Company: FWDI
Filing Date: 2025-02-13
Form Type: 10-Q
Source: 0001683168-25-000993
Chunk: 24

Company: Forward Industries, Inc.
Filing Date: 2025-02-13
Form: 10-Q
Item: Item 1
Chunk 24
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 2024, the Company and Forward China agreed to: (i) extend the sourcing agreement until April 30,
2025, but allow either party to cancel with 30 days’ notice, (ii) reduce the fixed portion of the sourcing fee to $35,000 per month,
and (iii) change the payment terms to better align with payments from the Company’s customers.

Terence Wise, Chief Executive
Officer and Chairman of the Company, is the owner of Forward China. 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 $159,000 and $234,000 during the three months ended December 31, 2024 and 2023, respectively, which are included as a component
of cost of sales upon sales of the related products. The Company had purchases from Forward China during the three months ended December
31, 2024 and 2023 of approximately $1,671,000 and $1,516,000, respectively.

In order to preserve the
Company’s current and future liquidity, in November 2023, the Company and Forward China entered into an agreement whereby Forward
China agreed to limit the amount of outstanding payables it would seek to collect from the Company to $500,000 in any 12-month period,
which the Company agreed to pay within 30 days of any such request. This agreement pertains only to payables that were outstanding at
October 30, 2023 of approximately $7,365,000. Purchases from Forward China made after October 30, 2023 are not covered by this agreement
and are expected to be paid according to normal payment terms. At December 31, 2024, the remaining balance covered by this agreement was
approximately $4,881,000.

Accounts Payable Conversion Agreements

In order to maintain compliance
with Nasdaq’s listing standards, the Company entered into two separate agreements with Forward China (the “Conversion Agreements”),
which were effective in July and September of 2024, to convert portions of amounts Due to Forward China into shares of preferred stock.
Under the terms of the Conversion Agreements, Forward China agreed to convert $2,200,000 of the Due to Forward China payable into 2,200
shares of the Company’s newly designated Series A-1 convertible preferred stock (the “Preferred Stock”) with a