What changed in this filing

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Item 1. Financial Statements

2025-08-14 compared with 2025-05-14 · 500 added, 320 removed, 474 unchanged (63% of the section changed)

5 unchanged sentences

Current assets:

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

Accounts receivable, net of allowances for credit losses of $ 15,916 and$ 27,282 as of June 30, 2025 and September 30, 2024, respectively

Contract assets

4 unchanged sentences

Intangible assets, net

Operating lease right-of-use assets, net

Operating lease right-of-use assets

Liabilities and shareholders' equity

1 unchanged sentence

Note payable to Forward China (related party)

Due to Forward China (related party)

Accounts payable

5 unchanged sentences

Other liabilities:

Warrant liability

Operating lease liability, less current portion

3 unchanged sentences

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

stated value of $ 1,000 per share;

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 )

of $ 1,000 per

shares authorized, 4,925

shares issued and outstanding at June 30, 2025 and September 30, 2024, respectively (liquidation preference of $ 4,925,000 and $ 2,200,000 at June 30, 2025 and September 30, 2024, respectively)

Series B Convertible Preferred Stock, par value $0.01 per share;

stated value of

$ 1 per share;

1,000,000 shares authorized, 1,000,000 and 0 shares issued and outstanding at June 30, 2025 and September 30, 2024,

respectively (liquidation preference of $ 1,262,848 and $ 0 at June 30, 2025 and September 30, 2024, respectively)

Common stock, 40,000,000 shares authorized;

par value $ 0.01 per share;

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

1,125,998 and 1,101,069 shares

issued and outstanding at June 30, 2025 and September 30, 2024, respectively

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.

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Revenues, net

7 unchanged sentences

( 5,279,571 )

( 1,444,639 )

Interest income

Interest expense - related party

Other expense, net

Gain on change in fair value of warrant liability

Other (income)/expense, net

Loss from continuing operations before income taxes

1 unchanged sentence

( 5,124,337 )

( 1,447,085 )

Provision for income taxes

2 unchanged sentences

( 5,124,337 )

( 1,447,085 )

Income from discontinued operations, net of tax

1 unchanged sentence

( 1,307,019 )

Deemed dividend on Series B Convertible Preferred Stock

Net loss attributable to common shareholders

$ ( 860,300 )

$ ( 399,585 )

$ ( 3,019,976 )

$ ( 1,307,019 )

Basic (loss)/earnings per share :

11 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Six Months Ended March 31, 2025

Nine Months Ended June 30, 2025

Series A-1 Convertible

Preferred Stock

Series B Convertible

Balance at September 30, 2024

6 unchanged sentences

( 1,451,611 )

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

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

Share-based compensation

Issuance of preferred stock, net

of issuance costs

Common stock issued in connection

Balance June 30, 2025

$ ( 22,646,838 )

Nine Months Ended June 30, 2024

Series A-1 Convertible

Preferred Stock

Series B Convertible

Balance at September 30, 2023

6 unchanged sentences

( 18,593,987 )

Share-based compensation

Balance at June 30, 2024

$ ( 18,993,572 )

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended March 31,

For the Nine Months Ended June 30

Operating Activities:

1 unchanged sentence

$ ( 1,307,019 )

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

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

Share-based compensation

2 unchanged sentences

Goodwill impairment

Gain on change in fair value of warrant liability

Gain on sale of OEM segment

( 1,405,972 )

Changes in operating assets and liabilities:

Accounts receivable

Contract assets

Prepaid expenses and other current assets

3 unchanged sentences

Accrued expenses and other current liabilities

Net cash used in operating activities – continuing

Net cash used in operating activities-continuing operations

( 2,595,483 )

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

Net cash used in operating activities

( 1,409,653 )

Net cash provided by operating activities-discontinued operations

Net cash (used in) / provided by operating activities

( 2,199,330 )

Investing Activities:

Cash paid for sale of OEM segment

Purchases of property and equipment

1 unchanged sentence

Financing Activities:

Proceeds from issuance of preferred stock and warrants, net of related

issuance costs

Deferred financing cost associated with equity line of credit

Repayment of note payable to Forward China (related party)

Net cash used in financing activities

Net cash provided by/(used in) financing activities

Net decrease in cash

( 1,513,963 )

Cash at beginning of period

6 unchanged sentences

Conversion of accounts payable to convertible preferred stock

Fair value of commitment shares issued for equity line of credit

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

2 unchanged sentences

Forward Industries, Inc.

(“Forward”, “we”, “our” or the “Company”) is a global design, sourcing and distribution

company serving top tier medical and technology customers worldwide.

The Company provides hardware

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

(“Forward”, “we”, “our” or the “Company”) is a global design company serving top tier

medical and technology customers.

The Company provides hardware and software product design and

engineering services to customers predominantly located in the U.S.

Reverse Stock Split

The Company’s shareholders

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

Any fractional

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

Accordingly, all references

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

have been retroactively adjusted to reflect the reverse stock split.

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

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

Discontinued Operations

4 unchanged sentences

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

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

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.

In May 2025, the Company completed the sale of this line of business and is presenting its results of operations within discontinued operations

in the current and prior periods presented herein.

The OEM distribution segment sourced and sold

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 packaged our products as accessories “in box”

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

The Company did not manufacture

any of its OEM products and sourced substantially all of these products from independent suppliers in China, through Forward Industries

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

former CEO (see Note 8).

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

See Note 3 for more

information on these 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 (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

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 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.

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.

Company had an accumulated deficit and working capital of $ 22,647,000

and $ 1,211,000 , respectively, on

June 30, 2025, a net loss of $ 3,010,000

for the nine months ended June 30, 2025 and $ 1,951,000

in Fiscal 2024 and a cash balance of approximately $ 5,600,000

at August 12, 2025.

In December 2024,

our largest 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 relative to Fiscal 2024.

In addition, due to the uncertainty in the global

markets related to tariffs on imports, many customers have been slow to commit funds to projects with us.

Based on our forecasted cash

flows, we believe our existing cash balance and working capital may not be sufficient to meet our liquidity needs through August 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 initiated

cost reduction measures to mitigate the impact of declining revenues, including two reductions in workforce in January and June of

Management continues to evaluate and adjust cost reduction efforts as deemed necessary based on the ongoing needs of the

In May 2025, the Company raised $ 1

million via the issuance of Series B Convertible Preferred Stock (see Note 6).

From July 1 to August 12, 2025, the Company

raised $2,432,000

additional capital via its equity line of credit (see Note 6) and $2,230,000 in a registered direct offering (See Note 12).

the Company continues to meet its obligations under the Series B Preferred Stock Purchase Agreement (see Note 6), management plans

to raise additional capital through the ELOC in the near future.

We cannot provide any assurance that:

(i) we will be able to

continue selling under the ELOC, (ii) if we are able to sell under the ELOC, that we will be able to do so at prices that we believe

are beneficial to the Company and its shareholders, or (iii) that our registration statement on Form S-1 registering shares to be

sold under the ELOC in the future will be declared and remain effective.

As of the filing date of this Form 10-Q, the Company

has sold all shares registered by it under the ELOC.

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

31 unchanged sentences

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.

Exit and the OEM Plan, the design segment is the Company’s only reportable segment at June 30, 2025.

The design segment consists

4 unchanged sentences

Accounts receivable consist

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

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 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

of finished goods and are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value.

management’s estimates, an allowance is made to reduce excess, obsolete, or otherwise unsellable inventories to net realizable value.

The allowance is established through charges to cost of sales in the Company’s condensed consolidated statements of operations.

In determining the adequacy of the allowance, management’s estimates are based upon several factors, including analyses of inventory

levels, historical loss trends, sales history and projections of future sales demand.

The Company’s estimates of the allowance may

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

of unsecured trade accounts with customers net of an allowance for credit losses.

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.

At June 30, 2025 and September 30, 2024, the Company had allowances for credit

losses of $ 16,000 and $ 27,000 , respectively.

Inventories consisted primarily

of finished goods and were stated at the lower of cost (determined by the first-in, first-out method) or net realizable value.

management’s estimates, an allowance was made to reduce excess, obsolete, or otherwise unsellable inventories to net realizable

If needed, an allowance was established through charges to cost of sales in the Company’s condensed consolidated statements

of operations.

In determining the adequacy of any allowance, management’s estimates were based upon several factors, including analyses

of inventory levels, historical loss trends, sales history and projections of future sales demand.

Due to the Retail Exit and the OEM

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

Plan the Company has no remaining inventory at June 30, 2025.

Inventory on hand at September 30, 2024 is presented as a component of assets

held for sale.

Revenue Recognition

1 unchanged sentence

The OEM distribution segment

recognizes revenue when:

(i) finished goods are shipped to its customers (in general, these conditions occur at either point of shipment

recognized revenue when:

(i) finished goods were shipped to its customers (in general, these conditions occurred at either point of shipment

or point of destination, depending on the terms of sale and transfer of control);

(ii) there are no other deliverables or performance

and (iii) there are no further obligations to the customer after the title of the goods has transferred.

If 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.

(ii) there were no other deliverables or performance

and (iii) there were no further obligations to the customer after the title of the goods had transferred.

If the Company

received consideration before achieving the criteria previously mentioned, it recorded a contract liability, which was classified as a

component of deferred income in the accompanying condensed consolidated balance sheets.

The OEM distribution segment had no contract liabilities

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.

at June 30, 2025 or September 30, 2024.

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

and nine months ended June 30, 2025 and 2024.

Discontinued Retail Distribution Segment

7 unchanged sentences

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.

retailers for product returns and any taxes collected from customers that would 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 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 and six months ended March 31, 2025 and 2024.

received consideration before achieving the criteria previously mentioned, it recorded a contract liability, which was 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, 2025 or September 30, 2024.

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

for the three and nine months ended June 30, 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 and the transfer of goods or services

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

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

has been completed and accepted.

Recognized revenues that

will not be billed until a later date, or contract assets, are recorded as an asset and classified as a component of accounts receivable

in the accompanying condensed consolidated balance sheets.

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

at March 31, 2025, September 30, 2024 and September 30, 2023, respectively.

Contracts where collections to date have exceeded recognized

revenues, or contract liabilities, are recorded as a liability and classified as a component of deferred income in the accompanying condensed

consolidated balance sheets.

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.

will not be billed until a later date are recorded as contract assets in the accompanying condensed consolidated balance sheets.

segment had contract assets of $ 725,000 , $ 1,273,000 and $ 976,000 at June 30, 2025, September 30, 2024 and September 30, 2023, respectively.

Contracts where collections to date have exceeded recognized revenues, or contract liabilities, are recorded as a liability and classified

as a component of deferred income in the accompanying condensed consolidated balance sheets.

The design segment had contract liabilities

of $ 310,000 , $ 399,000 , and $ 297,000 at June 30, 2025, September 30, 2024 and September 30, 2023, respectively.

Fair Value Measurements

We perform fair value measurements in accordance

with the guidance provided by ASC 820, “Fair Value Measurement.” ASC 820 defines fair value as the price that would be received

from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal

or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets

or liabilities, such as inherent risk, transfer restrictions, and risk of nonperformance.

ASC 820 establishes a fair value hierarchy that

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

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.

The carrying amounts of cash, accounts receivable, accounts payable, due to Forward China, and the Note payable to Forward China approximate

fair value due to their short-term maturities.

The Company reviews goodwill

34 unchanged sentences

Management evaluated

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

and concluded that there were no indications of impairments of intangible assets at June 30, 2025.

Lease assets and liabilities

12 unchanged sentences

Recent Accounting Pronouncements

In November 2024, the Financial

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

In November 2024, the

Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)

2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic

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):

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.

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.

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.

ASU 2024-03 will also require the Company to disclose

both the amount and the Company’s definition of selling expenses.

This ASU 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

13 unchanged sentences

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 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 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 and six months ended March 31, 2025 and 2024.

In July 2023, the Company

decided to cease operations of its retail distribution segment (“Retail Exit”).

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.

to have no further significant continuing involvement with this segment.

The 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 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 and nine months ended June 30, 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.

(“Sourcing Agreement”), which subsequently expired on May 9, 2025 (see Note 8).

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.

On May 16, 2025, the Company and Forward

US entered into a transaction agreement with Forward China, pursuant to which the Company sold all equity interest in Forward Switzerland

and Forward UK and sold certain other net assets related to Forward US’ OEM segment to Forward China to satisfy outstanding payables

due to Forward China under the Sourcing Agreement.

Additionally, the Company and Forward China terminated the Supply Agreement and extended

the term of the Note Payable (see Note 8) to December 31, 2025.

The Company paid $200,000 at closing and agreed to make additional cash

payments of $ 150,000 on each of July 31, 2025, August 31, 2025 and September 30, 2025, which are shown as Due to Forward China on the

condensed consolidated financial statements.

Results of operations for Forward Switzerland and Forward UK were included in the Company’s

results of operations through and including May 16, 2025.

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.

and liabilities of the OEM segment were classified as assets and liabilities held for sale on the condensed consolidated balance sheets

at 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 nine months ended June 30, 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

The following table presents

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Revenues, net

2 unchanged sentences

General and administrative expenses

Income from discontinued operations

Operating income from discontinued operations

Gain on sale of discontinued operations

Net income from discontinued operations

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

amortization, or financing cash flow activities for the discontinued operations in the three or nine months ended June 30, 2025 or 2024.

Investing cash flows related to the discontinued operations included $ 200,000 paid for the sale of the OEM segment in May 2025.

significant non-cash activity for the discontinued operations in the three and nine months ended June 30, 2025 and 2024 was the conversion

of accounts payable to Forward China into preferred stock in February and March of 2025 (See Note 8).

The following table presents

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

the major components of assets and liabilities held for sale on our condensed consolidated balance sheet at September 30, 2024:

Schedule of major components of assets and liabilities

September 30,

Accounts receivable, net

Prepaid expenses and other assets

Prepaid expenses and other current assets

Total assets held for sale

1 unchanged sentence

Due to Forward China

Other liabilities

Other current liabilities

Total liabilities held for sale

4 unchanged sentences

Schedule of intangible assets

March 31, 2025

September 30, 2024

Customer Relationships

Total Intangible Assets

Customer Relationships

Total Intangible Assets

Relationships

Gross carrying amount

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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

over their expected useful lives of 15

years for the trademarks and eight

8 years for the customer relationships.

Amortization expense related to intangible assets was $ 53,000

for the three months ended June 30, 2025 and 2024, and $ 160,000

for the nine months ended June 30, 2025 and 2024, which is included in general and administrative expenses on the condensed consolidated

statements of operations.

At June 30, 2025, estimated

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

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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:

the second and third quarters 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, primarily in the second quarter of fiscal 2025, 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 and third quarters, which the Company considered triggering events 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 June 30, 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 with

Level 3 of the fair value hierarchy, such as projected revenues, growth rate and discount rate.

Considering the workforce reductions in

January and June of 2025, modest expectations of revenue growth for this reporting unit, and the reduction in its carrying value, the

quantitative testing indicated the fair value of the IPS reporting unit exceeded its carrying amount, resulting in no further goodwill

impairment in the nine months ended June 30, 2025.

is rollforward of goodwill:

Schedule of roll forward

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Impairment of IPS reporting unit

Balance at March 31, 2025

Balance at June 30, 2025

SEGMENTS AND CONCENTRATIONS

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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

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

respectively.

represented 32.4 % of the Company’s consolidated net revenues for the three months ended June 30, 2025.

Revenues from three customers

represented 42.5 % of the Company’s consolidated net revenues for the nine months ended June 30, 2025.

Revenues from two customer

represented 49.7 % and 50.1 % of the Company’s consolidated net revenues for the three and nine months ended June 30, 2024, respectively.

Accounts receivable and contract

assets from three customers represented 50.1 % and 57.9 % of the Company’s consolidated accounts receivable and contract asset balances

at June 30, 2025 and September 30, 2024, respectively.

In December 2024, our largest

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The Company expects

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

this to continue to cause a material decrease in revenues relative to Fiscal 2024.

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

have been retroactively adjusted to reflect the reverse stock split.

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

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

In July 2023, the Company

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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.

Until July 24, 2025, the Company was subject to a Nasdaq “Panel Monitor” which provided

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 would 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

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Preferred Stock

Series A-1 Convertible Preferred Stock

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

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Series A-1 is not redeemable.

Series B Convertible

Preferred Stock

May 21, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “COD”) designating 1,000,000

shares of Series B Convertible Preferred Stock (the “Series B”), with a par value of $ 0.01 per share and a stated value of

$ 1.00 per share.

The Series B shares:

(i) accrue dividends at 10% per annum, payable quarterly in arrears in cash, provided that the Company

may elect to pay dividends in common stock or by increasing the stated value if specified equity conditions are met (as defined in the

COD), (ii) are convertible into common stock at $ 4.50 per share, subject to customary anti-dilution and other adjustments as set forth

in the COD, (iii) are mandatorily convertible if certain conditions are met, (iv) have liquidation rights equal to the greater of 125%

of the conversion amount and the amount the holder would have received if the holder converted the shares into common stock immediately

prior to liquidation, (v) are not redeemable, (vi) have such voting rights as required by New York law, including class voting rights

on matters affecting the Series B rights and preferences and (vii) have senior rights to all classes of common stock with respect to dividends,

distributions, and liquidation preferences.

The Series B shares contain certain beneficial ownership limitations and are subject to a

maximum number of shares of common stock that may be issued without triggering shareholder approval requirements under the Nasdaq Stock

Market rules.

Dividends through June 30, 2025 were capitalized by increasing the stated value of each share of the Series B.

May 23, 2025 the Company entered into a Preferred Stock Purchase Agreement (the “PS Agreement”) and related Registration Rights

Agreement with two accredited investors whereby the Company granted the investors an aggregate of 1,000,000 shares of the Series B and

warrants to purchase an additional 111,111 shares of common stock in exchange for $ 1,000,000 .

The PS Agreement contains restrictions

on the Company’s ability to incur debt, issue additional preferred shares, enter into a change of control transaction or make restricted

payments without prior written consent of the investors.

The Company paid third-party fees of $ 66,500 associated with this agreement,

of which $29,000 related to the preferred stock portion of the agreement and has been deducted from the proceeds and recorded as a reduction of additional paid-in capital, and $37,500 related to the warrants and has been recorded as a component of general and administrative expenses on the condensed consolidated financial

statements at June 30, 2025.

connection with the PS Agreement, the Company issued warrants to purchase 111,111 shares of its common stock with an exercise price of

$ 6.50 per share and an expiration date of May 23, 2030.

The warrants have been classified as a liability because the nature of certain settlement provisions prevent them from meeting the fixed-for-fixed equity

classification criteria in ASC 815, “Derivatives and Hedging.” The fair value of the warrants was measured on the grant date

and is remeasured every reporting period with the resulting gain or loss from the change in fair value recorded as a component of other

income/expense on the condensed consolidated financial statements.

The fair value of the warrants was estimated using a Black-Scholes valuation

methodology using the assumptions in the following table, which are categorized within Level 3 of the fair value hierarchy.

term represents the remaining contractual term of the warrants.

The expected volatility is based on the historical price of the Company’s

common stock over the most recent periods commensurate with the expected term of the warrants.

The risk-free interest rate is based on

the implied yield of U.S.

Treasury zero-coupon issues with a remaining term equivalent to the warrants’ expected term.

historically has not paid any dividends on its common stock and has no intention to do so in the foreseeable future.

Schedule of warrant assumptions

Expected term (years)

Expected volatility

Risk free interest rate

Expected dividends

change in fair value of the warrants is as follows:

Schedule of change in warrant fair value

Warrant liability at May 23, 2025

Change in fair value of warrant liability

Warrant liability at June 30, 2025

Equity Line of Credit

On May 16, 2025, the Company entered into a Securities

Purchase Agreement (the “ELOC”) and related Registration Right Agreement with an accredited investor (the “Purchaser”)

pursuant to which the Company has the right, in its sole discretion, to sell, and the Purchaser agrees to purchase, shares of the Company’s

common stock having an aggregate value of up to $ 35 million, subject to certain limitations and conditions set forth in the underlying

The Company will control the timing and amount of any sales of common stock under this agreement.

connection with the execution of the ELOC, the Company issued 25,000 commitment shares to the Purchaser and paid third-party fees of $ 60,000 ,

which have been recorded as a component of other assets on the condensed consolidated financial statements.

Pursuant to the terms of the

ELOC, the Company may issue and sell shares to the Purchaser at prices discounted below the then-current market price of the Company’s

common stock.

As of June 30, 2025, no other shares of common stock were issued in connection with this agreement.

On June 10, 2025, the Company

filed a registration statement to register shares of common stock issuable under the ELOC.

The registration statement was declared effective

by the SEC on June 20, 2025.

Stock Options

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

On June 1, 2025, the Company

granted options to three of its non-employee directors to purchase an aggregate of 36,000 shares of its common stock at an exercise price

of $ 6.37 per share.

1 unchanged sentence

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.

grant-date fair value of $ 3.29 per share and an aggregate grant-date fair value of $ 120,000 , 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 14,000 shares of its common stock at an exercise price of $ 6.01

The options vest one year from the date of grant and expire 5 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 period.

On October 1, 2024, the Company

granted options to two of its non-employee directors to purchase an aggregate of 48,000 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 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

The options have a

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

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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 was recognized, net of forfeitures, ratably over the vesting period.

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.

The options have a grant-date fair value of $ 3.60 per share and an aggregate grant-date fair value of $ 120,000 , which

was recognized, net of forfeitures, ratably over the vesting period.

On May 31, 2023, the Company

granted options to three of its non-employee directors to purchase an aggregate of 12,000 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 grant.

have a grant-date fair value of $ 4.80 per share and an aggregate grant-date fair value of $ 60,000 , which was recognized, net of forfeitures,

ratably over the vesting period.

were no options exercised during the three or nine months ended June 30, 2025 or 2024.

Company recognized compensation expense for stock option awards of $ 39,000 and $ 20,000 during the three months ended June 30, 2025 and

2024, respectively, and $ 86,000 and $ 81,000 for the nine months ended June 30, 2025 and 2024, respectively, which was recorded as a component

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

At June 30, 2025 there was $ 154,000 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.

Options outstanding and exercisable at June 30, 2025 had a weighted average exercise price of $ 8.06 and $ 12.29 , respectively.

EARNINGS PER SHARE

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Dilutive common-equivalent shares consist of shares that would be issued upon the exercise of stock options and warrants,

computed using the treasury stock method.

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

computed using the treasury stock method, and convertible securities, computed using the if-converted method.

A reconciliation of basic

and diluted earnings per share is as follows:

Schedule of reconciliation of basic and diluted earnings per share

For the Three Months Ended

For the Six Months Ended

For the Three Months Ended June

For the Nine Months Ended June

Loss from continuing operations

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$ ( 454,699 )

Income from discontinued operations, net of tax

$ ( 5,124,337 )

$ ( 1,447,085 )

deemed dividend on Series B Convertible Preferred Stock

from continuing operations attributable to common shareholders

( 2,414,631 )

( 5,134,615 )

( 1,447,085 )

Income from discontinued operations, net

Net loss attributable to common shareholders

$ ( 860,300 )

$ ( 399,585 )

$ ( 3,019,976 )

$ ( 1,307,019 )

Weighted average common shares outstanding

4 unchanged sentences

Basic earnings per share from discontinued operations

Basic loss per share

Basic loss per share attributable to common shareholders

Diluted (loss) / earnings per share:

1 unchanged sentence

Diluted earnings per share from discontinued operations

Diluted loss per share

Diluted loss per share attributable to common shareholders

The following securities

1 unchanged sentence

Schedule of anti-dilutive shares

For the Three Months Ended

For the Six Months Ended

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Convertible preferred stock

Total potentially dilutive shares

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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

Gross Profit”, which is defined as the selling price less the cost from Forward China.

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.

See Notes 3 and 11.

Terence Wise, Chief Executive

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

cost and, from October 2023 through October 2024, paid Forward China a monthly service fee equal to the sum of (i) $65,833, and (ii) 4%

of “Adjusted Gross Profit”, which is defined as the selling price less the cost from Forward China.

Due to the Retail Exit

and decline in the OEM distribution segment business, this 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.

The Sourcing Agreement was extended until May 9, 2025 and was subsequently terminated in

connection with the sale of the OEM segment.

In connection with the sale of the OEM segment,

effective May 16, 2025, the Company and Terence Wise, who served as the Chief Executive Officer of the Company, the Chairman of the Board,

and a director, entered into a Separation Agreement pursuant to which, Mr.

Wise resigned from all of these positions with the Company.

Terence Wise, former Chief

Executive Officer and Chairman of the Company, is the owner of Forward China and beneficially owns more than 5% of the Company’s

common stock.

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 $ 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.

Yu, a Managing Director of Forward China, beneficially owns more than 5% of the Company’s common

The Company recorded service fees to Forward China of $ 39,000 and $ 221,000 during the three

months ended June 30, 2025 and 2024, respectively, and $ 331,000 and $ 674,000 for the nine months ended June 30, 2025 and 2024, respectively,

which were 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 nine months ended June 30, 2025 and 2024.

The Company had purchases from Forward

China of approximately $ 480,000 and $ 2,149,000 , for the three months ended June 30, 2025 and 2024, respectively, and $ 4,040,000 and $ 5,672,000

for the nine months ended June 30, 2025 and 2024, respectively.

In order to preserve the

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

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

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

This agreement pertains only to payables that were outstanding at

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

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

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

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

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

Company’s liquidity, in November 2023, the Company and Forward China entered into an agreement whereby Forward China agreed to limit

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

to pay within 30 days of any such request.

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

$ 7,365,000 .

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

to normal payment terms.

In connection with the sale of the OEM segment in May 2025 (see Note 3), this agreement was terminated and all

amounts due thereunder extinguished.

Accounts Payable Conversion Agreements

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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

pursuant to which Forward China agreed to convert an aggregate $ 4,925,000 of amounts due to Forward China into shares of preferred stock.

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 amounts due to Forward China into 2,200 shares and 2,725

shares, respectively, of the Company’s Series A-1.

Promissory Note

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The Company incurred and paid interest associated with this note of $ 12,000 and $ 14,000

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,

in the three months ended June 30, 2025 and 2024, respectively and $ 36,000 and $ 50,000 in the nine months ended June 30, 2025 and 2024,

respectively.

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

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.

In connection with the sale of the OEM segment, the maturity date of this note was extended to December 31, 2025 .

date of this note has been extended multiple times pursuant to amendments between the parties, with the current maturity date being December

This note has a remaining balance of $ 600,000 at June 30, 2025.

Other Related Party Activity

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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.

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

of the Company.

The Company recognized revenues from the sale of Koble products of $ 4,000 and $ 380,000 in the three and nine months ended

June 30, 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.

and nine months ended June 30, 2024.

The Company had an agreement

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$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 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.

This agreement expired November 30, 2023.

incurred costs under this agreement of $ 0 and $ 20,000 for the three months and nine months ended June 30, 2024, respectively.

Retail Exit, these costs are included in the income from discontinued operations for the three and nine months ended June 30, 2024.

Company had no accounts payable to Justwise at June 30, 2025 or September 30, 2024.

The Company recorded revenue

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

Yu, a significant shareholder of the Company and managing

director of Forward China.

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.

The Company recognized revenue from this customer

of $ 108,000 and $ 122,000 for the three and nine months ended June 30, 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 nine months ended June 30, 2025

or accounts receivable balances at June 30, 2025.

Due to the OEM Plan, these revenues are included in income from discontinued operations

for the three and nine months ended June 30, 2024 and the accounts receivable balance is included in assets held for sale at September

LEGAL PROCEEDINGS

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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

At June 30, 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

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expenses on the condensed consolidated financial statements.

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

Total operating lease expense for the three and nine months ended June 30,

2025 was $ 155,000 and $ 465,000 , respectively and total operating lease expense for the three and nine months ended June 30, 2024 was $ 155,000

and $ 464,000 , respectively.

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

Cash paid for amounts included in operating lease liabilities for the nine months ended June 30, 2025 and

2024, which have been included in cash flows from operating activities, was $ 452,000 and $ 441,000 , respectively.

The Company signed a renewal

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

to extend the lease term of one of its New York locations through April 2027.

Payments under this operating lease commenced February 1,

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

At March 31, 2025, the Company’s

At June 30, 2025, the Company’s

operating leases had a weighted average remaining lease term of 6.1 years and a weighted average discount rate of 5.9 %.

At March 31, 2025, future

At June 30, 2025, future

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

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Long-term portion of lease liabilities

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities

at June 30, 2025 and September 30, 2024 are as follows:

Schedule of accrued expenses and other current liabilities

September 30,

Accrued commissions/bonuses

Paid time off

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.

On August 8, 2025, the Company’s shareholders

approved, among other proposals, (i) of the issuance of shares of the Company’s common stock in excess of the Nasdaq 19.9%

(exchange cap) limitations pursuant to the conversion of the Series B and exercise of the warrants issued pursuant to the PS Agreement,

(ii) of the issuance of shares that may be issued under the ELOC without giving effect to the 19.9% (exchange cap) limitations

in the underlying agreements and (iii) an amendment to the 2021 Equity Incentive Plan to increase the number of shares of the Company’s

common stock available and reserved for issuance thereunder by 300,000 shares.

On August 8, 2025, Forward China converted 610

shares of the Series A-1 into 81,333 shares of common stock in accordance with the Company’s Certificate of Incorporation (as amended).

On August 11, 2025, the Company entered into subscription

agreements with six investors pursuant to which it agreed to issue and sell, in a registered direct offering (the “Offering”),

an aggregate of approximately 263,000 shares of its common stock at a price of $8.50 per share.

The Offering closed on August 11,

2025 and the aggregate gross proceeds from the Offering were approximately $2,230,000.

From July 1 – August 12, 2025, the Company

received gross proceeds of $2,432,000 from the sale of 246,000 shares of common stock under the ELOC.

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