to cost” and “right to invoice” methods of revenue recognition to the contracts with customers in the design

The Company applies the “cost

to cost” and “right to invoice” methods of revenue recognition to the contracts with customers in the design segment.

The design segment typically engages in two types of contracts:

(i) time and material and (ii) fixed price.

The Company recognizes

revenue over time on its time and material contracts utilizing a “right to invoice” method.

The Company recognizes revenue

over time on its time and material contracts utilizing a “right to invoice” method.

Revenues from fixed price contracts that

require performance of services that are not related to the production of tangible assets are recognized by using cost inputs to measure

progress toward the completion of its performance obligations, or the “cost to cost” method.

Revenues from fixed price contracts

that require performance of services that are not related to the production of tangible assets are recognized by using cost inputs to

measure progress toward the completion of its performance obligations, or the “cost to cost” method.

Revenues from fixed price

contracts that contain specific deliverables are recognized when the performance obligation has been satisfied or the transfer of goods

to the customer has been completed and accepted.

that contain specific deliverables are recognized when the performance obligation has been satisfied or the transfer of goods to the customer

has been completed and accepted.

Recognized revenues that

2 unchanged sentences

The design segment had contract assets of $ 1,240,000 , $ 976,000 and $ 609,000

at December 31, 2023, September 30, 2023 and September 30, 2022, respectively.

at March 31, 2024, September 30, 2023 and September 30, 2022, respectively.

Contracts where collections to date have exceeded recognized

1 unchanged sentence

consolidated balance sheets.

The design segment had contract liabilities of $ 250,000 , $ 297,000 , and $ 439,000 at December 31, 2023, September

The design segment had contract liabilities of $ 229,000 , $ 297,000 , and $ 439,000 at March 31, 2024, September

30, 2023 and September 30, 2022, respectively.

17 unchanged sentences

the fair value of a reporting unit.

Management evaluated and concluded that there were no indications goodwill was impaired at December

Management evaluated and concluded that there were no indications goodwill was impaired at March 31,

Intangible Assets

Intangible assets include trademarks

and customer relationships, which were acquired as part of the acquisitions of IPS in Fiscal 2018 and Kablooe in Fiscal 2020 and are amortized

over their estimated useful lives, which are periodically evaluated for reasonableness.

Our intangible assets are reviewed

for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

the recoverability of our intangible assets, we must make estimates and assumptions regarding future cash flows and other factors to determine

the fair value of the respective assets.

These estimates and assumptions could have a significant impact on whether an impairment charge

is recognized and the magnitude of any such charge.

Fair value estimates are made at a specific point in time, based on relevant information.

These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined

with precision.

Intangible assets include

trademarks and customer relationships, which were acquired as part of the acquisitions of IPS in Fiscal 2018 and Kablooe in Fiscal 2020

and are amortized over their estimated useful lives, which are periodically evaluated for reasonableness.

Our intangible assets are

reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In assessing the recoverability of our intangible assets, we must make estimates and assumptions regarding future cash flows and other

factors to determine the fair value of the respective assets.

These estimates and assumptions could have a significant impact on whether

an impairment charge is recognized and the magnitude of any such charge.

Fair value estimates are made at a specific point in time, based

on relevant information.

These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore

cannot be determined with precision.

Changes in assumptions could significantly affect the estimates.

If these estimates or material related assumptions change

in the future, we may be required to record impairment charges related to our intangible assets.

Management evaluated and concluded that

there were no indications of impairments of intangible assets at December 31, 2023.

If these estimates or material related

assumptions change in the future, we may be required to record impairment charges related to our intangible assets.

Management evaluated

and concluded that there were no indications of impairments of intangible assets at March 31, 2024.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

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, 2023, there was no change to our assessment that a full valuation allowance was required against all net deferred

At March 31, 2024, 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 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 value

hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring

We perform fair value measurements

in accordance with the guidance provided by 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

value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring

An asset's or liability's categorization within the fair value hierarchy is based upon the lowest level of input that is significant

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

Lease assets and

liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, using the

Company’s incremental borrowing rate commensurate with the lease term, since the Company’s lessors do not provide an implicit

rate, nor is one readily available.

The Company has certain leases that may include an option to renew and when it is reasonably probable

to exercise such option, the Company will include the renewal option terms in determining the lease asset and lease liability.

represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s

obligation to make lease payments arising from the lease.

Lease expense for lease payments is recognized on a straight-line basis over

the lease term.

Lease assets and liabilities

are recognized at the lease commencement date based on the present value of lease payments over the lease term, using the Company’s

incremental borrowing rate commensurate with the lease term, since the Company’s lessors do not provide an implicit rate, nor is

one readily available.

The Company has certain leases that may include an option to renew and when it is reasonably probable to exercise

such option, the Company will include the renewal option terms in determining the lease asset and lease liability.

Lease assets represent

the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation

to make lease payments arising from the lease.

Lease expense for lease payments is recognized on a straight-line basis over the lease

Operating lease assets are shown as right of use assets on the condensed consolidated balance sheets.

The current and

long-term portions of operating lease liabilities are shown separately as such on the condensed consolidated balance sheets.

The current and long-term

portions of operating lease liabilities are shown separately as such on the condensed consolidated balance sheets.

Recent Accounting Pronouncements

In November 2023, the Financial

Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting

Improvements to Reportable Segment Disclosures,” which requires expanded segment reporting and is effective for the

Company for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

The Company is currently evaluating

the effects of this pronouncement on its condensed consolidated financial statements.

In November 2019, the FASB

issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU 2019-11 is

an accounting pronouncement that provides clarity to and amends earlier guidance on this topic and would be effective concurrently with

the adoption of such earlier guidance.

This pronouncement is effective for the Company for fiscal years beginning after December 15, 2022,

and interim periods within those fiscal years.

The Company adopted this guidance in the first quarter of fiscal 2024 with no material

impact on its condensed consolidated financial statements.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

In November 2019, the FASB issued

ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU 2019-11 is an accounting

pronouncement that provides clarity to and amends earlier guidance on this topic and would be effective concurrently with the adoption

of such earlier guidance.

This pronouncement is effective for the Company for fiscal years beginning after December 15, 2022, and interim

periods within those fiscal years.

The Company adopted this guidance in the first quarter of fiscal 2024 with no material impact on its

condensed consolidated financial statements.

NOTE 3 DISCONTINUED

OPERATIONS AND ASSETS HELD FOR SALE

Considering the recurring losses

incurred by the retail segment, in July 2023, the Company decided to cease operations of its retail distribution segment (“Retail

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Considering the recurring

losses incurred by the retail segment, in July 2023, the Company decided to cease operations of its retail distribution segment (“Retail

The primary assets of the retail segment are inventory and accounts receivable.

5 unchanged sentences

Operations.” Accordingly, the retail inventory is classified on our condensed consolidated balance sheets as “discontinued

assets held for sale” at December 31, 2023 and September 30, 2023, and the results of operations for the retail segment have been

classified as “Discontinued Operations” on the condensed consolidated statements of operations for the three months ended

December 31, 2023 and 2022.

The condensed consolidated balance sheets and results of operations for comparable prior periods have been

reclassified to conform to this presentation in accordance with the accounting guidance.

The total amount related to the

discontinued retail segment included in Due to Forward China on the condensed consolidated balance sheets was approximately $ 905,000 and

$ 1,002,000 (which includes the $723,000 due on canceled purchase orders) at December 31, 2023 and September 30, 2023, respectively.

The following table presents

the major classes of the “Income / loss from discontinued operations, net of tax” in our condensed consolidated statements

of operations.

assets held for sale” at March 31, 2024 and September 30, 2023, and the results of operations for the retail segment have been classified

as “Discontinued Operations” on the condensed consolidated statements of operations for the three and six months ended March

31, 2024 and 2023.

The condensed consolidated balance sheets and results of operations for comparable prior periods have been reclassified

to conform to this presentation in accordance with the accounting guidance.

The total amount related

to the discontinued retail segment included in Due to Forward China on the condensed consolidated balance sheets was approximately $ 698,000

and $ 1,002,000 at March 31, 2024 and September 30, 2023, respectively.

The following table presents the major classes

of the “Income / loss from discontinued operations, net of tax” in our condensed consolidated statements of operations.

Schedule of discontinued operations

For the Three Months Ended December 31,

For the Three Months Ended

For the Six Months Ended

Revenues, net

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General and administrative expenses

Income / (loss) from discontinued operations before income taxes

(Loss) / income from discontinued operations before income taxes

( 1,091,000 )

Provision for income taxes

Income / (loss) from discontinued operations

(Loss) / income from discontinued operations

$ ( 752,000 )

INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2023 and September

$ ( 1,091,000 )

At March 31, 2024 and September

30, 2023, discontinued assets held for sale of $ 0 and $ 508,000 , respectively, consist of the net inventory of the retail segment.

These numbers include an allowance of $ 834,000 and $ 1,464,000 , respectively to reduce excess or otherwise unsellable inventory to its

estimated net realizable value.

There was no depreciation, amortization,

investing or financing cash flow activities, or other significant noncash operating cash flow activities for the retail segment in the

three months ended December 31, 2023 and 2022.

NOTE 4 INTANGIBLE ASSETS AND GOODWILL

numbers include an allowance of $ 262,000 and $ 1,464,000 , respectively to reduce excess or otherwise unsellable inventory to its estimated

net realizable value.

There was no depreciation,

amortization, investing or financing cash flow activities, or other significant noncash operating cash flow activities for the retail

segment in the three and six months ended March 31, 2024 or 2023.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

1 unchanged sentence

assets consist of the following:

Schedule of intangible assets

December 31, 2023

September 30, 2023

Customer Relationships

Total Intangible Assets

Customer Relationships

Total Intangible Assets

Schedule of intangible

Relationships

Intangible Assets

Relationships

Intangible Assets

Gross carrying amount

3 unchanged sentences

Net carrying amount

The Company’s intangible

assets resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively, and relate to the design segment

of our business.

The Company’s

intangible assets resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively, and relate to the

design segment of our business.

Intangible assets are amortized over their expected useful lives of 15

2 unchanged sentences

Amortization expense related to intangible assets was $ 53,000

for the three months ended December 31, 2023 and 2022, which is included in general and administrative expenses on the condensed

for the three months ended March 31, 2024 and 2023, and $ 106,000

for the six months ended March 31, 2024 and 2023, which is included in general and administrative expenses on the condensed

consolidated statements of operations.

At December 31, 2023, estimated

At March 31, 2024, estimated

amortization expense for the Company’s intangible assets is as follows:

Schedule of estimated amortization

Schedule of estimated amortization expense

Remainder of Fiscal 2024

INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

represents the future economic benefits of assets acquired in a business combination that are not individually identified or separately

3 unchanged sentences

All of the Company’s goodwill is held under the design segment of our business.

NOTE 5 FAIR VALUE

FAIR VALUE MEASUREMENTS

acquisition of Kablooe provides annual contingent earnout payments based on their results of operations through August 2025.

1 unchanged sentence

categorized within level three of the fair value hierarchy.

During the three months ended December 31, 2022, the Company reduced this

liability from $70,000 to $30,000 based on changes to the expected likelihood of Kablooe reaching the specified earnings targets.

2023, the Company further reduced this liability from $30,000 to $0 due to the low likelihood of Kablooe reaching the specified earnings

The fair value of this earnout liability remained $ 0 at December 31, 2023.

During the three and six months ended December 31, 2022, the Company reduced

this liability from $70,000 to $30,000 based on changes to the expected likelihood of Kablooe reaching the specified earnings targets.

In September 2023, the Company further reduced this liability from $30,000 to $0 due to the low likelihood of Kablooe reaching the specified

earnings target.

The fair value of this earnout liability remained $ 0 at March 31, 2024.

The resulting gains have been recorded as a component

of other income on the condensed consolidated statements of operations.

NOTE 6 SEGMENTS AND CONCENTRATIONS

of other income on the condensed consolidated statement of operations.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEGMENTS AND CONCENTRATIONS

As a result of discontinuing

1 unchanged sentence

OEM distribution and design.

The results of the retail segment were classified as discontinued

operations as discussed in Note 3.

Segment information presented herein excludes the results of the retail segment for all periods presented.

The results of the retail segment

are classified as discontinued operations as discussed in Note 3.

Segment information presented herein excludes the results of the retail

segment for all periods presented.

Our chief operating decision

8 unchanged sentences

and inventory, which are regularly reviewed by the CODM, as well as goodwill and intangible assets resulting from design segment acquisitions.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Information by segment and related

reconciliations are shown in tables below:

Schedule of segment and related reconciliations

Information by segment and

related reconciliations are shown in tables below:

Schedule of segment and

related reconciliations

For the Three Months Ended

For the Six Months Ended

OEM distribution

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General corporate expenses

( 1,283,000 )

( 1,324,000 )

Operating loss from continuing operations before income taxes

2 unchanged sentences

$ ( 546,000 )

$ ( 119,000 )

$ ( 927,000 )

$ ( 210,000 )

Depreciation and amortization:

2 unchanged sentences

Schedule of segment assets

December 31, 2023

September 30,

5 unchanged sentences

Other assets of discontinued retail segment

The Company had certain

customers in the OEM distribution segment whose individual percentage of the Company’s consolidated revenues was 10% or greater.

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 months ended December 31, 2023.

Revenues from two customers or their affiliates or contract manufacturers

represented 27.7 % of the Company’s consolidated net revenues for the three months ended December 31, 2022.

INDUSTRIES, INC.

AND SUBSIDIARIES

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended

December 31, 2023 and 2022, the Company had one customer in the design segment whose individual percentage of the Company’s consolidated

The Company had certain customers

in the OEM distribution segment whose individual percentage of the Company’s consolidated revenues was 10% or greater.

from one customer or their affiliates or contract manufacturers represented 13.9 % of the Company’s consolidated net revenues for

the three months ended March 31, 2024 and 2023.

Revenues from one customer or their affiliates or contract manufacturers represented 11.4 %

of the Company’s consolidated net revenues for the six months ended March 31, 2024 and revenues from two customers or their affiliates

or contract manufacturers represented 24.9 % of the Company’s consolidated net revenues for the six months ended March 31, 2023.

For the three and six months

ended March 31, 2024 and 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 27.5 % and 15.9 %, respectively, of the Company’s consolidated

net revenues for the three months ended December 31, 2023 and 2022.

At December 31, 2023 and September

Revenues from this customer represented 27.6 % and 26.3 % of the Company’s consolidated net revenues

for the three months ended March 31, 2024 and 2023, respectively.

Revenues from this customer represented 27.6 % and 21.1 % of the Company’s

consolidated net revenues for the six months ended March 31, 2024 and 2023, respectively.

At March 31, 2024 and September

30, 2023, the Company had customers in the OEM distribution segment whose accounts receivable balance accounted for 10% or more of the

1 unchanged sentence

One customer or its affiliate or contract manufacturer represented 14 % and 12.0 % of

the Company’s consolidated accounts receivable at December 31, 2023 and September 30, 2023, respectively.

At December 31, 2023 and

September 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 28.4 % and 31.1 %, respectively,

of the Company’s consolidated accounts receivable at December 31, 2023 and September 30, 2023.

the Company’s consolidated accounts receivable at March 31, 2024 and September 30, 2023, respectively.

At March 31, 2024 and September

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 26.7 % and 31.1 %, respectively, of the Company’s

consolidated accounts receivable at March 31, 2024 and September 30, 2023.

In March 2023, the Company’s

2 unchanged sentences

did not extend its contract with this customer.

Revenue from this customer represented 13.4 % of our consolidated net revenues for the

three months ended December 31, 2022.

The Company expects the loss of this customer to cause a significant decline in OEM distribution

segment revenues in future periods.

NOTE 7 SHAREHOLDERS’

Revenue from this customer approximated 14.0 % of our consolidated net revenues for the

three and six months ended March 31, 2023.

The Company expects the loss of this customer to continue to cause a significant decline in

OEM distribution segment revenues in future periods.

SHAREHOLDERS’ EQUITY

Stock Options

2 unchanged sentences

of $ 0.76 per share.

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

The options have

a weighted average grant-date fair value of $ 0.36 per share and an aggregate grant-date fair value of $ 120,000 , which will be recognized

ratably over the vesting period.

No options were granted during the three months ended December 31, 2022.

were no options exercised during the three months ended December 31, 2023 or 2022.

Company recognized compensation expense for stock option awards of $ 51,000 and $ 24,000 during the three months ended December 31, 2023

and 2022, respectively, which was recorded as a component of general and administrative expenses in its condensed consolidated statements

of operations.

At December 31, 2023, there was $ 91,000 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.

The options vest one year from the date of grant, expire five years from the date of the grant and 110,803 were forfeited

prior to vesting.

The options have a weighted average grant-date fair value of $ 0.36 per share and an aggregate grant-date fair value

of $ 120,000 , which will be recognized, net of forfeitures, ratably over the vesting period.

No options were granted during the three and

six months ended March 31, 2023.

There were no options exercised during the three and six months

ended March 31, 2024 or 2023.

Company recognized compensation expense for stock option awards of $ 10,000 and $ 15,000 during the three months ended March 31, 2024 and

2023, respectively, and $ 61,000 and $ 39,000 during the six months ended March 31, 2024 and 2023, respectively, which was recorded as a

component of general and administrative expenses in its condensed consolidated statements of operations.

At March 31, 2024, there was

$ 41,000 of total unrecognized compensation cost related to nonvested stock option awards that is expected to be recognized over a weighted

average period of 0.5 years.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On July 31, 2023, the Company

5 unchanged sentences

had determined that the Company’s common stock would be scheduled for delisting from Nasdaq.

Company requested a hearing on this matter with the Nasdaq Hearings Panel (“Panel”) and a hearing has been scheduled for April

This request stayed any trading suspension or delisting of the Company’s common stock until the completion of the

hearings process.

The Company has received shareholder approval for a reverse stock split (see below), on February 6, 2024,

and is considering its options.

We can provide no assurances that we will regain compliance with the requirements to remain listed on

Nasdaq or that the Panel will approve our plans to regain compliance.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

On February 6, 2024, the Company requested

a hearing on this matter with the Nasdaq Hearings Panel (“Panel”), which was held on April 9, 2024.

This request stayed any

trading suspension or delisting of the Company’s common stock until the completion of the hearings process.

On February 22, 2024, the

Company was notified by Nasdaq that its shareholders’ equity of $ 2,312,852 as reported in its Form 10-Q for the period ended December

31, 2023 fell below the $2,500,000 minimum required for continued listing and that the Panel would consider this additional deficiency

at the April 9 th hearing.

At the hearing, the Company

presented a plan of action to meet compliance with both bid price and shareholders’ equity (our “Compliance Plan”).

On April 19, 2024, the Company was notified by the Panel that its request for an extension was granted.

The Company has until July 9,

2024 to become compliant with both bid price and shareholders’ equity.

We can provide no assurance that we will regain compliance

by July 9, 2024.

order to meet the shareholders’ equity requirement, the Company is in negotiations with Forward China to convert a portion of the

accounts payable due to them from the purchase of product into equity.

We can provide no assurance that these negotiations will be successful.

Reverse Stock Split

6, 2024, the Company's shareholders approved an amendment to our Restated Certificate of Incorporation (the "Amendment") to

effect a reverse stock split at a ratio in the range of 1-for-2 to 1-for-3 , with such ratio to be determined at the discretion

of the Company's board of directors and with such reverse stock split to be effected at such time and date, if at all, as

determined by the Company's board of directors in its sole discretion.

The Company’s board of directors intends to determine whether

to proceed with the reverse stock split, the effective time and ratio of the reverse stock split at a future date.

We can provide no assurances

that it will be implemented or that it will result in our stock price increasing to meet the bid price requirement for a period of time

sufficient to regain compliance with Nasdaq listing requirements.

NOTE 8 EARNINGS

On February 6, 2024, the

Company's shareholders approved an amendment to our Restated Certificate of Incorporation (the “Amendment”) to effect a reverse

stock split at a ratio in the range of 1-for-2 to 1-for-3 , with such ratio to be determined at the discretion of the Company's board

of directors and with such reverse stock split to be effected at such time and date, if at all, as determined by the Company's

board of directors in its sole discretion.

Due to the decline in its stock price since February 6, 2024, the Company does not believe

the ratio approved in February will be significant enough to maintain long term compliance with Nasdaq’s bid price requirement.

The Company is therefore currently seeking shareholder approval at a special meeting on June 10, 2024 to increase the range of the reverse

stock split from 1-for-3 to 1-for-10, which if approved, would void the ratio approved by shareholders on February 6, 2024.

If shareholder

approval is obtained, the Company’s board of directors intends to determine whether to proceed with the reverse stock split, the

effective time and ratio of the reverse stock split at a future date.

We can provide no assurances that it will be approved by shareholders

or implemented by the board of directors or that it will result in our stock price increasing to meet the bid price requirement for a

period sufficient to regain compliance with Nasdaq listing requirements.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

Basic earnings per share

7 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Loss from continuing operations

$ ( 546,000 )

Income / (loss) from discontinued operations, net of tax

$ ( 119,000 )

$ ( 927,000 )

$ ( 210,000 )

(Loss) / income from discontinued operations, net of tax

( 1,091,000 )

$ ( 553,000 )

$ ( 871,000 )

$ ( 907,000 )

$ ( 1,301,000 )

Weighted average common shares outstanding

3 unchanged sentences

Basic loss per share from continuing operations

Basic earnings/(loss) per share from discontinued operations

Basic (loss)/earnings per share from discontinued operations

Basic loss per share

1 unchanged sentence

Diluted loss per share from continuing operations

Diluted earnings/(loss) per share from discontinued operations

Diluted (loss)/earnings per share from discontinued operations

Diluted loss per share

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The following securities

were excluded from the calculation of diluted earnings per share in each period because their inclusion would have been anti-dilutive:

Schedule of anti-dilutive securities

Schedule of anti-dilutive shares

For the Three Months Ended

For the Six Months Ended

Total potentially dilutive shares

NOTE 9 RELATED

PARTY TRANSACTIONS

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY TRANSACTIONS

Buying Agency and Supply

The Company has a Buying Agency

and Supply Agreement (the “Supply Agreement”) with 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 through

March 2023 paid 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.

Considering the loss of a significant OEM distribution customer

(see Note 6), effective April 1, 2023, the Company and Forward China agreed to reduce the fixed portion of the sourcing fee from $100,000

to $83,333 per month for the remaining term of the Supply Agreement, which expired in October 2023.

Effective October 2023, the Company

and Forward China entered into a new sourcing agreement under which the fixed portion of the sourcing fee was further reduced to $65,833

The Company has a Buying

Agency and Supply Agreement (the “Supply Agreement”) with 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 through March 2023 paid 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.

Considering the loss of a significant OEM

distribution customer (see Note 6), effective April 1, 2023, the Company and Forward China agreed to reduce the fixed portion of the sourcing

fee from $100,000 to $83,333 per month for the remaining term of the Supply Agreement, which expired in October 2023.

Effective October

2023, the Company and Forward China entered into a new sourcing agreement under which the fixed portion of the sourcing fee was further

reduced to $65,833 per month.

Other terms in the agreement are substantially the same as the prior agreement.

The new sourcing agreement expires October

The Company recorded service fees to Forward China of $ 234,000 and $ 344,000 during the

three months ended December 31, 2023 and 2022, respectively, which are included as a component of cost of sales upon sales of the related

The Company had purchases from Forward China during the three months ended December 31, 2023 and 2022 of approximately $ 1,516,000

and $ 4,412,000 , respectively.

In order to preserve the Company’s

current and future liquidity, in November 2023, the Company and Forward China entered into an agreement whereby Forward China agreed to

limit the amount of outstanding payables it would seek to collect from the Company to $500,000 in any 12-month period, which the Company

agreed to pay within 30 days of any such request.

This agreement pertains only to payables that were outstanding at October 30, 2023 of

The new sourcing agreement

expires October 31, 2024.

The Company recorded service fees to Forward China of $ 219,000 and $ 349,000

during the three months ended March 31, 2024 and 2023, respectively, and $ 453,000 and $ 694,000 for the six months ended March 31, 2024

and 2023, respectively, which are included as a component of cost of sales upon sales of the related products.

The Company had purchases

from Forward China during the three months ended March 31, 2024 and 2023 of approximately $ 2,007,000 and $ 3,191,000 , respectively, and

$ 3,523,000 and $ 7,796,000 for the six months ended March 31, 2024 and 2023, respectively.

In order to preserve the

Company’s current and future liquidity, in November 2023, the Company and Forward China entered into an agreement whereby Forward

China agreed to limit the amount of outstanding payables it would seek to collect from the Company to $500,000 in any 12-month period,

which the Company agreed to pay within 30 days of any such request.

This agreement pertains only to payables that were outstanding at

October 30, 2023 of approximately $ 7,365,000 .

Purchases from Forward China made after October 30, 2023 are not covered by this agreement

and are expected to be paid according to normal payment terms.

At March 31, 2024, the remaining balance covered by this agreement was

approximately $ 7,162,000 .

Purchases from Forward China made after October 30, 2023 are not covered by this agreement and are expected

to be paid according to normal payment terms.

At December 31, 2023, the remaining balance covered by this agreement was approximately

$ 7,365,000 .

Promissory Note

6 unchanged sentences

The Company incurred and paid interest associated with this note of $ 17,000 and $ 26,000

in the three months ended December 31, 2023 and 2022, respectively.

in the three months ended March 31, 2024 and 2023, respectively, and $ 36,000 and $ 54,000 in the six months ended March 31, 2024 and 2023,

respectively.

The maturity date of this note was extended to December 31, 2024 .

The maturity date of this note has been extended on several occasions to assist the Company with liquidity.

The Company made principal

payments of $ 250,000 and $ 50,000 on this note during the three months ended December 31, 2023 and 2022, respectively, and this note has

a remaining balance of $ 850,000 at December 31, 2023.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

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 $ 350,000 and $ 100,000 on this note during the six

months ended March 31, 2024 and 2023, respectively, and this note has a remaining balance of $ 750,000 at March 31, 2024.

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.

In October 2020, the Company’s

retail division 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 recognized revenues from the sale of Koble products of $ 273,000 and $ 497,000 in the three months ended December

31, 2023 and 2022, respectively.

Due to the Retail Exit, these revenues are included in the income / (loss) from discontinued operations

for the three months ended December 31, 2023 and 2022.

The Company had an agreement with Justwise, under which (i) Justwise performed

design, marketing and inventory management 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 paid Justwise $10,000 per month plus 1% of the cost

of Koble products purchased from Forward China.

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 $ 104,000 and $ 543,000 in the three months

ended March 31, 2024 and 2023, respectively, and $ 376,000 and $ 1,041,000 in the six months ended March 31, 2024 and 2023, respectively.

Due to the Retail Exit, these revenues are included in the income / (loss) from discontinued operations for the three and six months ended

March 31, 2024 and 2023.

The Company had an agreement with Justwise, under which (i) Justwise performed design, marketing and inventory

management 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 paid Justwise $10,000 per month plus 1% of the cost of Koble products purchased from Forward

This agreement existed on a month-to-month basis until November 30, 2023.

incurred costs under this agreement of $ 20,000 and $ 33,000 for the three months ended December 31, 2023 and 2022, respectively.

the Retail Exit, these costs are included in the income / (loss) from discontinued operations for the three months ended December 31,

2023 and 2022.

The Company had accounts payable to Justwise of $ 0 and $ 10,000 at December 31, 2023 and September 30, 2023, respectively.

The Company incurred costs under this agreement of $ 0

and $ 20,000 for the three and six months ended March 31, 2024, respectively.

T he Company incurred

costs of $ 33,000 and $ 65,000 under this agreement for the three and six months ended March 31, 2023, respectively.

Due to the Retail

Exit, these costs are included in the income / (loss) from discontinued operations for the three and six months ended March 31, 2024 and

The Company had accounts payable to Justwise of $ 0 and $ 10,000 at March 31, 2024 and September 30, 2023, respectively.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded revenue

from a customer whose principal owner is an immediate family member of Jenny P.

Yu, a shareholder of the Company and managing director

Yu, a large shareholder of the Company and managing director

of Forward China.

The Company recognized revenue from this customer of $ 120,000 and $ 134,000 for the three months ended December 31, 2023

and 2022, respectively.

The Company had no accounts receivable from this customer at December 31, 2023 or September 30, 2023.

The Company recognized revenue from this customer of $ 198,000 and $ 251,000 for the three months ended March 31, 2024

and 2023, respectively, and $ 318,000 and $ 385,000 for the six months ended March 31, 2024 and 2023, respectively.

The Company had no accounts

receivable from this customer at March 31, 2024 or September 30, 2023.

The Company recorded

2 unchanged sentences

The Company recognized revenue from this customer of $ 23,000

for the three months ended December 31, 2023 and 2022, respectively.

The Company had no accounts receivable from this customer at

December 31, 2023 or September 30, 2023.

NOTE 10 LEGAL PROCEEDINGS

for the three and six months ended March 31, 2024, respectively and no

revenue was recognized for the three and six months ended March 31, 2023.

The Company had accounts receivable from this customer of

at March 31, 2024 and September 30, 2023, respectively.

LEGAL PROCEEDINGS

From time to time, the Company

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

At December 31, 2023, and through the date

of this filing, 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 business.

NOTE 11 LINE OF CREDIT

At March 31, 2024, and through the date of

this filing, 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 business.

LINE OF CREDIT

The Company, specifically

IPS, has a $ 1,300,000 revolving line of credit with a bank which was renewed in March 2023.

The line of credit has a maturity date of

May 31, 2024 , 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 9.25 % at December 31, 2023 and September 30, 2023.

December 31, 2023, 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, 2023, the Company was in compliance with such covenants.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 12 LEASES

The line of credit 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

The effective interest rate was 9.25 % at March 31, 2024 and September 30, 2023.

At March 31, 2024, the Company had $ 1,300,000 available

under the line of credit, which has a maturity date of May 31, 2024 and will not be renewed.

The Company’s operating

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

Total operating lease expense for the three months ended

December 31, 2023, was $ 155,000 , of which $ 4,000 was recorded in sales and marketing expenses and $ 151,000 was recorded in general and

administrative expenses on the condensed consolidated statement of operations.

Total operating lease

expense for the three months ended December 31, 2022, was $ 148,000 , of which $ 1,000 was recorded in sales and marketing expenses and $ 147,000

was recorded in general and administrative expenses on the condensed consolidated statement of operations.

Cash paid for

amounts included in operating lease liabilities for the three months ended December 31, 2023 and 2022, which have been included in cash

flows from operating activities, was $ 147,000 and $ 143,000 , respectively.

At December 31, 2023, the Company’s

Cash paid for amounts included in operating lease liabilities

for the six months ended March 31, 2024 and 2023, which have been included in cash flows from operating activities, was $ 294,000

and $ 286,000 ,

respectively.

Details of operating lease expense are as follows:

Schedule of operating lease expense

For the Three Months Ended

For the Six Months Ended

Operating lease expense included in:

Sales and marketing expense

General and administrative expense

At March 31, 2024, the Company’s

operating leases had a weighted average remaining lease term of 7.2 years and a weighted average discount rate of 5.7 %.

At December 31, 2023, future

At March 31, 2024, future

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

6 unchanged sentences

Long-term portion of lease liabilities

NOTE 13 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other

current liabilities at December 31, 2023 and September 30, 2023 are as follows:

current liabilities at March 31, 2024 and September 30, 2023 are as follows:

Schedule of accrued expenses and other accrued liabilities

3 unchanged sentences

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