What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-05-10 · 295 added, 264 removed, 556 unchanged (50% of the section changed)

5 unchanged sentences

Current assets:

Accounts receivable, net of allowances for credit losses of

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

Accounts receivable, net of allowances for credit losses of $ 773,917 and $ 955,965 as of June 30, 2024

and September 30, 2023, respectively

Inventories, net

7 unchanged sentences

Current liabilities:

Note payable to Forward China

Note payable to Forward China (related party)

Accounts payable

Due to Forward China

Due to Forward China (related party)

Deferred income

3 unchanged sentences

Other liabilities:

Note payable to Forward China

Note payable to Forward China (related party)

Operating lease liability, less current portion

5 unchanged sentences

40,000,000 shares authorized;

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

1,101,069 shares issued and

outstanding at June 30, 2024 and September 30, 2023, respectively

Additional paid-in capital

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Six Months Ended

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Revenues, net

Revenues, net - related party

Total Revenues, net

Cost of sales

Cost of sales - related party

Total Cost of sales

Sales and marketing expenses

General and administrative expenses

Operating loss

Operating (loss) / income

( 1,301,533 )

Fair value adjustment of earnout consideration

Interest income

Interest expense

Interest expense - related party

Other income, net

Loss from continuing operations before income taxes

(Loss) / income from continuing operations before income taxes

( 1,303,979 )

Provision for income taxes

Loss from continuing operations

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

(Loss) / income from continuing operations

( 1,303,979 )

Loss from discontinued operations, net of tax

( 1,761,620 )

2 unchanged sentences

$ ( 1,307,019 )

$ ( 1,837,967 )

Basic loss per share :

11 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Three and Six Months Ended March 31, 2024

Balance at September 30, 2023

Three and Nine Months Ended June 30, 2024

Balance at September 30, 2023, unadjusted

$ ( 17,686,553 )

Adjustment for reverse stock split 1-for-10, effective

June 18, 2024

( 8,960,116 )

Balance at September 30, 2023, as adjusted

( 17,686,553 )

Share-based compensation

4 unchanged sentences

( 18,593,987 )

For the Three and Six Months Ended March 31, 2023

Balance at September 30, 2022

Share-based compensation

Balance at June 30, 2024

$ ( 18,993,572 )

the Three and Nine Months Ended June 30, 2023

Balance at September 30, 2022, unadjusted

$ ( 13,949,896 )

Adjustment for reverse stock split 1-for-10, effective

June 18, 2024

( 8,960,116 )

Balance at September 30, 2022, as adjusted

( 13,949,896 )

Share-based compensation

4 unchanged sentences

( 15,251,119 )

Share-based compensation

Balance at June 30, 2023

$ ( 15,787,863 )

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 Six Months

Ended March 31,

For the Nine Months Ended June 30,

Operating Activities:

1 unchanged sentence

$ ( 1,837,967 )

Adjustments to reconcile net loss to net cash used in operating

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

Share-based compensation

6 unchanged sentences

Prepaid expenses and other current assets

Accounts payable and due to Forward China

Accounts payable

Due to Forward China (related party)

Deferred income

1 unchanged sentence

Accrued expenses and other current liabilities

Net cash used in operating activities

Net cash (used in) / provided by operating activities

Investing Activities:

2 unchanged sentences

Financing Activities:

Repayment of note payable to Forward China

Repayment of note payable to Forward China (related party)

Net cash used in financing activities

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 OVERVIEW

Forward Industries, Inc.

8 unchanged sentences

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”).

Corporation, a British Virgin Islands corporation, a related party owned by the Company’s CEO (“Forward China”).

The Company’s shareholders

authorized, and the Board of Directors approved, a 1-for-10 reverse stock split, which became effective on June 18, 2024.

Discontinued Operations

6 unchanged sentences

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.

the balance sheets at June 30, 2024 and September 30, 2023.

Where applicable, certain footnotes exclude the discontinued operations unless

1 unchanged sentence

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).

For the nine months ended

June 30, 2024, the Company generated a net loss of $ 1,307,000 , loss from continuing operations of $ 1,304,000 and used cash flows from

operating activities of $ 72,000 .

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 8).

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.

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.

In order to regain compliance with Nasdaq listing standards, the Company and Forward China entered into an agreement

to convert $ 1,700,000 of the due to Forward China into preferred stock, which became effective July 5, 2024 (See Note 6).

forecasted cash flows, discontinuing our retail segment and the agreements with Forward China, we believe our existing cash balance and

working capital will be sufficient to meet our liquidity needs through at least August 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.

8 unchanged sentences

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

ACCOUNTING POLICIES

NOTE 2 ACCOUNTING POLICIES

Basis of Presentation

44 unchanged sentences

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

of unsecured trade accounts with customers in amounts that have been invoiced ($ 5,891,000 and $ 6,949,000 at June 30, 2024 and September

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

6 unchanged sentences

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

At March 31, 2024 and

At June 30, 2024 and

September 30, 2023, the Company recorded accounts receivable allowances of $ 43,000 and $ 139,000 , respectively, for the discontinued retail

20 unchanged sentences

The OEM distribution segment had no contract liabilities

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

at June 30, 2024, September 30, 2023 or September 30, 2022.

Discontinued Retail Distribution Segment

12 unchanged sentences

The retail distribution segment had no contract liabilities

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

at June 30, 2024, September 30, 2023 or 2022.

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

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

for the three and nine months ended June 30, 2024 and 2023.

FORWARD INDUSTRIES, INC.

17 unchanged sentences

The design segment had contract assets of $ 1,369,000 , $ 976,000 and $ 609,000

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

at June 30, 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 $ 229,000 , $ 297,000 , and $ 439,000 at March 31, 2024, September

The design segment had contract liabilities of $ 205,000 , $ 297,000 , and $ 439,000 at June 30, 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 March 31,

Management evaluated and concluded that there were no indications goodwill was impaired at June 30,

Intangible Assets

16 unchanged sentences

Management evaluated

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

and concluded that there were no indications of impairments of intangible assets at June 30, 2024.

FORWARD INDUSTRIES, INC.

3 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 March 31, 2024, there was no change to our assessment that a full valuation allowance was required against all net deferred

At June 30, 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.

In connection with the acquisition

of Kablooe, the Company has a contingent earnout agreement based on Kablooe’s results of operations through August 2025.

agreement is measured at fair value 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

6 unchanged sentences

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

acquisition of Kablooe provides annual contingent earnout payments based Kablooe’s results of operations through August 2025.

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.

During fiscal 2023, the Company reduced this liability from $70,000 to $0

due to the low likelihood of Kablooe reaching the specified earnings target.

The fair value of this earnout liability remained $0 at June

The resulting gains have been recorded as a component of other income on the condensed consolidated statement of operations.

carrying amounts of cash, accounts receivable, prepaid expenses and other current assets, accounts payable, due to Forward China, and other current liabilities approximate fair value due their short-term maturities.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Lease assets and liabilities

26 unchanged sentences

impact on its condensed consolidated financial statements.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Reclassification

Certain prior year amounts have been reclassified

for consistency with the current year presentation.

These reclassifications had no effect on the reported results of operations.

NOTE 3 DISCONTINUED

OPERATIONS AND ASSETS HELD FOR SALE

Considering the recurring

1 unchanged sentence

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

The Company expects to sell, liquidate,

or otherwise dispose of remaining retail inventory by June 30, 2024, and to collect remaining retail accounts receivable by the end of

The Company has sold, liquidated, or otherwise

disposed of all remaining retail inventory as of June 30, 2024, and expects to collect remaining retail accounts receivable by the end

of Fiscal 2024.

After this time, we expect to have no further significant continuing involvement with the retail distribution segment.

Retail Exit is considered a strategic shift that will have a significant impact on the Company’s operations and financial results.

The inventory of the retail segment meets the criteria to be considered “held-for-sale” in accordance with ASC 205-20, “Discontinued

The Retail Exit is considered a strategic shift that will have a significant impact on the Company’s operations and financial results.

The inventory of the retail segment met the criteria to be considered “held-for-sale” in accordance with ASC 205-20, “Discontinued

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

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

assets held for sale” at June 30, 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 nine months ended June

30, 2024 and 2023.

1 unchanged sentence

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

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The total amount related

to the discontinued retail segment included in Due to Forward China on the condensed consolidated balance sheets was approximately $ 641,000

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

and $ 1,002,000 at June 30, 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.

of the Loss from discontinued operations, net of tax” in our condensed consolidated statements of operations.

Schedule of discontinued operations

For the Three Months Ended

For the Six Months Ended

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Revenues, net

2 unchanged sentences

General and administrative expenses

(Loss) / income from discontinued operations before income taxes

Loss from discontinued operations before income taxes

( 1,762,000 )

Provision for income taxes

(Loss) / income from discontinued operations

Loss from discontinued operations

$ ( 670,000 )

$ ( 1,762,000 )

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.

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.

At September 30, 2023, discontinued

assets held for sale of $ 508,000 consisted of the net inventory of the retail segment.

This number includes an allowance of $ 1,464,000

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

segment in the three and nine months ended June 30, 2024 or 2023.

NOTE 4 INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

1 unchanged sentence

assets consist of the following:

Schedule of intangible

Relationships

Intangible Assets

Relationships

Intangible Assets

Schedule of intangible assets

June 30, 2024

September 30, 2023

Customer Relationships

Total Intangible Assets

Customer Relationships

Total Intangible Assets

Gross carrying amount

2 unchanged sentences

( 1,241,000 )

( 1,082,000 )

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.

Intangible assets are amortized over their expected useful lives of 15

years for the trademarks and eight

years for the customer relationships.

Amortization expense related to intangible assets was $ 53,000

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

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 years for the trademarks and eight years for the

customer relationships.

Amortization expense related to intangible assets was $ 53,000 for the three months ended June 30, 2024 and 2023,

and $ 160,000 for the nine months ended June 30, 2024 and 2023, which is included in general and administrative expenses on the condensed

consolidated statements of operations.

At March 31, 2024, estimated

At June 30, 2024, estimated

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

6 unchanged sentences

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

FAIR VALUE MEASUREMENTS

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

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.

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 statement of operations.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEGMENTS AND CONCENTRATIONS

NOTE 5 SEGMENTS AND CONCENTRATIONS

As a result of discontinuing

15 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Information by segment and

2 unchanged sentences

related reconciliations

For the Three Months Ended

For the Six Months Ended

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

OEM distribution

6 unchanged sentences

( 1,913,000 )

Operating loss from continuing operations before income taxes

Other expense/(income), net

Loss from continuing operations before income taxes

$ ( 546,000 )

Operating (loss) / income from continuing operations before income taxes

( 1,301,000 )

Other expense / (income), net

(Loss) / income from continuing operations before income taxes

$ ( 377,000 )

15 unchanged sentences

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

from one customer or their affiliates or contract manufacturers represented 14.7 % and 10.3 % of the Company’s consolidated net revenues

for the three months ended June 30, 2024 and 2023, respectively.

Revenues from one customer or their affiliates or contract manufacturers

represented 12.6 % of the Company’s consolidated net revenues for the nine months ended June 30, 2024 and revenues from two customers

or their affiliates or contract manufacturers represented 21.1 % of the Company’s consolidated net revenues for the nine months ended

June 30, 2023.

For the three and nine months

ended June 30, 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 23.9 % and 35.0 % of the Company’s consolidated net revenues

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

for the three months ended June 30, 2024 and 2023, respectively.

Revenues from this customer represented 26.3 % and 25.4 % of the Company’s

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

At March 31, 2024 and September

consolidated net revenues for the nine months ended June 30, 2024 and 2023, respectively.

At June 30, 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

Company’s consolidated accounts receivable.

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

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

At March 31, 2024 and September

One customer or its affiliate or contract manufacturer represented 17.8 % and 12 .

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

At June 30, 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

1 unchanged sentence

Accounts receivable from this customer represented 19.7 % and 31.1 %, respectively, of the Company’s

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

consolidated accounts receivable at June 30, 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 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

Revenue from this customer approximated 2.0 % and 10.0 % of our consolidated net revenues

for the three and nine months ended June 30, 2023, respectively.

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

significant decline in OEM distribution segment revenues in future periods.

NOTE 6 SHAREHOLDERS’

Reverse Stock Split

The Company’s shareholders authorized, and

the Board of Directors approved a 1-for-10 reverse stock split, which became effective on June 18, 2024.

Any fractional shares that

would have otherwise resulted from the reverse stock split were rounded up to the nearest whole share.

Accordingly, all references made

to shares, per share, or common share amounts in the accompanying condensed consolidated financial statements and applicable disclosures

have been retroactively adjusted to reflect the reverse stock split.

The reverse stock split did not change the par value of the common

stock nor the authorized number of shares of common stock, preferred stock or any series of preferred stock.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In July 2023, the Company

was notified by Nasdaq that it was not in compliance with Nasdaq’s $1.00 minimum closing bid price requirement (“Bid Price

Requirement”).

Thereafter, in February 2024, the Company was notified that it was not in compliance with Nasdaq’s minimum

$2.5 million shareholders’ equity requirement (“SE Requirement”) (collectively, with the Bid Price Requirement, the

“Minimum Requirements”).

In April 2024, the Company presented a plan of action to the Nasdaq Hearings Panel to meet compliance

with the Minimum Requirements.

As a result of the reverse stock split effected in June 2024 and

the entrance into the Accounts Payable Conversion Agreement (described in Note 8), the Company regained compliance with the Minimum

Requirements in July 2024 and was formally notified by Nasdaq that the Minimum Requirements were met.

Until July 24, 2025, the Company

is subject to a Nasdaq “Panel Monitor” which provides for in the event the Company fails to satisfy the SE Requirement (not

the Bid Price Requirement) during the monitoring period, the Company will be required to request a hearing before the Panel in order to

maintain its listing rather than taking the interim step of submitting a compliance plan for the Listing Qualifications Staff’s

review or receiving any otherwise applicable grace period.

We can provide no assurance that if the Company falls below the SE Requirement

during this period that the Company will be able to maintain its Nasdaq listing.

Preferred Stock

connection with the Accounts Payable Conversion Agreement with Forward China (“Conversion Agreement”), the Company filed a

Certificate of Amendment of the Certificate of Incorporation (the “COD”) designating 1,700 shares of Series A-1 Convertible

Preferred Stock, with a stated value of $ 1,000 per share (the “Stated Value”), which became effective on July 5, 2024.

holders of the Series A-1 Convertible Preferred Stock have no voting rights and rank senior to all classes or series of the Company’s

common stock with respect to the distribution of assets upon liquidation, dissolution, or winding up.

Subject to a 19.9 % share cap (as

defined in the COD), the Series A-1 Convertible Preferred Stock shall be convertible into a number of shares of the Company’s common

stock as determined by (i) multiplying the number of shares to be converted by the Stated Value, (ii) adding the result of all accrued

and accumulated and unpaid dividends on such shares to be converted, and then (iii) dividing the result by the conversion price of $ 7.50 ,

subject to adjustment as defined in the COD.

The Series A-1 Convertible Preferred Stock is not redeemable.

Stock Options

6 unchanged sentences

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

May 2023, the Company granted options to three of its non-employee directors to purchase an aggregate of 12,474 shares of its common stock

at an exercise price of $ 10.30 per share.

The options vested six months from the date of grant and expire five years from the date of

The options have a weighted average grant-date fair value of $ 4.80 per share and an aggregate grant-date fair value of $ 60,000 ,

which were recognized ratably over the vesting period.

were no options exercised during the three and nine months ended June 30, 2024 or 2023.

Company recognized compensation expense for stock option awards of $ 20,000 and $ 17,000 during the three months ended June 30, 2024 and

2023, respectively, and $ 81,000 and $ 56,000 during the nine months ended June 30, 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

As of June 30, 2024, there was

$ 20,000 of total unrecognized compensation cost related to nonvested stock option awards that is expected to be recognized over a weighted

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On July 31, 2023, the Company

was notified by Nasdaq that it was not compliant with its closing bid price requirement because the closing bid price of our common stock

was below $1.00 per share for 30 consecutive trading days.

The Company had 180 days, or until January 29, 2024, to regain compliance with

this requirement.

On January 30, 2024, we were notified by Nasdaq that based on our continued non-compliance with this requirement, it

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

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

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

NOTE 7 EARNINGS

Basic earnings per share

7 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Loss from continuing operations

$ ( 546,000 )

$ ( 119,000 )

For the Nine Months Ended

(Loss) / income from continuing operations

$ ( 377,000 )

$ ( 1,304,000 )

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

Loss from discontinued operations, net of tax

( 1,762,000 )

7 unchanged sentences

Basic (loss) / earnings per share:

Basic loss per share from continuing operations

Basic (loss) / earnings per share from continuing operations

Basic (loss) / earnings per share from discontinued operations

1 unchanged sentence

Diluted (loss) / earnings per share:

Diluted loss per share from continuing operations

Diluted (loss) / earnings per share from continuing operations

Diluted (loss) / earnings per share from discontinued operations

3 unchanged sentences

Schedule of anti-dilutive shares

For the Three Months Ended

For the Six Months Ended

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Total potentially dilutive shares

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY TRANSACTIONS

NOTE 8 RELATED PARTY

Buying Agency and Supply

17 unchanged sentences

The Company recorded service fees to Forward China of $ 221,000 and $ 284,000

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

during the three months ended June 30, 2024 and 2023, respectively, and $ 674,000 and $ 978,000 for the nine months ended June 30, 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.

from Forward China during the three months ended June 30, 2024 and 2023 of approximately $ 2,149,000 and $ 2,454,000 , respectively, and

$ 5,672,000 and $ 9,963,000 for the nine months ended June 30, 2024 and 2023, respectively.

In order to preserve the

6 unchanged sentences

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 .

At June 30, 2024, the remaining balance covered by this agreement was approximately

$ 7,105,000 .

Accounts Payable Conversion Agreement

Effective July 5, 2024, the

Company and Forward China entered into a Conversion Agreement.

Under the terms of the Conversion Agreement, Forward China agreed to convert

$ 1,700,000 of the Due to Forward China payable into 1,700 shares of the Company’s newly designated Series A-1 convertible preferred

stock (the “Preferred Stock”) with a stated value of $ 1,000 per share.

Promissory Note

6 unchanged sentences

The Company incurred and paid interest associated with this note of $ 14,000 and $ 25,000

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,

in the three months ended June 30, 2024 and 2023, respectively, and $ 50,000 and $ 80,000 in the nine months ended June 30, 2024 and 2023,

respectively.

2 unchanged sentences

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.

The Company made principal payments of $ 500,000 and $ 200,000 on this note during the nine

months ended June 30, 2024 and 2023, respectively, and this note has a remaining balance of $ 600,000 at June 30, 2024.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other Related Party Activity

6 unchanged sentences

The Company recognized revenues from the sale of Koble products of $ 4,000 and $ 509,000 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.

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

ended June 30, 2024 and 2023, respectively, and $ 380,000 and $ 1,550,000 in the nine months ended June 30, 2024 and 2023, respectively.

Due to the Retail Exit, these revenues are included in the loss from discontinued operations for the three and nine months ended June

30, 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.

for such services, the Company paid Justwise $10,000 per month plus 1% of the cost of Koble products purchased from Forward China.

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

The Company incurred costs under this agreement of $ 0 and $ 20,000

for the three and nine months ended June 30, 2024, respectively.

T he Company incurred costs of $ 31,000

and $ 95,000 under this agreement for the three and nine months ended June 30, 2023, respectively.

Due to the Retail Exit, these

costs are included in the loss from discontinued operations for the three and nine months ended June 30, 2024 and 2023.

The Company had

accounts payable to Justwise of $ 0 and $ 10,000 at June 30, 2024 and September 30, 2023, respectively.

The Company recorded revenue

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

Yu, a large shareholder of the Company and managing director

of Forward China.

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

revenue from a customer who employs an immediate family member of a former member of our Audit, Governance and Compensation

committees of our Board of Directors.

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

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

Yu, a significant shareholder of the Company and managing

director of Forward China.

The Company recognized revenue from this customer of $ 108,000 and $ 122,000 for the three months ended June

30, 2024 and 2023, respectively, and $ 427,000 and $ 507,000 for the nine months ended June 30, 2024 and 2023, respectively.

had no accounts receivable from this customer at June 30, 2024 or September 30, 2023.

The Company recorded revenue

from a customer who employs an immediate family member of a former member of our Audit, Governance and Compensation committees of our

Board of Directors.

The Company recognized revenue from this customer of $ 8,000 and $ 46,000 for the three and nine months ended June 30,

2024, respectively, and no revenue was recognized for the three and nine months ended June 30, 2023.

The Company did no t have accounts

receivable from this customer June 30, 2024 or September 30, 2023.

NOTE 9 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 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

At June 30, 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 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.

NOTE 10 LEASES

The Company’s operating

1 unchanged sentence

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.

for the nine months ended June 30, 2024 and 2023, which have been included in cash flows from operating activities, was $ 441,000

and $ 429,000 , respectively.

Details of operating lease expense are as follows:

Schedule of operating lease expense

For the Three Months Ended

For the Six Months Ended

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Operating lease expense included in:

1 unchanged sentence

General and administrative expense

At March 31, 2024, the Company’s

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At June 30, 2024, the Company’s

operating leases had a weighted average remaining lease term of 7.1 years and a weighted average discount rate of 5.7 %.

At March 31, 2024, future

At June 30, 2024, future

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

Schedule of future minimum payments under operating leases

Schedule of future

minimum payments under non-cancellable operating leases

Remainder of Fiscal 2024

4 unchanged sentences

Long-term portion of lease liabilities

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

NOTE 11 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other

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

current liabilities at June 30, 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