What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-14 compared with 2025-02-13 · 217 added, 196 removed, 103 unchanged (80% of the section changed)

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The following discussion

and analysis compares our condensed consolidated results of operations for the three months ended December 31, 2024 (the “2025 Quarter)

with those for the three months ended December 31, 2023 (the “2024 Quarter”).

All dollar amounts and percentages presented

herein have been rounded to approximate values.

Cautionary Note Regarding Forward-Looking Statements

and analysis compares our condensed consolidated results of operations for the three and six months ended March 31, 2025 (the “2025

Quarter” and the “2025 Period”, respectively) with those for the three and six months ended March 31, 2024 (the “2024

Quarter” and “2024 Period”, respectively).

All dollar amounts and percentages presented herein have been rounded

to approximate values.

Cautionary Note Regarding

Forward-Looking Statements

This report contains “forward-looking

statements”, as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements

include, among other things, statements regarding our liquidity, plans on repaying outstanding debt obligations, as well as other statements

regarding our future operations, financial condition and prospects, and business strategies.

Forward-looking statements generally can

be identified by words such as "anticipates," "believes," "estimates," "expects," "intends,"

"plans," "predicts," "projects," "will be," "will continue," "will likely result,"

and similar expressions.

These forward-looking statements are based on current expectations and assumptions that are subject to risks

and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking

These risks include the inability to expand our customer base, loss of additional customers, pricing pressures, lack of success

of our sales people, failure to develop products at a profit, supply chain issues, unexpected tariffs placed on products we purchase from

China , inability to maintain compliance with Nasdaq listing standards, inability

of our design division’s customers to pay for our services, unanticipated issues with our affiliated sourcing agent, issues at Chinese

factories that source our products, and failure to obtain acceptance of our products.

No assurance can be given that the actual results

will be consistent with the forward-looking statements.

Investors should read carefully the factors described in the “Risk Factors”

section of the Company’s filings with the SEC, including the Company’s Form 10-K for the year ended September 30, 2024 for

information regarding risk factors that could affect the Company’s results.

We undertake no obligation to revise or publicly release

the results of any revision to these forward-looking statements, except as required by law.

Given these risks and uncertainties, readers

are cautioned not to place undue reliance on such forward-looking statements.

statements” (as such term is defined in the Private Securities Litigation Reform Act of 1995).

These statements include, among

other things, statements regarding our liquidity, plans on repaying outstanding debt obligations, planned sale of the OEM business, closing

of an equity line of credit or other equity financing as well as other statements regarding our future operations, financial condition

and prospects, and business strategies.

Forward-looking statements generally can be identified by words such as "anticipates,"

"believes," "estimates," "expects," "intends," "plans," "predicts," "projects,"

"will be," "will continue," "will likely result," and similar expressions.

These forward-looking statements

are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to

differ materially from those reflected in the forward-looking statements.

These risks include the inability to expand our customer base,

loss of additional customers, pricing pressures, lack of success of our marketing people, economic or other factors resulting in the failure

to enter into purchase agreements for the sale of equity, failure to reach a definitive agreement for the sale of the OEM business ,

inability to maintain compliance with Nasdaq listing standards, and the inability of our customers to pay for our services.

assurance can be given that the actual results will be consistent with the forward-looking statements.

Investors should read carefully

the factors described in the “Risk Factors” section of the Company’s filings with the SEC, including the Company’s

Form 10-K for the year ended September 30, 2024 for information regarding risk factors that could affect the Company’s results.

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required

by applicable law or regulation.

Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking

Business Overview

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is a global design, sourcing and distribution 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 (“Forward China”).

Forward China is owned by our Chairman of the Board and

Chief Executive Officer.

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

In June 2024, the Company’s

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

Exit”) and we are presenting the results of operations for this segment within discontinued operations in the prior periods presented

The discontinuation of the retail segment represents a strategic shift in the Company’s business.

The primary assets of

the retail segment were inventory and accounts receivable.

The Company sold, liquidated, or otherwise disposed of the remaining retail

inventory and collected the remaining retail accounts receivable by September 30, 2024, at which time the retail segment was considered

fully discontinued.

Exit”) and we are presenting the results of operations for this segment within discontinued operations in the current and prior

periods presented herein.

The discontinuation of the retail segment represented a strategic shift in the Company’s business.

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

The Company sold, liquidated, or otherwise disposed of the

remaining retail inventory and collected the 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.

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 sheet 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 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 was classified on our condensed consolidated balance sheet 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 and six months ended March 31, 2025 and 2024.

In March 2025, in connection

with the fourth Conversion Agreement (see Note 8 to the condensed consolidated financial statements), Forward China determined it would

not renew the Buying Agency and Supply Agreement, which was scheduled to expire on April 30, 2025.

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.

The results of operations for the OEM segment have been classified as discontinued operations on the condensed

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

Unless otherwise noted, results

for discontinued operations are excluded from the discussion that follows.

Variability of Revenues

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of operations, to vary over a relatively short period of time.

Critical Accounting Policies

and Estimates

We discussed the accounting

policies and significant estimation processes that are critical to our business operations and the understanding of our financial statements

in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, under the caption “Management’s Discussion

and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” There have been

no material changes in critical accounting policies or estimation processes during the period covered by this report, but the following

accounting estimates had a material impact on our results of operations for the 2025 Quarter and fiscal 2024.

Critical Estimates

We discussed the significant

estimation processes that are critical to our business operations and the understanding of our financial statements in our Annual Report

on Form 10-K for the fiscal year ended September 30, 2024, under the caption “Management’s Discussion and Analysis of Financial

Condition and Results of Operations—Critical Accounting Policies and Estimates.” There have been no material changes in critical

accounting policies or estimation processes during the period covered by this report, but the following accounting estimates had a material

impact on our results of operations for the 2025 Period and fiscal 2024.

We review goodwill for impairment

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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 performed quantitative testing on this reporting unit, which indicated

its carrying amount exceeded its fair value, resulting in a goodwill impairment charge of $225,000 in the 2025 Quarter, primarily driven

by a reduction in its expected future performance.

this program) represented 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 performed quantitative testing on this reporting unit, which indicated its

carrying amount exceeded its fair value, resulting in a goodwill impairment charge of $225,000 in December 2024, primarily driven by a

reduction in its expected future performance.

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 performed

a quantitative goodwill impairment analysis for the IPS reporting unit at March 31, 2025, which 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.

to the historical losses of the Kablooe reporting unit, the Company elected to bypass the qualitative assessment and perform quantitative

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RESULTS OF OPERATIONS FOR

THE THREE MONTHS ENDED DECEMBER 31, 2024 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2023

Consolidated Results

THE THREE MONTHS ENDED MARCH 31, 2025 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2024

The table below summarizes our consolidated results

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Revenues, net

$ (1,948,000 )

Cost of sales

Gross profit/(loss)

Sales and marketing expenses

General and administrative expenses

Goodwill impairment

Loss from operations

Other (income) / expense, net

Other expense, net

Loss from continuing operations

$ (1,822,000 )

$ (1,195,000 )

The discussion that follows

below provides further details about our results from continuing operations for the 2025 Quarter as compared to the 2024 Quarter.

Most of the decline in net

revenues from the 2024 Quarter to the 2025 Quarter is attributable to the design segment, while the OEM distribution segment experienced

a small decline in revenue.

Our gross profit decreased

in the design segment and was partially offset by an increase in gross margin in the OEM distribution segment.

Our gross margin was mostly

flat at 22.7% in the 2025 Quarter versus 23.0% in the 2024 Quarter.

Declines in the design segment margin driven by lower utilization

rates were mostly offset by improvements in OEM segment margin due to the lower sourcing fee from Forward China and a change in the mix

The decline in net revenues

from the 2024 Quarter to the 2025 Quarter is primarily attributable to the loss of a major customer in December 2024 as well as a net

decrease in volume of work and projects with continuing customers, partially offset by projects from new customers.

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 continue to cause a material decrease in our revenues in fiscal 2025.

We are working on cost reduction efforts to mitigate the

reduction in revenue.

Additionally, based on current economic conditions, in part due to the uncertainty in how tariffs will affect our

customers, we believe that our revenues will continue to decrease in the design business as customers are slow to commit funds to projects.

Our gross profit/(loss) margin

declined significantly, from 26.2% in the 2024 Quarter to (5.7%) in the 2025 Quarter, driven by lower staff utilization rates, and partially

mitigated by an increase in the average bill rate.

Sales and marketing expenses

decreased primarily due to lower personnel costs and decreased slightly as a percentage of revenues.

decreased primarily due to lower personnel costs and increased as a percentage of revenues from 4.1% in the 2024 Quarter to 4.7% in the

2025 Quarter.

General and administrative

expenses increased slightly in the 2025 Quarter.

Higher corporate professional fees and an increase in design segment bad debt expense

were partially offset by a reduction in other components of corporate expenses, primarily director compensation.

Management continues

to monitor the various components of general and administrative expenses and how these costs are affected by inflationary and other factors.

We intend to adjust these costs as needed based on the overall needs of the business.

The decrease in other income/expense,

net is primarily due to a decrease in interest expense resulting from a reduction in the amount of debt outstanding.

During the 2025 Quarter,

we recorded a goodwill impairment charge of $225,000 related to the IPS reporting unit, which is included in the design segment.

impairment charge resulted from the quantitative goodwill impairment testing performed at December 31, 2024 and was driven by the expected

reduction in revenues following the loss of a significant customer.

expenses decreased in the 2025 Quarter.

Lower personnel costs and a reduction in expenses related to our annual shareholder meeting were

partially offset by higher professional fees.

Management continues to monitor the various components of general and administrative expenses

and how these costs are affected by inflationary and other factors.

We intend to adjust these costs as needed based on the overall needs

of the business.

The decrease in other expense,

net is due to a decrease in interest expense resulting from a reduction in the amount of debt outstanding, a decrease in interest income

resulting from lower cash balances in interest bearing accounts and a reduction in foreign currency exchange losses.

We generated a loss from

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loss per share from continuing operations were $1.65 and $0.57 for the 2025 Quarter and the 2024 Quarter, respectively.

Segment Results

RESULTS OF OPERATIONS FOR

THE SIX MONTHS ENDED MARCH 31, 2025 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 2024

The table below summarizes our consolidated results

from continuing operations for the 2025 Period as compared to the 2024 Period:

Consolidated Results of Operations

Revenues, net

$ (2,466,000 )

Cost of sales

Sales and marketing expenses

General and administrative expenses

Goodwill impairment

Loss from operations

Other expense, net

Loss from continuing operations

$ (2,720,000 )

$ (1,728,000 )

The discussion that follows

below provides further details about the results of operations for each segment as compared to the prior year quarter.

Segment Results of Operations

OEM Distribution

Corporate Expenses

2025 Quarter revenues

2024 Quarter revenues

2025 Quarter operating income/(loss)

2024 Quarter operating income/(loss)

OEM Distribution Segment

Net revenues in the OEM distribution

segment decreased slightly as lower revenue from non-diabetic customers and lower volumes from some diabetic customers was partially offset

by higher volumes from other diabetic customers.

As consumer demand increases for diabetic testing products which require no carrying

case, we expect diabetic product sales to continue to represent a smaller portion of our OEM distribution revenue.

The following tables set

forth revenues by product line of our OEM distribution segment customers for the periods indicated:

OEM Revenues by Product Line

Diabetic products

Other products

Total net revenues

Diabetic Product Revenues

Our OEM distribution segment

sources to the order of, and sells carrying cases for, blood glucose diagnostic kits directly to OEMs (or their contract manufacturers).

The OEM customer or its contract manufacturer packages our carry cases “in box” as a custom accessory for the OEM’s

blood glucose testing and monitoring kits or, to a lesser extent, sells them through their retail distribution channels.

Revenues from diabetic products

increased due to higher volumes from some diabetic customers, partially offset by lower volumes from other diabetic customers.

believes that revenues from diabetic customers will decline in future periods.

Revenues from diabetic products represented 81% of net

revenues for the OEM distribution segment in the 2025 Quarter compared to 71% in the 2024 Quarter.

Other Product Revenues

Our OEM distribution segment

also sources and sells cases and protective solutions for a diverse array of portable electronic and non-electronic products (such as

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

to fit the products sold by our OEM customers.

Revenues from other products

decreased due to the net reduction in demand from non-diabetic customers.

We will continue to focus on our sales and sales support teams

in our continued efforts to expand and diversify our other products customer base.

Operating Income

Operating income improved

for the OEM distribution segment and operating income margin improved from 2.0% in the 2024 Quarter to 11.2% in the 2025 Quarter.

to the sourcing fee from Forward China and a change in the mix of revenue drove the improvement in both operating income and margin.

Design Segment

The decrease in net revenues

in the design segment was primarily driven by one customer whose revenue declined approximately $470,000, as well as a net decrease in

volume of work and projects with continuing customers, partially offset by projects from new customers.

below provides further details about our results from continuing operations for the 2025 Period as compared to the 2024 Period.

The decline in net revenues

from the 2024 Period to the 2025 Period is primarily attributable to the loss of a major customer in December 2024 as well as a net decrease

in volume of work and projects with continuing customers, partially offset by projects from new customers.

In December 2024, our largest

design customer notified us of its plan to discontinue their insulin patch pump program, on which the Company was working.

We expect this

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

We are working on cost reduction efforts

to mitigate the reduction in revenue.

Operating income for the

design segment decreased and operating income/(loss) margin decreased from 5.2% in the 2024 Quarter to (5.6%) in 2025 Quarter, primarily

driven by a decline in billable project hours and the goodwill impairment charge, partially offset by an increase in the average bill

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

We expect this to continue

to cause a material decrease in our revenues in fiscal 2025.

We are working on cost reduction efforts to mitigate the reduction in revenue.

Additionally, based on current economic conditions, in part due to the uncertainty in how tariffs will affect our customers, we believe

that our revenues will continue to decrease in the design business as customers are slow to commit funds to projects.

Our gross margin decreased

from 27.1% in the 2024 Period to 12.3% in the 2025 Period, driven by lower staff utilization rates and was partially offset by an increase

in the average bill rate.

Sales and marketing expenses

decreased primarily due to lower personnel costs but remained flat at 4.0% of revenues in both periods.

General and administrative

expenses decreased in the 2025 Period.

Lower personnel costs related to staff reductions, coupled with a reduction in expenses related

to our annual shareholder meeting and lower director compensation were partially offset by higher professional fees.

Management continues

to monitor the various components of general and administrative expenses and how these costs are affected by inflationary and other factors.

We intend to adjust these costs as needed based on the overall needs of the business.

During the 2025 Period, we

recorded a goodwill impairment charge of $225,000 related to the IPS reporting unit.

This impairment charge resulted from the quantitative

goodwill impairment testing performed at December 31, 2024 and was driven by the expected reduction in revenues following the loss of

a significant customer.

The decrease in other expense,

net is due to a decrease in interest expense resulting from a reduction in the amount of debt outstanding, a decrease in interest income

resulting from lower cash balances in interest bearing accounts and a reduction in foreign currency exchange losses.

We generated a loss from

continuing operations of $2,720,000 in the 2025 Period compared to $992,000 in the 2024 Period.

We maintain significant net operating

loss carryforwards and do not recognize a significant income tax expense or benefit as our deferred tax provision is typically offset

by a full valuation allowance on our net deferred tax asset.

Consolidated basic and diluted

loss per share from continuing operations were $2.47 and $0.90 for the 2025 Period and the 2024 Period, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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liquidity have been adequate to satisfy working capital requirements arising in the ordinary course of business.

At December 31, 2024,

our working capital deficit was $162,000 compared to working capital of $273,000 at September 30, 2024.

The decrease was primarily due

to lower cash and accounts receivable balances and was partially offset by the reduction in amounts due to Forward China.

At March 31, 2025, our

working capital (excluding discontinued assets held for sale) was $2,784,000 compared to working capital of $4,663,000 at September 30,

The decrease was primarily due to lower cash and accounts receivable balances.

Forward China, our largest

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Note”) issued by us which matures on June 30, 2025 (see Note 8 to the condensed consolidated financial statements).

of the FC Note was reduced to $600,000 after we made principal payments of $1,000,000 through December 31, 2024.

Although the FC Note

has been extended on multiple occasions to assist us with our liquidity position, we plan on funding the repayment at maturity using existing

cash balances and/or obtaining additional extensions as deemed necessary.

Additionally, Forward China has extended payment terms on our

outstanding payables due to them when necessary.

At December 31, 2024, our accounts payable due to Forward China was approximately $6,771,000.

In connection with the sourcing agreement entered into in October 2023 (see Note 8 to the condensed consolidated financial statements)

and in order to preserve our current and future liquidity, Forward China agreed to limit the amount of outstanding payables it would seek

to collect from us to $500,000 in any 12-month period, which we agreed to pay within 30 days of any such request.

This agreement pertains

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

Purchases from Forward China made after October 30, 2023, are

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

At December 31, 2024, the remaining balance

covered by this agreement was $4,881,000.

We can provide no assurance that (i) Forward China will extend the FC Note again if we request

an extension, (ii) Forward China will extend additional payment terms on any payables not covered by the agreement, if needed, or (iii)

any new credit facility will be available on terms acceptable to us or at all.

The outstanding

balance of the FC Note has been reduced to $600,000 following principal payments totaling $1,000,000 made through March 31, 2025.

the FC Note has been extended multiple times to support our liquidity position, we intend to fund the repayment at maturity using existing

cash balances, proceeds from equity and/or debt financing, and/or by seeking additional extensions as deemed necessary.

Additionally,

Forward China has extended payment terms on our outstanding payables due to them when necessary.

At March 31, 2025, our accounts payable

due to Forward China was approximately $4,998,000.

In connection with the sourcing agreement entered into in October 2023 (see Note 8

to the condensed consolidated financial statements) and in order to preserve our current and future liquidity, Forward China agreed to

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

We have agreed to pay

these amounts within 30 days of any such request.

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

totaled $7,365,000.

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

to be paid according to normal payment terms.

At March 31, 2025, the remaining balance covered by this agreement was $2,099,000.

As previously disclosed on

a Form 8-K filed with the SEC on March 24, 2025, 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 business.

As part of those proposed terms,

a payment plan on the amounts owed under the FC Note and the outstanding payables will be provided by Forward China as part of the consideration

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

The Company is 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.

Our condensed consolidated

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We 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.

capital (excluding discontinued assets 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.

In December 2024, we

were notified by our largest design customer of its plan to discontinue their insulin patch pump program, on which IPS was working, and

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

We expect 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 that there is substantial

doubt about our ability to continue as a going concern for a period of 12 months from the date of issuance of the condensed consolidated

financial statements.

more than 30% of the Company’s consolidated net revenues in fiscal 2024.

We expect this to continue to cause a material decrease

in our revenues in Fiscal 2025.

Based on our forecasted cash flows, we believe that there is substantial doubt about our ability to continue

as a going concern for a period of 12 months from the date of issuance of the condensed consolidated financial statements.

If we have the opportunity

to make a strategic acquisition (as we have in the past with the acquisitions of IPS and Kablooe) or an investment in a product or partnership,

we may require additional capital beyond our current cash balance to fund the opportunity.

If we seek to raise additional capital, there

is no assurance that we will be able to raise funds on terms that are acceptable to us or at all.

to make a strategic acquisition, we may require additional capital beyond our current cash balance to fund the opportunity.

Although we do not anticipate

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amount of equipment and other capital assets in the future, depending on need.

During the 2025 Quarter and

2024 Quarter, our sources and uses of cash were as follows:

During the 2025 Quarter,

cash used in operating activities of $410,000 resulted from a net loss of $708,000, a decrease in amounts due to Forward China of $455,000,

an increase in inventories of $263,000, an decrease in deferred income of $121,000, a decrease in accrued expenses and other current liabilities

of $126,000, partially offset by an decrease in accounts receivable of $819,000, non-cash charges for depreciation, amortization, share-based

compensation, credit losses and goodwill impairment of $353,000 and the net change in other operating assets and liabilities of $91,000.

During the 2024 Quarter,

cash provided by operating activities of $116,000 resulted from an increase in accounts payable and amounts due to Forward China of $522,000,

a decrease in accounts receivable of $445,000, a decrease in discontinued assets held for sale of $372,000 and non-cash charges of $121,000

related to depreciation, amortization, share-based compensation and credit losses, partially offset by a decrease in accrued expenses

and other current liabilities of $863,000, a net loss of $354,000 and the net change in other operating assets and liabilities of $127,000.

During the 2025 Period and

2024 Period, our sources and uses of cash were as follows:

During the 2025 Period, cash

used in operating activities of $972,000 resulted from a net loss of $2,160,000, a decrease in accrued expenses and other current liabilities

of $153,000 and the net change in other operating assets and liabilities of $33,000, partially offset by non-cash expenses of $462,000

related to depreciation, amortization, share-based compensation and credit loss expense and a decrease in accounts receivable of $912,000.

During the 2024 Period, cash

used in operating activities of $383,000 resulted from a net loss of $907,000, decreases in accrued expenses and other current liabilities

of $785,000, a decrease in accounts payable of $304,000, a decrease in deferred income of $69,000 and the net change in other operating

assets and liabilities of $55,000, partially offset by the net change in discontinued assets and liabilities held for sale of $891,000,

non-cash expenses of $228,000 related to depreciation, amortization, share-based compensation and credit loss expense and a decrease in

accounts receivable of $618,000.

Investing Activities

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis