What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-14 compared with 2025-02-13 · 311 added, 324 removed, 483 unchanged (57% of the section changed)

5 unchanged sentences

Current assets:

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

Accounts receivable, net of allowances for credit losses of $ 14,442 and $ 27,282 as of March 31, 2025 and September 30, 2024, respectively

Contract assets

Prepaid expenses and other current assets

Assets held for sale

Total current assets

6 unchanged sentences

Accounts payable

Due to Forward China (related party)

Deferred income

1 unchanged sentence

Accrued expenses and other current liabilities

Liabilities held for sale

Total current liabilities

6 unchanged sentences

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 )

6,700 shares authorized, 4,925 and 2,200 shares issued and outstanding at March 31, 2025 and September 30, 2024, respectively (liquidation preference of $ 4,925,000 )

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

1,101,069 shares issued and outstanding at March 31, 2025 and September 30, 2024

Additional paid-in capital

4 unchanged sentences

Total liabilities and shareholders' equity

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

The accompanying notes

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

FORWARD INDUSTRIES, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended December 31,

For the Three Months Ended

For the Six Months Ended

Revenues, net

Revenues, net - related party

Total revenues, net

Cost of sales

Cost of sales - related party

Total cost of sales

Gross profit/(loss)

Sales and marketing expenses

2 unchanged sentences

Operating loss

( 1,821,758 )

( 2,719,789 )

Interest income

Interest expense - related party

Other expense/(income), net

Other expense, net

Loss from continuing operations before income taxes

( 1,822,209 )

( 2,719,984 )

Provision for income taxes

Loss from continuing operations

( 1,822,209 )

( 2,719,984 )

Income from discontinued operations, net of tax

1 unchanged sentence

$ ( 553,214 )

$ ( 2,159,676 )

$ ( 907,434 )

Basic (loss)/earnings per share :

8 unchanged sentences

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

INDUSTRIES, INC.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Three Months Ended December 31, 2024

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Six Months Ended March 31, 2025

Series A-1 Convertible

5 unchanged sentences

( 20,345,205 )

For the Three Months Ended December 31, 2023

Share-based compensation

( 1,451,611 )

Preferred stock issued in connection with conversion of accounts payable to Forward China

Balance at March 31, 2025

$ ( 21,796,816 )

For the Six Months Ended March 31, 2024

Series A-1 Convertible

5 unchanged sentences

( 18,040,773 )

Share-based compensation

Balance at March 31, 2024

$ ( 18,593,987 )

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

INDUSTRIES, INC.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended December 31,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended March 31,

Operating Activities:

1 unchanged sentence

$ ( 907,434 )

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

Adjustments to reconcile net loss to net cash used in operating activities:

Share-based compensation

Depreciation and amortization

Credit loss expense/(recoveries)

Credit loss expense

Goodwill impairment

1 unchanged sentence

Accounts receivable

Discontinued assets held for sale

Prepaid expenses and other current assets

Accounts payable

Due to Forward China (related party)

Deferred income

1 unchanged sentence

Accrued expenses and other current liabilities

Net cash (used in) / provided by operating activities

Net cash used in operating activities – continuing

( 1,369,640 )

Net cash (used in)/provided by operating activities – discontinued operations

Net cash used in operating activities

Investing Activities:

9 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

Conversion of accounts payable to convertible preferred stock

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

4 unchanged sentences

company serving top tier medical and technology customers worldwide.

Company’s design division provides hardware and software product design and engineering services to customers predominantly located

The Company’s original equipment manufacturing (“OEM”) distribution division sources and sells carrying

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

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

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

The Company does not manufacture any of

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

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

The Company provides hardware

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

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 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.

for this segment within discontinued operations in the 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

The inventory of the retail segment was presented as discontinued assets held for sale on the balance sheet at

September 30, 2023.

See Note 3 for additional information on discontinued operations.

In March 2025, the Company

committed to a plan to sell the original equipment manufacturer (“OEM”) distribution segment of the business (“OEM Plan”)

and is presenting the results of operations for this segment within discontinued operations in the current and prior periods presented

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

medical monitoring and diagnostic kits as well as a variety of other portable electronic and non-electronic devices to OEMs or their contract

manufacturers worldwide, that either package our products as accessories “in box” together with their branded product offerings

or sell them through their retail distribution channels.

The Company does not manufacture any of its OEM products and sources substantially

all of these products from independent suppliers in China, through Forward Industries Asia-Pacific Corporation, a British Virgin Islands

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

See Notes 3 and 8.

otherwise noted, amounts related to these discontinued operations are excluded from the disclosures presented herein.

Liquidity and Going Concern

3 unchanged sentences

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.

deficit and working capital (excluding assets and liabilities held for sale) of $21,797,000 and $2,784,000, respectively, at March 31,

2025, a net loss of $2,160,000 for the six months ended March 31, 2025 and $1,951,000 in Fiscal 2024 and a cash balance of approximately

$1,400,000 at April 30, 2025.

The Company’s

6 unchanged sentences

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

we believe our existing cash balance and working capital will not be sufficient to meet our liquidity needs through May 14, 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.

In conjunction with the OEM Plan, the Company

and Forward China have entered into proposed terms which would provide a framework by which Forward China would purchase either the assets

or the securities of the OEM distribution segment of the business.

As part of those proposed terms, a payment plan on the amounts owed

under the note payable and the outstanding payables will be provided by Forward China as part of the consideration paid.

We can provide

no assurance that a definitive agreement will be reached or that any transaction will be completed.

The Company is currently in preliminary discussions

regarding a potential sale of equity securities and establishment of an equity line of credit facility with an institutional investor.

We can provide no assurance that either financing will close or, if closed, will be on terms acceptable to us.

Management also continues to evaluate cost reduction efforts as needed.

However, there are no assurances 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.

ACCOUNTING POLICIES

30 unchanged sentences

Segment Reporting

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 segments.

As a result of the Retail

Exit and the OEM Plan, the design segment is the Company’s only reportable segment at March 31, 2025.

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

Accounts Receivable

Accounts receivable consist

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,

of unsecured trade accounts with customers in amounts that have been invoiced ($ 1,791,000 , $ 2,335,000 and $ 4,805,000 at March 31, 2025,

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

3 unchanged sentences

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.

At March 31, 2025, September 30, 2024 and September 30, 2023, the Company had allowances for credit losses of $ 14,000 , $ 27,000

and $ 956,000 , respectively.

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

Due to the Retail Exit and the OEM

Plan, all inventory is now presented as a component of assets held for sale.

Revenue Recognition

OEM Distribution Segment

Discontinued OEM Distribution Segment

The OEM distribution segment

8 unchanged sentences

The OEM distribution segment had no contract liabilities

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

at March 31, 2025, September 30, 2024 or September 30, 2023.

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

operations for the three and six months ended March 31, 2025 and 2024.

Discontinued Retail Distribution Segment

12 unchanged sentences

The retail distribution segment had no contract liabilities

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

at March 31, 2025, 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.

operations for the three and six months ended March 31, 2025 and 2024.

Design Segment

9 unchanged sentences

Revenues from fixed price contracts

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

has been completed and accepted.

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

to the customer has been completed and accepted in accordance with contact terms.

Recognized revenues that

2 unchanged sentences

The design segment had contract assets of $ 868,000 , $ 1,273,000 and $ 976,000

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

at March 31, 2025, 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 $ 279,000 , $ 399,000 , and $ 297,000 at December 31, 2024, September

The design segment had contract liabilities of $ 355,000 , $ 399,000 , and $ 297,000 at March 31, 2025, September

30, 2024 and September 30, 2023, respectively.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company reviews goodwill

34 unchanged sentences

Management evaluated

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

The Company recognizes future

tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax

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

At December 31, 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.

Accordingly, any deferred tax provision or benefit was

offset by an equal and opposite change to the valuation allowance.

Our income tax provision or benefit is generally not significant due

to the existence of significant net operating loss carryforwards.

Fair Value Measurements

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.

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ASC 820 establishes a fair

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

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

to the fair value measurement.

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

quoted prices in active markets for identical assets or liabilities;

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

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

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.

and concluded that there were no indications of impairments of intangible assets at March 31, 2025.

Lease assets and liabilities

26 unchanged sentences

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

Early adoption of this ASU is permitted and can be applied prospectively on the on the effective date or retrospectively to prior periods

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

6 unchanged sentences

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

17 unchanged sentences

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

at December 31, 2024 and September 30, 2024.

Operations” on the condensed consolidated statements of operations for the three and six months ended March 31, 2025 and 2024.

In March 2025, in connection

with the fourth Conversion Agreement (see Note 8), Forward China determined it would not renew the Buying Agency and Supply Agreement,

which was scheduled to expire on April 30, 2025 (see Note 11).

Without this agreement, the Company determined it would not continue the

OEM segment of the business and committed to a plan to sell the segment in the next three months, after which it does not plan to have

any significant continuing involvement with this segment.

The sale of the OEM business is considered a strategic shift that will have

a significant impact on the Company’s operations and financial results.

The assets and liabilities of the OEM segment are classified

as assets and liabilities held for sale on the condensed consolidated balance sheets at March 31, 2025 and September 30, 2024.

of operations for the OEM segment have been classified as discontinued operations on the condensed consolidated statement of operations

for the three and six months ended March 31, 2025 and 2024.

The condensed consolidated balance sheets and statements of operations for

comparable periods have been reclassified to conform to this presentation in accordance with the accounting guidance.

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.

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

Schedule of discontinued operations

For the Three Months Ended

For the Six Months Ended

Revenues, net

3 unchanged sentences

Income from discontinued operations

There was no depreciation,

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.

There were no depreciation,

amortization, investing or financing cash flow activities for the discontinued operations in the three or six months ended March 31, 2025

The only significant non-cash operating cash flow activity for the discontinued operations in the three and six months ended

March 31, 2025 and 2024 was the conversion of accounts payable to Forward China into preferred stock in February and March of 2025 (See

The following table presents

the major components of assets and liabilities held for sale on our condensed consolidated balance sheets:

Schedule of major components of assets and liabilities

September 30,

Accounts receivable, net

Prepaid expenses and other assets

Total assets held for sale

Accounts payable

Due to Forward China

Other liabilities

Total liabilities held for sale

INTANGIBLE ASSETS AND GOODWILL

3 unchanged sentences

Schedule of intangible assets

December 31, 2024

March 31, 2025

September 30, 2024

10 unchanged sentences

Net carrying amount

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 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

assets resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively.

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, 2025 and 2024, and $ 106,000 for the six months ended March 31, 2025

and 2024, which is included in general and administrative expenses on the condensed consolidated statements of operations.

At March 31, 2025, estimated

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

5 unchanged sentences

is deductible for tax purposes.

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

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

1 unchanged sentence

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:

more than 30% 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.

the second quarter of fiscal 2025, the IPS reporting unit continued to experience low levels of staff utilization due in part to the loss

of the aforementioned major customer, which was anticipated.

In addition, due to the uncertainty in the global markets related to tariffs

on imports, many IPS customers were slow to commit funds to projects as they were unsure how tariffs and other macroeconomic factors would

impact their business.

The combination of these events resulted in negative gross profit for the IPS reporting unit in the second quarter,

which the Company considered another triggering event to evaluate the goodwill of the IPS reporting unit for impairment.

Management concluded

an impairment was more likely than not to have occurred and performed a quantitative goodwill impairment analysis for the IPS reporting

unit at March 31, 2025.

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 fair value of the IPS reporting unit exceeded its carrying amount,

resulting in no further goodwill impairment in the three months ended March 31, 2025.

is a rollforward of goodwill:

Schedule of roll forward

1 unchanged sentence

Impairment of IPS reporting unit

Balance at December 31, 2024

Balance at March 31, 2025

SEGMENTS AND CONCENTRATIONS

The Company has two reportable

OEM distribution and design.

Our chief operating decision

maker (“CODM”) regularly reviews revenue and operating income for each segment to assess financial results and allocate resources.

For our OEM distribution segment, we exclude general and administrative and general corporate expenses from its measure of profitability

as these expenses are not allocated to the segments and therefore not included in the measure of profitability used by the CODM.

design segment, general and administrative expenses directly attributable to that segment are included in its measure of profitability

as these expenses are included in the measure of its profitability reviewed by the CODM.

We do not include intercompany activity in our

segment results shown below to be consistent with the information that is presented to the CODM.

Segment assets consist of accounts receivable

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

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Information by segment and

related reconciliations are shown in tables below:

Schedule of segment and

related reconciliations

For the Three Months Ended December 31,

OEM distribution

Total segment revenues

Operating income / (loss):

OEM distribution

Total segment operating (loss)/income

General corporate expenses

Operating loss from continuing operations before income taxes

Other expense / (income), net

Loss from continuing operations before income taxes

$ ( 708,000 )

$ ( 381,000 )

Depreciation and amortization:

OEM distribution

Total depreciation and amortization

Schedule of segment assets

December 31, 2024

September 30, 2024

Segment Assets:

OEM distribution

Total segment assets

General corporate assets

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.

As a result of the Retail

Exit and the OEM Plan, the Company now has only one reportable segment.

The prior year segment disclosures have been reformatted from

what was previously disclosed to conform to the current year presentation and omit certain disclosures that are no longer required.

Revenues from two customers

represented 36.4 % and 36.3 % of the Company’s consolidated net revenues for the three and six months ended March 31, 2025, respectively.

Revenues from one customer represented 42.7 % of the Company’s consolidated net revenues for the three months ended March 31, 2024

and revenues from two customers represented 50.2 % of the Company’s consolidated net revenues for the six months ended March 31,

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.

3 customers represented 51.3 % and 57.9 % of the Company’s consolidated accounts receivable at March 31, 2025 and September 30, 2024,

respectively.

In December 2024, our largest

1 unchanged sentence

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

this to continue to cause a material decrease in design segment revenues in Fiscal 2025.

SHAREHOLDERS’ EQUITY

9 unchanged sentences

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

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 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.

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 Rule”).

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.

a result of the reverse stock split effected in June 2024 and the entrance into the first 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 (requiring minimum stockholders’ equity of $2.5

million) 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.

On February 21, 2025, the

Company was notified by Nasdaq that due to its reported Shareholders’ Equity of $2,279,297 at December 31, 2024, it was not in compliance

with the Stockholders’ Equity Rule.

Due to the Panel Monitor, the Company was not eligible for any grace period and Nasdaq determined

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

On February 27, 2025, the Company requested a hearing on

this matter with the Panel, which stayed any trading suspension or delisting of the Company’s common stock until the completion

of the hearings process.

As a result of the fourth

conversion agreement with Forward China (see Note 8), the Company regained compliance with the Stockholders’ Equity Rule in March

2025 and was formally notified by Nasdaq in April that it was in compliance with all applicable continued listing standards and that the

scheduled hearing had been canceled.

Preferred Stock

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

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.

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

to the Certificate of Incorporation (the “COD”) designating 6,700 shares of Series A-1 Convertible Preferred Stock (the “Series

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

holders of the Series A-1 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 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.

Series A-1 is not redeemable.

Stock Options

2 unchanged sentences

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,

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

The options have a

weighted average grant-date fair value of $ 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 February 1, 2025, the

Company granted options to one of its non-employee directors to purchase 13,779 shares of its common stock at an exercise price of $ 6.01

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

The options have a grant-date-fair-value

of $ 2.90 per share and an aggregate grant-date-fair value of $ 40,000 , which will be recognized, net of forfeitures, ratably over the vesting

On October 1, 2023, the Company

5 unchanged sentences

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

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

were no options exercised during the three or six months ended March 31, 2025 or 2024.

Company recognized compensation expense for stock option awards of $ 26,000

during the three months ended March 31, 2025 and 2024, respectively, and $ 46,000

for the six months ended March 31, 2025 and 2024, respectively, which was recorded as a component of general and administrative

expenses in its condensed consolidated statements of operations.

At March 31, 2025 there was $ 74,000

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

average period of 0.7

Options outstanding and exercisable at March 31, 2025 had a weighted average exercise price of $ 8.52 and $ 12.29 ,

respectively.

EARNINGS PER SHARE

8 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Loss from continuing operations

18 unchanged sentences

Schedule of anti-dilutive shares

For the Three Months Ended December 31,

For the Three Months Ended

For the Six Months Ended

Total potentially dilutive shares

FORWARD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY TRANSACTIONS

Buying Agency and Supply

The Company has a Buying

The Company had a Buying

Agency and Supply Agreement (the “Supply Agreement”) with Forward China.

The Supply Agreement provides that, upon the terms

and subject to the conditions set forth therein, Forward China will act as the Company’s exclusive buying agent and supplier of

The Supply Agreement provided that, upon the terms

and subject to the conditions set forth therein, Forward China would act as the Company’s exclusive buying agent and supplier of

Products (as defined in the Supply Agreement) in the Asia-Pacific region.

The Company purchases products at Forward China’s

The Company purchased products at Forward China’s

cost and, through March 2023, paid Forward China a monthly service fee equal to the sum of (i) $100,000, and (ii) 4% of “Adjusted

13 unchanged sentences

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

See Notes 3 and 11.

Terence Wise, Chief Executive

4 unchanged sentences

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.

China of $ 133,000 and $ 219,000 during the three months ended March 31, 2025 and 2024, respectively, and $ 292,000 and $ 453,000 for the

six months ended March 31, 2025 and 2024, respectively, which are included as a component of cost of sales upon sales of the related products.

Due to the OEM Plan, these costs are now included in income from discontinued operations for the three and six months ended March 31,

2025 and 2024.

The Company had purchases from Forward China of approximately $ 1,888,000 and $ 2,007,000 , for the three months ended March

31, 2025 and 2024, respectively, and $ 3,559,000 and $ 3,523,000 for the six months ended March 31, 2025 and 2024, respectively.

In order to preserve the

6 unchanged sentences

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

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

approximately $ 4,881,000 .

At March 31, 2025, the remaining balance covered by this agreement was

approximately $ 2,099,000 and is included in the balance of liabilities held for sale.

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.

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

to convert an aggregate $ 4,925,000 of amounts Due to Forward China into shares of Series A-1.

Under the terms of the Conversion Agreements,

in the fourth quarter of fiscal 2024 and the second quarter of fiscal 2025, respectively, Forward China agreed to convert $ 2,200,000 and

$ 2,725,000 , respectively, of the Due to Forward China payable into 2,200 shares and 2,725 shares, respectively, of the Company’s

Promissory Note

6 unchanged sentences

The Company incurred and paid interest associated with this note of $ 12,000 and $ 17,000

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

in the three months ended March 31, 2025 and 2024, respectively and $ 24,000 and $ 36,000 in the six months ended March 31, 2025 and 2024,

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The 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 March 31, 2025.

Other Related Party Activity

In October 2020, the Company’s

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

The Company’s retail

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

under the Koble brand name.

The Koble brand is owned by The Justwise Group Ltd.

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

and Chairman of the Company.

The Company recognized revenues from the sale of Koble products of $ 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 Koble brand

is owned by The Justwise Group Ltd.

(“Justwise”), a company owned by Terence Wise, Chief Executive Officer and Chairman of

The Company recognized revenues from the sale of Koble products of $ 104,000 and $ 376,000 in the three and six months ended

March 31, 2024, respectively.

Due to the Retail Exit, these revenues are included in the income from discontinued operations for the three

and six months ended March 31, 2024.

The Company had an agreement

5 unchanged sentences

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 incurred costs under this agreement of $ 0 and $ 20,000 for the three months and six months ended March

31, 2024, respectively.

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

six months ended March 31, 2024.

The Company had no accounts payable to Justwise at March 31, 2025 or September 30, 2024.

The Company recorded revenue

2 unchanged sentences

director of Forward China.

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.

The Company recognized revenue from this customer of $ 198,000 and $ 318,000 for the three and six months ended

March 31, 2024, respectively.

The Company had accounts receivable from this customer of $ 96,000 at September 30, 2024.

There were no revenues

from this customer for the three or six months ended March 31, 2025 or accounts receivable balances at March 31, 2025.

Due to the OEM

Plan, these revenues are included in income from discontinued operations for the three and six months ended March 31, 2024 and the accounts

receivable balance is included in assets held for sale at September 30, 2024.

LEGAL PROCEEDINGS

From time to time, the Company

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

At December 31, 2024, and through the date

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

At March 31, 2025, 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

1 unchanged sentence

The Company’s operating

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

Total operating lease expense for the three months ended

December 31, 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

leases are primarily for corporate, engineering, and administrative office space and the related expense is 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.

Total operating lease expense for the three and six months ended March 31,

2025 was $ 155,000 and $ 310,000 , respectively and total operating lease expense for the three and six months ended March 31, 2024 was $ 155,000

and $ 309,000 , respectively.

Cash paid for amounts included in operating lease liabilities for the six months ended March 31, 2025 and

2024, which have been included in cash flows from operating activities, was $ 302,000 and $ 294,000 , 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

Payments under this operating lease commenced 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 December 31, 2024, future

At March 31, 2025, the Company’s

operating leases had a weighted average remaining lease term of 6.3 years and a weighted average discount rate of 5.9 %.

At March 31, 2025, future

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

7 unchanged sentences

Long-term portion of lease liabilities

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

SUBSEQUENT EVENTS

connection with the OEM Plan, on April 30, 2025, the Company and Forward China agreed to extend the Supply Agreement until May 2, 2025.

On May 2, 2025, the Company and Forward China agreed to extend the Supply Agreement until May 9, 2025.

All other terms in the agreement

remained unchanged from the prior agreement.

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