0000038264 false 09/30 2022 Q2 176311 360327 0000038264 2021-10-01 2022-03-31 0000038264 2022-04-30 0000038264 2022-03-31 0000038264 2021-09-30 0000038264 2022-01-01 2022-03-31 0000038264 2021-01-01 2021-03-31 0000038264 2020-10-01 2021-03-31 0000038264 us-gaap:CommonStockMember 2021-09-30 0000038264 us-gaap:AdditionalPaidInCapitalMember 2021-09-30 0000038264 us-gaap:RetainedEarningsMember 2021-09-30 0000038264 us-gaap:CommonStockMember 2021-12-31 0000038264 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0000038264 us-gaap:RetainedEarningsMember 2021-12-31 0000038264 2021-12-31 0000038264 us-gaap:CommonStockMember 2020-09-30 0000038264 us-gaap:AdditionalPaidInCapitalMember 2020-09-30 0000038264 us-gaap:RetainedEarningsMember 2020-09-30 0000038264 2020-09-30 0000038264 us-gaap:CommonStockMember 2020-12-31 0000038264 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0000038264 us-gaap:RetainedEarningsMember 2020-12-31 0000038264 2020-12-31 0000038264 us-gaap:CommonStockMember 2021-10-01 2021-12-31 0000038264 us-gaap:AdditionalPaidInCapitalMember 2021-10-01 2021-12-31 0000038264 us-gaap:RetainedEarningsMember 2021-10-01 2021-12-31 0000038264 2021-10-01 2021-12-31 0000038264 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0000038264 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0000038264 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0000038264 us-gaap:CommonStockMember 2020-10-01 2020-12-31 0000038264 us-gaap:AdditionalPaidInCapitalMember 2020-10-01 2020-12-31 0000038264 us-gaap:RetainedEarningsMember 2020-10-01 2020-12-31 0000038264 2020-10-01 2020-12-31 0000038264 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0000038264 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0000038264 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0000038264 us-gaap:CommonStockMember 2022-03-31 0000038264 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0000038264 us-gaap:RetainedEarningsMember 2022-03-31 0000038264 us-gaap:CommonStockMember 2021-03-31 0000038264 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0000038264 us-gaap:RetainedEarningsMember 2021-03-31 0000038264 2021-03-31 0000038264 ford:OEMDistributionMember 2022-03-31 0000038264 ford:OEMDistributionMember 2021-09-30 0000038264 ford:OEMDistributionMember 2020-09-30 0000038264 ford:DesignMember 2022-03-31 0000038264 ford:DesignMember 2021-09-30 0000038264 ford:DesignMember 2020-09-30 0000038264 ford:RetailDistributionMember 2022-03-31 0000038264 ford:RetailDistributionMember 2021-09-30 0000038264 ford:RetailDistributionMember 2020-09-30 0000038264 us-gaap:TrademarksMember 2022-03-31 0000038264 us-gaap:CustomerRelationshipsMember 2022-03-31 0000038264 us-gaap:TrademarksMember 2021-09-30 0000038264 us-gaap:CustomerRelationshipsMember 2021-09-30 0000038264 ford:KablooeMember 2022-03-31 0000038264 ford:KablooeMember 2021-09-30 0000038264 ford:OEMDistributionMember us-gaap:OperatingSegmentsMember 2022-01-01 2022-03-31 0000038264 ford:OEMDistributionMember us-gaap:OperatingSegmentsMember 2021-01-01 2021-03-31 0000038264 ford:OEMDistributionMember us-gaap:OperatingSegmentsMember 2021-10-01 2022-03-31 0000038264 ford:OEMDistributionMember us-gaap:OperatingSegmentsMember 2020-10-01 2021-03-31 0000038264 ford:RetailDistributionMember us-gaap:OperatingSegmentsMember 2022-01-01 2022-03-31 0000038264 ford:RetailDistributionMember us-gaap:OperatingSegmentsMember 2021-01-01 2021-03-31 0000038264 ford:RetailDistributionMember us-gaap:OperatingSegmentsMember 2021-10-01 2022-03-31 0000038264 ford:RetailDistributionMember us-gaap:OperatingSegmentsMember 2020-10-01 2021-03-31 0000038264 ford:DesignMember us-gaap:OperatingSegmentsMember 2022-01-01 2022-03-31 0000038264 ford:DesignMember us-gaap:OperatingSegmentsMember 2021-01-01 2021-03-31 0000038264 ford:DesignMember us-gaap:OperatingSegmentsMember 2021-10-01 2022-03-31 0000038264 ford:DesignMember us-gaap:OperatingSegmentsMember 2020-10-01 2021-03-31 0000038264 us-gaap:OperatingSegmentsMember 2022-01-01 2022-03-31 0000038264 us-gaap:OperatingSegmentsMember 2021-01-01 2021-03-31 0000038264 us-gaap:OperatingSegmentsMember 2021-10-01 2022-03-31 0000038264 us-gaap:OperatingSegmentsMember 2020-10-01 2021-03-31 0000038264 ford:OEMDistributionMember us-gaap:NetAssetsSegmentMember 2022-03-31 0000038264 ford:OEMDistributionMember us-gaap:NetAssetsSegmentMember 2021-09-30 0000038264 ford:RetailDistributionMember us-gaap:NetAssetsSegmentMember 2022-03-31 0000038264 ford:RetailDistributionMember us-gaap:NetAssetsSegmentMember 2021-09-30 0000038264 ford:DesignMember us-gaap:NetAssetsSegmentMember 2022-03-31 0000038264 ford:DesignMember us-gaap:NetAssetsSegmentMember 2021-09-30 0000038264 us-gaap:NetAssetsSegmentMember 2022-03-31 0000038264 us-gaap:NetAssetsSegmentMember 2021-09-30 0000038264 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember ford:TwoCustomersMember ford:OEMDistributionMember 2022-01-01 2022-03-31 0000038264 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember ford:TwoCustomersMember ford:OEMDistributionMember 2021-10-01 2022-03-31 0000038264 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember ford:ThreeCustomersMember ford:OEMDistributionMember 2021-01-01 2021-03-31 0000038264 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember ford:TwoCustomersMember ford:OEMDistributionMember 2020-10-01 2021-03-31 0000038264 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember ford:OneCustomerMember ford:DesignMember 2022-01-01 2022-03-31 0000038264 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember ford:OneCustomerMember ford:DesignMember 2021-10-01 2022-03-31 0000038264 us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember ford:TwoCustomersMember ford:OEMDistributionMember 2022-01-01 2022-03-31 0000038264 us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember ford:TwoCustomersMember ford:OEMDistributionMember 2020-10-01 2021-09-30 0000038264 us-gaap:StockOptionMember ford:NonEmployeeDirectorsMember 2021-10-01 2021-10-31 0000038264 us-gaap:StockOptionMember ford:NonEmployeeDirectorsMember 2022-01-01 2022-01-31 0000038264 us-gaap:StockOptionMember 2022-01-01 2022-01-31 0000038264 us-gaap:StockOptionMember ford:NonEmployeeDirectorsMember 2022-02-01 2022-02-28 0000038264 us-gaap:StockOptionMember ford:FormerNonEmployeeDirectorsMember 2022-02-01 2022-02-28 0000038264 us-gaap:StockOptionMember 2021-10-01 2022-03-31 0000038264 us-gaap:StockOptionMember 2020-10-01 2021-03-31 0000038264 us-gaap:StockOptionMember 2022-03-31 0000038264 us-gaap:StockOptionMember 2022-01-01 2022-03-31 0000038264 us-gaap:StockOptionMember 2021-01-01 2021-03-31 0000038264 ford:StockOptionsMember 2022-01-01 2022-03-31 0000038264 ford:StockOptionsMember 2021-01-01 2021-03-31 0000038264 ford:StockOptionsMember 2021-10-01 2022-03-31 0000038264 ford:StockOptionsMember 2020-10-01 2021-03-31 0000038264 us-gaap:WarrantMember 2022-01-01 2022-03-31 0000038264 us-gaap:WarrantMember 2021-01-01 2021-03-31 0000038264 us-gaap:WarrantMember 2021-10-01 2022-03-31 0000038264 us-gaap:WarrantMember 2020-10-01 2021-03-31 0000038264 ford:ForwardChinaMember ford:ServiceFeesMember 2022-01-01 2022-03-31 0000038264 ford:ForwardChinaMember ford:ServiceFeesMember 2021-01-01 2021-03-31 0000038264 ford:ForwardChinaMember ford:ServiceFeesMember 2021-10-01 2022-03-31 0000038264 ford:ForwardChinaMember ford:ServiceFeesMember 2020-10-01 2021-03-31 0000038264 ford:ForwardChinaMember ford:InventoryPurchasesMember 2022-03-31 0000038264 ford:ForwardChinaMember ford:InventoryPurchasesMember 2021-09-30 0000038264 ford:ForwardChinaMember ford:PromissoryNoteMember 2018-01-18 0000038264 ford:ForwardChinaMember ford:PromissoryNoteMember 2017-10-01 2018-01-18 0000038264 ford:ForwardChinaMember ford:PromissoryNoteMember 2022-01-01 2022-03-31 0000038264 ford:ForwardChinaMember ford:PromissoryNoteMember 2021-01-01 2021-03-31 0000038264 ford:ForwardChinaMember ford:PromissoryNoteMember 2021-10-01 2022-03-31 0000038264 ford:ForwardChinaMember ford:PromissoryNoteMember 2020-10-01 2021-03-31 0000038264 ford:ForwardChinaMember 2021-10-01 2022-03-31 0000038264 srt:ChiefExecutiveOfficerMember ford:KobleMember 2022-01-01 2022-03-31 0000038264 srt:ChiefExecutiveOfficerMember ford:KobleMember 2021-01-01 2021-03-31 0000038264 srt:ChiefExecutiveOfficerMember ford:KobleMember 2021-10-01 2022-03-31 0000038264 srt:ChiefExecutiveOfficerMember ford:KobleMember 2020-10-01 2021-03-31 0000038264 ford:JustWiseMember 2021-10-01 2022-03-31 0000038264 ford:JustWiseMember 2022-01-01 2022-03-31 0000038264 ford:IPSMember 2022-03-31 0000038264 ford:IPSMember 2021-10-01 2022-03-31 0000038264 ford:IPSMember 2020-10-01 2021-09-30 0000038264 ford:PaycheckProtectionProgramMember 2021-10-01 2022-03-31 0000038264 ford:PaycheckProtectionProgramMember 2022-03-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number 001-34780

FORWARD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

New York |  | 13-1950672
(State or other jurisdiction of |  | (I.R.S. Employer
incorporation or organization) |  | Identification No.)
700 Veterans Memorial Highway, Suite 100, Hauppauge, NY |  | 11788
(Address of principal executive offices) |  | (Zip Code)

Registrant’s telephone number, including area code: (631) 547-3041

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 | FORD | The Nasdaq Stock Market (The Nasdaq Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ |  | Accelerated filer ☐
Non-accelerated filer ☒ |  | Smaller reporting company ☒
|  | Emerging growth company ☐

If an emerging growth company, indicate by checkmark 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 10,061,185 shares of the registrant’s common stock outstanding as of April 30, 2022.

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

PART I. | FINANCIAL INFORMATION | Page No.
Item 1. | Financial Statements |
| Condensed Consolidated Balance Sheets at March 31, 2022 (Unaudited) and September 30, 2021 | 3
| Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended March 31, 2022 and 2021 | 4
| Condensed Consolidated Statements of Shareholders' Equity (Unaudited) for the Three and Six Months Ended March 31, 2022 and 2021 | 5
| Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended March 31, 2022 and 2021 | 6
| Notes to Condensed Consolidated Financial Statements | 7
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26
Item 4. | Controls and Procedures | 26
PART II. | OTHER INFORMATION |
Item 1. | Legal Proceedings | 27
Item 1A. | Risk Factors | 27
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 27
Item 3. | Defaults Upon Senior Securities | 27
Item 4. | Mine Safety Disclosures | 27
Item 5. | Other Information | 27
Item 6. | Exhibits | 29
| Signatures | 28

| 2 |

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

|  | March 31, |  |  | September 30, |
|  | 2022 |  |  | 2021 |
|  | (Unaudited) |  |  |  |
Assets |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash |  | $ | 1,541,192 |  |  | $ | 1,410,365 |
Accounts receivable, net |  |  | 8,685,896 |  |  |  | 8,760,715 |
Inventories, net |  |  | 3,897,479 |  |  |  | 2,062,557 |
Prepaid expenses and other current assets |  |  | 816,250 |  |  |  | 561,072 |
Total current assets |  |  | 14,940,817 |  |  |  | 12,794,709 |
Property and equipment, net |  |  | 247,345 |  |  |  | 167,997 |
Intangible assets, net |  |  | 1,212,279 |  |  |  | 1,318,658 |
Goodwill |  |  | 1,758,682 |  |  |  | 1,758,682 |
Operating lease right of use assets, net |  |  | 3,741,813 |  |  |  | 3,743,242 |
Other assets |  |  | 72,251 |  |  |  | 72,251 |
Total assets |  | $ | 21,973,187 |  |  | $ | 19,855,539 |
Liabilities and shareholders' equity |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Note payable to Forward China |  | $ | 1,500,000 |  |  | $ | – |
Accounts payable |  |  | 463,901 |  |  |  | 391,992 |
Due to Forward China |  |  | 7,239,885 |  |  |  | 5,733,708 |
Deferred income |  |  | 620,572 |  |  |  | 187,695 |
Current portion of earnout consideration |  |  | 25,000 |  |  |  | 25,000 |
Current portion of operating lease liability |  |  | 405,811 |  |  |  | 340,151 |
Accrued expenses and other current liabilities |  |  | 787,010 |  |  |  | 529,497 |
Total current liabilities |  |  | 11,042,179 |  |  |  | 7,208,043 |
Other liabilities: |  |  |  |  |  |  |  |
Note payable to Forward China |  |  | – |  |  |  | 1,600,000 |
Operating lease liability, less current portion |  |  | 3,514,064 |  |  |  | 3,559,053 |
Earnout consideration, less current portion |  |  | 45,000 |  |  |  | 45,000 |
Total other liabilities |  |  | 3,559,064 |  |  |  | 5,204,053 |
Total liabilities |  |  | 14,601,243 |  |  |  | 12,412,096 |
Commitments and contingencies |  |  | – |  |  |  | – |
Shareholders' equity: |  |  |  |  |  |  |  |
Common stock, par value $0.01 per share; 40,000,000 shares authorized; 10,061,185 shares issued and outstanding at March 31, 2022 and September 30, 2021 |  |  | 100,612 |  |  |  | 100,612 |
Additional paid-in capital |  |  | 20,019,288 |  |  |  | 19,914,476 |
Accumulated deficit |  |  | (12,747,956 | ) |  |  | (12,571,645 | )
Total shareholders' equity |  |  | 7,371,944 |  |  |  | 7,443,443 |
Total liabilities and shareholders' equity |  | $ | 21,973,187 |  |  | $ | 19,855,539 |

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

| 3 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

|  | For the Three Months Ended March 31, |  |  | For the Six Months Ended March 31, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenues, net |  | $ | 10,314,563 |  |  | $ | 8,395,379 |  |  | $ | 21,928,304 |  |  | $ | 18,112,982 |
Cost of sales |  |  | 8,061,889 |  |  |  | 6,651,933 |  |  |  | 17,056,861 |  |  |  | 14,106,650 |
Gross profit |  |  | 2,252,674 |  |  |  | 1,743,446 |  |  |  | 4,871,443 |  |  |  | 4,006,332 |
Sales and marketing expenses |  |  | 704,102 |  |  |  | 578,436 |  |  |  | 1,441,780 |  |  |  | 1,181,397 |
General and administrative expenses |  |  | 1,871,311 |  |  |  | 1,981,186 |  |  |  | 3,538,188 |  |  |  | 3,808,604 |
Loss from operations |  |  | (322,739 | ) |  |  | (816,176 | ) |  |  | (108,525 | ) |  |  | (983,669 | )
Gain on forgiveness of note payable |  |  | – |  |  |  | – |  |  |  | – |  |  |  | (1,356,570 | )
Fair value adjustment of earn-out consideration |  |  | – |  |  |  | – |  |  |  | – |  |  |  | (30,000 | )
Interest income |  |  | – |  |  |  | (33,554 | ) |  |  | – |  |  |  | (56,301 | )
Interest expense |  |  | 30,864 |  |  |  | 46,714 |  |  |  | 63,691 |  |  |  | 93,106 |
Other expense, net |  |  | 2,732 |  |  |  | 5,392 |  |  |  | 4,095 |  |  |  | 1,788 |
(Loss)/income before income taxes |  |  | (356,335 | ) |  |  | (834,728 | ) |  |  | (176,311 | ) |  |  | 364,308 |
Provision for income taxes |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |
Net (loss)/income |  | $ | (356,335 | ) |  | $ | (834,728 | ) |  | $ | (176,311 | ) |  | $ | 364,308 |
(Loss)/earnings per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.04 | ) |  | $ | (0.08 | ) |  | $ | (0.02 | ) |  | $ | 0.04 |
Diluted |  | $ | (0.04 | ) |  | $ | (0.08 | ) |  | $ | (0.02 | ) |  | $ | 0.04 |
Weighted average common shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 10,061,185 |  |  |  | 9,909,497 |  |  |  | 10,061,185 |  |  |  | 9,897,385 |
Diluted |  |  | 10,061,185 |  |  |  | 9,909,497 |  |  |  | 10,061,185 |  |  |  | 10,378,733 |

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

| 4 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)

|  | For the Three and Six Months Ended March 31, 2022 |
|  |  |  |  |  |  |  | Additional |  |  |  |  |  |  |
|  | Common Stock |  |  | Paid-In |  |  | Accumulated |  |  |  |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Total |
Balance at September 30, 2021 |  |  | 10,061,185 |  |  | $ | 100,612 |  |  | $ | 19,914,476 |  |  | $ | (12,571,645 | ) |  | $ | 7,443,443 |
Share-based compensation |  |  | – |  |  |  | – |  |  |  | 38,800 |  |  |  | – |  |  |  | 38,800 |
Net income |  |  | – |  |  |  | – |  |  |  | – |  |  |  | 180,024 |  |  |  | 180,024 |
Balance at December 31, 2021 |  |  | 10,061,185 |  |  |  | 100,612 |  |  |  | 19,953,276 |  |  |  | (12,391,621 | ) |  |  | 7,662,267 |
Share-based compensation |  |  | – |  |  |  | – |  |  |  | 66,012 |  |  |  | – |  |  |  | 66,012 |
Net loss |  |  | – |  |  |  | – |  |  |  | – |  |  |  | (356,335 | ) |  |  | (356,335 | )
Balance at March 31, 2022 |  |  | 10,061,185 |  |  | $ | 100,612 |  |  | $ | 20,019,288 |  |  | $ | (12,747,956 | ) |  | $ | 7,371,944 |

|  | For the Three and Six Months Ended March 31, 2021 |
|  |  |  |  |  |  |  | Additional |  |  |  |  |  |  |
|  | Common Stock |  |  | Paid-In |  |  | Accumulated |  |  |  |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Total |
Balance at September 30, 2020 |  |  | 9,883,851 |  |  | $ | 98,838 |  |  | $ | 19,579,684 |  |  | $ | (13,095,450 | ) |  | $ | 6,583,072 |
Share-based compensation |  |  | – |  |  |  | – |  |  |  | 41,457 |  |  |  | – |  |  |  | 41,457 |
Stock options exercised |  |  | 2,500 |  |  |  | 25 |  |  |  | 1,650 |  |  |  | – |  |  |  | 1,675 |
Net income |  |  | – |  |  |  | – |  |  |  | – |  |  |  | 1,199,036 |  |  |  | 1,199,036 |
Balance at December 31, 2020 |  |  | 9,886,351 |  |  |  | 98,863 |  |  |  | 19,622,791 |  |  |  | (11,896,414 | ) |  |  | 7,825,240 |
Share-based compensation |  |  | – |  |  |  | – |  |  |  | 21,287 |  |  |  | – |  |  |  | 21,287 |
Stock options exercised |  |  | 66,415 |  |  |  | 665 |  |  |  | 141,858 |  |  |  | – |  |  |  | 142,523 |
Net loss |  |  | – |  |  |  | – |  |  |  | – |  |  |  | (834,728 | ) |  |  | (834,728 | )
Balance at March 31, 2021 |  |  | 9,952,766 |  |  | $ | 99,528 |  |  | $ | 19,785,936 |  |  | $ | (12,731,142 | ) |  | $ | 7,154,322 |

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

| 5 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

|  | For the Six Months Ended March 31, |
|  | 2022 |  |  | 2021 |
Operating Activities: |  |  |  |  |  |  |  |
Net (loss)/income |  | $ | (176,311 | ) |  | $ | 364,308 |
Adjustments to reconcile net (loss)/income to net cash provided by/(used in) operating activities: |  |  |  |  |  |  |  |
Share-based compensation |  |  | 104,812 |  |  |  | 62,744 |
Depreciation and amortization |  |  | 156,531 |  |  |  | 171,836 |
Bad debt expense |  |  | 59,635 |  |  |  | 513,691 |
Gain on forgiveness of note payable |  |  | – |  |  |  | (1,356,570 | )
Change in fair value of earn-out consideration |  |  | – |  |  |  | (30,000 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | 15,184 |  |  |  | 756,793 |
Inventories |  |  | (1,834,922 | ) |  |  | (873,760 | )
Prepaid expenses and other current assets |  |  | (255,178 | ) |  |  | 34,227 |
Other assets |  |  | – |  |  |  | 44,446 |
Accounts payable and due to Forward China |  |  | 1,578,086 |  |  |  | 395,469 |
Deferred income |  |  | 432,877 |  |  |  | (347,632 | )
Net changes in operating lease liabilities |  |  | 22,100 |  |  |  | 27,055 |
Accrued expenses and other current liabilities |  |  | 257,513 |  |  |  | (160,525 | )
Net cash provided by/(used in) operating activities |  |  | 360,327 |  |  |  | (397,918 | )
Investing Activities: |  |  |  |  |  |  |  |
Purchases of property and equipment |  |  | (129,500 | ) |  |  | (37,878 | )
Net cash used in investing activities |  |  | (129,500 | ) |  |  | (37,878 | )
Financing Activities: |  |  |  |  |  |  |  |
Proceeds from line of credit borrowings |  |  | – |  |  |  | 150,000 |
Repayment of line of credit borrowings |  |  | – |  |  |  | (1,150,000 | )
Repayment of notes payable |  |  | – |  |  |  | (84,457 | )
Repayment of note payable to Forward China |  |  | (100,000 | ) |  |  | – |
Proceeds from stock options exercised |  |  | – |  |  |  | 144,198 |
Repayments of finance leases |  |  | – |  |  |  | (19,407 | )
Net cash used in financing activities |  |  | (100,000 | ) |  |  | (959,666 | )
Net increase/(decrease) in cash |  |  | 130,827 |  |  |  | (1,395,462 | )
Cash at beginning of period |  |  | 1,410,365 |  |  |  | 2,924,627 |
Cash at end of period |  | $ | 1,541,192 |  |  | $ | 1,529,165 |
Supplemental Disclosures of Cash Flow Information: |  |  |  |  |  |  |  |
Cash paid for interest |  | $ | 63,669 |  |  | $ | 88,479 |
Cash paid for taxes |  | $ | 6,795 |  |  | $ | 5,636 |
Supplemental Disclosures of Non-Cash Information: |  |  |  |  |  |  |  |
Operating lease right of use assets recorded |  | $ | 204,881 |  |  | $ | – |
Operating lease liabilities recorded |  | $ | 204,881 |  |  | $ | – |

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

| 6 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 | OVERVIEW

Business

Forward Industries, Inc. (“Forward”, “we”, “our” or the “Company”) is a fully integrated design, development and manufacturing solution provider for top tier medical and technology customers worldwide. As a result of the continued expansion of our design and development capabilities through our wholly-owned subsidiaries, we are now able to introduce proprietary products to the market from concepts brought to us from a number of different sources, both inside and outside the Company.

Liquidity

For the six months ended March 31, 2022, the Company generated a net loss of $176,000, and $360,000 of cash flows from operating activities. We believe our existing cash balance and working capital will be sufficient to meet our liquidity needs through at least May 31, 2023.

Impact of COVID-19

The effects of the COVID-19 pandemic continue to impact the retail and OEM distribution segments of our business. The increase in global consumer demand, coupled with the global shipping container shortage, dramatically increased demand for both ocean freight and ground transportation. These factors led to a significant increase in freight costs, particularly from the Asia-Pacific region and most notably in the second quarter of the fiscal year ending September 30, 2022 (“Fiscal 2022”). Labor shortages at U.S. ports and in ground transportation services caused container ships to spend a significant amount of time waiting for goods to be unloaded and to arrive at our warehouses. These factors caused an increase in the demand for and cost of ground transportation and delayed consumer availability for many of our products in the first half of Fiscal 2022. The timing and extent of these COVID-19 related transportation disruptions is still largely unknown but are expected to continue throughout Fiscal 2022.

The effects of the pandemic had a lesser impact on the design segment of our business. Rising inflation caused an increase in the cost of acquiring and maintaining our employees. The timing and extent of future inflation is difficult to predict, but we expect these rising costs to have a more significant impact in the second half of Fiscal 2022.

The effects of COVID-19 may further impact our business in ways we cannot predict, and such impacts could be significant. The current economic impact may continue to negatively impact our results of operations, cash flows and financial position in future periods as well as that of our customers, including their ability to pay for our services and to choose to allocate their budgets to new or existing projects which may or may not require our services. The long-term financial impact on our business cannot be reasonably estimated at this time. As a result, the effects of COVID-19 may not be fully reflected in our financial results until future periods.

Until the effects of the pandemic have fully receded, we expect business conditions to remain challenging. In response to these challenges, we will continue to focus on those factors that we can control: closely managing and controlling our expenses; aligning our design and development schedules with demand in a proactive manner to minimize our cash operating costs; pursuing further improvements in the productivity and effectiveness of our development, selling and administrative activities and, where appropriate, taking advantage of opportunities to enhance our business growth and strategy.

| 7 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 | ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Forward Industries, Inc. and all of its 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”). The terms “Forward”, “we”, “our” or the “Company” as used throughout this document are used to indicate Forward Industries, Inc. and all of its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

In the opinion of management, the accompanying condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q reflect all normal recurring adjustments necessary to present fairly the financial position and results of operations and cash flows for the interim periods presented herein but are not necessarily indicative of the results of operations for the year ending September 30, 2022. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2021, and with the disclosures and risk factors presented therein. The September 30, 2021 condensed consolidated balance sheet has been derived from the audited consolidated financial statements.

Accounting Estimates

The preparation of the Company’s condensed 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.

Throughout this document, certain dollar amounts and percentages have been rounded to their approximate values.

Segment Reporting

The Company has three reportable segments: OEM distribution, retail distribution and design. The OEM distribution segment sources and distributes carrying cases and other accessories for medical monitoring and diagnostic kits and a variety of other portable electronic and non-electronic devices directly to OEMs or their contract manufacturers worldwide. The retail distribution segment sources and sells smart-enabled furniture and a variety of other products to customers predominantly located in the U.S. through agreements with various retailers, both in stores and through online retailer websites. The design segment consists of two operating segments (IPS and Kablooe, which have been aggregated into one reportable segment) that provide a full spectrum of hardware and software product design and engineering services to customers predominantly located in the U.S. See Note 5 for more information on segments.

Accounts Receivable

Accounts receivable consist of unsecured trade accounts with customers. The Company maintains an allowance for doubtful accounts, which is recorded as a reduction to accounts receivable on the condensed consolidated balance sheets. Collectability of accounts receivable is estimated by evaluating the number of days accounts are outstanding, customer payment history, recent payment trends and perceived creditworthiness, adjusted as necessary based on specific customer situations. At March 31, 2022, September 30, 2021 and September 30, 2020, the Company had allowances for doubtful accounts of $90,000, $90,000 and $249,000, respectively, for the OEM distribution segment and $824,000, $706,000 and $347,000, respectively, for the design segment. The Company did not have any allowances for doubtful accounts related to its retail distribution segment at March 31, 2022, September 30, 2021 or September 30, 2020.

| 8 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company has sales agreements with various retailers which contain different terms for trade discounts, promotional and other allowances. At March 31, 2022, September 30, 2021 and September 30, 2020, the Company recorded accounts receivable allowances of $25,000, $0 and $0, respectively, for the retail distribution segment.

Revenue Recognition

Distribution Segments

The Company generally recognizes revenue in its OEM and retail distribution segments when: (i) finished goods are shipped to its customers (in general, these conditions occur at either point of shipment or point of destination, depending on the terms of sale and transfer of control); (ii) there are no other deliverables or performance obligations; and (iii) there are no further obligations to the customer after the title of the goods has transferred. When the Company receives consideration before achieving the criteria previously mentioned, it records a contract liability, which is classified as a component of deferred income in the accompanying condensed consolidated balance sheets. The retail distribution segment had contract liabilities of $0, $0 and $75,000 at March 31, 2022, September 30, 2021 and September 30, 2020, respectively. The OEM distribution segment had no contract liabilities at March 31, 2022, September 30, 2021 or September 30, 2020.

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, or contract assets, are recorded as an asset and classified as a component of accounts receivable in the accompanying condensed consolidated balance sheets. The design segment had contract assets of $607,000, $693,000 and $649,000 at March 31, 2022, September 30, 2021 and September 30, 2020, respectively. Contracts where collections to date have exceeded recognized revenues, or contract liabilities, are recorded as a liability and classified as a component of deferred income in the accompanying condensed consolidated balance sheets. The design segment had contract liabilities of $621,000, $188,000 and $410,000 at March 31, 2022, September 30, 2021 and September 30, 2020, respectively.

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. The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company would not need to perform a quantitative impairment test for the reporting unit. If the Company cannot support such a conclusion or does not elect to perform the qualitative assessment, then the Company will perform the quantitative assessment by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying value, no impairment charge is recognized. If the fair value of the reporting unit is less than its carrying value, an impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value. A significant amount of judgment is required in performing goodwill impairment tests including estimating the fair value of a reporting unit. Management evaluated and concluded that there were no indications goodwill was impaired at March 31, 2022.

| 9 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 impairments of intangible assets at March 31, 2022.

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 March 31, 2022, 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. No current book income tax provision was recorded against book net income due to the existence of significant net operating loss carryforwards.

Fair Value Measurements

We perform fair value measurements in accordance with the guidance provided by Accounting Standards Codification (“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.

| 10 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Leases

Lease assets and liabilities are recognized at the 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 condensed consolidated balance sheets. The current and long-term portions of operating and financing lease liabilities are shown separately as such on the condensed consolidated balance sheets.

Reclassifications

Certain amounts in the accompanying financial statements at and for the three and six months ended March 31, 2021 have been reclassified to conform to the current year presentation.

Recent Accounting Pronouncements

In November 2019, the Financial Accounting Standards Board (“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 fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. The Company is currently evaluating the effects of this pronouncement on its condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This guidance removes certain exceptions to the general principles in Topic 740 and provides consistent application of U.S. GAAP by clarifying and amending existing guidance. The effective date of the new guidance for public companies is for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance in the first quarter of fiscal 2022 with no material impact to its condensed consolidated financial statements.

NOTE 3 | INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The Company’s intangible assets consist of the following:

Intangible Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | March 31, 2022 |  |  | September 30, 2021 |
|  | 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 |  |  | (145,000 | ) |  |  | (618,000 | ) |  |  | (763,000 | ) |  |  | (125,000 | ) |  |  | (531,000 | ) |  |  | (656,000 | )
Net carrying amount |  | $ | 440,000 |  |  | $ | 772,000 |  |  | $ | 1,212,000 |  |  | $ | 460,000 |  |  | $ | 859,000 |  |  | $ | 1,319,000 |

| 11 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s intangible assets were acquired as a result of 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 8 years for the customer relationships. Amortization expense related to intangible assets was $53,000 for the three months ended March 31, 2022 and 2021 and $106,000 for the six months ended March 31, 2022 and 2021, which is included in general and administrative expenses on the condensed consolidated statements of operations.

At March 31, 2022, estimated amortization expense for the Company’s intangible assets for each of the next five years and thereafter is as follows:

Estimated amortization expense |  |  |  |
Remainder of Fiscal 2022 |  | $ | 106,000 |
Fiscal 2023 |  |  | 213,000 |
Fiscal 2024 |  |  | 213,000 |
Fiscal 2025 |  |  | 213,000 |
Fiscal 2026 |  |  | 121,000 |
Thereafter |  |  | 346,000 |
Total |  | $ | 1,212,000 |

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

NOTE 4 | FAIR VALUE MEASUREMENTS

The earnout consideration of $70,000 at March 31, 2022 and September 30, 2021 represents the fair value of the contingent earnout consideration related to the acquisition of Kablooe. The fair value of the earnout liability is measured on a recurring basis at each reporting date using a Black-Scholes valuation model with inputs categorized within level three of the fair value hierarchy. The current and non-current portions of this liability are shown in the corresponding categories on the condensed consolidated balance sheets in each period presented. During the three and six months ended March 31, 2022, there were no changes to the fair value of this earnout liability.

NOTE 5 | SEGMENTS AND CONCENTRATIONS

The Company has three reportable segments: OEM distribution, retail distribution and design. See Note 2 for more information on the composition and accounting policies of our reportable segments.

Our chief operating decision maker (“CODM”) regularly reviews revenue and operating income for each segment to assess financial results and allocate resources. In Fiscal 2021, due to the growth of our retail division, we determined it to be a separate reportable segment. For our OEM and retail distribution segments, we exclude general and administrative and general corporate expenses from their measure of profitability as these expenses are not allocated to the segments and therefore not included in the measure of profitability used by the CODM. For the design segment, general and administrative expenses directly attributable to that segment are included in its measure of profitability as these expenses are included in the measure of its profitability reviewed by the CODM. We do not include intercompany activity in our segment results shown below to be consistent with the information that is presented to the CODM. Segment assets consist of accounts receivable and inventory, which are regularly reviewed by the CODM, as well as goodwill and intangible assets resulting from design segment acquisitions.

| 12 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The results of operations for the three and six months ended March 31, 2021 for each segment discussed below have been reformatted from what was previously disclosed to segregate the retail distribution segment and exclude general corporate expenses from segment operating income to show them as a reconciling item so that results are comparable to the current period presentation.

Information by segment and related reconciliations are shown in tables below:

Segment operating income (loss) |  |  |  |  |  |  |  |  |  |  |  |
|  | For the Three Months Ended March 31, |  |  | For the Six Months Ended March 31, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |
OEM distribution |  | $ | 4,676,000 |  |  | $ | 4,254,000 |  |  | $ | 9,917,000 |  |  | $ | 9,467,000 |
Retail distribution |  |  | 649,000 |  |  |  | 229,000 |  |  |  | 2,041,000 |  |  |  | 621,000 |
Design |  |  | 4,990,000 |  |  |  | 3,912,000 |  |  |  | 9,970,000 |  |  |  | 8,025,000 |
Total segment revenues |  | $ | 10,315,000 |  |  | $ | 8,395,000 |  |  | $ | 21,928,000 |  |  | $ | 18,113,000 |
Operating income/(loss): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
OEM distribution |  | $ | 326,000 |  |  | $ | 302,000 |  |  | $ | 823,000 |  |  | $ | 719,000 |
Retail distribution |  |  | (356,000 | ) |  |  | (210,000 | ) |  |  | (584,000 | ) |  |  | (389,000 | )
Design |  |  | 389,000 |  |  |  | (288,000 | ) |  |  | 974,000 |  |  |  | (112,000 | )
Total segment operating income/(loss) |  |  | 359,000 |  |  |  | (196,000 | ) |  |  | 1,213,000 |  |  |  | 218,000 |
General corporate expenses |  |  | (682,000 | ) |  |  | (620,000 | ) |  |  | (1,322,000 | ) |  |  | (1,202,000 | )
Total loss from operations |  |  | (323,000 | ) |  |  | (816,000 | ) |  |  | (109,000 | ) |  |  | (984,000 | )
Other expense/(income), net |  |  | 33,000 |  |  |  | 19,000 |  |  |  | 67,000 |  |  |  | (1,348,000 | )
(Loss)/income before income taxes |  | $ | (356,000 | ) |  | $ | (835,000 | ) |  | $ | (176,000 | ) |  | $ | 364,000 |
Depreciation and amortization: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
OEM distribution |  | $ | 3,000 |  |  | $ | 2,000 |  |  | $ | 4,000 |  |  | $ | 4,000 |
Design |  |  | 80,000 |  |  |  | 77,000 |  |  |  | 153,000 |  |  |  | 168,000 |
Total depreciation and amortization |  | $ | 83,000 |  |  | $ | 79,000 |  |  | $ | 157,000 |  |  | $ | 172,000 |

Schedule of segment assets |  |  |  |  |  |
|  | March 31, 2022 |  |  | September 30, 2021 |
Segment Assets: |  |  |  |  |  |  |  |
OEM distribution |  | $ | 5,577,000 |  |  | $ | 5,898,000 |
Retail distribution |  |  | 3,662,000 |  |  |  | 2,178,000 |
Design |  |  | 6,316,000 |  |  |  | 5,824,000 |
Total segment assets |  |  | 15,555,000 |  |  |  | 13,900,000 |
General corporate assets |  |  | 6,418,000 |  |  |  | 5,956,000 |
Total assets |  | $ | 21,973,000 |  |  | $ | 19,856,000 |

The Company had certain customers in the OEM distribution segment whose individual percentage of the Company’s consolidated revenues was 10% or greater. Revenues from two customers or their affiliates or contract manufacturers represented 26.2% and 25.7%, respectively, of the Company’s consolidated revenues for the three and six months ended March 31, 2022. Revenues from three customers or their affiliates or contract manufacturers represented 40.4% of the Company’s consolidated revenues for the three months ended March 31, 2021 and revenues from two customers or their affiliates or contract manufacturers represented 29.7% of the Company’s consolidated revenues for the six months ended March 31, 2021.

| 13 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended March 31, 2022, the Company had one customer in the design segment whose individual percentage of the Company’s consolidated revenues was 10% or greater. Revenues from this customer represented 11.7% and 10.2%, respectively, of the Company’s consolidated revenues for the three and six months ended March 31, 2022. There were no customers in the design segment whose individual percentage of the Company’s consolidated revenues was 10% or greater during the three or six months ended March 31, 2021.

At March 31, 2022 and September 30, 2021, the Company had customers in the OEM distribution segment whose accounts receivable balance accounted for 10% or more of the Company’s consolidated accounts receivable. Accounts receivable from two customers or their affiliates or contract manufacturers represented 34.8% of the Company’s consolidated accounts receivable at March 31, 2022 and revenues from three customers or their contract manufacturers represented 44.0% of the Company’s consolidated accounts receivable at September 30, 2021.

NOTE 6 | SHARE-BASED COMPENSATION

Stock Options

In October 2021 and January 2022, the Company granted options to non-employee directors to purchase an aggregate of 58,000 and 83,000 shares, respectively, of its common stock at an exercise price of $2.39 and $1.56 per share, respectively. The options expire five years from the date of grant, approximately half vested immediately and approximately half vest one year from the date of grant. The options have a weighted average grant-date fair value of $1.03 and $0.72 per share, respectively, and each grant has an aggregate grant-date fair value of $60,000, which will be recognized ratably over the vesting period.

In January 2022, the Company granted options to one of its employees to purchase an aggregate of 14,000 shares of its common stock at an exercise price of $1.56 per share. The options expire five years from the date of grant, approximately one-third vested immediately, approximately one-third vest one year from the date of grant and approximately one-third vest two years from the date of grant. The options have a weighted average grant-date fair value of $0.73 per share and an aggregate grant-date fair value of $10,000, which will be recognized ratably over the vesting period.

In February 2022, the Company granted options to one of its non-employee directors to purchase an aggregate of 31,000 shares of its common stock at an exercise price of $1.68 per share. The options vest one year from the date of grant and expire five years from the date of grant. The options have a weighted average grant-date fair value of $0.80 per share and an aggregate grant-date fair value of $25,000, which will be recognized ratably over the vesting period.

In February 2022, the Company granted options to one of its former non-employee directors to purchase an aggregate of 19,000 shares of its common stock at an exercise price of $1.68 per share. The options vested immediately and expire ten years from the date of grant. The options have a weighted average grant-date fair value of $1.07 per share and an aggregate grant-date fair value of $20,000, which was fully recognized on the grant date.

There were no options exercised during the six months ended March 31, 2022. During the six months ended March 31, 2021, the Company issued 69,000 shares of its common stock pursuant to the exercise of stock options for aggregate cash proceeds of $144,000, which had an aggregate intrinsic value of $122,000.

The Company recognized compensation expense for stock option awards of $66,000 and $21,000 during the three months ended March 31, 2022 and 2021, respectively, and $105,000 and $63,000 during the six months ended March 31, 2022 and 2021, respectively, which was recorded as a component of general and administrative expenses in its condensed consolidated statements of operations. At March 31, 2022, there was $54,000 of total unrecognized compensation cost related to nonvested stock option awards that is expected to be recognized over a weighted average period of 0.8 years.

| 14 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 | 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. A reconciliation of basic and diluted earnings per share is as follows:

Schedule of Earnings Per Share, Basic and Diluted |  |  |  |  |  |  |  |  |  |  |  |
|  | For the Three Months Ended March 31, |  |  | For the Six Months Ended March 31, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net (loss)/income |  | $ | (356,000 | ) |  | $ | (835,000 | ) |  | $ | (176,000 | ) |  | $ | 364,000 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average common shares outstanding |  |  | 10,061,000 |  |  |  | 9,909,000 |  |  |  | 10,061,000 |  |  |  | 9,897,000 |
Dilutive common share equivalents |  |  | – |  |  |  | – |  |  |  | – |  |  |  | 482,000 |
Weighted average diluted shares outstanding |  |  | 10,061,000 |  |  |  | 9,909,000 |  |  |  | 10,061,000 |  |  |  | 10,379,000 |
(Loss)/earnings per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.04 | ) |  | $ | (0.08 | ) |  | $ | (0.02 | ) |  | $ | 0.04 |
Diluted |  | $ | (0.04 | ) |  | $ | (0.08 | ) |  | $ | (0.02 | ) |  | $ | 0.04 |

The following securities were excluded from the calculation of diluted earnings per share in each period because their inclusion would have been anti-dilutive:

Schedule of antidilutive securities excluded |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | For the Three Months Ended March 31, |  |  | For the Six Months Ended March 31, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Options |  |  | 1,110,000 |  |  |  | 1,049,000 |  |  |  | 1,110,000 |  |  |  | 10,000 |
Warrants |  |  | 151,000 |  |  |  | 151,000 |  |  |  | 151,000 |  |  |  | – |
Total potentially dilutive shares |  |  | 1,261,000 |  |  |  | 1,200,000 |  |  |  | 1,261,000 |  |  |  | 10,000 |

NOTE 8 | RELATED PARTY TRANSACTIONS

Buying Agency and Supply Agreement

The Company has a Buying Agency and Supply Agreement (the “Supply Agreement”) with Forward Industries Asia-Pacific Corporation (“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 pays 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. The Supply Agreement expires October 22, 2023. 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 $350,000 and $340,000 during the three months ended March 31, 2022 and 2021, respectively, and $712,000 and $683,000 during the six months ended March 31, 2022 and 2021, respectively, which are included as a component of cost of sales upon sales of the related products.

| 15 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company made prepayments to Forward China for inventory purchases of $418,000 and $317,000 at March 31, 2022 and September 30, 2021, respectively, which is included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

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 an interest 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 $31,000 and $32,000, respectively, in the three months ended March 31, 2022 and 2021 and $63,000 and $64,000, respectively, in the six months ended March 31, 2022 and 2021. The maturity date of this note was extended to December 31, 2022. The maturity date of this note has been extended on several occasions to assist the Company with liquidity. The Company made principal payments of $100,000 on this note during the six months ended March 31, 2022.

Other Related Party Activity

In October 2020, the Company began selling smart-enabled furniture, which is 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 $441,000 and $154,000 in the three months ended March 31, 2022 and 2021, respectively, and $981,000 and $339,000 in the six months ended March 31, 2022 and 2021, respectively. The Company entered into an agreement with JustWise effective March 1, 2022 under which (i) JustWise will perform design and marketing 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 will pay JustWise $10,000 per month plus 1% of the cost of Koble products purchased from Forward China. This agreement is effective until August 31, 2022, will be extended thereafter for a mutually agreed upon term and can be terminated thereafter by either party giving three months’ notice. The Company incurred costs of $10,000 under this agreement for the three and six months ended March 31, 2022, which were included in selling and marketing expenses on the condensed consolidated statement of operations.

NOTE 9 | LEGAL PROCEEDINGS

As previously disclosed, on August 21, 2020, IPS was named a third-party defendant in a patent dispute claim in the U.S. District Court for the Eastern District of New York. The complaint, which contains no specific amount of monetary damages, asserts that certain intellectual property was misappropriated by IPS and one of its former employees. In October 2021, the Court ruled that the misappropriation claim was invalid. The remaining allegation was that IPS breached a non-disclosure agreement with a party to the case. In January 2022, all claims in this matter were dismissed without prejudice.

From time to time, the Company may become a party to other legal actions or proceedings in the ordinary course of its business. At March 31, 2022, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material to its operations or cash flows.

NOTE 10 | LINE OF CREDIT

The Company, specifically IPS, has a $1,300,000 revolving line of credit which was renewed in February 2022. The line of credit has a maturity date of May 31, 2023, is guaranteed by the Company and is secured by all of IPS’ assets. The interest rate on the line of credit is 0.75% above The Wall Street Journal prime rate. The effective interest rate was 4.25% and 4.0% at March 31, 2022 and September 30, 2021, respectively. At March 31, 2022, the Company had $1,300,000 available under the line of credit. The Company is subject to certain debt-service ratio requirements which are measured annually. At September 30, 2021, the Company was in compliance with such covenants.

| 16 |

FORWARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 | DEBT

On April 18, 2020, the Company entered into a loan in an aggregate principal amount of $1,357,000 under the Paycheck Protection Program (the “PPP loan”) pursuant to the U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The loan was unsecured, bore interest at a rate of 1% per annum, and was scheduled to mature on April 18, 2022. In October 2020, the Company filed for forgiveness of this loan and in December 2020, the Small Business Administration (“SBA”) approved its forgiveness request. The forgiveness has been accounted for as an extinguishment of debt and the resulting gain has been recorded as forgiveness of note payable on the condensed consolidated statement of operations for the six months ended March 31, 2021. There is a six-year period during which the SBA can review the Company’s forgiveness.

NOTE 12 | LEASES

The Company’s operating leases are primarily for corporate, sales and administrative office space. Cash paid for amounts included in operating lease liabilities for the six months ended March 31, 2022 and 2021, which have been included in cash flows from operating activities, was $294,000 and $226,000, respectively. Details of operating lease expense are as follows:

Schedule of operating lease expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | For the Three Months Ended March 31, |  |  | For the Six Months Ended March 31, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Operating lease expense included in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing expense |  | $ | 13,000 |  |  | $ | 14,000 |  |  | $ | 27,000 |  |  | $ | 28,000 |
General and administrative expense |  |  | 141,000 |  |  |  | 138,000 |  |  |  | 283,000 |  |  |  | 276,000 |
Total |  | $ | 154,000 |  |  | $ | 152,000 |  |  | $ | 310,000 |  |  | $ | 304,000 |

At March 31, 2022, the Company’s operating leases had a weighted average remaining lease term of 8.6 years and a weighted average discount rate of 5.6%.

At March 31, 2022, future minimum payments under non-cancellable operating leases were as follows:

Schedule of future minimum payments under operating & financial leases |  |  |  |
Remainder of Fiscal 2022 |  | $ | 306,000 |
Fiscal 2023 |  |  | 626,000 |
Fiscal 2024 |  |  | 639,000 |
Fiscal 2025 |  |  | 556,000 |
Fiscal 2026 |  |  | 510,000 |
Thereafter |  |  | 2,398,000 |
Total future minimum lease payments |  |  | 5,035,000 |
Less imputed interest |  |  | (1,115,000 | )
Present value of lease liabilities |  | $ | 3,920,000 |

| 17 |

ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements, and the notes thereto, and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. The following discussion and analysis compares our consolidated results of operations for the three and six months ended March 31, 2022 (the “2022 Quarter” and “2022 Period”, respectively) with those for the three and six months ended March 31, 2021 (the “2021 Quarter” and “2021 Period”, respectively). Additionally, the twelve months ending September 30, 2022 are referred to as “Fiscal 2022.” All dollar amounts and percentages presented herein have been rounded to approximate values.

Cautionary Note Regarding Forward-Looking Statements

This report contains “forward-looking statements”, as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding our liquidity and 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 under the caption "Risk Factors" in Item 1A of our Form 10-K for the year ended September 30, 2021 and those discussed in other documents we file with the Securities and Exchange Commission. 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 fully integrated design, development and manufacturing solution provider for top tier medical and technology customers worldwide. As a result of the continued expansion of our design development capabilities through our wholly-owned subsidiaries, IPS and Kablooe, we are now able to introduce proprietary products to the market from concepts brought to us from a number of different sources, both inside and outside the Company.

The effects of the COVID-19 pandemic continue to impact the retail and OEM distribution segments of our business. The increase in global consumer demand, coupled with the global shipping container shortage, dramatically increased demand for both ocean freight and ground transportation. These factors led to a significant increase in freight costs, particularly from the Asia-Pacific region and most notably in the second quarter of Fiscal 2022. Labor shortages at U.S. ports and in ground transportation services caused container ships to spend a significant amount of time waiting for goods to be unloaded and to arrive at our warehouses. These factors caused an increase in the demand for and cost of ground transportation and delayed consumer availability for many of our products in the first half of Fiscal 2022. The timing and extent of these COVID-19 related transportation disruptions is still largely unknown but are expected to continue throughout Fiscal 2022.

The effects of the pandemic had a lesser impact on the design segment of our business. Rising inflation caused an increase in the cost of acquiring and maintaining our employees. The timing and extent of future inflation are difficult to predict, but we expect these rising costs to have a more significant impact in the second half of Fiscal 2022.

The effects of COVID-19 may further impact our business in ways we cannot predict, and such impacts could be significant. The current economic impact may continue to negatively impact our results of operations, cash flows and financial position in future periods as well as that of our customers, including their ability to pay for our services and to choose to allocate their budgets to new or existing projects which may or may not require our services. The long-term financial impact on our business cannot be reasonably estimated at this time. As a result, the effects of COVID-19 may not be fully reflected in our financial results until future periods.

| 18 |

Until the effects of the pandemic have fully receded, we expect business conditions to remain challenging. In response to these challenges, we will continue to focus on those factors that we can control: closely managing and controlling our expenses; aligning our design and development schedules with demand in a proactive manner to minimize our cash operating costs; pursuing further improvements in the productivity and effectiveness of our development, selling and administrative activities and, where appropriate, taking advantage of opportunities to enhance our business growth and strategy.

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 discuss the material accounting policies that are critical in making the estimates and judgments in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, under the caption “Management’s Discussion and Analysis—Critical Accounting Policies and Estimates”. There has been no material change in critical accounting policies or estimates during the period covered by this report.

Recent Accounting Pronouncements

For information on recent accounting pronouncements and impacts, see Note 2 to the unaudited condensed consolidated financial statements.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2022 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2021

Consolidated Results

The table below summarizes our consolidated results of operations for the 2022 Quarter as compared to the 2021 Quarter:

|  | Consolidated Results of Operations |
|  | 2022 Quarter |  |  | 2021 Quarter |  |  | Change ($) |  |  | Change (%) |
Revenues, net |  | $ | 10,315,000 |  |  | $ | 8,395,000 |  |  | $ | 1,920,000 |  |  |  | 22.9% |
Cost of sales |  |  | 8,063,000 |  |  |  | 6,652,000 |  |  |  | 1,411,000 |  |  |  | 21.2% |
Gross profit |  |  | 2,252,000 |  |  |  | 1,743,000 |  |  |  | 509,000 |  |  |  | 29.2% |
Sales and marketing expenses |  |  | 704,000 |  |  |  | 578,000 |  |  |  | 126,000 |  |  |  | 21.8% |
General and administrative expenses |  |  | 1,871,000 |  |  |  | 1,981,000 |  |  |  | (110,000 | ) |  |  | (5.6% | )
Loss from operations |  |  | (323,000 | ) |  |  | (816,000 | ) |  |  | 493,000 |  |  |  | (60.4% | )
Other expense, net |  |  | 33,000 |  |  |  | 19,000 |  |  |  | 14,000 |  |  |  | 73.7% |
Provision for income taxes |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |
Net loss |  | $ | (356,000 | ) |  | $ | (835,000 | ) |  | $ | 479,000 |  |  |  | (57.4% | )

The discussion that follows below provides further details about our results of operations for the 2022 Quarter as compared to the 2021 Quarter.

| 19 |

Net revenues increased across all segments, with the most significant growth coming from the IPS component of the design segment.

Our gross profit increased, primarily driven by the increase in revenues, and gross margin improved from 20.8% in the 2021 Quarter to 21.8% in the 2022 Quarter. Higher utilization rates coupled with an increase in the average bill rate drove design segment margins higher. However, higher importation and logistics costs drove margins down in both the OEM and retail distribution segments. Management believes there will be continued volatility in OEM and retail distribution cost of sales for the remainder of Fiscal 2022.

Sales and marketing expenses increased in the 2022 Quarter primarily due to higher advertising costs and sales commissions related to our retail distribution segment. Sales and marketing as a percentage of revenues remained relatively flat at 6.8% in the 2022 Quarter. As we continue to invest in the retail segment and as it grows to represent a larger component of the overall business, management expects sales and marketing costs, both in total and as a percentage of revenues, to increase in future periods.

General and administrative expenses declined in the 2022 Quarter, primarily related to lower bad debt expense in the design segment. These declines were partially offset by slightly higher corporate expenses, primarily related to an increase in non-employee board members’ equity compensation. Management continues to monitor the various components of general and administrative expenses and how these costs are affected by inflationary and other factors. We intend to make adjustments to these costs as needed based on the overall needs of the business.

Other expense, net increased due to a decrease in interest income on a customer note receivable, partially offset by lower interest expense due to a reduction in the average amount of debt outstanding.

We generated a net loss of $356,000 and $835,000 in the 2022 and 2021 Quarter, respectively. We maintain significant net operating loss carryforwards and do not recognize 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 were $0.04 and $0.08 for the 2022 Quarter and the 2021 Quarter, respectively.

Segment Results

The discussion that follows below provides further details about the results of operations for each segment as compared to the prior year quarter. Due to the growth of our retail division, we determined it to be a separate reportable segment in the fourth quarter of fiscal 2021. The results of operations for the 2021 Quarter for each segment discussed below have been reformatted from what was previously disclosed to segregate the retail distribution segment and exclude general corporate expenses from segment operating income to show them as a reconciling item so that results are comparable to the current year presentation.

|  | Segment Results of Operations |
|  | OEM Distribution |  |  | Retail Distribution |  |  | Design |  |  | Corporate Expenses |  |  | Consolidated |
2022 Quarter revenues |  | $ | 4,676,000 |  |  | $ | 649,000 |  |  | $ | 4,990,000 |  |  | $ | – |  |  | $ | 10,315,000 |
2021 Quarter revenues |  |  | 4,254,000 |  |  |  | 229,000 |  |  |  | 3,912,000 |  |  |  | – |  |  |  | 8,395,000 |
Change |  | $ | 422,000 |  |  | $ | 420,000 |  |  | $ | 1,078,000 |  |  | $ | – |  |  | $ | 1,920,000 |
2022 Quarter operating income/(loss) |  | $ | 326,000 |  |  | $ | (356,000 | ) |  | $ | 389,000 |  |  | $ | (682,000 | ) |  | $ | (323,000 | )
2021 Quarter operating income/(loss) |  |  | 302,000 |  |  |  | (210,000 | ) |  |  | (288,000 | ) |  |  | (620,000 | ) |  |  | (816,000 | )
Change |  | $ | 24,000 |  |  | $ | (146,000 | ) |  | $ | 677,000 |  |  | $ | (62,000 | ) |  | $ | 493,000 |

OEM Distribution Segment

Net revenues in the OEM distribution segment increased due primarily to an increase in sales of diabetic products, while an increase in revenues from other products comprised a lesser portion of the increase. As consumer demand increases for diabetic testing products which require no carrying case, we expect diabetic product sales to represent a smaller portion of our OEM distribution revenue.

| 20 |

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

|  | OEM Revenues by Product Line |
|  | 2022 Quarter |  |  | 2021 Quarter |  |  | Change ($) |  |  | Change (%) |
Diabetic products |  | $ | 4,159,000 |  |  | $ | 3,836,000 |  |  | $ | 323,000 |  |  |  | 8.4% |
Other products |  |  | 517,000 |  |  |  | 418,000 |  |  |  | 99,000 |  |  |  | 23.7% |
Total net revenues |  | $ | 4,676,000 |  |  | $ | 4,254,000 |  |  | $ | 422,000 |  |  |  | 9.9% |

Diabetic Product Revenues

Our OEM distribution segment manufactures to the order of, and sells carrying cases for, blood glucose diagnostic kits directly to OEMs (or their contract manufacturers). The OEM customer or its contract manufacturer packages our carry cases “in box” as a custom accessory for the OEM’s blood glucose testing and monitoring kits, or to a lesser extent, sells them through their retail distribution channels.

Revenues from diabetic products increased in the 2022 Quarter primarily due to logistical delays caused by limited cargo capacity in the first quarter of Fiscal 2022 which were resolved in the 2022 Quarter. This increase was further enhanced by a slight increase in demand for some products. As mentioned above, management believes that revenues from diabetic customers will continue to decline in future periods.

Revenues from diabetic products represented 89% of net revenues for the OEM distribution segment in the 2022 Quarter compared to 90% in the 2021 Quarter. The remaining revenues from our OEM distribution segment are described below.

Other Product Revenues

Our OEM distribution segment also sources and sells cases and protective solutions for a diverse array of portable electronic and non-electronic products (such as sporting and recreational products, bar code scanners, GPS location devices, tablets and firearms) on a made-to-order basis that are customized to fit the products sold by our OEM customers.

Revenues from other products increased primarily due to higher sales volume with existing customers. We will continue to focus on our sales and sales support teams in our continued efforts to expand and diversify our other products customer base.

Operating Income

Operating income for the OEM distribution segment increased and operating income margin remained relatively consistent at 7.0%. The higher gross margins derived from other product revenue was offset by declining margins on diabetic products due to higher freight and other importation costs and pricing pressures from customers, resulting in a decrease in gross margin as compared to the prior year quarter. The decline in gross margin was mitigated by lower selling and marketing costs resulting from a reduction in contract sales personnel, which improved operating income and helped maintain the operating income margin.

Retail Distribution Segment

Net revenues increased due to new product offerings and the continued expansion of our retail distribution network; revenue derived from new retailers as well as an increase in volume with certain existing retailers. We will continue to focus on our sales and sales support teams in our attempt to expand and diversify our retail product offerings.

Although revenues increased, the increase in operating loss was driven by higher cost of sales caused by higher freight and other importation costs, supply chain issues and higher sales and marketing expenses driven by higher sales commission resulting from the increase in revenue and higher advertising and promotion expenses.

| 21 |

Design Segment

The increase in net revenues in the design segment was driven by an increase in projects from new and existing customers, which was partially offset by declines in revenues from certain prior year customers.

Operating income for the design segment increased and operating income margin improved from (7.4%) in the 2021 Quarter to 7.8% in 2022 Quarter. The increase in gross profit, driven by higher revenues and better utilization and billing rates, was further enhanced by a decrease in general and administrative expenses primarily due to a reduction in bad debt expense.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2022 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 2021

Consolidated Results

The table below summarizes our consolidated results of operations for the 2022 Period as compared to the 2021 Period:

|  | Consolidated Results of Operations |
|  | 2022 Period |  |  | 2021 Period |  |  | Change ($) |  |  | Change (%) |
Revenues, net |  | $ | 21,928,000 |  |  | $ | 18,113,000 |  |  | $ | 3,815,000 |  |  |  | 21.1% |
Cost of sales |  |  | 17,057,000 |  |  |  | 14,107,000 |  |  |  | 2,950,000 |  |  |  | 20.9% |
Gross profit |  |  | 4,871,000 |  |  |  | 4,006,000 |  |  |  | 865,000 |  |  |  | 21.6% |
Sales and marketing expenses |  |  | 1,442,000 |  |  |  | 1,181,000 |  |  |  | 261,000 |  |  |  | 22.1% |
General and administrative expenses |  |  | 3,538,000 |  |  |  | 3,809,000 |  |  |  | (271,000 | ) |  |  | (7.1% | )
Loss from operations |  |  | (109,000 | ) |  |  | (984,000 | ) |  |  | 875,000 |  |  |  | (88.9% | )
Other expense/(income), net |  |  | 67,000 |  |  |  | (1,348,000 | ) |  |  | 1,415,000 |  |  |  | (105.0% | )
Provision for income taxes |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |
Net (loss)/income |  | $ | (176,000 | ) |  | $ | 364,000 |  |  | $ | (540,000 | ) |  |  | (148.4% | )

The discussion that follows below provides further details about our results of operations for the 2022 Period as compared to the 2021 Period.

Net revenues increased across all segments, most notably in the design and retail distribution segments and to a lesser extent, in the OEM distribution segment.

Our gross profit increased, primarily driven by the increase in revenues, but gross margin remained relatively consistent at 22.2%. Better utilization and higher billing rates in the design segment were mostly offset by higher importation and logistics costs, which drove OEM and retail distribution margins down. Management believes there will be continued volatility in OEM and retail distribution cost of sales for the remainder of Fiscal 2022.

Sales and marketing expenses increased in the 2022 Period primarily due to higher advertising and promotional costs coupled with sales commissions related to our retail distribution segment. Sales and marketing as a percentage of revenues increased slightly to 6.6% in the 2022 Period. As we continue to invest in the retail business and as it grows to represent a larger component of the overall business, management expects sales and marketing costs, both in total and as a percentage of revenues, to increase in future periods.

General and administrative expenses declined in the 2022 Period, primarily related to lower bad debt expense in the design segment. These declines were partially offset by higher corporate expenses, primarily related to an increase in non-employee board members’ equity compensation and a reduction in certain foreign tax credits received for research and development activities. 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 make adjustments to these costs as needed based on the overall needs of the business.

| 22 |

We reported other expense of $67,000 in the 2022 Period as compared to net other income of $1,348,000 in the 2021 Period. The decrease is primarily due to the forgiveness of note payable related to the PPP loan in the 2021 Period, which did not recur in the 2022 Period. A decrease in interest payment on a customer note receivable contributed to the balance of the change.

In the 2022 Period, we generated a net loss of $176,000. In the 2021 Period, we generated net income of $364,000, primarily resulting from the $1,357,000 forgiveness of note payable related to the PPP loan, which was not recognized as taxable income per the CARES Act. We maintain significant net operating loss carryforwards and do not recognize 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)/earnings per share were $(0.02) and $0.04 for the 2022 Period and the 2021 Period, respectively.

Segment Results

The discussion that follows below provides further details about the results of operations for each segment as compared to the prior year period. Due to the growth of our retail division, we determined it to be a separate reportable segment in the fourth quarter of fiscal 2021. The results of operations for the 2021 Period for each segment discussed below have been reformatted from what was previously disclosed to segregate the retail distribution segment and exclude general corporate expenses from segment operating income to show them as a reconciling item so that results are comparable to the current year presentation.

|  | Segment Results of Operations |
|  | OEM Distribution |  |  | Retail Distribution |  |  | Design |  |  | Corporate Expenses |  |  | Consolidated |
2022 Period revenues |  | $ | 9,917,000 |  |  | $ | 2,041,000 |  |  | $ | 9,970,000 |  |  | $ | – |  |  | $ | 21,928,000 |
2021 Period revenues |  |  | 9,467,000 |  |  |  | 621,000 |  |  |  | 8,025,000 |  |  |  | – |  |  |  | 18,113,000 |
Change |  | $ | 450,000 |  |  | $ | 1,420,000 |  |  | $ | 1,945,000 |  |  | $ | – |  |  | $ | 3,815,000 |
2022 Period operating income/(loss) |  | $ | 823,000 |  |  | $ | (584,000 | ) |  | $ | 974,000 |  |  | $ | (1,322,000 | ) |  | $ | (109,000 | )
2021 Period operating income/(loss) |  |  | 719,000 |  |  |  | (389,000 | ) |  |  | (112,000 | ) |  |  | (1,202,000 | ) |  |  | (984,000 | )
Change |  | $ | 104,000 |  |  | $ | (195,000 | ) |  | $ | 1,086,000 |  |  | $ | (120,000 | ) |  | $ | 875,000 |

OEM Distribution Segment

Net revenues in the OEM distribution segment increased primarily due to higher sales of other OEM products coupled with a smaller increase in diabetic product revenue. Revenues from other products increased $362,000 and revenue from diabetic products increased $88,000. As consumer demand increases for diabetic testing products which require no carrying case, we expect diabetic product sales to represent a smaller portion of our OEM distribution revenue.

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

|  | OEM Revenues by Product Line |
|  | 2022 Period |  |  | 2021 Period |  |  | Change ($) |  |  | Change (%) |
Diabetic products |  | $ | 8,393,000 |  |  | $ | 8,305,000 |  |  | $ | 88,000 |  |  |  | 1.1% |
Other products |  |  | 1,524,000 |  |  |  | 1,162,000 |  |  |  | 362,000 |  |  |  | 31.2% |
Total net revenues |  | $ | 9,917,000 |  |  | $ | 9,467,000 |  |  | $ | 450,000 |  |  |  | 4.8% |

| 23 |

Diabetic Product Revenues

Our OEM distribution segment manufactures to the order of, and sells carrying cases for, blood glucose diagnostic kits directly to OEMs (or their contract manufacturers). The OEM customer or its contract manufacturer packages our carry cases “in box” as a custom accessory for the OEM’s blood glucose testing and monitoring kits, or to a lesser extent, sells them through their retail distribution channels.

Revenues from diabetic products increased due to higher revenues from one major diabetic customer. The higher revenue from this customer was due to a short-term increase in demand for certain products that are being phased out, coupled with delays in placing orders near the end of Fiscal 2021 which resulted in more revenue being recognized in the first half of Fiscal 2022. These increases were partially offset by lower revenue from other diabetic customers, which were less significant. As mentioned above, management believes that revenues from diabetic customers will continue to decline in future periods.

Revenues from diabetic products represented 85% of net revenues for the OEM distribution segment in the 2022 Period compared to 88% in the 2021 Period. The remaining revenues from our OEM distribution segment are described below.

Other Product Revenues

Our OEM distribution segment also sources and sells cases and protective solutions for a diverse array of portable electronic and non-electronic products (such as sporting and recreational products, bar code scanners, GPS location devices, tablets and firearms) on a made-to-order basis that are customized to fit the products sold by our OEM customers.

Revenues from other products increased due to an increase in sales volume from existing customers. We will continue to focus on our sales and sales support teams in our continued efforts to expand and diversify our other products customer base.

Operating Income

Operating income for the OEM distribution segment increased and operating income margin improved to 8.3% in the 2022 Period from 7.6% in the 2021 Period. The higher gross margins derived from other products was mostly offset by declining margins on diabetic products due to pricing pressures from customers, resulting in a slight decrease in gross margin as compared to the prior year quarter. The decline in gross margin was mitigated by lower selling and marketing costs related to OEM sales commissions.

Retail Distribution Segment

Net revenues increased due to new product offerings and the continued expansion of our retail distribution network; revenue derived from new retailers as well as an increase in volume with certain existing retailers. We will continue to focus on our sales and sales support teams in our attempt to expand and diversify our retail product offerings.

The increase in gross profit driven by higher revenues was offset by higher sales and marketing expenses related to sales commissions, advertising and promotional expenses to support the growth in revenue.

Design Segment

The increase in net revenues in the design segment was driven by new customers and an increase in projects from certain existing customers, which was partially offset by declines in revenues from certain prior year customers.

Operating income for the design segment increased and operating income margin improved from (1.4%) in the 2021 Period to 9.8% in 2022 Period. The increase in gross profit, driven by higher revenues and better utilization and billing rates, was further enhanced by a decrease in general and administrative expenses primarily due to a reduction in bad debt expense.

| 24 |

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 March 31, 2022, our working capital was $3,899,000 compared to $5,587,000 at September 30, 2021; the decrease primarily due to the remaining $1,500,000 balance on the note payable to Forward China becoming a current liability at March 31, 2022 as opposed to a long-term liability at September 30, 2021.

At April 30, 2022, we had $1,900,000 cash on hand and $1,300,000 available under our line of credit which matures May 31, 2023. Additionally, Forward China, our largest vendor and an entity owned by our Chairman of the Board and Chief Executive Officer, holds a $1,600,000 promissory note issued by the Company which matures on December 31, 2022 (see Note 8 to the condensed consolidated financial statements). The balance of this promissory note was reduced to $1,500,000 after the Company made principal payments of $100,000 in Fiscal 2022. Although this promissory note has been extended on multiple occasions to assist us with our liquidity position, we plan on funding the repayment at maturity using existing cash balances and/or obtaining an additional credit facility as deemed necessary. Forward China has extended payment terms on our outstanding payables due to them when necessary. We can provide no assurance that (i) Forward China will extend the promissory note again if we request an extension, (ii) Forward China will continue to extend payment terms when we need them, or (iii) any additional credit facility will be available on terms acceptable to us or at all.

We anticipate that our liquidity and financial resources for the 12 months following the date of this report will be adequate to manage our operating and financial requirements. If we have the opportunity to make a strategic acquisition (as we have in the past with the acquisitions of IPS and Kablooe) or an investment in a product or partnership, we may require additional capital beyond our current cash balance to fund the opportunity. If we seek to raise additional capital, there is no assurance that we will be able to raise funds on terms that are acceptable to us or at all.

Although we do not anticipate the need to purchase 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 the 2022 Period and 2021 Period, our sources and uses of cash were as follows:

Operating Activities

During the 2022 Period, cash provided by operating activities of $360,000 primarily resulted from an increase in accounts payable, accrued expenses and amounts due to Forward China of $1,836,000, an increase in deferred income of $433,000 and non-cash expenses of $321,000 for depreciation, amortization, share-based compensation and bad debt expense, partially offset by an operating loss of $109,000, an increase in inventories of $1,835,000, a decrease in prepaid expenses and other current liabilities of $255,000 and the net change in other operating assets and liabilities of $31,000.

During the 2021 Period, cash used in operating activities of $398,000 primarily resulted from an operating loss of $984,000, a decrease in deferred income of $348,000, an increase in inventories of $874,000, a decrease in accrued expenses of $161,000, partially offset by non-cash expenses of $748,000 relating to depreciation, amortization, share-based compensation and bad debt expense, a decrease of $757,000 in accounts receivable, an increase of $395,000 in accounts payable and amounts due to Forward China and the net change in other operating assets and liabilities of $69,000.

Investing Activities

Cash used in investing activities in the 2022 Period and the 2021 Period of $130,000 and $38,000, respectively, resulted from purchases of property and equipment.

| 25 |

Financing Activities

In the 2022 Period, cash used in financing activities of $100,000 consisted of principal payments on the promissory note held by Forward China.

In the 2021 Period, cash used in financing activities of $960,000 consisted of net repayments of the line of credit of $1,000,000, repayments of notes payable and finance leases of $104,000, partially offset by proceeds from stock options exercised of $144,000.

Related Party Transactions

For information on related party transactions and their financial impact, see Note 8 to the unaudited condensed consolidated financial statements contained herein.

ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. | CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our management carried out an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, required by Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act. Based on their evaluation, our management has concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations of the Effectiveness of Controls and Procedures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations of any control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

| 26 |

PART II. OTHER INFORMATION

ITEM 1. | LEGAL PROCEEDINGS

As previously disclosed, on August 21, 2020, IPS was named a third-party defendant in a patent dispute claim in the U.S. District Court for the Eastern District of New York. The complaint, which contains no specific amount of monetary damages, asserts that certain intellectual property was misappropriated by IPS and one of its former employees. In October 2021, the Court ruled that the misappropriation claim was invalid. The remaining allegation was that IPS breached a non-disclosure agreement with a party to the case. In January 2022, all claims in this matter were dismissed without prejudice.

From time to time, the Company may become a party to other legal actions or proceedings in the ordinary course of its business. At March 31, 2022, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material to its operation or cash flow.

ITEM 1A. | RISK FACTORS

While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. Item 1A - “Risk Factors” in the Form 10-K for the fiscal year ended September 30, 2021 describes some of the risks and uncertainties associated with our business, which we strongly encourage you to review. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects. There have been no material changes in our risk factors from those disclosed in the Form 10-K for the fiscal year ended September 30, 2021.

ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of the Company’s equity securities during the three months ended March 31, 2022, that were not previously disclosed in a Current Report on Form 8-K.

ITEM 3. | DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. | MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. | OTHER INFORMATION

None.

ITEM 6. | EXHIBITS

The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-Q.

| 27 |

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

Dated: May 12, 2022

FORWARD INDUSTRIES, INC.
By: /s/ Terence Wise Terence Wise Chief Executive Officer (Principal Executive Officer) By: /s/Anthony Camarda Anthony Camarda Chief Financial Officer (Principal Financial and Accounting Officer)

| 28 |

EXHIBIT INDEX

|  |  | Incorporated by Reference |
Exhibit No. |  | Exhibit Description | Form | Date | Number | Filed or Furnished Herewith
2.1 |  | Stock Purchase Agreement dated January 18, 2018 - Intelligent Product Solutions, Inc.+ | 8-K | 1/18/18 | 2.1 |
2.2 |  | Asset Purchase Agreement by and among Forward Industries, Inc., Kablooe, Inc., Kablooe Design, Inc. and Tom KraMer dated August 17, 2020+ | 8-K | 8/17/20 | 2.1 |
3.1 |  | Restated Certificate of Incorporation | 10-K | 12/8/10 | 3(i) |
3.2 |  | Certificate of Amendment of the Certificate of Incorporation, April 26, 2013 | 8-K | 4/26/13 | 3.1 |
3.3 |  | Certificate of Amendment of the Certificate of Incorporation, June 28, 2013 | 8-K | 7/3/13 | 3.1 |
3.4 |  | Third Amended and Restated Bylaws, as of May 28, 2014 | 10-K | 12/10/14 | 3(ii) |
10.1 |  | Consultancy Agreement dated March 1, 2022, between the Company and Justwise Group Ltd. |  |  |  | Filed
31.1 |  | CEO Certification (302) |  |  |  | Filed
31.2 |  | CFO Certification (302) |  |  |  | Filed
32.1 |  | CEO and CFO Certifications (906) |  |  |  | Furnished
101 | .INS | XBRL Instance Document |  |  |  | Filed
101 | .SCH | XBRL Taxonomy Extension Schema Document |  |  |  | Filed
101 | .CAL | XBRL Taxonomy Extension Calculation Linkbase Document |  |  |  | Filed
101 | .DEF | XBRL Taxonomy Extension Definition Linkbase Document |  |  |  | Filed
101 | .LAB | XBRL Taxonomy Extension Label Linkbase Document |  |  |  | Filed
101 | .PRE | XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  | Filed
104 |  | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |  |  |  |

+ Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601 of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission staff upon request.

Copies of this filing (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Forward Industries, Inc.; 700 Veterans Memorial Hwy, Suite 100, Hauppauge, NY 11788; Attention: Corporate Secretary.

| 29 |