Company: FWDI
Filing Date: 2025-12-11
Form Type: 10-K
Source: 0001683168-25-009068
Chunk: 1139

Company: Forward Industries, Inc.
Filing Date: 2025-12-11
Form: 10-K
Item: Item 9A
Chunk 1139
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 of future taxable income, current year NOL utilization and the extent of the Company’s
cumulative losses in recent years, the Company determined that, on a more likely than not basis, it would not be able to use remaining
deferred tax assets. Accordingly, the Company has determined to maintain a full valuation allowance against its net deferred tax assets.
At September 30, 2025 and 2024, the valuation allowance was $45,643,000 and $4,307,000, respectively. In the future, the utilization of
the Company’s NOLs may be subject to certain change of control limitations as described below. If the Company determines that it
will be able to use some or all of its deferred tax assets in a future reporting period, the adjustment to reduce or eliminate the valuation
allowance would reduce its income tax expense and increase after-tax income.

Utilization of NOLs may be subject
to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 (the “Code”) due to ownership change
limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOLs that
can be utilized annually to offset future taxable income. An ownership change pursuant to the Code generally occurs if one or more shareholders
or groups of shareholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over
their lowest ownership percentage within a rolling three-year period. The Company’s ability to utilize its NOLs and other tax attributes
to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection
with the Securities Purchase Agreement (Note 8) or other transactions. Similar rules may apply under state tax laws.

Additionally, Section 382 requires
companies to satisfy the “continuity of business enterprise” in order to utilize pre-change tax attributes, which requires
the continuance of at least one significant historic line of business or the usage of a significant portion of historic assets in a business.
Failure to meet these requirements not only affects the ability to utilize NOLs, but may also result in limitations or forfeiture of other
deferred tax assets.

The Company has engaged external
tax experts to perform a comprehensive Section 382 study, but as of the date of this filing, this study has not been completed and therefore,
the effects of any Section 382 limitations on the utilization of NOLs cannot be determined as