What changed in this filing

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Item 1. Financial Statements

2025-02-13 compared with 2024-08-14 · 359 added, 403 removed, 448 unchanged (63% of the section changed)

5 unchanged sentences

Current assets:

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

and September 30, 2023, respectively

Accounts receivable, net of allowances for credit losses of $ 51,342 and $ 27,282 as of December 31, 2024 and September 30, 2024, respectively

Accounts receivable (related party)

Inventories, net

Discontinued assets held for sale

Prepaid expenses and other current assets

13 unchanged sentences

Other liabilities:

Note payable to Forward China (related party)

Operating lease liability, less current portion

Total other liabilities

Total liabilities

1 unchanged sentence

Shareholders' equity:

Common stock, par value $ 0.01 per share;

40,000,000 shares authorized;

1,101,069 shares issued and

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

Series A-1 Convertible Preferred Stock, par value $0.01 per share;

stated value of $ 1,000 per share;

2,700 shares authorized, 2,200 shares issued and outstanding at December 31, 2024 and September 30, 2024 (liquidation preference of $ 2,200,000 )

Common stock, 40,000,000 shares authorized;

par value $ 0.01 per share;

1,101,069 shares issued and outstanding at December 31, 2024 and September 30, 2024

Additional paid-in capital

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

Revenues, net

6 unchanged sentences

General and administrative expenses

Operating (loss) / income

( 1,301,533 )

Fair value adjustment of earnout consideration

Goodwill impairment

Operating loss

Interest income

Interest expense - related party

Other income, net

(Loss) / income from continuing operations before income taxes

( 1,303,979 )

Other expense/(income), net

Loss from continuing operations before income taxes

Provision for income taxes

(Loss) / income from continuing operations

( 1,303,979 )

Loss from discontinued operations, net of tax

( 1,761,620 )

$ ( 399,585 )

$ ( 536,744 )

Loss from continuing operations

Income from discontinued operations, net of tax

$ ( 708,065 )

$ ( 354,220 )

Basic loss per share :

Basic (loss)/earnings per share :

Basic loss per share from continuing operations

Basic loss per share from discontinued operations

Basic earnings per share from discontinued operations

Basic loss per share

Diluted loss per share:

Diluted (loss)/earnings per share:

Diluted loss per share from continuing operations

Diluted loss per share from discontinued operations

Diluted earnings per share from discontinued operations

Diluted loss per share

1 unchanged sentence

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

FORWARD INDUSTRIES, INC.

INDUSTRIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Three Months Ended December 31, 2024

Series A-1 Convertible

Preferred Stock

Balance at September 30, 2024

$ ( 19,637,140 )

2 unchanged sentences

$ ( 20,345,205 )

Share-based compensation

Balance at March 31, 2024

( 18,593,987 )

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

For the Three Months Ended December 31, 2023

Series A-1 Convertible

Preferred Stock

Balance at September 30, 2023

$ ( 17,686,553 )

2 unchanged sentences

$ ( 18,040,773 )

Share-based compensation

Balance at March 31, 2023

( 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.

FORWARD INDUSTRIES, INC.

INDUSTRIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended June 30,

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended December 31,

Operating Activities:

1 unchanged sentence

$ ( 354,220 )

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

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

Share-based compensation

Depreciation and amortization

Credit loss expense

Change in fair value of earnout consideration

Credit loss expense/(recoveries)

Goodwill impairment

Changes in operating assets and liabilities:

19 unchanged sentences

Cash paid for interest

Cash paid for taxes

Supplemental Disclosures of Non-Cash Information:

Operating lease assets obtained in exchange for operating lease liabilities

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 OVERVIEW

Forward Industries, Inc.

9 unchanged sentences

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

1 unchanged sentence

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 June 30, 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 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.

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.

for this segment within discontinued operations in the 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 was presented as discontinued assets held for sale on the balance

sheet at September 30, 2023.

Where applicable, certain footnotes exclude the discontinued operations unless otherwise noted.

3 for additional information on discontinued operations.

Liquidity and Going Concern

The accompanying condensed

consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among

other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.

The Company had an accumulated

deficit and working capital deficit of $20,345,000 and $162,000, respectively, at December 31, 2024, a net loss of $708,000 for the three

months ended December 31, 2024 and $1,951,000 in Fiscal 2024 and a cash balance of approximately $2,900,000 at January 31, 2025.

The Company’s

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

to preserve the Company’s current and future liquidity, 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 (See Note 8).

In December 2024, our

largest design customer notified us of its plan to discontinue their insulin patch pump program, on which we were working.

this to cause a material decrease in our revenues beginning in the second quarter of Fiscal 2025.

Based on our forecasted cash flows,

we believe our existing cash balance and working capital will not be sufficient to meet our liquidity needs through February 13, 2026,

12 months from the date of issuance of these condensed consolidated financial statements.

These factors raise substantial doubt about

our ability to continue as a going concern.

Management plans to

initiate cost reduction measures in Fiscal 2025 to mitigate the impact of the loss of our largest customer, including a reduction in force

which was communicated in December 2024.

These plans will be evaluated and adjusted as deemed necessary based on the ongoing needs of

the business.

Management also plans to seek flexibility on payment terms for ongoing purchases from Forward China and attempt to obtain

debt or equity financing to fund its ongoing operations.

However, there are no current agreements or understanding with regard to the

form, time or amount of such financing and there is no assurance that any financing can be obtained, that Forward China will grant any

flexibility on payment terms or that our cost reduction efforts will be sufficient to enable the Company to continue as a going concern.

The condensed consolidated financial statements do not include any adjustments that might result if the Company is unable to continue

as a going concern.

Such adjustments could be material.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Impact of COVID-19

On May 11, 2023, the U.S.

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.

NOTE 2 ACCOUNTING POLICIES

ACCOUNTING POLICIES

Basis of Presentation

29 unchanged sentences

Segment Reporting

As a result of the discontinued

retail segment, as disclosed in Note 3, the Company now has two reportable segments:

The Company has two reportable

OEM distribution and design.

The OEM distribution

segment sources and sells carrying cases and other accessories for medical monitoring and diagnostic kits and a variety of other portable

electronic and non-electronic devices (such as sporting and recreational products, bar code scanners, GPS location devices, tablets and

firearms) on a made-to-order basis that are customized to fit the products sold by our OEM customers worldwide.

The design segment consists

of two operating segments (IPS and Kablooe, which have been aggregated into one reportable segment) that provide a full spectrum of hardware

and software product design and engineering services to customers predominantly located in the U.S.

See Note 5 for more information on

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The OEM distribution segment sources and sells carrying cases and other accessories for medical

monitoring and diagnostic kits and a variety of other portable electronic and non-electronic devices (such as sporting and recreational

products, bar code scanners, GPS location devices, tablets and firearms) on a made-to-order basis that are customized to fit the products

sold by our OEM customers worldwide.

The design segment consists of two operating segments (IPS and Kablooe, which have been aggregated

into one reportable segment) that provide a full spectrum of hardware and software product design and engineering services to customers

predominantly located in the U.S.

See Note 5 for more information on segments.

Accounts Receivable

Accounts receivable consist

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

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.

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 June 30, 2024 and

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

distribution segment.

of unsecured trade accounts with customers in amounts that have been invoiced ($ 4,028,000 , $ 4,460,000 and $ 6,949,000 at December 31, 2024,

September 30, 2024, and September 30, 2023, respectively) and contract assets as described further below under the heading “Revenue

Recognition.” The Company maintains an allowance for credit losses, which is recorded as a reduction to accounts receivable on the

condensed consolidated balance sheets.

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

At December 31, 2024, September 30, 2024 and September 30, 2023, the Company had no allowances for credit losses for the OEM

distribution segment and $ 51,000 , $ 27,000 and $ 771,000 , respectively, for the design segment.

Inventories consist primarily

6 unchanged sentences

change from time to time based on management’s assessments, and such changes could be material.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

10 unchanged sentences

The OEM distribution segment had no contract liabilities

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

at December 31, 2024, September 30, 2024 or September 30, 2023.

Discontinued Retail Distribution Segment

1 unchanged sentence

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

Revenue is recognized when control

Revenue was recognized when control

(as defined in Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”) of the

related goods is transferred to the retailer, which generally occurs upon shipment to the end customer.

Other than product delivery, the

retail distribution segment does not typically have other deliverables or performance obligations associated with its products.

is measured as the amount of consideration expected to be received in exchange for the products provided, net of allowances taken by retailers

for product returns and any taxes collected from customers that will be remitted to governmental authorities.

When the Company receives

consideration before achieving the criteria previously mentioned, it records a contract liability, which is classified as a component

related goods were transferred to the retailer, which generally occurred upon shipment to the end customer.

Other than product delivery,

the retail distribution segment did not typically have other deliverables or performance obligations associated with its products.

was measured as the amount of consideration expected to be received in exchange for the products provided, net of allowances taken by

retailers for product returns and any taxes collected from customers that will be remitted to governmental authorities.

When the Company

receives consideration before achieving the criteria previously mentioned, it records a contract liability, which is classified as a component

of deferred income in the accompanying condensed consolidated balance sheets.

The retail distribution segment had no contract liabilities

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 nine months ended June 30, 2024 and 2023.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

at December 31, 2024, September 30, 2024 or September 30, 2023.

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

operations for the three months ended December 31, 2023.

Design Segment

15 unchanged sentences

The design segment had contract assets of $ 885,000 , $ 1,273,000 and $ 976,000

at June 30, 2024, September 30, 2023 and September 30, 2022, respectively.

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

Contracts where collections to date have exceeded recognized

1 unchanged sentence

consolidated balance sheets.

The design segment had contract liabilities of $ 205,000 , $ 297,000 , and $ 439,000 at June 30, 2024, September

The design segment had contract liabilities of $ 279,000 , $ 399,000 , and $ 297,000 at December 31, 2024, September

30, 2024 and September 30, 2023, respectively.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company reviews goodwill

16 unchanged sentences

the fair value of a reporting unit.

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 June 30, 2024.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company recognizes future

1 unchanged sentence

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

At June 30, 2024, there was no change to our assessment that a full valuation allowance was required against all net deferred

At December 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.

12 unchanged sentences

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

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

fair value of the earnout liability is measured on a recurring basis at each reporting date using inputs categorized within Level 3 of

the fair value hierarchy.

Due to the low likelihood of Kablooe reaching the specified earnout targets, the fair value of this earnout

liability is $0 at December 31, 2024 and September 30, 2024.

carrying amounts of cash, accounts receivable (including accounts receivable from related party), accounts payable, due to Forward China,

and the Note Payable to Forward China approximate fair value due their short-term maturities.

Lease assets and liabilities

13 unchanged sentences

In November 2024, 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.

Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2024-03, “Income

Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement

Expenses” and in January 2025, the FASB issued ASU No.

2025-01, “Income Statement—Reporting Comprehensive

Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date”, which clarified the effective

date of ASU 2024-03 for non-calendar year-end companies.

ASU 2024-03 will require the Company to disclose the amounts of

purchases of inventory, employee compensation, depreciation and intangible asset amortization, as applicable, included in certain expense

captions in the consolidated statements of operations, as well as qualitatively describe remaining amounts included in those captions.

2024-03 will also require the Company to disclose both the amount and the Company’s definition of selling expenses.

is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 31, 2027.

The Company is currently evaluating the effects of the pronouncement on its condensed consolidated financial statements.

In December 2023, the FASB

issued ASU 2023-09, "Income Taxes - Improvements to Income Tax Disclosures", requiring enhancements and further transparency

to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid.

This ASU is effective for fiscal years

beginning after December 15, 2024 on a prospective basis and retrospective application is permitted.

The Company is currently evaluating

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

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In November 2023, 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.

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

issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” which requires expanded

segment reporting and disclosure and is effective for the Company for fiscal years beginning after December 15, 2023, and interim periods

within fiscal years beginning after December 15, 2024.

The Company is currently evaluating the effects of this pronouncement on its condensed

consolidated financial statements.

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.

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.

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

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

The Company sold, liquidated, or otherwise

disposed of all remaining retail inventory, and collected remaining retail accounts receivable by September 30, 2024, at which time the

retail segment was considered fully discontinued.

We expect to have no further significant continuing involvement with this segment.

Retail Exit was considered a strategic shift that would 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 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.

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.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

assets held for sale” at 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.

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 June 30, 2024 and September 30, 2023, respectively.

The following table presents the major classes

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

at December 31, 2024 and September 30, 2024.

The following table presents

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

for the three months ended December 31, 2023.

Schedule of discontinued operations

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Revenues, net

2 unchanged sentences

General and administrative expenses

Loss from discontinued operations before income taxes

( 1,762,000 )

Provision for income taxes

Loss from discontinued operations

$ ( 670,000 )

$ ( 1,762,000 )

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.

Income from discontinued operations

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 nine months ended June 30, 2024 or 2023.

NOTE 4 INTANGIBLE ASSETS AND GOODWILL

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

segment in the three months ended December 31, 2024 or 2023.

INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

2 unchanged sentences

Schedule of intangible assets

June 30, 2024

December 31, 2024

September 30, 2024

8 unchanged sentences

( 1,053,000 )

( 1,295,000 )

Net carrying amount

6 unchanged sentences

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 June 30, 2024, estimated

Amortization expense related to intangible assets was $ 53,000 for the three months ended December 31, 2024 and

2023, which is included in general and administrative expenses on the condensed consolidated statements of operations.

At December 31, 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.

NOTE 5 SEGMENTS AND CONCENTRATIONS

As a result of discontinuing

the retail segment (see Note 3), the Company now has two reportable segments:

December 2024, IPS was notified by its largest customer of its plan to discontinue its insulin patch pump program, on which IPS was working,

and was beginning to wind down all activities related to it.

Revenue from this customer (all of which related to this program) represented

approximately 25.2% of the Company’s consolidated net revenues in fiscal 2024.

Due to the historically high concentration of revenue

with this customer, the loss of its business was considered a triggering event which prompted the Company to evaluate the goodwill of

the IPS reporting unit.

Management concluded an impairment was more likely than not to have occurred and performed a quantitative goodwill

impairment test for the IPS reporting unit at December 31, 2024.

Using primarily an income approach methodology, the fair value of the

IPS reporting unit was estimated using a discounted cash flow analysis incorporating variables categorized within Level 3 of the fair

value hierarchy such as projected revenues, growth rate and discount rate.

The quantitative testing indicated the carrying amount of the

IPS reporting unit exceeded its fair value, resulting in a goodwill impairment charge of $ 225,000 in the three months ended December 31,

2024, primarily driven by a reduction in the expected future performance of the IPS reporting unit.

is a rollforward of goodwill for the design segment, the only reportable segment with goodwill:

Schedule of roll forward

Balance at September 30, 2024

Impairment of IPS reporting unit

Balance at December 31, 2024

SEGMENTS AND CONCENTRATIONS

The Company has two reportable

OEM distribution and design.

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

14 unchanged sentences

related reconciliations

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

OEM distribution

2 unchanged sentences

OEM distribution

Total segment operating income

Total segment operating (loss)/income

General corporate expenses

( 1,858,000 )

( 1,913,000 )

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

( 1,301,000 )

Operating loss from continuing operations before income taxes

Other expense / (income), net

(Loss) / income from continuing operations before income taxes

Loss from continuing operations before income taxes

$ ( 708,000 )

4 unchanged sentences

Schedule of segment assets

December 31, 2024

September 30, 2024

3 unchanged sentences

General corporate assets

Discontinued assets held for sale

Other assets of discontinued retail segment

The Company had certain customers

whose individual percentage of the Company’s consolidated revenues and accounts receivable was 10% or greater.

Revenues from one

customer in the design segment represented 22.6 % and 27.5 % of the Company’s consolidated net revenues for the three months ended

December 31, 2024 and 2023, respectively.

There were no customers in the OEM distribution segment whose individual percentage of the Company’s

consolidated revenues was 10% or greater during the three months ended December 31, 2024 or 2023.

Accounts receivable from

three customers in the design segment represented 40.2 % of the Company’s consolidated accounts receivable at December 31, 2024 and

accounts receivable from one customer in the design segment represented 19.0 % of the Company’s consolidated accounts receivable

at September 30, 2024.

One customer in the OEM segment, or its affiliates or contract manufacturers, represented 11.4 % and 14.5 % of the

Company’s consolidated accounts receivable at December 31, 2024 and September 30, 2024, respectively.

In December 2024, our largest

design customer notified us of its plan to discontinue their insulin patch pump program, on which we were working.

The Company expects

this to cause a material decrease in design segment revenues beginning in the second quarter of Fiscal 2025.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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 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 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 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

consolidated accounts receivable.

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

consolidated accounts receivable at June 30, 2024 and September 30, 2023.

In March 2023, the Company’s

contract with one of its major diabetic customers in the OEM distribution segment expired.

Due to increased pricing pressures, the Company

did not extend its contract with this customer.

Revenue from this customer 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’

SHAREHOLDERS’ EQUITY

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

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.

1 unchanged sentence

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 July 2023, the

Company was notified by Nasdaq that it was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price

Thereafter, in February 2024, the Company was notified that it was not in compliance with Nasdaq Listing Rule

5550(b)(1) (the “Stockholders’ Equity Rule”) (collectively, with the Minimum Bid Price Rule, 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.

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 that in the event the Company fails to satisfy the

Stockholders’ Equity Rule (not the Minimum Bid Price Rule) 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.

If the Company falls

below the Stockholders’ Equity Rule during this period, we can provide no assurance the Company will be able to maintain its

Nasdaq listing.

The Company’s stockholders’ equity was below $2,500,000 at December 31, 2024.

As a result, and in an

effort to maintain compliance with the Stockholders’ Equity Rule, in February 2025, the Company and Forward China agreed to

convert additional amounts due to Forward China into preferred stock.

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.

connection with the Accounts Payable Conversion Agreements with Forward China (see Note 8), the Company filed two Certificates of Amendment

to the Certificate of Incorporation (the “COD”) designating 2,700 shares of Series A-1 Convertible Preferred Stock, with a

stated value of $ 1,000 per share (the “Stated Value”).

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

8 unchanged sentences

On October 1, 2024, the Company

granted options to two of its non-employee directors to purchase an aggregate of 48,020 shares of its common stock at an exercise price

of $ 3.73 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 $ 1.67 per share and an aggregate grant-date fair value of $ 80,000 , which will be recognized,

net of forfeitures, ratably over the vesting period.

On October 1, 2023, the Company

granted options to three of its non-employee directors to purchase an aggregate of 33,243 shares of its common stock at an exercise price

of $ 7.60 per share.

The options vest one year from the date of grant, expire five years from the date of the grant and 11,081 were forfeited

The options vested one year from the date of grant, expire five years from the date of the grant and 11,081 were forfeited

prior to vesting.

The options have a weighted average grant-date fair value of $ 3.60 per share and an aggregate grant-date fair value

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

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.

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

average period of 0.25 years.

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

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 EARNINGS

were no options exercised during the three months ended December 31, 2024 or 2023.

Company recognized compensation expense for stock option awards of $ 20,000 and $ 51,000 during the three months ended December 31, 2024

and 2023, respectively, which was recorded as a component of general and administrative expenses in its condensed consolidated statements

of operations.

As of December 31, 2024, there was $ 60,000 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.

EARNINGS PER SHARE

Basic earnings per share

5 unchanged sentences

A reconciliation of basic and diluted earnings per share is as follows:

Schedule of basic and diluted earnings per share

Schedule of reconciliation of basic and diluted earnings per share

For the Three Months Ended

For the Nine Months Ended

(Loss) / income from continuing operations

$ ( 377,000 )

$ ( 1,304,000 )

Loss from discontinued operations, net of tax

( 1,762,000 )

Loss from continuing operations

$ ( 708,000 )

$ ( 381,000 )

Income from discontinued operations, net of tax

$ ( 708,000 )

4 unchanged sentences

Basic (loss) / earnings per share:

Basic (loss) / earnings per share from continuing operations

Basic (loss) / earnings per share from discontinued operations

Basic loss per share from continuing operations

Basic earnings per share from discontinued operations

Basic loss per share

Diluted (loss) / earnings per share:

Diluted (loss) / earnings per share from continuing operations

Diluted (loss) / earnings per share from discontinued operations

Diluted loss per share from continuing operations

Diluted earnings per share from discontinued operations

Diluted loss per share

2 unchanged sentences

Schedule of anti-dilutive shares

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

Total potentially dilutive shares

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 RELATED PARTY

RELATED PARTY TRANSACTIONS

Buying Agency and Supply

7 unchanged sentences

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 5), 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 31, 2024.

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

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 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.

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.

Due to the Retail Exit and decline in the OEM distribution segment business, the new sourcing agreement

expired October 31, 2024.

In November 2024, the Company and Forward China agreed to:

(i) extend the sourcing agreement until April 30,

2025, but allow either party to cancel with 30 days’ notice, (ii) reduce the fixed portion of the sourcing fee to $35,000 per month,

and (iii) change the payment terms to better align with payments from the Company’s customers.

Terence Wise, Chief Executive

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

In addition, Jenny P.

Yu, a Managing Director of Forward China, beneficially

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

The Company recorded service fees to Forward

China of $ 159,000 and $ 234,000 during the three months ended December 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 December

31, 2024 and 2023 of approximately $ 1,671,000 and $ 1,516,000 , respectively.

In order to preserve the

6 unchanged sentences

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

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.

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

approximately $ 4,881,000 .

Accounts Payable Conversion Agreements

In order to maintain compliance

with Nasdaq’s listing standards, the Company entered into two separate agreements with Forward China (the “Conversion Agreements”),

which were effective in July and September of 2024, to convert portions of amounts Due to Forward China into shares of preferred stock.

Under the terms of the Conversion Agreements, Forward China agreed to convert $ 2,200,000 of the Due to Forward China payable into 2,200

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.

See Notes 6 and 11.

Promissory Note

6 unchanged sentences

The Company incurred and paid interest associated with this note of $ 12,000 and $ 19,000

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.

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 $ 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.

in the three months ended December 31, 2024 and 2023, respectively.

The maturity date of this note was extended to June 30, 2025 .

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

This note has a remaining balance

of $ 600,000 at December 31, 2024.

FORWARD INDUSTRIES, INC.

2 unchanged sentences

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.

retail division began selling smart-enabled furniture, which was sourced by Forward China and sold in the U.S.

under the Koble brand name.

2 unchanged sentences

and Chairman of the Company.

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

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 recognized revenues from the sale of Koble products of $ 0 and $ 273,000 in the three months ended

December 31, 2024 and 2023, respectively.

Due to the Retail Exit, these revenues are included in the loss from discontinued operations

for the three months ended December 31, 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 China.

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 months ended December 31, 2024

and 2023, respectively.

Due to the Retail Exit, these costs are included in the loss from discontinued operations for the three months

ended December 31, 2023.

The Company had no accounts payable to Justwise at December 31, 2024 or September 30, 2024.

The Company recorded revenue

2 unchanged sentences

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

The Company recognized revenue from this customer of $ 0 and $ 120,000 for the three months ended December 31,

2024 and 2023, respectively.

The Company had accounts receivable from this customer of $ 0 and $ 96,000 at December 31, 2024 or September

30, 2024, 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 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.

NOTE 10 LEASES

At December 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.

The Company’s operating

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

Cash paid for amounts included in operating lease liabilities

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 June 30,

For the Nine Months Ended June 30,

Operating lease expense included in:

Sales and marketing expense

General and administrative expense

Total operating lease expense for the three months ended

December 31, 2024 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 financial statements.

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 financial statements.

Cash paid for amounts included in operating lease liabilities for the three

months ended December 31, 2024 and 2023, which have been included in cash flows from operating activities, was $ 151,000 and $ 147,000 ,

respectively.

The Company signed a renewal

to extend the lease term of one of its New York locations for an additional 27 months .

Payments under this operating lease commence February

1, 2025 and escalate 4.0% per year.

The monthly rent payment is $ 6,000 per month.

At December 31, 2024, the

Company’s operating leases had a weighted average remaining lease term of 6.5 years and a weighted average discount rate of 5.9 %.

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 June 30, 2024, future

At December 31, 2024, future

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

7 unchanged sentences

Long-term portion of lease liabilities

NOTE 11 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other

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

Schedule of accrued expenses and other accrued liabilities

September 30,

Accrued commissions/bonuses

Paid time off

SUBSEQUENT EVENT

On February 11, 2025, the Company entered

into a third agreement with Forward China to convert $225,000 of amounts due to Forward China into 225 shares of Series A-1

convertible preferred stock with a stated value of $1,000 per share.

This conversion agreement was affected to raise the

Company’s shareholders’ equity to the amount necessary to meet the Stockholders’ Equity Rule.

See Notes 6 and

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