Company Update

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________   FORM 8-K ______________   CURRENT REPORT   Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934   Date of Report (Date of earliest event reported): September 30, 2024   Forward Industries, Inc. (Exact name of registrant as specified in its charter)   New York   001-34780   13-1950672 (State or Other Jurisdiction   (Commission   (I.R.S. Employer of Incorporation)   File Number)   Identification No.)   700 Veterans Memorial Hwy . Suite 100 Hauppauge , New York 11788 (Address of Principal Executive Office) (Zip Code)   ( 631 ) 547-3055 (Registrant’s telephone number, including area code)   Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))   Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.01 per share FORD The NASDAQ Capital Market   Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐   If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐              Item 8.01. Other Events.   As previously disclosed in a 10-Q filed May 14, 2025, in March 2025, Forward Industries, Inc. (the “Company”) determined it would not continue the Original Equipment Manufacturer (“OEM”) segment of its business and committed to a plan to sell this segment. As further disclosed in an 8-K filed May 22, 2025, on May 16, 2025, the Company and Forward Industries (IN), Inc (“Forward US”)., a wholly-owned subsidiary of the Company, entered into a transaction agreement with Forward Industries (Asia-Pacific) Corporation (“Forward China”), whereby the Company sold its wholly-owned subsidiary, Forward Industries (Switzerland) GmbH (“Forward Switzerland”) and certain other assets related to the Company’s OEM business to Forward China. Beginning in the second quarter of Fiscal 2025, as a result of the Company committing to a plan to sell this segment, the results of operations of the OEM segment have been classified as discontinued operations and the assets and liabilities of this segment have been classified as assets and liabilities held for sale in accordance with ASC 205-20, “Discontinued Operations,” as the disposal represents a strategic shift that has and will have a significant impact on the Company’s operations and financial results. Upon reclassification of the OEM segment, the Company determined it had only one reportable segment.   The Company is filing this Current Report on Form 8-K to recast its consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2024 that was previously filed with the Securities and Exchange Commission (“SEC”) on December 27, 2024 (the “Prior Annual Report”) and its consolidated financial statements included in its Quarterly Report on Form 10-Q for the period ended December 31, 2024 that was previously filed with the SEC on February 13, 2025 (the “Prior Quarterly Report”) to (i) reflect the presentation of the OEM segment as a discontinued operation, (ii) update the Company’s segment disclosures for all periods presented therein and (iii) update relevant disclosures under Part II, Item 7 of the Prior Annual Report and Part I, Item 2 of the Prior Quarterly Report.   The following items of the Prior Annual Report are being recast to reflect the changes referenced above:   · Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations · Part II, Item 8. Financial Statements and Supplementary Data   The following items of the Prior Quarterly Report are being recast to reflect the changes referenced above:     · Part I, Item 1. Financial Statements   · Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   This report does not reflect events occurring after the respective filing dates of the Prior Annual Report or Prior Quarterly Report and does not modify or update disclosures therein except as discussed above. This Form 8-K should be read in conjunction with the Prior Annual Report, Prior Quarterly Report and SEC filings made by the Company after the filing dates of the Prior Annual Report and Prior Quarterly Report, including the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025 and June 30, 2025, and its Current Reports on Form 8-K.   Item 9.01. Financial Statements and Exhibits.   Exhibit No.   Exhibit Description       23.1   Consent of CohnReznick LLP       104   Cover Page Interactive Data File (embedded within the Inline XBRL document)         2       SIGNATURES   Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.     FORWARD INDUSTRIES, INC.           Date: September 16, 2025 By: /s/ Kathleen Weisberg       Name: Kathleen Weisberg       Title: Chief Financial Officer                                                                 3       Annex A   ITEM 7.         MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION   AND RESULTS OF OPERATIONS FOR FISCAL 2024 AS COMPARED TO FISCAL 2023   As described below, in March 2025, the Company committed to a plan to sell the OEM segment of its business and completed the sale of this segment in May 2025. The assets and liabilities of the OEM segment have been classified as assets and liabilities held for sale and the results of operations and cash flows have been classified as discontinued operations for all periods presented. Upon reclassification, the Company determined that it had only one reportable segment. Segment disclosures have been recast to reflect this change for all periods presented. This information is presented solely to present recast financial information to reflect these organizational structure changes. Accordingly, the following information speaks as of the original filing date and should be read in conjunction with the Annual Report and our other filings with the SEC since the date of the Annual Report.   In addition to historical information, this report includes “forward-looking statements”, as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding our liquidity, plans on repaying outstanding debt obligations, as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the Annual Report, and in particular, the risks discussed under the caption “Risk Factors” in Item 1A of the Annual Report and those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.   Business Overview   Forward Industries, Inc. 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.   In June 2024, the Company’s stockholders authorized, and the Company’s Board of Directors approved, a 1-for-10 reverse stock split of our common stock, which became effective on June 18, 2024. Accordingly, all references made to share, 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.   Discontinued Operations   Considering the recurring losses incurred by the retail segment, in July 2023, the Company decided to cease operations of our retail distribution segment (the “Retail Exit”), and we are presenting the results of operations for this segment within discontinued operations in the current and prior periods presented herein. The discontinuation of the retail segment represents a strategic shift in the Company’s business. The primary assets of the retail segment are inventory and accounts receivable. The Company sold, liquidated, or otherwise disposed of the remaining retail inventory and collected the remaining retail accounts receivable as of September 30, 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 inventory of the retail segment is presented as discontinued assets held for sale on the balance sheet 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 and 2023. All information and results in this annual report on Form 10-K exclude the discontinued retail segment unless otherwise noted. See Note 3 to our consolidated financial statements for additional information on the discontinued retail segment.   In March 2025, Forward China determined it would not renew the Buying Agency and Supply Agreement (“Sourcing Agreement”), which subsequently expired on May 9, 2025. Without this agreement, the Company determined it would not continue the OEM segment of the business and committed to a plan to sell the segment (the “OEM Plan”). On May 16, 2025, the Company and Forward US entered into a transaction agreement with Forward China, pursuant to which the Company sold all equity interest in Forward Switzerland and Forward UK and 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. The sale of the OEM business is considered a strategic shift that has and will have a significant impact on the Company’s operations and financial results. The assets and liabilities of the OEM segment were classified as assets and liabilities held for sale on the consolidated balance sheets at September 30, 2024 and 2023. The results of operations for the OEM segment have been classified as discontinued operations on the consolidated statements of operations for the fiscal years ended September 30, 2024 and 2023. Unless otherwise noted, results for discontinued operations are excluded from the discussion that follows.         A- 1       Variability of Revenues and Results of Operations   A significant portion of our revenue is concentrated with several large customers, some of which are the same and some of which change over time. Orders from some of these customers can be highly variable, with short lead times, which can cause our quarterly revenues, and consequently our results of operations, to vary over a relatively short period of time.   Critical Accounting Policies and Estimates   We have identified the accounting policies and significant estimation processes below as critical to our business operations and the understanding of our results of operations. The discussion below is not intended to be comprehensive. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP, with no need for management’s judgment. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. The impact and any associated risks related to these policies on our business operations are discussed throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect reported and expected financial results. For a detailed discussion of the applications of these and other accounting policies, see “Item 8. Financial Statements and Supplementary Data” in this report. The preparation of our consolidated financial statements requires us to make estimates and assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates and such differences could be significant.   Revenue Recognition   Discontinued OEM Distribution Segment   The OEM distribution segment 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 were no other deliverables or performance obligations; 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.   Design Segment   The design segment applies the “cost to cost” and “right to invoice” methods of revenue recognition to its contracts with customers. The design segment typically engages in two types of contracts: (i) time and material and (ii) fixed price. The Company recognizes revenue over time on its time and material contracts utilizing a “right to invoice” method. Revenues from fixed price contracts that require performance of services that are not related to the production of tangible assets are recognized by using cost inputs to measure progress toward the completion of its performance obligations, or the “cost to cost” method. Revenues from fixed price contracts that contain specific deliverables are recognized when the performance obligation has been satisfied or the transfer of goods to the customer has been completed and accepted.   Recognized revenues that will not be billed until a later date are recorded as contract assets in the accompanying consolidated balance sheets. 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.         A- 2       Segment Reporting   As a result of discontinuing our retail and OEM reportable segments, the design segment is the Company’s only reportable segment. 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.   Inventory Valuation   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. Based on management’s estimates, an allowance was made to reduce excess, obsolete, or otherwise unsellable inventories to net realizable value. The allowance was established through charges to cost of sales, which are now presented as a component of income/(loss) from discontinued operations in the Company’s consolidated statements of operations. In determining the adequacy of the 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. Based on the Retail Exit and the OEM Plan, all inventory on hand at September 30, 2024 and 2023 is presented as a component of assets held for sale.   Goodwill and Intangible Assets   We review goodwill for impairment at least annually, or more often if triggering events occur. We have two reporting units with goodwill (the IPS 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. We have the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If we 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 we would not need to perform a quantitative impairment test for the reporting unit. If we cannot support such a conclusion or do not elect to perform the qualitative assessment, then we 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. If the fair 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. During Fiscal 2024, the Company recorded an impairment charge of $200,000 related to goodwill (See Note 4 to the 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. 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. 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. There were no indications of impairment of intangible assets in Fiscal 2024 or Fiscal 2023.   Recent 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.         A- 3       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.   RESULTS OF OPERATIONS FOR FISCAL 2024 COMPARED TO FISCAL 2023   The following discussion and analysis compares our results of operations for the year ended September 30, 2024 (“Fiscal 2024”) with those for the year ended September 30, 2023 (“Fiscal 2023”). All dollar amounts and percentages presented herein have been rounded to approximate values.   The table below summarizes our consolidated results of continuing operations for Fiscal 2024 as compared to Fiscal 2023:       Consolidated Results of Continuing Operations       Fiscal 2024     Fiscal 2023     Change ($)     Change (%)   Net revenues   $ 19,991,000     $ 22,686,000     $ (2,695,000 )     (11.9% ) Cost of sales     14,807,000       15,549,000       (742,000 )     (4.8% ) Gross profit     5,184,000       7,137,000       (1,953,000 )     (27.4% ) Sales and marketing expenses     769,000       876,000       (107,000 )     (12.2% ) General and administrative expenses     6,365,000       6,322,000       43,000       0.7%   Goodwill impairment     200,000       –       200,000       –   Operating loss     (2,150,000 )     (61,000 )     (2,089,000 )     3424.6%   Other income, net     (7,000 )     (19,000 )     12,000       (63.2% ) Income tax provision     23,000       20,000       3,000       15.0%   Loss from continuing operations   $ (2,166,000 )   $ (62,000 )   $ (2,104,000 )     3393.5%     The decrease in net revenues was primarily driven by one customer whose revenue declined approximately $2,600,000, as well as a net decrease in volume of work and projects with continuing customers, partially offset by projects from new customers. In December 2024, our largest design customer notified 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.   Gross profit decreased and gross margin declined from 31.5% in Fiscal 2023 to 25.9% in Fiscal 2024. This decrease was mainly driven by lower utilization rates.   Sales and marketing expenses decreased primarily due to lower marketing spend, partially offset by higher personnel costs. Sales and marketing expenses remained fairly consistent at approximately 3.9% of revenue.   General and administrative expenses increased slightly in Fiscal 2024. Lower payroll costs were offset by increased corporate expenses, primarily driven by costs related to Nasdaq non-compliance issues, and a credit loss recovery of approximately $200,000 in Fiscal 2023 that did not recur in Fiscal 2024. Management continues to monitor the various components of general and administrative expenses and how these costs are affected by inflationary and other factors. We intend to adjust these costs as needed based on the overall needs of the business.         A- 4       During Fiscal 2024, the Company recorded a goodwill impairment charge of $200,000. This impairment charge resulted from the quantitative goodwill impairment testing performed at September 30, 2024 and was driven by historical losses and a reduction in expected future performance of the Kablooe reporting unit.   We reported other income, net, of $7,000 in Fiscal 2024 as compared to $19,000 in Fiscal 2023. The variance is due to fair value adjustments of $70,000 in Fiscal 2023 to reduce to the fair value of the earnout consideration related to the Kablooe acquisition, $18,000 of net duty drawback income received in Fiscal 2023 offset by an increase in interest income from interest bearing deposits and a decrease in interest expense resulting from a reduction in the amount of debt outstanding.   We generated a loss from continuing operations of $2,166,000 and $62,000 in Fiscal 2024 and 2023, respectively. We maintain significant net operating loss carryforwards and do not recognize a significant income tax expense or benefit as our deferred tax provision is typically offset by a full valuation allowance on our net deferred tax asset.   Consolidated basic and diluted loss per share from continuing operations was $1.97 and $0.06 for Fiscal 2024 and Fiscal 2023, respectively.   LIQUIDITY AND CAPITAL RESOURCES   Our primary source of liquidity is our operations. The primary demand on our working capital has historically been (i) operating losses, (ii) repayment of debt obligations, and (iii) any increases in accounts receivable and inventories arising in the ordinary course of business. Historically, our sources of liquidity have been adequate to satisfy working capital requirements arising in the ordinary course of business. At September 30, 2024, our working capital (excluding assets and liabilities held for sale) was $4,663,000 compared to $5,449,000 at September 30, 2023. The decrease was primarily due to a decrease in accounts receivable, partially offset by lower accrued expenses. At November 30, 2024, we had approximately $2,000,000 cash on hand, which excludes cash associated with the discontinued OEM segment.   Forward China, an entity owned by our former Chairman of the Board and Chief Executive Officer, holds a $600,000 promissory note issued by the Company which matures on December 31, 2025 (see Note 14 to the consolidated financial statements). We plan on repaying the note on or prior to its maturity date. In connection with the sale of the OEM business, we are obligated to pay Forward China $150,000 on September 30, 2025 (in addition to the $200,000 paid on closing and the $300,000 aggregate payments made on July 31, 2025 and August 31, 2025).   Our 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. We had an accumulated deficit of $19,637,000 at September 30, 2024, a net loss of $1,951,000 in Fiscal 2024 and a cash balance (excluding cash associated with the discontinued OEM segment) of approximately $2,000,000 at November 30, 2024.   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 that there is substantial doubt about our ability to continue as a going concern for a period of 12 months from the date of issuance of the consolidated financial statements.   If we have the opportunity to make a strategic acquisition (as we have in the past with the acquisitions of IPS and Kablooe) or an investment in a product or partnership, we may require additional capital beyond our current cash balance to fund the opportunity. If we seek to raise additional capital or obtain additional borrowings, there is no assurance that we will be able to raise funds on terms that are acceptable to us or at all. In the current environment of rising interest rates, any future borrowing is expected to result in higher interest expense.         A- 5       Although we do not anticipate the need to purchase any additional material capital assets in order to carry out our business, it may be necessary for us to purchase equipment and other capital assets in the future, depending on need.   Cash Flows   During Fiscal 2024 and Fiscal 2023, our sources and uses of cash were as follows:   Operating Activities   During Fiscal 2024, cash provided by operating activities of $520,000 resulted from a net decrease in accounts receivable and contract assets of $1,224,000, cash provided by discontinued operations of $1,672,000, non-cash charges for depreciation, amortization, share-based compensation, credit loss expense and goodwill impairment of $653,000 and the net change in other operating assets and liabilities of $53,000, partially offset by the net loss of $1,951,000, a decrease in accrued expenses and other current liabilities $739,000, a decrease in accounts payable $392,000.   During Fiscal 2023, cash provided by operating activities of $1,150,000 resulted from a cash provided by discontinued operations of $5,073,000, non-cash charges for depreciation, amortization, share-based compensation and credit loss expense of $481,000 an increase in accounts payable of $270,000, an increase in accrued expenses and other current liabilities of $182,000, partially offset by the increase in accounts receivable and contract assets of $986,000, the $70,000 non-cash adjustment to the fair value of the Kablooe earnout consideration, the net loss of $3,737,000 and the net change in other operating assets and liabilities of $63,000.    Investing Activities   In Fiscal 2024 and Fiscal 2023, cash used for investing activities of $65,000 and $136,000, respectively, resulted from purchases of property and equipment.   Financing Activities   In Fiscal 2024 and Fiscal 2023, cash used in financing activities of $500,000 and $300,000, respectively, consisted of principal payments on the promissory note held by Forward China.                              A- 6       ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2024   The consolidated financial statements and notes thereto included in this Annual Report may be found beginning on page F-1 of this Annual Report on Form 10-K.   FORWARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS       Page     Report of Independent Registered Public Accounting Firm (PCAOB #596) F-2     Consolidated Balance Sheets at September 30, 2024 and 2023 F-4     Consolidated Statements of Operations for the Years Ended September 30, 2024 and 2023 F-5     Consolidated Statements of Shareholders’ Equity for the Years Ended September 30, 2024 and 2023 F-6     Consolidated Statements of Cash Flows for the Years Ended September 30, 2024 and 2023 F-7     Notes to Consolidated Financial Statements F-8                 F- 1       REPORT 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 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. 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 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 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 risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. 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 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 and that: (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.         F- 2       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. As discussed in Notes 2 and 4 to the consolidated financial statements, the Company has goodwill and intangible assets related to its Kablooe, Inc. (“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 results. 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.   /s/ CohnReznick LLP   We have served as the Company’s auditor since 2011.   Melville, New York December 27, 2024   except for the presentation of the OEM segment as discontinued operations as described in Notes 1, 2 and 3.   September 16, 2025         F- 3       FORWARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS                         September 30,       2024     2023   Assets                                   Current assets:                 Cash   $ 2,777,125     $ 2,822,509   Accounts receivable, net of allowances for credit losses of $ 27,282 and $ 955,965 as of September 30, 2024 and 2023, respectively     2,308,425       3,848,987   Contract assets     1,272,993       975,745   Prepaid expenses and other current assets     382,832       321,981   Assets held for sale     2,908,039       3,403,002   Total current assets     9,649,414       11,372,224                     Property and equipment, net     218,025       272,041   Intangible assets, net     680,386       893,143   Goodwill     1,558,682       1,758,682   Operating lease right-of-use assets, net     2,593,112       3,021,315   Other assets     68,737       68,737   Total assets   $ 14,768,356     $ 17,386,142                     Liabilities and shareholders’ equity                                   Current liabilities:                 Note payable to Forward China (related party)   $ 600,000     $ –   Accounts payable     103,581       495,449   Deferred income     399,439       297,407   Current portion of operating lease liability     404,056       416,042   Accrued expenses and other current liabilities     571,662       1,310,945   Liabilities held for sale     7,292,858       8,316,256   Total current liabilities     9,371,596       10,836,099                     Other liabilities:                 Note payable to Forward China (related party)     –       1,100,000   Operating lease liability, less current portion     2,429,726       2,833,782   Total liabilities     11,801,322       14,769,881                     Commitments and contingencies (Note 12)     –       –                     Shareholders’ equity:                 Series A-1 Convertible Preferred Stock, par value $0.01 per share; stated value of $ 1,000 per share; 2,700 shares authorized, 2,200 and 0 shares issued and outstanding at September 30, 2024 and 2023, respectively (liquidation preference of $ 2,200,000 )     2,200,000       –   Common stock, 40,000,000 shares authorized; par value $ 0.01 per share; 1,101,069 shares issued and outstanding at September 30, 2024 and 2023     11,011       11,011   Additional paid-in capital     20,393,163       20,291,803   Accumulated deficit     ( 19,637,140 )     ( 17,686,553 ) Total shareholders’ equity     2,967,034       2,616,261                     Total liabilities and shareholders’ equity   $ 14,768,356     $ 17,386,142     The accompanying notes are an integral part of the consolidated financial statements.         F- 4       FORWARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS                         For the Fiscal Years Ended September 30,       2024     2023                 Revenues, net   $ 19,990,833     $ 22,685,834   Cost of sales     14,807,117       15,549,013   Gross profit     5,183,716       7,136,821                     Sales and marketing expenses     769,370       875,803   General and administrative expenses     6,365,464       6,322,147   Goodwill impairment     200,000       –                     Operating loss     ( 2,151,118 )     ( 61,129 )                   Fair value adjustment of earnout consideration     –       ( 70,000 ) Interest income     ( 78,863 )     ( 23,188 ) Interest expense - related party     62,662       104,201   Other expense / (income), net     8,315       ( 30,019 ) Loss from continuing operations before income taxes     ( 2,143,232 )     ( 42,123 )                   Provision for income taxes     22,947       20,006   Loss from continuing operations     ( 2,166,179 )     ( 62,129 ) Income/(loss) from discontinued operations, net of tax     215,592       ( 3,674,528 ) Net loss   $ ( 1,950,587 )   $ ( 3,736,657 )                   Basic loss per share:                 Basic loss per share from continuing operations     ( 1.97 )     ( 0.06 ) Basic income/(loss) per share from discontinued operations     0.20       ( 3.33 ) Basic loss per share     ( 1.77 )     ( 3.39 )                   Diluted loss per share:                 Diluted loss per share from continuing operations     ( 1.97 )     ( 0.06 ) Diluted income/(loss) per share from discontinued operations     0.20       ( 3.33 ) Diluted loss per share     ( 1.77 )     ( 3.39 )                   Weighted average common shares outstanding:                 Basic     1,101,069       1,101,069   Diluted     1,101,069       1,101,069     The accompanying notes are an integral part of the consolidated financial statements.         F- 5       FORWARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY                                                 For the Fiscal Year Ended September 30, 2024       Series A-1 Convertible                 Additional                   Preferred Stock     Common Stock     Paid-In     Accumulated             Shares     Amount     Shares     Amount     Capital     Deficit     Total                                               Balance at September 30, 2023, unadjusted     –     $ –       10,061,185     $ 100,612     $ 20,202,202     $ ( 17,686,553 )   $ 2,616,261   Adjustment for reverse stock split 1-for-10, effective June 18, 2024     –       –       ( 8,960,116 )     ( 89,601 )     89,601       –       –   Balance at September 30, 2023, as adjusted     –       –       1,101,069       11,011       20,291,803       ( 17,686,553 )     2,616,261                                                             Share-based compensation     –       –       –       –       101,360       –       101,360   Net loss     –       –       –       –       –       ( 1,950,587 )     ( 1,950,587 ) Preferred Stock issued in connection with conversion of accounts payable to Forward China     2,200       2,200,000       –       –       –       –       2,200,000                                                             Balance at September 30, 2024     2,200     $ 2,200,000       1,101,069     $ 11,011     $ 20,393,163     $ ( 19,637,140 )   $ 2,967,034                                                       For the Fiscal Year Ended September 30, 2023       Series A-1 Convertible                 Additional                   Preferred Stock     Common Stock     Paid-In     Accumulated             Shares     Amount     Shares     Amount     Capital     Deficit     Total                                               Balance at September 30, 2022, unadjusted     –     $ –       10,061,185     $ 100,612     $ 20,115,711     $ ( 13,949,896 )   $ 6,266,427   Adjustment for reverse stock split 1-for-10, effective June 18, 2024     –       –       ( 8,960,116 )     ( 89,601 )     89,601       –       –   Balance at September 30, 2022, as adjusted     –       –       1,101,069       11,011       20,205,312       ( 13,949,896 )     6,266,427                                                             Share-based compensation     –       –       –       –       86,491       –       86,491   Net loss     –       –       –       –       –       ( 3,736,657 )     ( 3,736,657 )                                                           Balance at September 30, 2023     –     $ –       1,101,069     $ 11,011     $ 20,291,803     $ ( 17,686,553 )   $ 2,616,261     The accompanying notes are an integral part of the consolidated financial statements.         F- 6       FORWARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS                         For the Fiscal Years Ended September 30,       2024     2023   Operating Activities:                 Net loss   $ ( 1,950,587 )   $ ( 3,736,657 ) Adjustments to reconcile net loss to net cash provided by operating activities:                 Share-based compensation     101,360       86,491   Depreciation and amortization     331,927       314,962   Credit loss expense     19,505       78,786   Change in fair value of earn-out consideration     –       ( 70,000 ) Goodwill impairment     200,000       –   Changes in operating assets and liabilities:                 Accounts receivable     1,521,057       ( 619,542 ) Contract assets     ( 297,248 )     ( 366,910 ) Prepaid expenses and other current assets     ( 60,851 )     51,063   Accounts payable     ( 391,868 )     269,724   Deferred income     102,032       ( 141,471 ) Net changes in operating lease liabilities     12,161       28,471   Accrued expenses and other current liabilities     ( 739,283 )     182,433   Net cash used in operating activities-continuing operations     ( 1,151,795 )     ( 3,922,650 ) Net cash provided by operating activities-discontinued operations     1,671,565       5,072,877   Net cash provided by operating activities     519,770       1,150,227                     Investing Activities:                 Purchases of property and equipment     ( 65,154 )     ( 136,082 ) Net cash used in investing activities     ( 65,154 )     ( 136,082 )                   Financing Activities:                 Repayment of note payable to Forward China (related party)     ( 500,000 )     ( 300,000 ) Net cash used in financing activities     ( 500,000 )     ( 300,000 )                   Net (decrease) / increase in cash     ( 45,384 )     714,145   Cash at beginning of year     2,822,509       2,108,364   Cash at end of year   $ 2,777,125     $ 2,822,509                     Supplemental Disclosures of Cash Flow Information:                 Cash paid for interest   $ 62,662     $ 104,201   Cash paid for taxes   $ 7,069     $ 10,271   Supplemental Disclosures of Non-Cash Information:                 Conversion of accounts payable to convertible preferred stock   $ 2,200,000     $ –     The accompanying notes are an integral part of the consolidated financial statements.         F- 7       FORWARD INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   NOTE 1        OVERVIEW   Business   Forward Industries, Inc. (“Forward”, “we”, “our”, or the “Company”), is a global design company serving top tier medical and technology customers. The Company provides hardware and software product design and engineering services to customers predominantly located in the U.S.   Discontinued Operations   In July 2023, the Company decided to cease operations of its retail distribution segment (the “Retail Exit”) and is presenting the results of operations for this segment within discontinued operations in the current and prior periods presented herein. Our retail distribution business sourced and sold smart-enabled furniture, hot tubs and saunas and a variety of other products through various online retailer websites to customers predominantly located in the U.S. and Canada. The inventory of the retail segment is presented as discontinued assets held for sale on the balance sheet at September 30, 2023.   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 of $19,637,000 at September 30, 2024, a net loss of $1,951,000 in Fiscal 2024 and a cash balance (excluding cash associated with the discontinued OEM segment) of approximately $2,000,000 at November 30, 2024.   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 concern.   Management plans to initiate cost reduction measures in Fiscal 2025 to mitigate the impact of the loss of our largest customer, including a reduction in force which was communicated in December 2024. These plans will be evaluated and adjusted as deemed necessary based on the ongoing needs of the business. Management also plans to seek flexibility on payment terms for ongoing purchases from Forward China and attempt to obtain debt or equity financing to fund its ongoing operations. However, there are no current agreements or understanding with regard to the form, time or amount of such financing and there is no assurance that any financing can be obtained, that Forward China will grant any flexibility on payment terms or that our cost reduction efforts will be sufficient to enable the Company to continue as a going concern. The 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.         F- 8       NOTE 2        ACCOUNTING POLICIES   Use of Estimates   The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. Within this report, certain dollar amounts and percentages have been rounded to their approximate values.   Basis of Presentation   The accompanying consolidated 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. (“Kablooe”). All significant intercompany transactions and balances have been eliminated in consolidation.   Segment Reporting   As a result of the discontinued retail and OEM segments, as disclosed in Note 3, the Company now has only one reportable segment. 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 segments.   Goodwill   The Company reviews goodwill for impairment at least annually, or more often if triggering events occur. The Company has two reporting units with goodwill (the IPS 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. If the fair 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. See Note 4.           F- 9       Intangible Assets   Intangible assets include trademarks and customer relationships, which were acquired as part of the acquisitions of IPS in Fiscal 2018 and Kablooe in Fiscal 2020 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. 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.   Cash   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). At September 30, 2024 and 2023, there were deposits totaling $ 2,089,000 and $ 2,207,000 , respectively, held in excess of federally insured limits. Historically, we have not experienced any losses due to such cash concentrations.   Accounts Receivable   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, 2024 and 2023, the Company had allowances for credit losses of $ 27,000 and $ 771,000 , respectively.   Inventories   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. Based on 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, 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 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. Due to the Retail Exit and the OEM Plan, all inventory on hand at September 30, 2024 and 2023 is presented as a component of assets held for sale.   Property and Equipment   Property and equipment consist of computer hardware and software, furniture, fixtures and equipment and are recorded at cost. Expenditures for major additions and improvements are capitalized, and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives for all property and equipment ranges from three to five years.         F- 10       Leases   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 incremental borrowing rate commensurate with the lease term, since the Company’s lessors do not provide an implicit rate, nor is one readily available. The Company has certain leases that may include an option to renew and when it is reasonably probable to exercise such option, the Company will include the renewal option terms in determining the lease asset and lease liability. Lease assets represent the Company’s right-to-use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease expense for lease payments is recognized on a straight-line basis over the lease term. 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.   Income Taxes   The Company recognizes future tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax bases of assets and liabilities and to net tax operating loss carryforwards to the extent that realization of these benefits is more likely than not. At September 30, 2024, there was no change to our assessment that a full valuation allowance was required against all net deferred tax assets as it is not probable that such deferred tax assets will be realized. Accordingly, any deferred tax provision or benefit was offset by an equal and opposite change to the valuation allowance. Our income tax provision or benefit is generally not significant due to the existence of significant net operating loss carryforwards.    Revenue Recognition   Discontinued OEM Distribution Segment   The OEM distribution segment 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 were no other deliverables or performance obligations; 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, 2024, 2023 or 2022. The results of operations of the OEM segment are reported as discontinued operations for Fiscal 2024 and Fiscal 2023 (see Note 3).   Discontinued Retail Distribution Segment   The retail distribution segment sold products primarily through online websites operated by authorized third-party retailers. Revenue was recognized when control (as defined in Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”) of the related goods was transferred to the retailer, which generally occurred upon shipment to the end customer. Other than product delivery, the retail distribution segment did not typically have other deliverables or performance obligations associated with its products. Revenue was measured as the amount of consideration expected to be received in exchange for the products provided, net of allowances taken by retailers for product returns and any taxes collected from customers that will be remitted to governmental authorities. When the Company received consideration before achieving the criteria previously mentioned, it recorded a contract liability, which was classified as a component of deferred income in the accompanying consolidated balance sheets. The retail distribution segment had no contract liabilities at September 30, 2024, 2023 or 2022. The results of operations of the retail segment are reported as discontinued operations for Fiscal 2024 and Fiscal 2023 (see Note 3).           F- 11       Design Segment   The Company applies the “cost to cost” and “right to invoice” methods of revenue recognition to the contracts with customers in the design segment. The design segment typically engages in two types of contracts: (i) time and material and (ii) fixed price. The Company recognizes revenue over time on its time and material contracts utilizing a “right to invoice” method. Revenues from fixed price contracts that require performance of services that are not related to the production of tangible assets are recognized by using cost inputs to measure progress toward the completion of its performance obligations, or the “cost to cost” method. Revenues from fixed price contracts that contain specific deliverables are recognized when the performance obligation has been satisfied or the transfer of goods to the customer has been completed and accepted.   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 $ 1,273,000 , $ 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. The design 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.   Foreign Currency Transactions   The Company’s functional currency is the U.S. dollar. Foreign currency transactions may generate receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. Fluctuations in exchange rates between such foreign currency and the functional currency increase or decrease the expected amount of functional currency cash flows upon settlement of the transaction. These increases or decreases in expected functional currency cash flows are foreign currency transaction gains or losses that are included in other income or expense 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.   Fair Value Measurements   We perform fair value measurements in accordance with the guidance provided by ASC 820, “Fair Value Measurement.” ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions, and risk of nonperformance.   ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. 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:     · Level 1: quoted prices in active markets for identical assets or liabilities;         · Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or         · Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.   The carrying amounts of cash, accounts receivable, accounts payable, due to Forward China, and the Note payable to Forward China approximate fair value due their short-term maturities.         F- 12       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 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 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.   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 Exit”). 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 “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 and 2023.   In March 2025, Forward China determined it would not renew the Buying Agency and Supply Agreement (the “Sourcing Agreement”), which subsequently expired on May 9, 2025 (see Note 14). Without this agreement, the Company determined it would not continue the OEM segment of the business and committed to a plan to sell the segment. On May 16, 2025, the Company and Forward US entered into a transaction agreement with Forward China, pursuant to which the Company sold all equity interest in Forward Switzerland and Forward UK and sold certain other net assets related to Forward US’ OEM segment to Forward China to satisfy outstanding payables due to Forward China under the Sourcing Agreement. Additionally, the Company and Forward China terminated the Supply Agreement and extended the term of the Note Payable (see Note 14) to December 31, 2025. The Company paid $200,000 at closing and agreed to make additional cash payments of $ 150,000 on each of July 31, 2025, August 31, 2025 and September 30, 2025.         F- 13       The sale of the OEM business is considered a strategic shift that will have a significant impact on the Company’s operations and financial results. The assets and liabilities of the OEM segment were classified as assets and liabilities held for sale on the consolidated balance sheets at September 30, 2024 and 2023. The results of operations for the OEM segment have been classified as discontinued operations on the consolidated statements of operations for fiscal 2024 and 2023. The consolidated balance sheets and statements of operations for comparable periods have been reclassified to conform to this presentation in accordance with the accounting guidance.    The following table presents the major classes of the “Net income/(loss) from discontinued operations, net of tax” in our consolidated statements of operations.   Schedule of discontinued operations                     For the Fiscal Years Ended September 30,       2024     2023                 Revenues, net   $ 10,935,000     $ 18,335,000   Cost of sales     9,642,000       18,060,000   Gross profit     1,293,000       275,000                     Sales and marketing expenses     880,000       1,998,000   General and administrative expenses     197,000       246,000                     Income/(loss) from operations     216,000       ( 1,969,000 )                   Loss on classification as held for sale     –       ( 1,705,000 ) Income/(loss) from discontinued operations, net of tax   $ 216,000     $ ( 3,674,000 )   There were no material amounts of depreciation, amortization, investing or financing cash flows for the discontinued operations in Fiscal 2024 or Fiscal 2023. The only significant non-cash activity for the discontinued operations in Fiscal 2024 and 2023 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:   Schedule of major components of assets and liabilities                     September 30,       2024     2023   Cash   $ 245,000     $ 358,000   Accounts receivable, net     2,124,000       2,144,000   Inventories     490,000       843,000   Prepaid expenses and other current assets     49,000       58,000   Total assets held for sale   $ 2,908,000     $ 3,403,000                     Accounts payable     25,000       23,000   Due to Forward China     7,226,000       8,246,000   Other current liabilities     42,000       47,000   Total liabilities held for sale   $ 7,293,000     $ 8,316,000           F- 14       NOTE 4         INTANGIBLE ASSETS AND GOODWILL   Intangible Assets   The Company’s intangible assets consist of the following:  Schedule of intangible assets                                         September 30, 2024     September 30, 2023       Trademarks     Customer Relationships     Total Intangible Assets     Trademarks     Customer Relationships     Total Intangible Assets                                         Gross carrying amount   $ 585,000     $ 1,390,000     $ 1,975,000     $ 585,000     $ 1,390,000     $ 1,975,000   Less accumulated amortization     ( 242,000 )     ( 1,053,000 )     ( 1,295,000 )     ( 203,000 )     ( 879,000 )     ( 1,082,000 ) Net carrying amount   $ 343,000     $ 337,000     $ 680,000     $ 382,000     $ 511,000     $ 893,000     The Company’s intangible assets resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively, and relate to the design segment of our business. Intangible assets are amortized over their expected useful lives of 15 years for the trademarks and eight years for the customer relationships. 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.   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       Fiscal 2025   $ 213,000   Fiscal 2026     121,000   Fiscal 2027     81,000   Fiscal 2028     78,000   Fiscal 2029     39,000   Thereafter     148,000   Total   $ 680,000     Goodwill   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 of the Kablooe reporting unit, the Company elected to bypass the qualitative assessment and perform quantitative goodwill impairment testing for the Kablooe reporting unit at September 30, 2024. Using an income approach methodology, the fair value of the Kablooe reporting unit was estimated with 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. This quantitative testing indicated the carrying amount of the Kablooe reporting unit exceeded its fair value, resulting in a goodwill impairment charge of $ 200,000 in fiscal 2024, primarily driven by a reduction in the expected future performance of the Kablooe reporting unit.         F- 15       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:  Schedule of roll forward of goodwill       Balance at September 30, 2023   $ 1,759,000             Impairment of Kablooe reporting unit     ( 200,000 )           Balance September 30, 2024   $ 1,559,000      NOTE 5         PROPERTY AND EQUIPMENT   Property and equipment and related accumulated depreciation and amortization are summarized in the table below:  Schedule of property and equipment                 September 30,       2024     2023   Computer hardware and software   $ 481,000     $ 478,000   Furniture and fixtures     48,000       67,000   Equipment     83,000       171,000   Property and equipment, cost     612,000       716,000   Less accumulated depreciation and amortization     ( 394,000 )     ( 444,000 ) Property and equipment, net   $ 218,000     $ 272,000     Depreciation expense was $ 119,000 and $ 102,000 for Fiscal 2024 and Fiscal 2023, respectively.   NOTE 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,     2024   2023 Volatility   40%   40% Risk-free interest rate   3.6%   4.9% - 5.3% Expected term in years   0.5   0.4 - 1.4 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.         F- 16       NOTE 7         ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES   Accrued expenses and other current liabilities at September 30, 2024 and 2023 are as follows:  Schedule of accrued expenses and other current liabilities                     September 30,       2024     2023   Accrued commissions/bonuses   $ 109,000     $ 852,000   Paid time off     265,000       268,000   Other     198,000       191,000   Total   $ 572,000     $ 1,311,000     NOTE 8         SHAREHOLDERS’ EQUITY   Reverse Stock Split   The Company’s shareholders authorized, and the Board of Directors approved a 1-for-10 reverse stock split, which became effective on June 18, 2024. Any fractional shares that would have otherwise resulted from the reverse stock split were rounded up to the nearest whole share. Accordingly, all references made to shares, per share, or common share amounts in the accompanying 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.   Nasdaq   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”). Thereafter, in February 2024, the Company was notified that it was not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Rule”) (collectively, with the Minimum Bid Price Rule, the “Minimum Requirements”). In April 2024, the Company presented a plan of action to the Nasdaq Hearings Panel to meet compliance with the Minimum Requirements. As a result of the reverse stock split effected in June 2024 and the entrance into the Accounts Payable Conversion Agreement (described in Note 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.   “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 or 2023.   In 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”).         F- 17       The 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.   Warrants   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.   NOTE 9         SHARE-BASED COMPENSATION   2021 Equity Incentive Plan   In February 2021, shareholders 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, employees and consultants. Upon approval of the 2021 Plan, no additional awards were granted under the 2011 Long Term Incentive Plan (the “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. At September 30, 2024, there were 1,243,000 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. 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 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 Company accounts for forfeitures in the period they occur.   In applying the Black-Scholes option pricing model to options granted, the Company used the following assumptions:  Schedule of assumptions used for options             Fiscal 2024   Fiscal 2023 Expected term (years)   3.00   2.75 Expected volatility   66.4 %   69.0 % Risk free interest rate   4.83 %   4.31 % Expected dividends   –   –   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 per share. 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.         F- 18       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. The options have a weighted average grant-date fair value of $ 4.80 per share and an aggregate grant-date fair value of $ 60,000 , which were recognized ratably over the vesting period.   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.   At September 30, 2024, there were no material amounts of unrecognized compensation cost related to nonvested stock option awards.   The following table summarizes stock option activity during Fiscal 2024:  Schedule of stock option activity                                   Weighted     Weighted                   Average     Average     Aggregate       Number of     Exercise     Remaining     Intrinsic       Options     Price     Life (Yrs.)     Value   Outstanding at September 30, 2023     92,000     $ 14.31                   Granted     33,000     $ 7.60                   Forfeited     ( 11,000 )   $ 7.60                   Expired     ( 33,000 )   $ 15.12                   Outstanding at September 30, 2024     81,000     $ 12.15       2.5     $ –                                     Exercisable at September 30, 2024     59,000     $ 13.86       2.0     $ –     Options outstanding at September 30, 2024 have an exercise price between $ 7.60 and $ 23.90 per share.   NOTE 10        INCOME TAXES   The following table summarizes the Company’s consolidated provision from continuing operations for U.S. federal, state and foreign taxes on income:  Schedule of income tax provision                 Fiscal 2024     Fiscal 2023   Current:                 Federal   $ –     $ –   State     23,000       20,000   Foreign     –       –                     Deferred:                 Federal     ( 141,000 )     112,000   State     ( 71,000 )     ( 244,000 ) Foreign     ( 16,000 )     ( 39,000 )  Deferred income tax expense (benefit)     ( 205,000 )     ( 151,000 ) Change in valuation allowance     228,000       171,000   Income tax provision   $ 23,000     $ 20,000     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.         F- 19       The Company’s deferred tax assets and liabilities are comprised of the following:  Schedule of deferred tax assets and liabilities                 September 30,       2024     2023   Deferred tax assets                 Net operating losses   $ 3,586,000     $ 2,976,000   Share-based compensation     269,000       242,000   AMT & other tax credits     –       5,000   Excess tax over book basis in inventory     –       18,000   Reserves and other allowances     388,000       893,000   Lease liability     702,000       794,000   Accrued compensation     32,000       101,000   Accrued related party interest     5,000       5,000   Charitable contributions     1,000       1,000   Interest expense limitation     82,000       46,000   Total deferred tax assets     5,065,000       5,081,000                     Deferred tax liabilities                 Depreciation     ( 11,000 )     ( 9,000 ) Prepaid expenses     ( 41,000 )     ( 88,000 ) Intangible assets     ( 64,000 )     ( 145,000 ) Operating lease right-of-use assets     ( 642,000 )     ( 737,000 ) Total deferred tax liabilities     ( 758,000 )     ( 979,000 ) Valuation allowance     ( 4,307,000 )     ( 4,102,000 ) Net deferred tax assets   $ –     $ –     The Company recorded a provision for income taxes which includes net expense of $23,000 and $20,000 in Fiscal 2024 and Fiscal 2023, respectively, primarily for state income tax expenses in states where net operating loss carryforwards (“NOLs”) were not available.   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 . 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 $ 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; therefore, 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.         F- 20       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:  Schedule of reconciliation of effective tax rate                 Fiscal 2024     Fiscal 2023   U.S. federal statutory rate     21.0 %       21.0 %   State tax rate, net of federal benefit     2.1 %       3.9 %   Foreign rate differential     0.7 %       ( 9.2 % ) Tax return to provision adjustments     ( 14.3 % )     ( 94.6 % ) Effect of state tax rate change     1.9 %       ( 8.5 % ) Change in valuation allowance     ( 12.6 % )     95.7 %   Permanent differences     ( 0.1 % )     2.9 %                     Effective tax rate     ( 1.3 % )     11.2 %     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. 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, 2021, are closed to federal and state examination.   NOTE 11        EARNINGS PER SHARE   Basic 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                     For the Fiscal Years Ended       September 30,       2024     2023   Numerator:             Loss from continuing operations   $ ( 2,166,179 )   $ ( 62,129 ) Income/(loss) from discontinued operations, net of tax     215,592       ( 3,674,528 ) Net loss   $ ( 1,950,587 )   $ ( 3,736,657 )                   Denominator:                 Weighted average common shares outstanding     1,101,069       1,101,069   Dilutive common share equivalents     –       –   Weighted average dilutive shares outstanding     1,101,069       1,101,069                     Basic loss per share:                 Basic loss per share from continuing operations   $ ( 1.97 )   $ ( 0.06 ) Basic income/(loss) per share from discontinued operations     0.20       ( 3.33 ) Basic loss per share   $ ( 1.77 )   $ ( 3.39 )                   Diluted loss per share:                 Diluted loss per share from continuing operations   $ ( 1.97 )   $ ( 0.06 ) Diluted income/(loss) per share from discontinued operations     0.20       ( 3.33 ) Diluted loss per share   $ ( 1.77 )   $ ( 3.39 )         F- 21       The following securities were excluded from the calculation of diluted earnings per share in Fiscal 2024 and Fiscal 2023 because their inclusion would have been anti-dilutive:  Schedule of anti-dilutive                 For the Fiscal Years Ended       September 30,       2024     2023   Options     81,400       92,300   Warrants     7,500       7,500   Total potentially dilutive shares     88,900       99,800     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. It is 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, 2024). At September 30, 2024, the Company had not incurred a liability in connection with this guarantee.   Legal Proceedings   From time to time, the Company may become a party to legal actions or proceedings in the ordinary course of its business. At September 30, 2024, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to its interests, the Company believes would be material to its business.         F- 22       NOTE 13       LEASES   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       Fiscal 2025   $ 556,000   Fiscal 2026     510,000   Fiscal 2027     419,000   Fiscal 2028     428,000   Fiscal 2029     440,000   Thereafter     1,111,000   Total future minimum lease payments     3,464,000   Less imputed interest     ( 630,000 ) Present value of lease liabilities     2,834,000   Less current portion of lease liabilities     (404,000 ) Long-term portion of lease liabilities   $ 2,430,000     NOTE 14         RELATED PARTY TRANSACTIONS     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. Effective October 2023, the Company and Forward China entered into a new sourcing agreement under which the fixed portion of the sourcing fee was further reduced to $65,833 per month. Other terms in the agreement are substantially the same as the prior agreement. Due to the Retail Exit and decline in the OEM distribution segment business, the new sourcing agreement expired October 31, 2024. In November 2024, the Company and Forward China agreed to: (i) extend the sourcing agreement until April 30, 2025, but allow either party to cancel with 30 days notice, (ii) reduce the fixed portion of the sourcing fee to $35,000 per month, and (iii) change the payment terms to better align with payments from the Company’s customers.         F- 23       Terence Wise, Chief Executive Officer and Chairman of the Company, is the owner of Forward China. In addition, Jenny P. Yu, a Managing Director of Forward China, beneficially owns more than 5% of the Company’s common stock. The Company recorded service fees to Forward China of $ 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. Due to the OEM Plan, these costs are now included in income from discontinued operations for fiscal 2024 and 2023. The 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).     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).   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. 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. At September 30, 2024, the maturity date of this note was December 31, 2024 . In October 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.   Other Related Party Activity   In October 2020, the Company began selling smart-enabled furniture, which was sourced by Forward China and sold in the U.S. under the Koble brand name. The Koble brand is owned by The Justwise Group Ltd. (“Justwise”) a company owned by Terence Wise, Chief Executive Officer and Chairman of the Company. The Company recognized revenues from the sale of Koble products of $ 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 2023.         F- 24       The Company had an agreement with Justwise, under which (i) Justwise performed design, marketing and inventory management services related to the Koble products sold by the Company and (ii) the Company was granted a license to sell Koble products. In exchange for such services, the Company paid Justwise $10,000 per month plus 1% of the cost of Koble products purchased from Forward China. This agreement was effective until August 31, 2023 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. Due to the Retail Exit, these costs are included in income (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 recorded revenue from a customer whose principal owner is an immediate family member of Jenny P. Yu, a shareholder of the Company and managing director of Forward China. The Company recognized revenues from this customer of $ 523,000 and $ 626,000 in Fiscal 2024 and Fiscal 2023, respectively. Due to the OEM Plan, this revenue is now presented as a component of income/(loss) from discontinued operations for fiscal 2024 and 2023. The Company had accounts receivable of $ 96,000 and $ 0 from this customer at September 30, 2024 and 2023, respectively. Due to the OEM Plan, these receivables are now shown as a component of assets held for sale at September 30, 2024 and 2023.      NOTE 15        401(k) PLAN   The Company maintains a 401(k) benefit plan allowing eligible employees to make pre-tax and/or after-tax contributions of a portion of their salary in amounts subject to Internal Revenue Service limitations. The Company made immediately vested contributions based on a percentage of the employee’s salary of $ 442,000 during Fiscal 2024, of which $ 341,000 was recorded to cost of sales, $ 24,000 was recorded to sales and marketing expense and $ 77,000 was recorded to general and administrative expense on the consolidated statement of operations. The Company made immediately vested contributions based on a percentage of the employee’s salary of $ 426,000 during Fiscal 2023, of which $ 310,000 was recorded to cost of sales, $ 25,000 was recorded to sales and marketing expense and $ 91,000 was recorded to general and administrative expense on the consolidated statement of operations.   NOTE 16        SEGMENTS AND CONCENTRATIONS   Segments   As a result of discontinuing the retail and OEM segments, see Note 3, the Company now has only one reportable segment. See Note 2 for more information on the composition and accounting policies of our reportable segments. The results 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 and omit certain disclosures that are no longer required.   Geographic Concentrations   The Company’s long-lived assets consist of property and equipment and operating lease right-of-use assets, all of which are located in the United States. The Company’s consolidated net revenues for fiscal 2024 and 2023 are from customers predominantly located in the United States.   Customer Concentrations   Revenues from two customers represented 48.4 % and 58.1 % of the Company’s consolidated net revenues in Fiscal 2024 and Fiscal 2023, respectively.   Accounts receivable from two customers represented 48.7 % and 65.8 % of the Company’s consolidated accounts receivable balances at September 30, 2024 and September 30, 2023, respectively.         F- 25       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. See Note 1.   Supplier Concentration   The Company’s discontinued OEM distribution segment procured substantially all its products through independent suppliers in China through Forward China (see Note 14). Depending on the product, Forward China may require several different suppliers to furnish component parts or pieces.                                                         F- 26       ITEM 1. FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2024     Condensed Consolidated Balance Sheets at December 31, 2024 (Unaudited) and September 30, 2024 F-28     Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended December 31, 2024 and 2023 F-29     Condensed Consolidated Statements of Shareholders' Equity (Unaudited) for the Three Months Ended December 31, 2024 and 2023 F-30     Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended December 31, 2024 and 2023 F-31     Notes to Condensed Consolidated Financial Statements F-32                                                 F- 27        FORWARD INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS                         December 31,     September 30,       2024     2024     (Unaudited)     (See Note 2)   Assets             Current assets:                 Cash   $ 2,337,424     $ 2,777,125   Accounts receivable, net of allowances for credit losses of $ 51,342 and$ 27,282 as of December 31, 2024 and September 30, 2024, respectively       2,500,753          2,308,425    Contract assets     884,703       1,272,993   Prepaid expenses and other current assets     348,411       382,832   Assets held for sale     2,558,693       2,908,039   Total current assets     8,629,984       9,649,414                     Property and equipment, net     192,884       218,025   Intangible assets, net     627,197       680,386   Goodwill     1,333,682       1,558,682   Operating lease right-of-use assets, net     2,639,821       2,593,112   Other assets     68,737       68,737   Total assets   $ 13,492,305     $ 14,768,356                     Liabilities and shareholders' equity                 Current liabilities:                 Note payable to Forward China (related party)   $ 600,000     $ 600,000   Accounts payable     150,098       103,581   Deferred income     278,607       399,439   Current portion of operating lease liability     454,509       404,056   Accrued expenses and other current liabilities     441,046       571,662   Liabilities held for sale     6,862,552       7,292,858   Total current liabilities     8,786,812       9,371,596                     Other liabilities:                 Operating lease liability, less current portion     2,426,196       2,429,726   Total liabilities     11,213,008       11,801,322                     Commitments and contingencies     –       –                     Shareholders' equity:                 Series A-1 Convertible Preferred Stock, par value $0.01 per share; stated value of $ 1,000 per share; 2,700 shares authorized, 2,200 shares issued and outstanding at December 31, 2024 and September 30, 2024 (liquidati