What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-12-11 compared with 2024-12-27 · 1578 added, 852 removed, 568 unchanged (81% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management carried out

an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our

disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act.

Our management carried out an

evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure

controls and procedures as defined in Rule 13a-15(e) under the Exchange Act.

Based on their evaluation, our Principal Executive Officer

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over financial reporting as of September 30, 2025, was effective based on that criteria.

Our internal control over

financial reporting is a process designed under the supervision of our Principal Executive Officer and Principal Financial Officer to

provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external

reporting purposes in accordance with U.S.

Internal control over financial reporting includes those policies and procedures that

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions

of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements

Our internal control over financial

reporting is a process designed under the supervision of our Principal Executive Officer and Principal Financial Officer to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes

in accordance with U.S.

GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management

and directors;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition

of our assets that could have a material effect on the consolidated financial statements.

Internal control over financial reporting includes those policies and procedures that (i) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with

GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors;

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets

that could have a material effect on the consolidated financial statements.

Because of its inherent limitations,

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Changes in Internal Control

There were no changes in

our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange

Act during the fourth quarter of Fiscal 2024 that materially affected, or are reasonably likely to materially affect, our internal

control over financial reporting.

During the fourth quarter

of Fiscal 2025, we began the implementation of our new digital assets treasury policy, as further described in Notes 1 and

6 to the consolidated financial statements and accordingly have implemented new and additional internal controls

surrounding the acquisition, safeguarding, custody, accounting and reporting of our digital assets.

We continue to implement and

enhance policies, processes, people, technology and operations related to our new treasury strategy and will continue to evaluate

the impact of any related changes to internal controls over financial reporting in Fiscal 2026.

Other than the

changes related to our new treasury strategy described above, there were no changes in our internal control over financial reporting

identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the fourth quarter

of Fiscal 2025 that materially affected, or are reasonably likely to materially affect, our internal control over

financial reporting.

Report of Independent Registered Public Accounting

Because we are a smaller reporting

company, this Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding

internal control over financial reporting.

OTHER INFORMATION

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September 30, 2025, no director or officer of the company adopted , modified or terminated a “Rule 10b5-1 trading

arrangement” or “non-rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) or Regulation S-K.

arrangement” or “non-rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS

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AND CORPORATE GOVERNANCE

The information required

by this item is incorporated by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with

the SEC within 120 days of the fiscal year ended September 30, 2024.

Our Board has adopted a Code of Business Conduct and Ethics

applicable to all officers, directors and employees, which is available on our website (https://forwardindustries.com) under “Investors”,

"Governance." We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver

from, a provision of our Code of Conduct and by posting such information on the website address and location specified above.

The information required by this

item is incorporated by reference to our Proxy Statement for the 2026 Annual Meeting of Shareholders to be filed with the SEC

within 120 days of the fiscal year ended September 30, 2025.

Code of Business Conduct and Ethics

Our Board of Directors has adopted

a Code of Business Conduct and Ethics applicable to all officers, directors and employees, which is available on our website (www.forwardindustries.com)

under “Investors – Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding

amendment to, or waiver from, a provision of our Code of Conduct and by posting such information on the website address and location specified

Insider Trading Arrangements and Policies

The Company has an insider trading

policy governing the purchase, sale and other dispositions of the Company’s securities that applies to all Company personnel, including

directors, officers, employees, and other covered persons, and the Company itself.

The Company believes that its insider trading policy

is reasonably designed to promote compliance with insider trading laws, rules and regulations, and any applicable listing standards.

copy of the Company’s insider trading policy is filed as Exhibit 19.1 to our Annual Report on Form 10-K for the fiscal year ended

September 30, 2024

EXECUTIVE COMPENSATION

The information required

by this item is incorporated by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with

the SEC within 120 days of the fiscal year ended September 30, 2024.

The information required by

this item is incorporated by reference to our Proxy Statement for the 2026 Annual Meeting of Shareholders to be filed

with the SEC within 120 days of the fiscal year ended September 30, 2025.

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The information required

by this item is incorporated by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with

the SEC within 120 days of the fiscal year ended September 30, 2024.

CERTAIN RELATIONSHIPS

AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required

by this item is incorporated by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with

the SEC within 120 days of the fiscal year ended September 30, 2024.

The information required by this

item is incorporated by reference to our Proxy Statement for the 2026 Annual Meeting of Shareholders to be filed with the SEC

within 120 days of the fiscal year ended September 30, 2025.

CERTAIN RELATIONSHIPS AND

RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this

item is incorporated by reference to our Proxy Statement for the 2026 Annual Meeting of Shareholders to be filed with the SEC

within 120 days of the fiscal year ended September 30, 2025.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required

by this item is incorporated by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with

the SEC within 120 days of the fiscal year ended September 30, 2024.

EXHIBITS AND FINANCIAL STATEMENT

The information required by this

item is incorporated by reference to our Proxy Statement for the 2026 Annual Meeting of Shareholders to be filed with the SEC

within 120 days of the fiscal year ended September 30, 2025.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Documents filed as part of the report.

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Not Applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities

Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange

Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

December 11, 2025

FORWARD INDUSTRIES, INC.

/s/ Terence Wise

Chief Executive Officer

/s/ Michael Pruitt

Michael Pruitt

Interim Chief Executive Officer

(Principal Executive Officer)

In accordance with the Securities Exchange Act of 1934, as amended,

this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

In accordance with the Securities Exchange Act of 1934, as amended, this

report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

December 11, 2025

/s/ Terence Wise

Principal Executive Officer and Director

/s/ Michael Pruitt

Michael Pruitt

Chief Executive Officer (Principal Executive Officer) and Director

December 11, 2025

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December 11, 2025

/s/ Pyahm (Kyle) Samani

Pyahm (Kyle) Samani

Chairman of the Board of Directors

December 11, 2025

/s/ Sangita Shah

December 11, 2025

/s/ Sharon Hrynkow

Sharon Hrynkow

/s/ Keith Johnson

Keith Johnson

EXHIBIT INDEX

1 unchanged sentence

Purchase Agreement, dated January 18, 2018 - Intelligent Product Solutions, Inc.

Purchase Agreement dated August 17, 2020 - Kablooe, Inc.+

Certificate of Incorporation

of Amendment of the Certificate of Incorporation – Series A Participating Preferred Stock

of Amendment of the Certificate of Incorporation – 6% Senior Convertible Preferred Stock

Asset Purchase Agreement, dated August 17, 2020 - Kablooe, Inc.

Restated Certificate of Incorporation

Certificate of Amendment of the Certificate of Incorporation – Series A Participating Preferred Stock

Certificate of Amendment of the Certificate of Incorporation – 6% Senior Convertible Preferred Stock

Certificate of Amendment of the Certificate of Incorporation – Reverse Stock Split

1 unchanged sentence

Certificate of Amendment of the Certificate of Incorporation – Increasing the Authorized Series A-1

Amended and Restated Bylaws, as of May 28, 2014

of securities registered under Section 12 of the Exchange Act of 1934

Promissory Note dated

January 18, 2018 – Forward Industries (Asia-Pacific) Corporation (as amended and restated)

Certificate of Amendment of the Certificate of Incorporation – Increasing the Authorized Series A-1

Certificate of Amendment of the Certificate of Incorporation – Series B

Certificate of Amendment to the Certificate of Incorporation – Increasing the Authorized Shares of Common Stock

Third Amended and Restated Bylaws, as of May 28, 2014

Amendment No.

1 to the Third Amended and Restated Bylaws

Description of securities registered under Section 12 of the Exchange Act of 1934

Promissory Note, dated January 18, 2018 – Forward Industries (Asia-Pacific) Corporation (as amended and restated)

Form of Pre-Funded Warrant– PIPE Offering

Long-Term Incentive Plan, as amended *

Equity Incentive Plan *

Form of Employment Agreement dated May 26, 2021 – Paul Severrino *

of Employment Arrangement - Terence Wise*

Agreement dated July 1, 2023 – Kathleen Weisberg*

Protection Program Term Note payable to TD Bank, N.A.

dated April 18, 2020

and Restated TD Bank Revolving Term Note dated September 28, 2018

Bank Modification Agreement dated September 28, 2018

to the 2021 Equity Incentive Plan *

Agreement, dated September 10, 2025 – Michael Pruitt *

Employment Agreement, dated July 1, 2023 – Kathleen Weisberg *

Amendment No.

1 to Employment Agreement – Kathleen Weisberg *

Employment Agreement, dated January 18, 2018 - Robert Wild *

Employment Agreement, dated August 17, 2020 – Tom KraMer *

Summary of Employment Arrangement - Terence Wise *

Separation Agreement, dated May 16, 2025, by and between Forward Industries, Inc.

and Terence Wise

Transaction Agreement, dated May 16, 2025, by and among Forward Industries, Inc., Forward Industries (IN), Inc.

and Forward Industries (Asia-Pacific) Corporation

Consultancy Agreement, dated March 1, 2022 - Justwise Group Ltd.

1 unchanged sentence

Extension to the Consultancy Agreement – Justwise Group Ltd.

Agreement dated January 18, 2018 - Robert Wild *

Agreement dated August 17, 2020 – Tom KraMer *

Promissory Note, dated January 18, 2028 (as amended and extended through December 31, 2025), issued to Forward Industries (Asia-Pacific) Corporation

Buying Agency and Supply Agreement, dated November 2, 2023 – Forward Industries (Asia-Pacific) Corporation +

2 unchanged sentences

Account Payables Conversion Agreement - Forward Industries (Asia- Pacific) Corporation – July 2024

Account Payables Conversion Agreement - Forward Industries (Asia- Pacific) Corporation – September 2024

Account Payables Conversion Agreement - Forward Industries (Asia- Pacific) Corporation – October 2024

Account Payables Conversion Agreement - Forward Industries (Asia- Pacific) Corporation – February 2025

Account Payables Conversion Agreement - Forward Industries (Asia- Pacific) Corporation – March 2025 Series A-1

Securities Purchase Agreement (ELOC), dated May 16, 2025, by and be tween Forward Industries, Inc.

and C/M Capital Master Fund, LP

Registration Rights Agreement (ELOC), dated May 16, 2025, by and between Forward Industries, Inc.

and C/M Capital Master Fund, LP

Preferred Stock Purchase Agreement, dated May 23, 2025 – Series B Convertible Preferred Stock

Registration Rights Agreement, dated May 23, 2025 – Series B Convertible Preferred Stock

Form of Warrant, dated May 23, 2025 – Series B Offering

Form of Subscription Agreement – August 2025 Registered Direct Offering

Form of Securities Purchase Agreement, dated September 6, 2025 – PIPE Offering +

Form of Registration Rights Agreement, dated September 6, 2025 – PIPE Offering

Form of Waiver and Consent, dated October 10, 2025 – RRA Extension

Strategic Advisor and Lead Investor Agreement, dated September 6, 2025, by and between Forward Industries, Inc.

and Galaxy Digital LP

Lead Investor Agreement, dated September 6, 2025, by and among Forward Industries, Inc., J Digital 6 Cayman Ltd.

and Multicoin Capital Master Fund, LP

Form of Waiver and Leak-Out Agreement – Series B Holders

Management Agreement, dated September 10, 2025, by and between Forward Industries, Inc.

and Galaxy Digital Capital Management LP +

Agreement, dated September 10, 2025, by and between Forward Industries, Inc.

and Galaxy Digital LP +

Letter from CohnReznick LLP

Insider Trading Policy

of Subsidiaries

Consent of Independent Registered Public Accounting Firm

CEO Certifications (302)

List of Subsidiaries

Consent of Independent Registered Public Accounting Firm CBIZ CPAs PC

Consent of Independent Registered Public Accounting Firm CohnReznick LLP

CEO Certification (302)

CFO Certification (302)

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Clawback Policy

Inline XBRL Instance Document (the Instance Document

does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase

Inline XBRL Taxonomy Extension Definition Linkbase

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase

Cover Page Interactive Data File (formatted as Inline

XBRL and contained in Exhibit 101)

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

______________________

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to the Securities and Exchange Commission staff upon request.

Copies of this filing (including the financial statements) and any

of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Forward Industries, Inc.;

Copies of this filing (including the financial statements) and any of the

exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Forward Industries, Inc.

Veterans Memorial Hwy, Suite 100, Hauppauge, NY 11788;

3 unchanged sentences

CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB # 596 )

Reports of Independent Registered Public Accounting Firms (PCAOB # 199 and # 596 )

Consolidated Balance Sheets at September 30, 2025 and 2024

3 unchanged sentences

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

The Board of Directors and Shareholders of

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Forward Industries, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Forward

Industries, Inc.

and Subsidiaries (the “Company”) as of September 30, 2024 and 2023, and the related consolidated statements

of operations, shareholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as

the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material

respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows

for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared

assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company

has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern.

plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that

might result from the outcome of this uncertainty.

We have audited the accompanying consolidated

balance sheet of Forward Industries, Inc.

(the “Company”) as of September 30, 2025, the related consolidated statements of

operations, shareholders’ equity and cash flows for the year ended September 30, 2025, and the related notes (collectively referred

to as the “financial statements”).

In our opinion, based on our audit, the financial statements present fairly, in all material

respects, the financial position of the Company as of September 30, 2025, and the results of its operations and its cash flows for the

year ended September 30, 2025, in conformity with accounting principles generally accepted in the United States of America.

Retrospective Application of a Change in Accounting

We also have audited the adjustments to the September

30, 2024 financial statements to retrospectively apply the change in accounting principle due to the adoption of Accounting Standards

Update 2023-07, Segment Reporting, as described in Note 16.

In our opinion, such adjustments are appropriate and have been properly applied.

We were not engaged to audit, review, or apply any procedures to the September 30, 2024 financial statements of the Company other than

with respect to the adjustments and, accordingly, we do not express an opinion or any form of assurance on the September 30, 2024 financial

statements taken as a whole.

Emphasis of Matter - Investment in SOL

In forming our opinion, we have considered the

adequacy of the disclosure in Note 17, "Risks and Uncertainties," to the consolidated financial statements, which describes

the significant risks and uncertainties that could materially affect the Company’s financial condition, and results of operations.

As discussed in Note 17, the Company holds a substantial concentration in SOL, a digital asset that is subject to high market volatility

and speculative trading, regulatory uncertainties, cybersecurity threats, and risks related to its custody and legal status.

These factors

may result in material adverse effects, including potential losses, increased variability in earnings, and exposure to additional regulatory

requirements and operational disruptions.

Emphasis of Matter - Discontinued Operations

As discussed in Note 3 to the financial statements,

the Company committed to a plan to dispose of its OEM segment, which met the criteria for discontinued operations under ASC 250-20.

we have audited the presentation of the OEM segment as discontinued operations as described in Note 3 for the September 30, 2024 financial

statements and in our opinion, such adjustments are appropriately and have been properly applied.

We were not engaged to audit, review,

or apply any procedures to the September 30, 2024 financial statements of the Company other than with respect to the adjustments and,

accordingly, we do not express an opinion or any form of assurance on the September 30, 2024 financial statements taken as a whole.

Basis for Opinion

These consolidated financial statements are the responsibility of the

Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and

are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal

These financial statements are the responsibility

of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are

required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal

control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for

Our audit included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from

the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the

consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate

opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of Going Concern assessment and of impairment of Kablooe

goodwill and intangible assets (Note 1, Note 2 and Note 4 to the Consolidated Financial Statements)

As discussed in Note 1 to the consolidated financial statements, significant

judgment is exercised by the Company in determining whether there is substantial doubt the Company will continue as a going concern.

discussed in Notes 2 and 4 to the consolidated financial statements, the Company has goodwill and intangible assets related to its Kablooe,

(“Kablooe”) operating unit.

The Company reviews goodwill for impairment at least annually, or more often if triggering

events occur, and performs an annual goodwill impairment test on September 30, the end of the fiscal year, or upon the occurrence of a

triggering event.

The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying

amount of the asset may not be recoverable.

The Company estimates the fair value of its reporting unit using a combination of the income,

or discounted cash flows approach, and the market approach, which utilizes Kablooe’s forecasted operating results.

Specifically,

the Company’s forecasted cash flows are sensitive to significant assumptions such as forecasted revenue and operating results, all

of which are affected by the expected future market or economic conditions and inflation.

Significant judgment is exercised by the Company in forecasting operating

results which factor into the Company’s going concern assessment and its goodwill and intangible assets impairment analysis related

to its Kablooe operating segment.

Specifically, the forecasted operating results used by the Company in its going concern assessment and

the impairment analysis of goodwill and intangible assets included in its Kablooe operating segment are sensitive to significant assumptions

such as future revenue and expenses, all of which are affected by uncertain future events.

Given these factors, the related audit effort in evaluating management’s

judgments in forecasting operating results which factor into the Company’s going concern assessment and its goodwill and intangible

assets impairment analysis related to its Kablooe reporting segment, were challenging, subjective, and complex and required a high degree

of auditor judgment.

How our Audit Addressed the Critical Audit Matter

Our principal audit procedures related to the forecasted cash flows

and operating results used in the Company’s going concern assessment and impairment of Kablooe’s goodwill and intangible assets

analysis included the following:

· We gained an understanding of and evaluated the design and implementation of the Company’s process to develop forecasted cash

flows and operating results, including significant assumptions used in developing forecasted cash flows and operating results as well

as considering the appropriateness of the underlying data used by the Company in its analyses.

· Evaluating the reasonableness of the Company’s forecasted revenue, expenses, and cash flows by comparing those forecasts to

underlying business strategies, including customer relationships and the Company’s ability to obtain new customers, and to historical

In addition, we performed sensitivity analyses related to the key inputs used in the Company’s forecasted revenue, expenses

and cash flows, including evaluating whether the changes in the assumptions would result in a material change in forecasted cash flows

and operating results.

· Evaluating management’s ability to accurately forecast future operating results by comparing the Company’s historical

forecasted revenue, expenses and cash flows to actual results.

The critical audit matters communicated below

are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to

the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion

on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions

on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of audit evidence pertaining to

the existence and control of the digital assets

We identified the evaluation of audit evidence

pertaining to the existence of the digital assets and whether the Company controls the digital assets as a critical audit matter.

principal considerations for our determination of the critical audit matter is as the result of especially subjective auditor judgment

was involved in determining the nature and extent of evidence required to assess the existence of the digital assets and whether the Company

controls the digital assets, as control over the digital assets is provided through private cryptographic keys stored using third-party

custodial service.

The following are the primary procedures we performed

to address this critical audit matter.

We evaluated the design and implementation of certain internal controls over the digital assets

process, including a control over the comparison of the Company’s records of digital assets held to the custodial records.

micro-movement testing on the wallets held by the Company as well as performed procedures on the micro movements on unstaking and staking

of wallet balances.

We obtained confirmation of the Company’s digital assets in custody as of September 30, 2025 and compared the

total digital assets confirmed to the Company’s record of digital asset holdings.

We also compared the Company’s record of

digital asset transactions to the records on the public blockchain using a software audit tool.

We applied auditor judgment in determining

the nature and extent of audit evidence required, especially related to assessing the existence of the digital assets and whether the

Company controls the digital assets.

We evaluated the sufficiency and appropriateness of audit evidence obtained by assessing the results

of procedures performed over the digital assets.

/s/ CBIZ CPAs P.C.

CBIZ CPAs P.C.

We have served as the Company’s auditor

since March 2025.

December 11, 2025

of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Forward Industries, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheet of Forward Industries, Inc.

and Subsidiaries (the “Company”) as of September 30, 2024, and the related consolidated

statements of operations, shareholders’ equity and cash flows for the year then ended, and the related notes (collectively referred

to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all

material respects, the financial position of the Company as of September 30, 2024, and the results of its operations and its cash flows

for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements

have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements,

the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include

any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements

based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provide

a reasonable basis for our opinion.

/s/ CohnReznick LLP

We have served as the Company’s auditor since 2011.

Melville, New York

We have served as the Company’s auditor

from 2011 to 2025.

Holmdel, New Jersey

December 27, 2024

except for the presentation of the OEM segment

as discontinued operations as described in Notes 1, 2, and 3, as to which the date is September 16, 2025 and the presentation of the

Fiscal 2024 Design Segment in Note 16, as to which the date is December 11, 2025.

FORWARD INDUSTRIES, INC.

2 unchanged sentences

September 30,

Current assets:

Accounts receivable, net of allowances for credit losses of $ 92,358 and $ 27,282 as of September 30, 2025 and 2024, respectively

Accounts receivable (related party)

Inventories, net

Discontinued assets held for sale

Contract assets

Prepaid expenses and other current assets

Assets held for sale

Total current assets

Digital assets

1,430,486,289

Property and equipment, net

1 unchanged sentence

Operating lease right-of-use assets, net

$ 1,474,942,489

Liabilities and shareholders' equity

2 unchanged sentences

Accounts payable

Due to Forward China (related party)

Related party payables (Note 14)

Deferred income

1 unchanged sentence

Accrued expenses and other current liabilities

Liabilities held for sale

Total current liabilities

Other liabilities:

Note payable to Forward China (related party)

Operating lease liability, less current portion

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stated value of $ 1,000 per share;

2,700 shares authorized, 2,200 and 0 shares issued and outstanding at September 30, 2024 and 2023, respectively (liquidation preference of $ 2,200,000 )

6,700 shares authorized, 0 and 2,200 shares issued and outstanding at September 30, 2025 and 2024, respectively

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

stated value of $ 1 per share;

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

Common stock, 300,000,000 shares authorized;

par value $ 0.01 per share;

1,101,069 shares issued and outstanding at September 30, 2024 and 2023

86,145,514 and 1,101,069 shares issued and outstanding at September 30, 2025 and 2024, respectively

Additional paid-in capital

1,655,874,892

Accumulated deficit

2 unchanged sentences

Total shareholders' equity

1,470,124,867

Total liabilities and shareholders' equity

$ 1,474,942,489

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

4 unchanged sentences

Revenues, net

Revenues, net - related party

Total revenues, net

Cost of sales

Cost of sales - related party

Total cost of sales

Sales and marketing expenses

General and administrative expenses

Goodwill impairment

Operating (loss) / income

Related party expenses

Goodwill and intangible asset impairment

Operating loss

( 8,392,420 )

Fair value adjustment of earnout consideration

( 2,151,118 )

Loss on change in fair value of digital assets

Loss on change in fair value of warrant liability

Interest income

Interest expense - related party

Other expense / (income), net

(Loss) / income from continuing operations before income taxes

Other expense, net

Loss from continuing operations before income taxes

( 169,068,575 )

( 2,143,232 )

Provision for income taxes

(Loss) / income from continuing operations

Loss from continuing operations

( 169,088,979 )

Loss from discontinued operations, net of tax

( 2,166,179 )

Income from discontinued operations, net of tax

( 166,974,340 )

( 1,950,587 )

Deemed dividend on Series B Convertible Preferred Stock

Net loss attributable to common shareholders

$ ( 167,003,784 )

$ ( 1,950,587 )

Basic loss per share :

Basic (loss) / income per share from continuing operations

Basic loss per share from discontinued operations

Basic loss per share from continuing operations

Basic earnings per share from discontinued operations

Basic loss per share

Diluted loss per share:

Diluted (loss) / income per share from continuing operations

Diluted loss per share from discontinued operations

Diluted loss per share from continuing operations

Diluted earnings per share from discontinued operations

Diluted loss per share

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Series A-1 Convertible

Series B Convertible

Preferred Stock

Balance at September 30, 2023, unadjusted

Preferred Stock

Balance at September 30, 2024

$ ( 19,637,140 )

Adjustment for reverse stock split 1-for-10, effective June 18, 2024

Share-based compensation

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

Issuance of preferred stock, net of related costs

Common stock issued in connection with ELOC, net of fees

Common stock issued in connection with registered direct offering

Common stock issued for conversion of preferred stock

( 4,925,000 )

Balance at September 30, 2023, as adjusted

( 1,000,000 )

Share-based compensation

Common stock issued in connection with ATM, net of fees

Reclassification of warrant liability

Common stock issued in connection with Securities Purchase Agreement, net of fees

1,361,897,718

1,362,704,834

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

Pre-Funded warrants issued in connection with Securities Purchase Agreement

Shares issued under Waiver and Leak-out agreement

Exercise of Pre-Funded Warrants

Exercise of stock options

( 166,974,340 )

Balance at September 30, 2025

$ 1,655,874,892

For the Fiscal Year Ended September 30, 2023

Series A-1 Convertible

Preferred Stock

Balance at September 30, 2022, unadjusted

$ ( 186,611,480 )

Adjustment for reverse stock split 1-for-10, effective June 18, 2024

$ 1,470,124,867

Balance at September 30, 2022, as adjusted

the Fiscal Year Ended September 30, 2024

Series A-1 Convertible

Series B Convertible

Balance at September 30, 2023

$ ( 17,686,553 )

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( 1,950,587 )

Preferred Stock issued in connection

with conversion of accounts payable to Forward China

Balance at September 30, 2024

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Fiscal Years

Ended September 30,

For the Fiscal Years Ended September 30,

Operating Activities:

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Credit loss expense

Change in fair value of earn-out consideration

Goodwill impairment

Non-cash digital asset revenue, net

( 4,411,859 )

Change in fair value of digital assets

Change in fair value of warrant liability

Goodwill and intangible asset impairment

Gain on sale of OEM segment

( 1,405,972 )

Changes in operating assets and liabilities:

Accounts receivable

Accounts receivable (related party)

Discontinued assets held for sale

Contract assets

Prepaid expenses and other current assets

Accounts payable

Due to Forward China (related party)

Related party payables

Deferred income

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Accrued expenses and other current liabilities

Net cash provided by operating activities

Net cash used in operating activities-continuing operations

( 4,898,240 )

( 1,151,795 )

Net cash provided by operating activities-discontinued operations

Net cash (used in)/provided by operating activities

( 4,502,087 )

Investing Activities:

Purchases of digital assets

( 900,790,843 )

Cash paid for sale of OEM segment

Purchases of property and equipment

Net cash used in investing activities

( 901,466,617 )

Financing Activities:

Proceeds from Securities Purchase Agreement, net

Proceeds from Equity Line of Credit, net

Proceeds from Registered Direct Offering

Proceeds from Waiver and Leak-out Agreement

Proceeds from ATM, net

Proceeds from issuance of Series B preferred stock and warrants, net

Deferred financing costs associated with ATM

Proceeds from stock options exercised

Repayment of note payable to Forward China (related party)

Net cash used in financing activities

Net (decrease) / increase in cash

Net cash provided by/(used in) financing activities

Net increase/(decrease) in cash

Cash at beginning of year

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Cash paid for taxes

Supplemental Disclosures of Non-Cash Information:

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Operating lease assets obtained in exchange for operating lease liabilities

Conversion of accounts payable to convertible preferred stock

Fair value of commitment shares issued under equity line of credit

Digital assets received in Securities Purchase Agreement

Digital assets used in investing activities

Unpaid portion of Securities Purchase Agreement fees

Reclass of warrant liability to equity

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

4 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’s design

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

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 original equipment

manufacturers (“OEM”s), 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”).

“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.

Company also acquires and holds Solana (“SOL”) and other digital assets and has adopted SOL as its primary treasury reserve

On November 17, 2025, the Company

changed its ticker symbol on the Nasdaq Capital Market from FORD to FWDI.

New Digital Asset Treasury Strategy

On September 8, 2025, in connection

with a private placement with certain accredited investors (see Note 8), we announced the launch of our digital asset treasury strategy,

pursuant to which we plan to pursue a number of strategic initiatives to acquire Solana (“SOL”) and other digital assets.

In September 2025, we entered into the Asset Management Agreement with Galaxy Digital Capital Management LP and the Services Agreement

with Galaxy Digital LP (see Note 14) to guide us through the implementation of our new digital assets treasury business.

Under our new treasury policy

and strategy, the principal holding in our treasury reserve on the balance sheet will be allocated to digital assets, primarily SOL by

applying a public-market treasury model to an asset that we believe is earlier in its lifecycle, structurally reflexive, and underexposed

as compared to Bitcoin.

Our planned approach involves acquiring SOL directly through market purchases and staking our holdings via our

own or third-party operated validators and generating incremental revenue through strategic partnerships and deployments within the Solana

In addition to operating our

hardware and software product design and engineering services business, our management will focus its resources on our new treasury policy

and a significant portion of the balance sheet will be allocated to holding SOL and other digital assets in our digital asset treasury.

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 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

In July 2023, the Company

decided to cease operations of its retail distribution segment and is presenting the results of operations for this segment within discontinued

operations in the current and prior periods presented herein.

Our retail distribution business sourced and sold smart-enabled furniture,

hot tubs and saunas and a variety of other products through various online retailer websites to customers predominantly located in the

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

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

See Note 3 for additional information

on discontinued operations.

Liquidity and Going Concern

The accompanying 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 of $19,637,000

and $273,000, respectively, at September 30, 2024, a net loss of $1,951,000 in Fiscal 2024 and a cash balance of approximately $2,300,000

at November 30, 2024.

The Company’s OEM distribution

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

In connection with the new

sourcing agreement and in order to preserve future liquidity, in November 2023, the Company and Forward China entered into an agreement

whereby Forward China agreed to limit the amount of outstanding payables it would seek to collect from the Company to $500,000 in any

12-month period, which the Company agreed to pay within 30 days of any such request (see Note 14).

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.

In December 2024, our largest design customer

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

We expect this to cause a material

decrease in our revenues beginning with 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 December 31, 2025, 12 months from the date

of issuance of these consolidated financial statements.

These factors raise substantial doubt about our ability to continue as a going

Management plans to initiate cost reduction measures

in Fiscal 2025 to mitigate the impact of the loss of our largest customer, including a reduction in force which was communicated in December

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

Management also plans

to seek flexibility on payment terms for ongoing purchases from Forward China and attempt to obtain debt or equity financing to fund its

ongoing operations.

However, there are no current agreements or understanding with regard to the form, time or amount of such financing

and there is no assurance that any financing can be obtained, that Forward China will grant any flexibility on payment terms or that our

cost reduction efforts will be sufficient to enable the Company to continue as a going concern.

The 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.

In July 2023, the Company’s

Board of Directors approved the decision to cease operations of its retail distribution segment (“Retail Exit”) and is presenting

the results of operations for this segment within discontinued operations in the periods presented herein.

Our retail distribution business

sourced and sold smart-enabled furniture, hot tubs and saunas and a variety of other products through various online retailer websites

to customers predominantly located in the U.S.

The inventory of the retail segment was presented as discontinued assets held

for sale on the balance sheet on September 30, 2023.

FORWARD INDUSTRIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In March 2025, the Company committed

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

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 14).

Unless 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 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 of $ 186,611,000 and $ 38,498,000 , respectively, on September 30, 2025, a net loss of $ 166,974,000 in Fiscal 2025 and a

cash balance of approximately $ 41.2 million at November 30, 2025.

In the prior reporting period,

the Company identified certain conditions that raised substantial doubt about its ability to continue as a going concern.

These conditions

included the loss of a significant customer, the resulting decline in revenues and cash, and recurring operating losses.

During the period

from May 2025 to September 2025, the Company raised gross proceeds of over $ 1.65 billion through multiple equity financing transactions

(see Note 8).

As a result, the Company believes it now has sufficient liquidity to fund anticipated cash requirements for operations and

working capital purposes through at least December 2026.

As a result, the previously disclosed going concern uncertainty language has

been removed as substantial doubt no longer exists regarding the Company’s ability to continue as a going concern.

NOTE 2 ACCOUNTING POLICIES

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financial statements include the accounts of Forward Industries, Inc.

and its wholly-owned subsidiaries (Forward Industries (IN), Inc.

(“Forward US”), Forward Industries (Switzerland) GmbH (“Forward Switzerland”), Forward Industries UK Limited (“Forward

UK”), Intelligent Product Solutions, Inc.

(“IPS”), and Kablooe, Inc.

All significant intercompany

transactions and balances have been eliminated in consolidation.

and all of its wholly-owned subsidiaries:

Forward Industries (IN),

(“Forward US”), DE Sub 1 LLC (“Forward Delaware”), Forward Industries (Switzerland) GmbH (“Forward

Switzerland”), Forward Industries UK Limited (“Forward UK”), Intelligent Product Solutions, Inc.

and Kablooe, Inc.

The terms “Forward”, “we”, “our” or the “Company”

as used throughout this document are used to indicate Forward Industries, Inc.

and all of its wholly-owned subsidiaries.

All significant

intercompany transactions and balances have been eliminated in consolidation.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Segment Reporting

As a result of the discontinued

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

OEM distribution and design.

The OEM distribution

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

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

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

The design segment consists

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

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

See Note 16 for more information on

As a result of the Retail Exit,

the OEM Plan and the Company’s new digital asset treasury strategy, the Company now has two reportable segments:

design and digital

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

that provide a full spectrum of hardware and software product design and engineering services to customers predominantly located in the

The digital assets segment captures SOL-based yield generated by participating in the Solana network’s staking protocol, which

currently comprises rewards received from native staking.

See Note 16 for additional information on our segments.

The Company reviews goodwill

2 unchanged sentences

and Kablooe operating segments) and we perform our annual goodwill impairment test on September 30, the end of the fiscal year, or upon

the occurrence of a triggering event such as an overall change in economic climate, changes in the industry and competitive environment,

and earnings quality and sustainability.

The Company has the option to perform a qualitative assessment to determine if an impairment

is more likely than not to have occurred.

If the Company can support the conclusion that it is not more likely than not that the fair

value of a reporting unit is less than its carrying amount, then the Company would not need to perform a quantitative impairment test

for the reporting unit.

If the Company cannot support such a conclusion or does not elect to perform the qualitative assessment, then

the Company will perform the quantitative impairment test by comparing the fair value of the reporting unit with its carrying amount,

including goodwill.

If the fair value of the reporting unit exceeds its carrying amount, no impairment charge is recognized.

value of the reporting unit is less than its carrying amount, an impairment charge will be recognized for the amount by which the reporting

unit’s carrying amount exceeds its fair value.

A significant amount of judgment is required in performing goodwill impairment tests

including estimating the fair value of a reporting unit.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the occurrence of a triggering event.

The Company has the option to perform a qualitative assessment to determine if an impairment is

more likely than not to have occurred.

If the Company can support the conclusion that it is not more likely than not that the fair value

of a reporting unit is less than its carrying amount, then the Company would not need to perform a quantitative impairment test for the

reporting unit.

If the Company cannot support such a conclusion or does not elect to perform the qualitative assessment, then the Company

will perform the quantitative assessment by comparing the fair value of the reporting unit with its carrying amount, including goodwill.

If the fair value of the reporting unit exceeds its carrying value, no impairment charge is recognized.

If the fair value of the reporting

unit is less than its carrying value, an impairment charge will be recognized for the amount by which the reporting unit’s carrying

amount exceeds its fair value.

A significant amount of judgment is required in performing goodwill impairment tests including estimating

the fair value of a reporting unit.

Digital Assets

The Company accounts for its

holdings of digital assets, including cryptocurrencies such as Solana, as indefinite-lived intangible assets in accordance with Accounting

Standards Codification (“ASC”) 350-60, “Intangibles – Goodwill and Other – Crypto Assets (“ASC 350-60”).

Digital assets are initially measured at cost and subsequently measured at fair value, with changes in fair value recognized in net income/(loss)

each reporting period.

Digital assets are classified as noncurrent assets unless the Company intends to sell them or otherwise realize

their value within twelve months after the reporting date.

Upon disposal of a digital asset (e.g., by sale, exchange or transfer) the

Company derecognizes the asset and recognizes a realized gain or loss in net income, calculated as the difference between the sale proceeds

and the asset’s carrying amount, which is determined using a first-in, first-out method.

Digital assets that are not in

scope of ASC 350-60 are accounted for as indefinite-lived intangible assets subject to impairment testing, or as financial assets if they

are redeemable for cash.

Intangible Assets

2 unchanged sentences

and are amortized over their estimated useful lives, which are periodically evaluated for reasonableness.

Our intangible assets are

reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In assessing the recoverability of our intangible assets, we must make estimates and assumptions regarding future cash flows and other

factors to determine the fair value of the respective assets.

These estimates and assumptions could have a significant impact on whether

an impairment charge is recognized and the magnitude of any such charge.

Fair value estimates are made at a specific point in time, based

on relevant information.

These estimates are subjective in nature and involve uncertainties and matters of significant judgments and

therefore cannot be determined with precision.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our intangible assets are reviewed

for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

the recoverability of our intangible assets, we must make estimates and assumptions regarding future cash flows and other factors to determine

the fair value of the respective assets.

These estimates and assumptions could have a significant impact on whether an impairment charge

is recognized and the magnitude of any such charge.

Fair value estimates are made at a specific point in time, based on relevant information.

These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined

with precision.

Changes in assumptions could significantly affect the estimates.

If these estimates or

material related assumptions change in the future, we may be required to record impairment charges related to our intangible assets.

Management evaluated and concluded that there were no indications of impairments of intangible assets at September 30, 2024 or 2023.

The Company maintains cash

deposits and a money market account in banks with financial institutions in the United States (that at times may exceed federally insured

limits of $250,000 per financial institution) and Switzerland.

At September 30, 2024 and 2023, there were deposits totaling $ 2,334,000

(which includes $ 245,000 in a foreign bank) and $ 2,565,000 (which includes $ 358,000 in a foreign bank), respectively, held in excess of

federally insured limits.

The Company maintains cash deposits

and money market accounts with financial institutions in the United States that at times may exceed federally insured limits of $250,000

per financial institution.

At September 30, 2025, there were deposits totaling approximately $ 37,471,000 held in excess of federally insured

Historically, we have not experienced any losses due to such cash concentrations.

Accounts Receivable

Accounts receivable consist

of unsecured trade accounts with customers in amounts that have been invoiced ($ 4,460,000 and $ 6,949,000 at September 30, 2024 and 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 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 situations.

At September 30, 2024 and 2023, the

Company had no allowances for credit losses for the OEM distribution segment, allowances for credit losses of $ 0 and $ 185,000 , respectively,

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

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 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.

Accounts receivable

consist 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 September 30, 2025 and September 30, 2024, the Company had allowances

for credit losses of $ 92,000 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, which is now presented as a component of income/(loss)

from discontinued operations in the Company’s 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 the Company has no remaining inventory at September 30,

Inventory on hand at September 30, 2024 is presented as a component of assets held for sale.

Property and Equipment

12 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Equity Offering Costs

Offering costs include underwriting

commissions, professional fees, filing fees and other costs directly associated with the Company’s recent financing transactions.

Prior to the completion of an offering, offering costs related to common and preferred stock issuances are recorded as a component of

other assets on the consolidated balance sheet and recorded a reduction to additional paid-in capital when the shares related to such

offering are issued.

Offering costs associated with warrant liabilities are expensed as incurred and recorded as a component of general

and administrative expenses.

Lease assets and liabilities

are recognized at lease commencement date based on the present value of lease payments over the lease term, using the Company’s

are recognized at the lease commencement date based on the present value of lease payments over the lease term, using the Company’s

incremental borrowing rate commensurate with the lease term, since the Company’s lessors do not provide an implicit rate, nor is

6 unchanged sentences

Lease expense for lease payments is recognized on a straight-line basis over the lease

Operating lease assets are shown as right-of-use assets and financing lease assets are a component of property and equipment on

the consolidated balance sheets.

The current and long-term portions of operating and financing lease liabilities are shown separately

as such on the consolidated balance sheets.

Operating lease assets are shown as right-of-use assets on the consolidated balance sheets.

The current and long-term portions of

operating lease liabilities are shown separately as such on the consolidated balance sheets.

The Company recognizes future

2 unchanged sentences

At September 30, 2025, there was no change to our assessment that a full valuation allowance was required against all net deferred

tax assets as it is not probable that such deferred tax assets will be realized.

Accordingly, any deferred tax provision or benefit was

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

Our income tax provision or benefit is generally not significant due

to the existence of significant net operating loss carryforwards.

Accordingly, any deferred tax provision or benefit was offset by an equal and opposite change to the valuation allowance.

Our income tax provision or benefit is generally not significant due to the existence of significant net operating loss carryforwards.

Revenue Recognition

OEM Distribution Segment

Discontinued OEM Distribution Segment

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 consolidated balance sheets.

The OEM distribution segment had no contract liabilities at September

30, 2024, 2023 or 2022.

(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 would be classified

as a component of liabilities held for sale in the accompanying consolidated balance sheets.

The OEM distribution segment had no contract

liabilities at September 30, 2025, 2024 or 2023.

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

for Fiscal 2025 and Fiscal 2024 (see Note 3).

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Discontinued Retail Distribution Segment

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

goods was transferred to the retailer, which generally occured upon shipment to the end customer.

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

Other than product delivery, the retail

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When the Company received consideration

before achieving the criteria previously mentioned, it recorded a contract liability, which was classified as a component of deferred

before achieving the criteria previously mentioned, it recorded a contract liability, which would be classified as a component of deferred

income in the accompanying consolidated balance sheets.

3 unchanged sentences

(see Note 3).

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Design Segment

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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 consolidated balance sheets.

The design segment had contract assets of $ 1,273,000 , $ 976,000 and $ 609,000 at September

30, 2024, 2023 and 2022, 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 consolidated balance sheets.

segment had contract liabilities of $ 399,000 , $ 297,000 and $ 439,000 at September 30, 2024, 2023 and 2022, respectively.

Shipping and Handling Fees

The Company includes shipping

and handling fees billed to customers in net revenues and the related transportation costs in cost of sales.

Recognized revenues that will

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

The design segment had

contract assets of $ 1,064,000 , $ 1,273,000 and $ 976,000 at September 30, 2025, 2024 and 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 consolidated balance sheets.

The design segment had contract liabilities of $ 293,000 , $ 399,000 and $ 297,000

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

Digital Asset Staking

The Company participates in proof-of-stake

Proof-of-stake validation, also referred to as staking, requires the Company to delegate its digital assets to a validator.

Staking can be performed on proprietary validation infrastructure or through the use of third-party infrastructure or service providers.

The Company concluded that where it controls the validation infrastructure, it is a principal in the provision of staking services to

the blockchain, and recognizes staking revenue on a gross basis.

Blockchain rewards distributed to third parties staking on the Company’s

validation infrastructure are included in the Cost of sales.

The Company recognizes noncash

consideration from staking activities related to its digital asset holdings in accordance with ASC 606.

Staking income is generated when

the Company participates in digital asset networks to validate transactions and, in return, earns rewards in the form of additional digital

The Company considers its performance obligation to be satisfied at the point in time when it has successfully provided validation

services to the network and the reward is determinable and collectible.

Revenue is measured as the fair value of digital assets received

as staking rewards at contract inception, which generally occurs at the beginning of each epoch of the respective blockchain.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disaggregation of Revenue

Design segment revenue is predominantly

recognized over time and has similar other economic factors, including, but not limited to, the geographic location and type of customer,

payment terms and length of contracts.

Digital assets staking revenue is recognized at a point in time.

See Note 16 for disaggregated

revenue amounts.

Foreign Currency Transactions

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in the accompanying consolidated statements of operations.

The approximate net gains (losses) from foreign currency transactions were

$8,000 and $2,000 in Fiscal 2024 and Fiscal 2023, respectively.

The approximate net losses from foreign currency transactions were $ 5,000 and

$ 8,000 in Fiscal 2025 and Fiscal 2024, respectively.

Fair Value Measurements

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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

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

to the fair value measurement.

ASC 820 establishes a fair value

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

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

that is significant to the fair value measurement.

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

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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 (including accounts receivable from related party), accounts payable, due to Forward China, and the Note payable to

Forward China approximate fair value due their short-term maturities.

The acquisition of Kablooe provided

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

In accordance with ASC 820, the

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

of the fair value hierarchy.

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

liability was $ 0 at September 30, 2024.

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.

FORWARD INDUSTRIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company applies ASC 820 in

the valuation of SOL held by the Company for financial statement purposes.

The fair value of SOL uses Level 1 inputs to reflect the price

that would be received for SOL in a current sale, which assumes an orderly transaction between market participants on the measurement

date in SOL’s “principal market,” or in the absence of a principal market, the most advantageous market.

Market participants

are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able

The Company determines its principal market (or in the absence of a principal market, the most advantageous market) on a

periodic basis to determine which market is its principal market for the purpose of calculating fair value for the creation of quarterly

and annual financial statements.

Issuer-specific events, market trends, bid/ask quotes of brokers and information providers and other

data may be reviewed in the course of making a good faith determination of the digital asset’s fair value.

Share-Based Compensation Expense

The Company estimates the

fair value of employee and non-employee director share-based compensation on the date of grant using the Black-Scholes option pricing

model, which includes variables such as the expected volatility of the Company’s share price, the exercise behavior of its grantees,

interest rates, and dividend yields.

These variables are projected based on the Company’s historical data, experience, and other

The fair value of employee and non-employee director share-based compensation is recognized in the consolidated statements of

operations over the related service or vesting period of each grant.

In the case of awards with multiple vesting periods, the Company

has elected to use the graded vesting attribution method, which recognizes compensation cost on a straight-line basis over each separately

vesting portion of the award as if the award was, in substance, multiple awards (see Note 9).

Accounting Pronouncements

In December 2023, the Financial

Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, "Income Taxes - Improvements

to Income Tax Disclosures", requiring enhancements and further transparency to certain income tax disclosures, most notably the tax

rate reconciliation and income taxes paid.

This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis

and retrospective application is permitted.

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

financial statements.

In November 2023, the FASB

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

Improvements to Reportable Segment Disclosures,” which requires expanded

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

within fiscal years beginning after December 15, 2024.

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

financial statements.

In November 2019, the FASB

issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU 2019-11 is

an accounting pronouncement that provides clarity to and amends earlier guidance on this topic and would be effective concurrently with

the adoption of such earlier guidance.

This pronouncement is effective for the Company for fiscal years beginning after December 15, 2022,

and interim periods within those fiscal years.

The Company adopted this guidance in the first quarter of Fiscal 2024 with no material

impact on its consolidated financial statements.

The Company estimates the fair

value of employee and non-employee director share-based compensation on the date of grant using the Black-Scholes option pricing model,

which includes variables such as the expected volatility of the Company’s share price, the exercise behavior of its grantees, interest

rates, and dividend yields.

These variables are projected based on the Company’s historical data, experience, and other factors.

The fair value of employee and non-employee director share-based compensation is recognized in the consolidated statements of operations

over the related service or vesting period of each grant.

In the case of awards with multiple vesting periods, the Company has elected

to use the graded vesting attribution method, which recognizes compensation cost on a straight-line basis over each separately vesting

portion of the award as if the award was, in substance, multiple awards (see Note 9).

Recent Accounting Pronouncements

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 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.

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 consolidated financial statements.

In December 2023, the FASB issued

ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets (“ASU

ASU 2023-08 requires certain crypto assets meeting defined criteria to be measured at fair value each reporting period

with changes in fair value recognized in net income, presented separately from other intangible assets and accompanied by enhanced disclosures.

This standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company adopted this

standard in the fourth quarter of Fiscal 2025, in conjunction with its new treasury strategy.

Since the Company held no digital assets

until September 2025, the adoption of this standard had no impact to prior reported financial statements and no cumulative adjustment

to retained earnings was required or recorded.

In December 2023, the FASB issued

ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures”, requiring enhancements and further transparency to certain

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

This ASU is effective for fiscal years beginning

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

The Company is currently evaluating the effects

of this pronouncement on its consolidated financial statements.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In November 2023, the FASB issued

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

Improvements to Reportable Segment Disclosures,” which requires expanded segment

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

fiscal years beginning after December 15, 2024.

The Company adopted this guidance in Fiscal 2025, which did not have a material impact

on its financial statements.

NOTE 3 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 the remaining retail inventory as of September 30, 2024, and collected all remaining retail accounts receivable by the end

of Fiscal 2024.

As of September 30, 2024, the retail segment was fully discontinued, and we expect to have no further significant involvement

in this segment.

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

and financial results.

The inventory of the retail segment meets the criteria to be considered “held-for-sale” in accordance

with ASC 205-20, “Discontinued Operations.” Accordingly, the retail inventory is classified on our 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 consolidated statements of operations for the years ended September 30, 2024

The total amount related

to the retail segment included in Due to Forward China on the consolidated balance sheets was approximately $ 641,000 and $ 1,002,000 at

September 30, 2024 and 2023, respectively.

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.

We expect 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 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 consolidated statements of operations

for the years ended September 30, 2025 and 2024.

In March 2025, in

connection with the fourth Conversion Agreement (see Note 14), Forward China determined it would not renew the Buying Agency and

Supply Agreement (“Sourcing Agreement”), which subsequently expired on May 9, 2025 (see Note 14).

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:

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;

Company and Forward China terminated the Sourcing Agreement and extended the term of the Note Payable (see Note 14) to December 31,

and (iii) the Company paid Forward China $ 200,000 at closing plus $ 150,000

on each of July 31, 2025, August 31, 2025 and September 30, 2025.

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 consolidated balance sheets at September

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

of operations for the years ended September 30, 2025 and 2024.

The consolidated balance sheets

and statements of operations for comparable periods have been reclassified to conform to this presentation in accordance with the accounting

FORWARD INDUSTRIES, INC.

2 unchanged sentences

The following table presents

the major classes of the “Net loss from discontinued operations, net of tax” in our consolidated statements of operations.

the major classes of the “Net income (loss) from discontinued operations, net of tax” in our consolidated statements of operations.

Schedule of discontinued operations

4 unchanged sentences

General and administrative expenses

Loss from operations

( 2,190,000 )

Loss on classification as held for sale

Loss from discontinued operations, net of tax

$ ( 3,895,000 )

At September 30, 2023, discontinued

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

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

to reduce excess or otherwise unsellable inventory to its estimated net realizable value.

There was no depreciation,

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

segment in Fiscal 2024 or Fiscal 2023.

NOTE 4 INTANGIBLE

ASSETS AND GOODWILL

Operating income

Gain on sale of discontinued operations

Income from discontinued operations, net of tax

There were no material amounts of depreciation, amortization,

investing or financing cash flows for the discontinued operations in Fiscal 2025 or Fiscal 2024.

The only significant non-cash activity

for the discontinued operations in Fiscal 2025 and 2024 was the conversion of accounts payable to Forward China into preferred stock in

July and September of 2024 (see Note 14).

The following table presents the major components

of assets and liabilities held for sale on our consolidated financial statements at September 30, 2024:

Schedule of major components of assets and liabilities

Accounts receivable, net

Prepaid expenses and other current assets

Total assets held for sale

Accounts payable

Due to Forward China

Other current liabilities

Total liabilities held for sale

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 INTANGIBLE ASSETS

Intangible Assets

1 unchanged sentence

assets consist of the following:

Schedule of intangible

Schedule of intangible assets

September 30, 2025

9 unchanged sentences

( 1,053,000 )

( 1,295,000 )

Impairment loss

Net carrying amount

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of our business.

Intangible assets are amortized over their expected useful lives of 15 years for the trademarks and eight years for the

customer relationships.

During Fiscal 2024 and Fiscal 2023, the Company recorded amortization expense related to intangible assets of

$ 213,000 , which is included in general and administrative expenses in the Company’s consolidated statements of operations.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At September 30, 2024, estimated

amortization expense for the Company’s intangible assets for each of the next five years and thereafter is as follows:

Schedule of estimated

amortization expense

Goodwill represents the

future economic benefits of assets acquired in a business combination that are not individually identified or separately recognized.

The Company’s goodwill resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively and are held

under the design segment of our business.

The goodwill associated with the IPS acquisition is not deductible for tax purposes, but the

goodwill associated with the Kablooe acquisition is deductible for tax purposes.

Due to historical losses

Intangible assets were amortized over their expected useful lives of 15 years for the trademarks and eight years for

the customer relationships.

During Fiscal 2025 and Fiscal 2024, the Company recorded amortization expense related to intangible assets

of $ 213,000 , which is included in general and administrative expenses in the Company’s consolidated statements of operations.

At September 30, 2025, due to

declining revenues and continuing losses in the design segment, the Company reviewed its intangible assets for impairment.

estimated future cash flows of the design business, the Company determined these intangible assets were no longer recoverable at September

30, 2025 and recorded an impairment charge for their remaining net carrying value.

Goodwill represents the future

economic benefits of assets acquired in a business combination that are not individually identified or separately recognized.

The Company’s

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

The goodwill associated with

the IPS acquisition is not deductible for tax purposes, but the goodwill associated with the Kablooe acquisition is deductible for tax

Due to the historical losses

of the Kablooe reporting unit, the Company elected to bypass the qualitative assessment and perform quantitative goodwill impairment testing

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the expected future performance of the Kablooe reporting unit.

The Company performed the

annual goodwill impairment test for Fiscal 2023 and determined there was no impairment.

Below is the rollforward

of goodwill for the design segment, the only reportable segment with goodwill:

The Company reviewed the fair value of the Kablooe reporting unit at September

30, 2025, in connection with its annual goodwill impairment evaluation.

Based on a decrease in its estimated future cash flows, driven

by declining revenues and continued losses, the Company determined the carrying amount of this reporting unit exceeded its fair value

and recorded an impairment charge of $ 391,000 for the remaining goodwill balance.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2024, IPS was notified

by its largest customer of its plan to discontinue its insulin patch pump program, on which IPS was working, and was beginning to wind

down all activities related to it.

Due to the historically high concentration of revenue with this customer, the loss of its business

was considered a triggering event which prompted the Company to evaluate the goodwill of the IPS reporting unit.

Management concluded

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

at December 31, 2024.

Using primarily an income approach methodology, the fair value of the IPS reporting unit was estimated using a discounted

cash flow analysis incorporating variables categorized within Level 3 of the fair value hierarchy such as projected revenues, growth rate

and discount rate.

The quantitative testing indicated the carrying amount of the IPS reporting unit exceeded its fair value, resulting

in a goodwill impairment charge of $ 225,000 in the three months ended December 31, 2024, primarily driven by a reduction in the expected

future performance of the IPS reporting unit.

The Company reviewed the fair

value of the IPS reporting unit at September 30, 2025, in connection with its annual goodwill impairment evaluation.

Based on a decrease

in its estimated future cash flows, driven by declining revenues and continued losses, the Company determined the carrying amount of this

reporting unit exceeded its fair value and recorded an additional impairment charge of $ 943,000 for the remaining goodwill balance.

Below is the rollforward of

goodwill for the design segment, the only reportable segment with goodwill:

Schedule of roll forward

Balance at September 30, 2024

Impairment of IPS reporting unit

( 1,168,000 )

Impairment of Kablooe reporting unit

Balance September 30, 2025

NOTE 5 PROPERTY

AND EQUIPMENT

Property and equipment and related accumulated

depreciation and amortization are summarized in the table below:

NOTE 5 PROPERTY AND

Property and equipment and related accumulated depreciation

and amortization are summarized in the table below:

Schedule of property and equipment

5 unchanged sentences

Property and equipment, net

Depreciation expense was $ 120,000 and $ 103,000

for Fiscal 2024 and Fiscal 2023, respectively.

Depreciation expense was $ 119,000 and $ 120,000 for

Fiscal 2025 and Fiscal 2024, respectively.

FORWARD INDUSTRIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6 FAIR VALUE MEASUREMENTS - EARNOUT

The acquisition of Kablooe

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

The fair value of this earnout liability

is measured on a recurring basis at each reporting date using a Black-Scholes valuation model with the following inputs and assumptions,

which are categorized within level 3 of the fair value hierarchy:

Schedule of fair value assumptions

September 30,

Risk-free interest rate

Expected term in years

Dividend yield

In Fiscal 2023, the Company

reduced this liability from $70,000 to $0 based on changes in the expected likelihood of Kablooe reaching the specified earnings targets.

In Fiscal 2024, there were no changes to the total fair value of this earnout liability.

NOTE 7 ACCRUED

EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities

at September 30, 2024 and 2023 are as follows:

NOTE 6 DIGITAL ASSETS

The following table shows the quantity of tokens,

cost basis and fair value of Solana held by the Company as of September 30, 2025:

Schedule of fair value

$ 1,590,521,000

$ 1,430,486,000

The following table summarizes

the Company’s Solana related activity for Fiscal 2025:

Schedule of digital assets carrying value

Carrying value at September 30, 2024

Purchases and other additions

1,590,521,000

Unrealized losses

( 160,035,000 )

Carrying value at September 30, 2025

$ 1,430,486,000

Staked Digital Assets

The Company had staked

$ 1.43 billion

of digital assets as of September 30, 2025.

The Company’s ability to sell or transfer staked digital assets is subject to

restrictions related to unbonding periods, which are based on network traffic on the Solana blockchain.

As of September 30,

2025, the majority of the Company’s staked digital assets on the Solana blockchain could be unbonded within three days.

staking rewards generated from proprietary staking activities for Fiscal 2025 were $ 4.36

NOTE 7 ACCRUED EXPENSES

AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities at

September 30, 2025 and 2024 are as follows:

Schedule of accrued expenses and other current liabilities

2 unchanged sentences

Paid time off

8 SHAREHOLDERS’ EQUITY

Professional fees

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 SHAREHOLDERS’

Reverse Stock Split

8 unchanged sentences

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

In July 2023, the Company

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

in February 2024, the Company was notified that it was not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’

Securities Purchase Agreement

In September 2025, we entered

into a securities purchase agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Purchasers”)

pursuant to which we sold and issued to the Purchasers in a private placement (the “Private Placement”) an aggregate of (i)

77,144,562 shares (the “Shares”) of common stock of the Company, par value $0.01 per share (the “Common Stock”),

at an offering price of $18.50 and (ii) pre-funded warrants (the “Pre-Funded Warrants” and together with the Shares, the “Securities”)

to purchase 12,031,364 shares of Common Stock (the “Pre-Funded Warrant Shares”) with $18.49999 of the exercise price per Pre-Funded

Warrant that was pre-funded at closing (the “Per Share Purchase Price”).

In the Private Placement, the Purchasers tendered

dollars, USD Coin (USDC) or Tether (USDT) to the Company as consideration for the Securities.

We received aggregate proceeds of approximately

$ 1.65 billion, before deducting placement agent fees and other expenses.

In connection with the Private

Placement, we entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, providing

for the registration for resale of the Shares, the Advisor Shares (as defined below), the Lead Investor Shares (as defined below), the

Pre-Funded Warrant Shares and the shares of Common Stock underlying each of the Advisor Warrants and Lead Investor Warrants on an effective

registration statement, pursuant to a registration statement which was filed on November 3, 2025 and amended on November 10, 2025 and

November 14, 2025.

On October 10, 2025, we entered

into a Waiver and Consent (the “Waiver and Consent”) with certain holders of the Company’s securities (who collectively

beneficially own at least 50.1% of the then outstanding Registrable Securities, as defined in the Registration Rights Agreement).

Waiver and Consent waived the compliance of the Filing Date (as defined in the Registration Rights Agreement) and extended the deadline

for the Company to file the initial resale registration statement with the Securities and Exchange Commission to November 10, 2025.

registration statement was filed and automatically effective on November 3, 2025.

Galaxy Strategic Advisor Agreement

In September 2025, we entered

into a Strategic Advisor and Lead Investor Agreement (the “Strategic Advisor Agreement”) with Galaxy Digital LP (“Galaxy”)

pursuant to which we engaged Galaxy to serve as our strategic advisor with respect to the Private Placement.

In consideration of Galaxy’s

services, we issued to Galaxy, in addition to the Securities acquired by Galaxy pursuant to the Securities Purchase Agreement, 1,783,519

of Pre-Funded Warrants and 4,458,796 warrants (the “Advisor Warrants”) to purchase an amount of shares of our Common Stock

(the “Advisor Shares”).

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lead Investor Agreement

In September 2025, we entered

into a Lead Investor Agreement (the “Lead Investor Agreement”) with J Digital 6 Cayman Ltd.

(“Jump Crypto”) and

Multicoin Capital Master Fund, LP (“Multicoin,” and together with Galaxy and Jump Crypto, the “Sponsors”) to secure

the commitment of Jump Crypto and Multicoin in the Private Placement.

In consideration of Jump Crypto and Multicoin’s participation,

we issued to each of Jump Crypto and Multicoin, in addition to the Securities acquired by Jump Crypto and Multicoin pursuant to the Securities

Purchase Agreement, 1,783,519 shares of our Common Stock (the “Lead Investor Shares”) and 4,458,796 warrants to purchase an

amount of shares of the Common Stock (the “Lead Investor Warrants”).

Pursuant to the Lead Investor Agreement, for so long

as Multicoin continues to beneficially own at least 5% of the Company’s issued and outstanding shares of Common Stock, Multicoin

has the right to nominate one individual for election to the Board of Directors, who shall also be chairperson of the Board of Directors

(such nominee, the “Investor Designee”), and the Company agreed to use its reasonable best efforts to cause the Investor Designee

to be elected to the Board of Directors (including recommending that the Company’s shareholders vote in favor of the election of

the Investor Designee).

Registered Direct Offering

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 $ 2,238,000 .

Preferred Stock

Series A-1 Convertible Preferred Stock

In connection with the Accounts

Payable Conversion Agreements with Forward China (see Note 14), the Company filed three Certificates of Amendment to the Certificate of

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

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

The holders of the Series A-1

have no voting rights and rank senior to all classes or series of the Company’s common stock with respect to the distribution of

assets upon liquidation, dissolution, or winding up.

Subject to a 19.9% Share Cap (as defined in the COD) the Series A-1 shall be convertible

into a number of shares of the Company’s common stock as determined by (i) multiplying the number of shares to be converted by the

Stated Value, (ii) adding the result of all accrued and accumulated and unpaid dividends on such shares to be converted, and then (iii)

dividing the result by the conversion price of $7.50, subject to adjustment as defined in the COD.

The Series A-1 is not redeemable.

In August and September 2025,

all 4,925 outstanding shares of the Series A-1 were converted into 656,666 shares of the Company’s common stock.

Following this

conversion, no shares of the Series A-1 remain outstanding.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Series B Convertible Preferred Stock

On 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.

Series B shares:

(i) accrued 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) were

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

were mandatorily convertible if certain conditions are met, (iv) had 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) were not redeemable, (vi) had such voting rights as required by New York law, including class voting rights on matters affecting the

Series B rights and preferences and (vii) had senior rights to all classes of common stock with respect to dividends, distributions, and

liquidation preferences.

The Series B shares contained certain beneficial ownership limitations and until August 8, 2025, were subject

to a maximum number of shares of common stock that could be issued without triggering shareholder approval requirements under the Nasdaq

Stock Market rules.

On August 8, 2025, the Company received shareholder approval to issue shares of the Series B in excess of these limitations.

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

On May 23, 2025, the Company

entered into a Preferred Stock Purchase Agreement (the “PS Agreement”) and related Registration Rights Agreement (the “Series

B Registration Rights Agreement”) with two accredited investors (the “Series B 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 (the

“Series B Warrants”) in exchange for $ 1,000,000 .

The PS Agreement contained 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.

These restrictions were terminated pursuant to the Waiver and Leak-out Agreement described below.

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 consolidated financial statements at September 30,

In September 2025, in connection

with the Securities Purchase Agreement, the Company entered into a waiver and leak-out agreement (the “Waiver and Leak-out Agreement”)

with the Series B Investors, pursuant to which the Series B Investors agreed to (i) the termination, waiver or amendment of all covenants

and provisions to forgo all of their rights under the Series B Warrants, the PS Agreement and the Series B Registration Rights Agreement,

including a general release from any liability for prior non-performance, and (ii) provide conversion notices and such other documentation

reasonably requested by the Company in order to complete the conversion of all of the Series B into shares of common stock.

10, 2025, all outstanding shares of the Series B were converted into 228,765 shares of the Company’s common stock.

Following the

conversion, no shares of Series B remain outstanding.

In connection with the Waiver

and Leak-out Agreement, the Company granted the Series B Investors the right to purchase up to $33,000,000 worth of shares of Common Stock

at a purchase price of $18.50 per share;

and has included for registration on the resale registration statement filed November 3, 2025,

on behalf of the Series B Investors as a selling shareholder, all shares of Common Stock previously underlying the Series B Stock and

Series B Warrants held by them.

In September 2025, the Series B Investors purchased 1,783,783 shares of the Company’s common stock

in connection with this agreement.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Series B Warrants

In 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 “Series B Warrants”).

At the time of grant, and through August 8, 2025, the warrants had been classified as a liability because the nature of certain settlement

provisions prevented them from meeting the fixed-for-fixed equity classification criteria in ASC 815, “Derivatives and Hedging.”

On August 8, 2025, upon receiving shareholder approval to issue shares of the Company’s common stock in excess of the Nasdaq 19.9%

(exchange cap) limitations upon exercise of the Series B Warrants, these warrants met the requirements to be classified as equity.

fair value of the warrants was measured on the grant date and was remeasured every reporting period through August 8, 2025, with the

resulting gain or loss from the change in fair value recorded as a component of other income/expense on the consolidated financial statements.

Upon receiving the aforementioned shareholder approval, the Series B Warrants were reclassified to equity and are no longer subject to

fair value measurement.

A final Black-Scholes valuation was performed prior to reclassifying the Series B Warrants to equity.

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.

The expected 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.

The Company 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

August 8, 2025

Expected term (years)

Expected volatility

Risk free interest rate

Expected dividends

A rollforward of the warrant liability is follows:

Schedule of rollforward warrant liability

Warrant liability at May 23, 2025

Change in fair value of warrant liability

Reclassification of warrant liability to equity

( 1,221,443 )

Warrant liability at September 30, 2025

Pre-Funded Warrants

The unfunded exercise price of

each Pre-Funded Warrant equals $0.00001 per underlying Pre-Funded Warrant Share.

The exercise price and the number of shares of Common

Stock issuable upon exercise of each Pre-Funded Warrant is subject to appropriate adjustment in the event of certain stock dividends,

stock splits, stock combinations, or similar events affecting our Common Stock.

The Pre-Funded Warrants are exercisable in cash or by

means of a cashless exercise and will not expire until the date such Pre-Funded Warrants are fully exercised.

The Pre-Funded Warrants

may not be exercised if the aggregate number of shares of Common Stock beneficially owned by the holder thereof (together with its affiliates)

immediately following such exercise would exceed a specified beneficial ownership limitation; provided, however, that a holder may

increase or decrease the beneficial ownership limitation by giving notice to the Company (61 days’ notice for increases), but not

to any percentage in excess of 9.99%.

In September 2025, 950,282 of the Pre-Funded Warrants were exercised via the cashless exercise provisions

of the related agreement and the Company issued 950,281 shares of its common stock in connection with such exercise.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advisor Warrants

The exercise price per share

of the Advisor Warrants shall equal $0.01 per share and shall be exercisable as follows:

(1) one-third (1/3) on and after the first date

on which the closing trading price of the Company’s Common Stock on its principal stock exchange is equal to or greater than 150%

of the cash Per Share Purchase Price for 20 out of 30 trading days following November 3, 2025 (the effective date of the resale registration

(2) one-third (1/3) on and after the first date on which the closing trading price of the Company’s Common Stock on

its principal stock exchange is equal to or greater than 200% of the cash Per Share Purchase Price for 20 out of 30 trading days following

November 3, 2025;

and (3) one-third (1/3) on and after the first date on which the closing trading price of the Company’s Common

Stock on its principal stock exchange is equal to or greater than 250% of the cash Per Share Purchase Price for 20 out of 30 trading days

following November 3, 2025.

The Advisor Warrants will not expire until the date such warrants are fully exercised.

Lead Investor Warrants

The exercise price per share

of the Lead Investor Warrants shall equal $0.01 per share and shall be exercisable as follows:

(1) one-third (1/3) on and after the first

date on which the closing trading price of the Company’s Common Stock on its principal stock exchange is equal to or greater than

150% of the cash Per Share Purchase Price for 20 out of 30 trading days following November 3, 2025;

(2) one-third (1/3) on and after the

first date on which the closing trading price of the Company’s Common Stock on its principal stock exchange is equal to or greater

than 200% of the cash Per Share Purchase Price for 20 out of 30 trading days following November 3, 2025;

and (3) one-third (1/3) on and

after the first date on which the closing trading price of the Company’s Common Stock on its principal stock exchange is equal to

or greater than 250% of the cash Per Share Purchase Price for 20 out of 30 trading days following November 3, 2025.

The Lead Investor

Warrants will not expire until the date such warrants are fully exercised.

Below is a rollforward of warrant

activity for Fiscal 2025:

Schedule of warrant

Number of Warrants

Weighted Average Exercise Price

Warrants outstanding at September 30, 2024

Warrants granted

Warrants exercised

Warrants outstanding at September 30, 2025

Equity Line of Credit

On May 16, 2025, the Company

entered into a Securities Purchase Agreement (the “ELOC”) and related Registration Rights Agreement with one of the Series

B Investors pursuant to which the Company had the right, in its sole discretion, to sell, and the Series B Investor agreed 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 agreement.

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

In connection with the execution of the ELOC, the Company issued 26,000 commitment shares to the Series B Investor and paid third-party

fees of $ 71,000 , which have been recorded to shareholders equity as a reduction of the related proceeds on the consolidated financial

statements as of September 30, 2025.

Pursuant to the terms of the ELOC, the Company could issue and sell shares to the Series B Investor

at prices discounted below the then-current market price of the Company’s common stock.

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.

In Fiscal 2025, the Company received gross proceeds of $ 2,432,000 from the sale of 248,000 shares of Common

Stock under the ELOC.

In September 2025, the Company and the Series B Investor mutually agreed to terminate the ELOC.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At-the Market Offering

On September 16, 2025,

the Company entered into a Controlled Equity Offering Sales Agreement (the “ATM”) with Cantor Fitzgerald & Company (“Cantor”),

as principal and/or agent, pursuant to which it may offer and sell, from time to time, through Cantor, shares of its common stock, having

an aggregate offering price of up to $4 billion.

Shares will be issued and sold pursuant to the Company’s effective registration

statement on Form S-3 as previously filed with, and declared effective by, the SEC.

The Company filed a prospectus supplement, dated September

16, 2025, with the SEC in connection with the offer and sale of shares under the ATM.

We will pay Cantor a commission of up to 3% of the

gross proceeds from each sale of shares under the ATM.

In Fiscal 2025, we sold 124,000 shares of common stock under the ATM for gross

proceeds of $ 4,064,000 and incurred fees related to the ATM of $ 839,000 , of which $ 102,000 have been recorded as a reduction to additional

paid-in capital and $ 737,000 have been recorded as deferred financing costs and presented as a component of other assets on the consolidated

financial statements.

In July 2023, the Company was

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

in February 2024, the Company was notified that it was not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Shareholders’

Equity Rule”) (collectively, with the Minimum Bid Price Rule, the “Minimum Requirements”).

1 unchanged sentence

presented a plan of action to the Nasdaq Hearings Panel to meet compliance with the Minimum Requirements.

a result of the reverse stock split effected in June 2024 and the entrance into the Accounts Payable Conversion Agreement (described in

Note 14), the Company regained compliance with the Minimum Requirements in July 2024 and was formally notified by Nasdaq that the

Minimum Requirements were met.

Until July 24, 2025, the Company is subject to a Nasdaq “Panel Monitor” which provides for

in the event the Company fails to satisfy the Stockholders’ Equity Rule (not the Minimum Bid Price Rule) during the monitoring period,

the Company will be required to request a hearing before the Panel in order to maintain its listing rather than taking the interim step

of submitting a compliance plan for the Listing Qualifications Staff’s review or receiving any otherwise applicable grace period.

We can provide no assurance that if the Company falls below the Stockholders’ Equity Rule requirement during this period that the

Company will be able to maintain its Nasdaq listing.

As a result of the reverse stock

split effected in June 2024 and the entrance into the first Accounts Payable Conversion Agreement (described in Note 14), the Company

regained compliance with the Minimum Requirements in July 2024 and was formally notified by Nasdaq that the Minimum Requirements were

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 Shareholders’ 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 Company

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

with the Shareholders’ Equity Rule.

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

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

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

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

of the hearings process.

As a result of the fourth conversion

agreement with Forward China (see Note 14), the Company regained compliance with the Shareholders’ Equity Rule in March 2025 and

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

hearing had been canceled.

Shares Reserved for Future Issuance

At September 30, 2025, the Company

had a total of 128,681,429 shares reserved for future issuance as follows:

(i) 102,440,439 shares related to the ATM, (ii) 11,081,083

related to the Pre-Funded Warrants, (iii) 6,242,315 related to the Advisor Warrants and (iv) 8,917,592 related to the Lead Investor Warrants.

FORWARD INDUSTRIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

“Blank Check” Preferred Stock

The Company is authorized

to issue up to 4,000,000 shares of "blank check" preferred stock.

The Board has the authority and discretion, without shareholder

approval, to issue preferred stock in one or more series for any consideration it deems appropriate, and to fix the relative rights and

preferences thereof including their redemption, dividend and conversion rights.

Of these shares, 100,000 shares have been authorized as

the Series A Participating Preferred Stock.

There were no shares of Series A preferred stock issued or outstanding at September 30, 2024

connection with the Conversion Agreements with Forward China (see Note 14), the Company filed two Certificates of Amendment to the Certificate

of Incorporation (the “COD”) designating 2,700

shares of Series A-1 Convertible Preferred Stock, with a stated value of $ 1,000

per share (the “Stated Value”).

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

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

Subject to a 19.9% share cap (as

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

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

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

subject to adjustment as defined in the COD.

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

At September 30, 2024, the

Company had 7,500 warrants outstanding and exercisable, which have an exercise price of $ 17.50 per share and an expiration date 90 days

after a registration statement registering common stock (other than pursuant to an employee benefit plan) is declared effective by the

Securities and Exchange Commission.

Tokenization of Common Stock

In September 2025, the Company

entered into a digital transfer agent agreement with Superstate Services LLC (“Superstate”) as its co-transfer agent, to give

shareholders the ability to tokenize their holdings of the Company’s common stock on the Solana blockchain.

Any tokenized shares

are recorded and maintained by Superstate and represent the same ownership interests as the corresponding shares of the Company’s

common stock.

At September 30, 2025, no shares of the Company’s common stock had been tokenized.

SHARE-BASED COMPENSATION

2 unchanged sentences

of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”), which is administered by the Compensation Committee

of the Board of Directors and authorizes 1,291,000 shares of common stock for grants of various types of equity awards to officers, directors,

of the Board of Directors and authorized 129,100 shares of common stock for grants of various types of equity awards to officers, directors,

employees and consultants.

1 unchanged sentence

“2011 Plan”), which expired according to its terms in March 2021.

Shares authorized under the 2021 Plan include 1,000,000

new shares and 291,000 shares that remained available under the 2011 Plan.

Awards which are forfeited or expire are eligible for regrant

under the 2021 Plan.

The exercise prices of stock options granted may not be less than the fair market value of the common stock as quoted

on the Nasdaq stock market on the grant date and the expiration date of option awards may not exceed 10 years.

Shares authorized under the 2021 Plan included 100,000 new

shares and 29,100 shares that remained available under the 2011 Plan.

Awards which are forfeited or expire are eligible for regrant under

the 2021 Plan.

The exercise prices of stock options granted may not be less than the fair market value of the common stock as quoted on

the Nasdaq stock market on the grant date and the expiration date of option awards may not exceed 10 years from the date of grant.

August 8, 2025, shareholders of the Company approved an increase of 300,000 authorized shares under the 2021 Plan.

At September 30, 2025,

there were 1,243,000 shares of common stock available for grants under the 2021 Plan.

there were approximately 53,000 shares of common stock available for grants under the 2021 Plan.

Stock Options

The fair value of option

awards is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions in the following table.

The expected term represents the period over which the stock option awards are expected to be outstanding.

The Company utilizes the simplified

method to develop an estimate of the expected term of “plain vanilla” option grants.

The expected volatility used is based

on the historical price of the Company’s stock over the most recent period commensurate with the expected term of the award.

risk-free interest rate used is based on the implied yield of U.S.

Treasury zero-coupon issues with a remaining term equivalent to the

award’s expected term.

The Company historically has not paid any dividends on its common stock and had no intention to do so on

the date the share-based awards were granted.

The fair value of option awards

is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions in the following table.

term represents the period over which the stock option awards are expected to be outstanding.

The Company utilizes the simplified method

to develop an estimate of the expected term of “plain vanilla” option grants.

The expected volatility used is based on the

historical price of the Company’s stock over the most recent period commensurate with the expected term of the award.

The risk-free

interest rate used is based on the implied yield of U.S.

Treasury zero-coupon issues with a remaining term equivalent to the award’s

expected term.

The Company has not historically paid any dividends on its common stock and had no intention to do so on the date the share-based

awards were granted.

The Company accounts for forfeitures in the period they occur.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In applying the Black-Scholes

3 unchanged sentences

Expected volatility

63.2 % - 84.2 %

Risk free interest rate

3.5 % - 4.2 %

Expected dividends

Fiscal 2024, the Company granted options to three of its non-employee directors to purchase an aggregate of 33,243

shares of its common stock at an exercise price of $ 7.60

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

were forfeited prior to vesting.

The options have a weighted average grant-date fair value of $ 3.60

per share and an aggregate grant-date fair value of $ 120,000 ,

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

In Fiscal 2023, the

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

price of $ 10.30 per share.

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

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

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In Fiscal 2025, the Company made

the following option grants:

· In October 2024, options to non-employee directors

to purchase an aggregate of 48,020 shares of its common stock at an exercise price of $ 3.73 per share.

The options vest one year from

the date of grant, expire five years from the date of grant and have an aggregate grant-date fair value of $ 80,000 , which will be recognized,

net of forfeitures, ratably over the vesting period.

· In February 2025, options to its Chief Executive

Officer to purchase 13,779 shares of its common stock at an exercise price of $ 6.01 per share.

The options vest one year from the date

of grant, expire five years from the date of grant, have an aggregate grant-date fair value of $ 40,000 , which will be recognized, net

of forfeitures, ratably over the vesting period.

· In June 2025, options to non-employee directors

to purchase 36,441 shares of its common stock at an exercise price of $ 6.37 per share.

The options vest one year from the date of grant,

expire five years from the date of grant, have an aggregate grant-date fair value of $ 120,000 , which will be recognized, net of forfeitures,

ratably over the vesting period.

The Company recognized compensation

expense for stock option awards of $ 101,000 and $ 86,000 during Fiscal 2024 and Fiscal 2023, respectively, which was recorded as a component

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

No options were exercised

during Fiscal 2024 and Fiscal 2023.

· In September 2025, options to non-employee directors

and management to purchase an aggregate of 180,000 shares of its common stock at an exercise price of $ 18.50 per share.

The options vested

upon grant, expire five years from the date of grant, and had an aggregate grant-date fair value of $ 1,428,000 , which was fully recognized

on the date of grant.

In Fiscal 2024, the Company granted

options to three of its non-employee directors to purchase an aggregate of 33,243 shares of its common stock at an exercise price of $ 7.60

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

The options had 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.

The options granted in Fiscal

2025 had a weighted average grant-date fair value of $ 5.99 per share.

The Company recognized compensation expense for stock option awards

of $ 1,574,000 and $ 101,000 during Fiscal 2025 and Fiscal 2024, respectively, which was recorded as a component of general and administrative

expenses in its consolidated statements of operations.

During Fiscal 2025, the Company

issued 3,907 shares of its common stock pursuant to the exercise of stock options for aggregate cash proceeds of $ 61,000 , which had an

aggregate intrinsic value of $ 75,000 .

No options were exercised in Fiscal 2024.

At September 30, 2025, there

were no material amounts of unrecognized compensation cost related to nonvested stock option awards.

was $ 94,000 of unrecognized compensation cost related to nonvested stock option awards that is expected to be recognized over a weighted

average period of 0.6 years.

In connection with the Securities Purchase Agreement (see Note 8), certain stock options are subject to

a lockup period, which prohibits the sale of the underlying common stock until March 2026, without prior written consent from the Company.

The following table summarizes

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Awards

In Fiscal 2025, the Company granted

50,000 shares of restricted stock to one of its non-employee directors.

These shares are fully vested and had an aggregate grant date

fair value of $ 1,298,000 based on the closing price of the Company’s common stock on the date of grant, which was recorded as compensation

expense on the date of grant and included as a component of general and administrative expenses on the consolidated financial statements.

In connection with the Securities Purchase Agreement (see Note 8), these shares are subject to a lockup period, which prohibits their

sale until March 2026 without prior written consent from the Company.

NOTE 10 INCOME TAXES

2 unchanged sentences

federal, state and foreign taxes on income:

Schedule of income tax provision

Schedule of tax provision

( 34,854,000 )

( 6,819,000 )

Deferred income tax expense (benefit)

( 41,316,000 )

Change in valuation allowance

Income tax provision

The deferred tax provision

is the change in the deferred tax assets and liabilities representing the tax consequences of changes in the amounts of temporary differences,

The deferred tax provision is

the change in the deferred tax assets and liabilities representing the tax consequences of changes in the amounts of temporary differences,

net operating loss carryforwards and changes in tax rates during the fiscal year.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s deferred

6 unchanged sentences

Share-based compensation

AMT & other tax credits

Excess tax over book basis in inventory

Reserves and other allowances

1 unchanged sentence

Accrued compensation

Intangible assets

Accrued related party interest

Unrealized gains/losses

Charitable contributions

13 unchanged sentences

tax expenses in states where net operating loss carryforwards (“NOLs”) were not available.

At September 30, 2025, the Company

had available NOLs for U.S.

federal income tax purposes of $ 15,776,000 and NOLs for state income tax purposes of $ 9,711,000 .

NOLs generated

prior to 2018 expire beginning in 2031 while NOLs generated after 2018 have an indefinite carryforward period.

The NOLs result in a deferred

tax asset of $ 3,313,000 with respect to U.S.

federal income taxes and $ 713,000 for state income taxes.

Total net deferred tax assets,

before valuation allowance, were $ 45,643,000 and $ 4,307,000 at September 30, 2025 and 2024, respectively.

FORWARD INDUSTRIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At September 30, 2024, the

Company had available NOLs for U.S.

federal income tax purposes of $ 13,012,000 and NOLs for state income tax purposes of $ 7,425,000 .

generated prior to 2018 expire beginning in 2031 while NOLs generated after 2018 have an indefinite carryforward period.

The NOLs result

in a deferred tax asset of $ 2,732,000 with respect to U.S.

federal income taxes and $ 516,000 for state income taxes.

In addition, at September

30, 2024, the Company had available NOLs for foreign income tax purposes of $ 1,975,000 , resulting in a deferred tax asset of $ 338,000 ,

expiring through 2028.

Total net deferred tax assets, before valuation allowance, were $ 4,307,000 and $ 4,102,000 at September 30, 2024

and 2023, respectively.

Undistributed earnings of the Company’s foreign subsidiaries are considered permanently reinvested;

in accordance with U.S.

GAAP, no provision for U.S.

federal or state income taxes would result.

In Fiscal 2024, Forward Switzerland had

a net loss for tax purposes of $ 96,000 and Forward UK had a net loss for tax purposes of $ 41,000 .

At September 30, 2024,

as part of its periodic evaluation of the necessity to maintain a valuation allowance against its deferred tax assets, and after

consideration of all factors, including, among others, projections of future taxable income, current year NOL utilization and the

extent of the Company’s cumulative losses in recent years, the Company determined that, on a more likely than not basis, it

would not be able to use remaining deferred tax assets, except with respect to the U.S.

federal income taxes in the event the

Company elects to effect repatriation of certain foreign source income of Forward Switzerland, which income is currently considered

to be permanently reinvested and for which no U.S.

tax liability has been accrued.

Accordingly, the Company has determined to

maintain a full valuation allowance against its net deferred tax assets.

At September 30, 2024 and 2023, the valuation allowance was

$4,307,000 and $4,102,000, respectively.

The change in the valuation allowance of $205,000 is comprised of a $228,000 increase from

continuing operations and a $23,000 decrease from discontinued operations.

In the future, the utilization of the Company’s

NOLs may be subject to certain change of control limitations.

If the Company determines that it will be able to use some or all of

its deferred tax assets in a future reporting period, the adjustment to reduce or eliminate the valuation allowance would reduce its

income tax expense and increase after-tax income.

The significant elements

contributing to the difference between the U.S.

At September 30, 2025, as part

of its periodic evaluation of the necessity to maintain a valuation allowance against its deferred tax assets, and after consideration

of all factors, including, among others, projections of future taxable income, current year NOL utilization and the extent of the Company’s

cumulative losses in recent years, the Company determined that, on a more likely than not basis, it would not be able to use remaining

deferred tax assets.

Accordingly, the Company has determined to maintain a full valuation allowance against its net deferred tax assets.

At September 30, 2025 and 2024, the valuation allowance was $45,643,000 and $4,307,000, respectively.

In the future, the utilization of

the Company’s NOLs may be subject to certain change of control limitations as described below.

If the Company determines that it

will be able to use some or all of its deferred tax assets in a future reporting period, the adjustment to reduce or eliminate the valuation

allowance would reduce its income tax expense and increase after-tax income.

Utilization of NOLs may be subject

to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 (the “Code”) due to ownership change

limitations that have occurred previously or that could occur in the future.

These ownership changes may limit the amount of NOLs that

can be utilized annually to offset future taxable income.

An ownership change pursuant to the Code generally occurs if one or more shareholders

or groups of shareholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over

their lowest ownership percentage within a rolling three-year period.

The Company’s ability to utilize its NOLs and other tax attributes

to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection

with the Securities Purchase Agreement (Note 8) or other transactions.

Similar rules may apply under state tax laws.

Additionally, Section 382 requires

companies to satisfy the “continuity of business enterprise” in order to utilize pre-change tax attributes, which requires

the continuance of at least one significant historic line of business or the usage of a significant portion of historic assets in a business.

Failure to meet these requirements not only affects the ability to utilize NOLs, but may also result in limitations or forfeiture of other

deferred tax assets.

The Company has engaged external

tax experts to perform a comprehensive Section 382 study, but as of the date of this filing, this study has not been completed and therefore,

the effects of any Section 382 limitations on the utilization of NOLs cannot be determined as of the date of this filing.

If the Company

earns taxable income, such limitations could result in an increased future income tax liability, and its future cash flows could be adversely

The significant elements contributing

to the difference between the U.S.

federal statutory tax rate and the Company’s effective tax rate are as follows:

8 unchanged sentences

Effective tax rate

At September 30, 2024 and

2023, the Company had no uncertain tax positions or related interest or penalties requiring accrual.

It is the Company’s policy to recognize

interest and/or penalties, if any, related to income tax matters in income tax expense in the consolidated statements of operations.

the periods presented in the accompanying consolidated statements of operations, no material income tax related interest or penalties

were assessed or recorded.

All fiscal years prior to the fiscal year ended September 30, 2021, are closed to federal and state examination.

FORWARD INDUSTRIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 EARNINGS PER SHARE

Basic earnings per share

At September 30, 2025 and 2024,

the Company had no significant uncertain tax positions or related interest or penalties requiring accrual.

It is the Company’s policy

to recognize interest and/or penalties, if any, related to income tax matters in income tax expense in the consolidated statements of

For the periods presented in the accompanying consolidated statements of operations, no material income tax related interest

or penalties were assessed or recorded.

All fiscal years prior to the fiscal year ended September 30, 2022, are closed to federal and

state examination.

On July 4, 2025,

the One Big Beautiful Bill Act (“OBBBA”) was enacted.

The OBBBA introduced multiple tax law and other

legislative changes, including modifications to income tax provisions such as domestic research and development expenses, capital

expenditures, and U.S.

taxation of international earnings.

The OBBBA is not expected to materially impact the Company’s

effective tax rate or cash flows for Fiscal 2025 or future periods.

NOTE 11 LOSS/EARNINGS PER

Basic loss/earnings per share

data for each period presented is computed using the weighted average number of shares of common stock outstanding during each such period

Diluted earnings per share data is computed using the weighted average number of common and dilutive common equivalent shares outstanding

during each period.

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, and the conversion of preferred stock, using the if-converted method.

A reconciliation of basic

and diluted earnings/loss per share is as follows:

Schedule of reconciliation of basic and diluted earnings/loss per share

and includes Pre-Funded Warrants (see Note 8) from their date of issuance.

Diluted loss/earnings per share data is computed using the

weighted average number of common and dilutive common equivalent shares outstanding during each period.

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/loss per share is as follows:

Schedule of reconciliation of basic and diluted earnings per share

For the Fiscal Years Ended

September 30,

(Loss) / income from continuing operations

Loss from continuing operations

$ ( 169,088,979 )

Loss from discontinued operations, net of tax

$ ( 2,166,179 )

Less deemed dividend on Series B Convertible Preferred Stock

Loss from continuing operations attributable to common shareholders

( 169,118,423 )

( 2,166,179 )

Income from discontinued operations, net of tax

Net loss attributable to common shareholders

$ ( 167,003,784 )

$ ( 1,950,587 )

Weighted average common shares outstanding

2 unchanged sentences

Basic loss per share :

Basic (loss) / earnings per share from continuing operations

Basic loss per share from discontinued operations

Basic loss per share

Diluted loss per share:

Diluted (loss) / earnings per share from continuing operations

Diluted loss per share from discontinued operations

Basic loss per share from continuing operations

Basic earnings per share from discontinued operations

Basic loss per share attributable to common shareholders

Diluted loss per share:

The following securities

Diluted loss per share from continuing operations

Diluted earnings per share from discontinued operations

Diluted loss per share attributable to common shareholders

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following options and warrants

were excluded from the calculation of diluted earnings per share in Fiscal 2025 and Fiscal 2024 because their inclusion would have been

anti-dilutive:

Schedule of anti-dilutive

Schedule of anti-dilutive shares

For the Fiscal Years Ended

1 unchanged sentence

Total potentially dilutive shares

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 COMMITMENTS AND

CONTINGENCIES

Guarantee Obligation

In February 2010, Forward

Switzerland and its European logistics provider (freight forwarding and customs agent) entered into an agreement (the “Representation

Agreement”) whereby, among other things, the European logistics provider agreed to act as Forward Switzerland’s fiscal representative

in The Netherlands for the purpose of providing services in connection with any value added tax matters.

As part of this agreement, Forward

Switzerland agreed to provide an undertaking (in the form of a bank letter of guarantee) to the logistics provider with respect to any

value added tax liability arising in The Netherlands that the logistics provider is required to pay to Dutch tax authorities on its behalf.

In February 2010, Forward

Switzerland entered into a guarantee agreement with a Swiss bank relating to the repayment of any amount up to €75,000 (equal to

approximately $84,000 at September 30, 2024) paid by such bank to the logistics provider in order to satisfy such undertaking pursuant

to the bank letter of guarantee.

Forward Switzerland would be required to perform under the guarantee agreement only in the event that

(i) a value added tax liability is imposed on the Company’s revenues in The Netherlands;

(ii) the logistics provider asserts that it has

been called upon in its capacity as surety by the Dutch Receiver of Taxes to pay such taxes;

(iii) Forward Switzerland or the Company

on its behalf fails or refuses to remit the amount of value added tax due to the logistics provider upon its demand;

and (iv) the logistics

provider makes a drawing under the bank letter of guarantee.

Under the Representation Agreement, Forward Switzerland agreed that the letter

of guarantee would remain available for drawing for three years following the date that its relationship terminates with the logistics

provider to satisfy any value added tax liability arising prior to expiration of the Representation Agreement but asserted by The Netherlands

after expiration.

The initial term of the bank

letter of guarantee expired February 28, 2011, but it renews automatically for one-year periods on February 28 of each subsequent year

unless Forward Switzerland provides the Swiss bank with written notice of termination at least 60 days prior to the renewal date.

the intent of Forward Switzerland and the logistics provider that the bank letter of guarantee amount be adjusted annually.

In consideration

of the issuance of the letter of guarantee, Forward Switzerland has granted the Swiss bank a security interest in all of its assets on

deposit with, held by, or credited to Forward Switzerland’s accounts with, the Swiss bank (approximately $245,000 at September 30,

At September 30, 2024, the Company had not incurred a liability in connection with this guarantee.

Legal Proceedings

NOTE 12 COMMITMENTS AND CONTINGENCIES

From time to time, the Company

5 unchanged sentences

The Company’s operating

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

Total operating lease expense in Fiscal 2024 was $ 619,000 ,

of which $ 15,000 was recorded in sales and marketing expenses and $ 604,000 was recorded in general and administrative expenses on the

consolidated statements of operations.

Total operating lease expense in Fiscal 2023 was $ 621,000 , of which $ 3,000 was recorded in

sales and marketing expenses and $ 618,000 was recorded in general and administrative expenses on the consolidated statements of operations.

Cash paid for amounts included in operating lease liabilities in Fiscal 2024 and Fiscal 2023, which have been included in cash flows from

operating activities, was $ 592,000 and $ 575,000 , respectively.

At September 30, 2024, the

Company’s operating leases had a weighted average remaining lease term of 6.9 years and a weighted average discount rate of 5.8 %.

Future minimum payments under non-cancellable

operating leases are as follows:

Schedule of future minimum payments under operating leases

leases are primarily for corporate, engineering, and administrative office space and the related expense is recorded in general and administrative

expenses on the consolidated financial statements.

Total operating lease expense in Fiscal 2025 and Fiscal 2024 was $ 617,000 and $ 619,000 ,

respectively.

Cash paid for amounts included in operating lease liabilities in Fiscal 2025 and Fiscal 2024, which have been included in

cash flows from operating activities, was $ 607,000 and $ 592,000 , respectively.

The Company signed a renewal

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

Payments under this operating lease commenced February 1,

2025, and escalate 4.0% per year.

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

At September 30, 2025, the Company’s

operating leases had a weighted average remaining lease term of 6.0 years and a weighted average discount rate of 5.9 %.

At September 30, 2025, future

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

Future minimum payments under non-cancellable operating

leases are as follows:

Schedule of future

minimum payments under non-cancellable operating leases

Total future minimum lease payments

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 RELATED PARTY

NOTE 14 RELATED PARTY TRANSACTIONS

Galaxy Service Agreement

In September 2025, the Company

entered into a services agreement (the “Services Agreement”) with Galaxy, pursuant to which the Company engaged Galaxy to

provide certain operational, financial and human resources services to assist with the inception of its new digital assets treasury business.

Galaxy will not be providing any (i) tax advice or services, (ii) legal advice or services, or (iii) advice in connection with the Investment

Company Act of 1940, as amended (the “Investment Company Act”), or any related analyses thereto.

As compensation for its services,

we will pay Galaxy fees of approximately $ 583,000 per month.

The Services Agreement has an initial term of six months but may be extended

for one additional six month period if mutually agreed in writing by the parties.

During Fiscal 2025, the Company incurred fees of $ 389,000

related to the Servies Agreement, which were recorded as a component of related party expenses and related party payables on the consolidated

financial statements at and for the fiscal year ended September 30, 2025.

Galaxy Asset Management Agreement

On September 10, 2025, we entered

into an asset management agreement (the “Asset Management Agreement”) with Galaxy Digital Capital Management LP, an SEC-registered

investment adviser (the “Asset Manager”), pursuant to which we appointed the Asset Manager to provide discretionary investment

management services with respect to all of our cash, cash equivalents, stablecoins, cryptocurrency and other investible assets (excluding

(i) publicly-traded equities acquired pursuant to mergers, acquisitions, combinations or other similar transactions pursuant to which

we acquire or otherwise combine or merge with another publicly-traded digital asset treasury company, (ii) privately offered equity securities

and (iii) non-publicly traded convertible debt instruments).

Title to the account and all account assets will be held in our name.

Asset Manager is not authorized to act as custodian of our assets, nor to take possession or title to any assets.

As compensation for the Asset

Manager’s services, we will pay management fees of 0.6 % per annum of the value of the Account Assets (as defined in the Asset Management

In addition, the Asset Manager is authorized to appoint an affiliate to stake some or all of the SOL purchased for, maintained

in the account, or otherwise owned or controlled by the Company.

Such Asset Manager affiliate will be entitled to mutually agreed upon

staking-based fees, subject to certain parameters according to a schedule set forth in the Asset Management Agreement.

The Asset Manager

is otherwise responsible for all of its overhead costs and the custody fees of any custodian selected by the Asset Manager, and the Company

will pay or reimburse the Asset Manager for all reasonable and documented expenses related to the operation of the account.

The Asset Management Agreement

has an initial term of three years and renews for successive one-year renewal periods unless the Company or the Asset Manager terminates

or elects not to continue effectiveness of the Asset Management Agreement.

The Asset Management Agreement may be terminated by either

party without cause after the initial term or any subsequent renewal period upon ninety (90) days’ notice prior to the expiration

of such term.

In addition, at any time, the Asset Management Agreement may be terminated either for cause or upon certain acts of insolvency,

each as described therein.

While the Asset Manager is the exclusive asset manager for the Company, the Asset Manager may nonetheless provide

similar services to other clients, and the Asset Manager or its affiliates may engage in transactions for their own accounts.

Management Agreement contains customary representations, warranties, confidentiality, indemnification and limitation of liability provisions,

and is governed by the laws of the State of New York.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During Fiscal 2025, the Company

incurred fees of $ 535,000 related to the Asset Management Agreement, which were recorded on the consolidated financial statements as a

component of related party expenses and related party payables at and for the fiscal year ended September 30, 2025.

Buying Agency and Supply Agreement

The Company has a Buying

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

The Supply Agreement provides that, upon the terms

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

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

The Company purchases 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.

Considering the loss of a significant OEM

distribution customer (see Note 16), 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.

October 2023, the Company and Forward China entered into a new sourcing agreement under which the fixed portion of the sourcing fee was

further reduced to $65,833 per month.

Other terms in the agreement are substantially the same as the prior agreement.

Due to the Retail

Exit and decline in the OEM distribution segment business, the new sourcing agreement expired October 31, 2024.

In November 2024, the

Company and Forward China agreed to:

(i) extend the sourcing agreement until April 30, 2025, but allow either party to cancel with 30

days notice, (ii) reduce the fixed portion of the sourcing fee to $35,000 per month, and (iii) change the payment terms to better align

with payments from the Company’s customers.

Terence Wise, Chief Executive

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

The Company had a Buying Agency

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

The Supply Agreement provided that, upon the terms and subject

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

defined in the Supply Agreement) in the Asia-Pacific region.

The Company purchased products at Forward China’s 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:

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 of Directors, 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 owned more than 5% of the Company’s common stock

prior to the Private Placement (see Note 8).

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 $ 891,000 and $ 1,266,000 during

Fiscal 2024 and Fiscal 2023, respectively, which are included as a component of cost of sales upon sales of the related products.

Company had purchases from Forward China of $ 7,862,000 and $ 12,799,000 during Fiscal 2024 and Fiscal 2023, respectively.

The Company has a separate

agreement with Forward China to address the potential impact of customers sourcing directly from Forward China.

In the event a customer

of the Company bypasses the services of the Company and does business directly with Forward China, Forward China will pay a commission

of 50% of the net revenue, less direct costs, generated from the products or services sold.

No commissions were recognized in Fiscal 2024

and Fiscal 2023.

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 September 30, 2024, the remaining balance covered by this agreement

was approximately $ 4,881,000 .

During Fiscal 2023, as a

result of the Retail Exit, the Company recognized a loss of approximately $ 1,021,000 relating to the termination of unfulfilled purchase

orders with Forward China for retail products (see Note 3).

Yu, a Managing Director of Forward China, beneficially owned more than

5% of the Company’s common stock prior to the Private Placement.

The Company recorded service fees to Forward China of $ 331,000

and $ 891,000 during Fiscal 2025 and Fiscal 2024, respectively, which were included as a component of cost of sales upon sales of the related

Due to the OEM Plan, these costs are now included in income from discontinued operations for Fiscal 2025 and Fiscal 2024.

Company had purchases from Forward China of approximately $ 4,040,000 and $ 7,862,000 during Fiscal 2025 and Fiscal 2024, respectively.

In order to preserve the 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 Agreement

In order to maintain

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

Agreements”), which were effective in July and September of 2024, to convert portions of amounts Due to Forward China into shares

of preferred stock.

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

China payable into 2,200 shares of the Company’s newly designated Series A-1 convertible preferred stock with a stated

value of $ 1,000 per share (see Note 8).

In order to maintain compliance

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

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 Fiscal 2025 and Fiscal 2024, respectively, Forward China agreed to convert $ 2,725,000

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

FORWARD INDUSTRIES, INC.

2 unchanged sentences

Promissory Note

On January 18, 2018, the

Company issued a $ 1,600,000 unsecured promissory note payable to Forward China to fund the acquisition of IPS.

The promissory note bears

interest at a rate of 8 % per annum and had an original maturity date of January 18, 2019.

On January 18, 2018, the Company

issued a $ 1,600,000 unsecured promissory note payable to Forward China to fund the acquisition of IPS.

The promissory note bears interest

at a rate of 8 % per annum and had an original maturity date of January 18, 2019.

Monthly interest payments commenced on February 18, 2018,

with the principal due at maturity.

The Company incurred and paid interest associated with this note of $ 63,000 and $ 104,000

in Fiscal 2024 and Fiscal 2023, respectively.

The Company incurred and paid interest associated with this note of $ 49,000 and $ 63,000 in Fiscal

2025 and Fiscal 2024, respectively.

At September 30, 2024, the maturity date of this note was December 31, 2024 .

2024, the maturity date of this note was extended to June 30, 2025 .

The maturity date of the note has been extended on several occasions

to assist the Company with liquidity.

The Company made principal payments of $ 500,000 and $ 300,000 on this note during Fiscal 2024 and

Fiscal 2023, respectively, and this note has a remaining balance of $ 600,000 at September 30, 2024.

In October 2024, the

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

In connection with the sale of the OEM segment, the maturity date of this note

was extended to December 31, 2025 .

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

The Company fully paid off this note in September 2025.

Other Related Party Activity

4 unchanged sentences

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 $ 380,000 and $ 2,058,000 in Fiscal 2024 and Fiscal 2023,

respectively.

Due to the Retail Exit, these revenues are included in the loss from discontinued operations for Fiscal 2024 and Fiscal

(“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 $ 380,000 in Fiscal 2024.

Due to the Retail Exit, these

revenues are included in the loss from discontinued operations.

The Company had an agreement

5 unchanged sentences

and was extended on a month-to-month basis until November 30, 2023.

The Company incurred costs under this agreement of $ 20,000 and $ 127,000

for Fiscal 2024 and Fiscal 2023, respectively.

The Company incurred costs under this agreement of $ 20,000 for Fiscal

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

for Fiscal 2024 and Fiscal 2023.

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

The Company had no accounts payable to

Justwise at September 30, 2025 or 2024.

The Company recorded revenue

2 unchanged sentences

of Forward China.

The Company recognized revenues from this customer of $ 523,000 and $ 626,000 in Fiscal 2024 and Fiscal 2023, respectively.

The Company had accounts receivable of $ 96,000 and $ 0 from this customer at September 30, 2024 and 2023, respectively.

In Fiscal 2024, the Company recognized revenues of $ 523,000 from this customer and had accounts receivable of $ 96,000

as of September 30, 2024.

There were no revenues from this customer in Fiscal 2025, and no accounts receivable balances were outstanding

as of September 30, 2025.

Due to the OEM plan, Fiscal 2024 revenues are reported as income from discontinued operations and the accounts

receivable as of September 30, 2024 are included in assets held for sale.

NOTE 15 401(k) PLAN

2 unchanged sentences

to Internal Revenue Service limitations.

The Company made immediately vested contributions based on a percentage of the employee’s

The Company made immediately vested contributions based on a percentage of the employees’

salary of $ 355,000 during Fiscal 2025, of which $ 285,000 was recorded to cost of sales, $ 9,000 was recorded to sales and marketing expense

4 unchanged sentences

the consolidated statement of operations.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 SEGMENTS AND CONCENTRATIONS

As a result of discontinuing

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

OEM distribution and design.

See Note 2 for more information

on the composition and accounting policies of our reportable segments.

The results of the retail segment were classified as discontinued

operations as discussed in Note 3.

Segment information presented herein excludes the results of the retail segment for all periods presented.

the retail and OEM segments (Note 3) and our new digital asset treasury strategy, the Company now has two reportable segments:

and digital assets.

See Note 2 for more information on the composition and accounting policies of our reportable segments.

of the retail and OEM segments were classified as discontinued operations as discussed in Note 3.

The prior year segment disclosures have

been reformatted from what was previously disclosed to conform to the current year presentation.

The Company’s Chief Executive

Officer serves as the Chief Operating Decision Maker (“CODM”) and evaluates the financial performance of the business and

makes resource allocation decisions on the basis of revenue, gross profit and net income or loss from continuing operations before income

taxes for each reportable segment.

The tables below represent

the primary measure of segment performance evaluated by the CODM, as well as additional measures that are regularly provided to

the CODM on a segment-level.

Schedule of segment performance

Design Segment

Cost of revenues

Depreciation expense (a)

Sales and marketing personnel costs

Sales promotion and marketing expenses

General and administrative personnel costs

Occupancy costs

Amortization expense (a)

Impairment of goodwill and intangible assets

Interest income

Other segment expenses (b)

(Loss)/income from continuing operations before income taxes

$ ( 5,159,000 )

FORWARD INDUSTRIES, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our chief operating decision

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

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

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

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

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

We do not include intercompany activity in our

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

Segment assets consist of accounts receivable

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

Information by segment and

related reconciliations are shown in tables below:

Schedule of segment and

related reconciliations

OEM distribution

Total segment revenues

Operating Income/(Loss)

OEM distribution

Total segment operating income

General corporate expenses

Digital Assets Segment

Cost of revenues

Asset management fees (a)

Loss on change in fair value of digital assets

Loss from continuing operations before income taxes

$ ( 156,162,000 )

Depreciation expense, amortization expense and asset management fees are not regularly provided to the CODM, however they are components of loss from continuing operations before income taxes and identified as a "specific profit or loss" item and therefore disclosed separately in accordance with the related accounting guidance.

Other segment expenses include insurance expense, bad debt expense, bank and payroll processing fees, and various other general and administrative expenses.

The following table is a reconciliation

of segment loss from continuing operations before taxes to our consolidated loss from continuing operations before income taxes.

Schedule of reconciliation

of segment loss

Design segment loss from continuing operations before income taxes

$ ( 5,159,000 )

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

Digital assets segment loss from continuing operations before income taxes

( 156,162,000 )

Other income, net

(Loss)/income from continuing operations before income taxes

Corporate and other non-segment expenses

( 7,748,000 )

Depreciation and Amortization

OEM distribution

Schedule of condensed balance sheet

Segment Assets

September 30,

OEM distribution

( 2,247,000 )

Consolidated loss from continuing operations before income taxes

$ ( 169,069,000 )

$ ( 2,143,000 )

Segment assets consist of accounts

receivable and digital assets, which are regularly reviewed by the CODM, as well as goodwill and intangible assets resulting from design

segment acquisitions.

Schedule of segment assets

Segment Assets at September 30,

Design segment

Digital assets segment

1,430,486,000

Total segment assets

1,433,866,000

General corporate assets

Discontinued assets held for sale

Other assets of discontinued retail segment

$ 1,474,942,000

FORWARD INDUSTRIES, INC.

4 unchanged sentences

assets consist of property and equipment and operating lease right-of-use assets, all of which are located in the United States.

The following

table sets forth our consolidated net revenues by country for Fiscal 2024 and Fiscal 2023:

Schedule of consolidated net revenues

United States

Other foreign countries

The Company’s

consolidated net revenues for Fiscal 2025 and 2024 are from customers predominantly located in the United States.

Customer Concentrations

The Company had certain customers

in the OEM distribution segment whose individual percentage of the Company’s consolidated revenues was 10% or greater.

one of these customers or their affiliates or contract manufacturers represented 13.0 % and 11.2 % of the Company’s consolidated net

revenues in Fiscal 2024 and Fiscal 2023, respectively.

The Company had one customer

in the design segment whose individual percentage of the Company’s consolidated revenues was 10% or greater.

Revenues from this

customer represented 25.2 %

of the Company’s consolidated net revenues in Fiscal 2024 and Fiscal 2023, respectively.

In December 2024, our largest design customer

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

We expect this to cause

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

We are currently working on cost reduction efforts

to mitigate the reduction in revenue, including a reduction in force which was communicated in December 2024.

The Company had customers

in the OEM distribution segment whose accounts receivable balances accounted for 10% or more of the Company’s consolidated accounts

One customer or its affiliate or contract manufacturer represented 14.5 % and 12.0 % of the Company’s consolidated accounts

receivable at September 30, 2024 and 2023, respectively.

At September 30, 2024, the

Company had one customer in the design segment whose accounts receivable balances accounted for 10% or more of the Company’s consolidated

accounts receivable.

Accounts receivable from this customer represented 19.0 % and 31.1 % of the Company’s consolidated accounts receivable

at September 30, 2024 and 2023, respectively.

Supplier Concentration

The Company’s OEM distribution

segment procures substantially all its products through independent suppliers in China through Forward China (see Note 14).

on the product, Forward China may require several different suppliers to furnish component parts or pieces.

Revenues from one design segment

customer represented 12.4 % of the Company’s consolidated net revenues in Fiscal 2025 and revenue from two design customers represented

48.4 % of the Company’s consolidated net revenues in Fiscal 2024.

Accounts receivable from three

design segment customers represented 49.4 % of the Company’s consolidated accounts receivable balance at September 30, 2025 and accounts

receivable from two design segment customers represented 48.7 % of the Company’s consolidated accounts receivable balance at September

There were no concentrations

of revenue or accounts receivable with any significant customer in our digital assets segment.

NOTE 17 RISKS AND UNCERTAINTIES

The Company is subject to various

risks including market risk, liquidity risk and other risks related to its concentration in SOL.

Investing in SOL is currently highly

speculative and volatile.

The price of SOL has been, and

will likely continue to be, highly volatile.

Our financial results and the market price of our common stock could be materially adversely

affected if the price of SOL decreases substantially, as it has in the past, including as a result of shifts in market sentiment, speculative

trading, macroeconomic trends, technology-related disruptions and regulatory announcements.

Our historical financial statements

do not reflect the potential variability in earnings that we may experience in the future from holding or selling digital assets.

volatility in our earnings may be significantly more than what we experienced in prior periods, and it may be difficult to evaluate the

Company’s business and future prospects.

We also may need to perform an analysis each quarter to identify whether events or changes

in circumstances indicate that our digital assets are impaired.

The Company will face risks relating

to the custody of its digital assets.

Cybersecurity threats, including hacking, phishing and other malicious attacks, could result in

the loss, theft or misappropriation of our SOL.

If we or our third-party service providers experience a security breach or cyberattack

and unauthorized parties obtain access to our private keys, or if our private keys are lost or destroyed, or other similar circumstances

or events occur, we may lose some or all of our digital assets and our financial condition and results of operations could be materially

adversely affected.

There is no clearing

house for SOL, nor is there a central or major depository for the custody of SOL.

There is a risk that some or all of the

Company’s SOL could be lost or stolen.

There can be no assurance that our custodians will maintain adequate insurance or that

such coverage will cover any losses with respect to the Company’s SOL.

Further, transactions in SOL are irrevocable.

incorrectly transferred SOL may be irretrievable.

As a result, any incorrectly executed transactions of the Company’s SOL

could adversely affect an investment in the Company’s common stock.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s shareholders have no specific rights to any specific SOL.

In the event of the insolvency of the

Company, its assets may be inadequate to satisfy a claim by its shareholders.

The SEC has stated that

certain digital assets may be considered securities under federal securities laws.

The test for determining whether a particular digital

asset is a security is complex and difficult to apply, and the outcome is difficult to predict.

Future developments could change the

legal status of digital assets we hold.

If SOL is determined to be a security under federal or state securities laws or in a proceeding

in a court of law, or otherwise, it may have material adverse consequences for SOL, making it more difficult to be traded, cleared or

custodied compared to other digital assets that are not considered securities.

In addition, if SOL is considered a security, the Company

could be considered an unregistered investment company under the Investment Company Act of 1940, which could necessitate the Company’s

If the Company is required to comply with additional regulatory obligations, it could result in a significant increase in

operating expenses and make it difficult to continue our current operations, which would materially and adversely affect our business,

financial condition and results of operations.

The Company relies on certain

third-party providers to perform certain functions essential to its operations.

Any disruptions to the Company’s service providers’

business operations resulting from business failures, financial instability, security failures, government mandated regulation or operational

problems could have an adverse impact on the Company’s ability to access critical services and would be disruptive to the operations

of the Company.

The Company may be subject

to various litigation, regulatory investigations and other proceedings that arise in the ordinary course of business.

NOTE 18 SUBSEQUENT EVENT

On November 3, 2025, the Company’s

Board of Directors authorized a share repurchase program permitting the Company to repurchase up to $1 billion of its common

Repurchases may be made from time to time through open-market purchases, block trades, and/or privately negotiated transactions

(including accelerated share repurchases), and may include Rule 10b5-1 trading plans.

Any repurchase will be executed in compliance with

Rule 10b-18 of the Securities Exchange Act of 1934.

The Company may determine the timing, amount, and method of repurchases based on market

conditions, share price, legal and regulatory requirements, and other considerations in its sole discretion.

The program does not obligate

the Company to repurchase any specific number of shares and may be modified, suspended, or terminated at any time.

Through the date of

this filing, no shares have been repurchased under this program.

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-K

Item 9A. Controls and Procedures