NOTE 3         DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

In July 2023, the Company decided to cease operations of its retail distribution segment (“Retail Exit”). The primary assets of the retail segment were inventory and accounts receivable. The Company sold, liquidated, or otherwise disposed of all remaining retail inventory, and collected remaining retail accounts receivable by September 30, 2024, at which time the retail segment was considered fully discontinued. We expect to have no further significant continuing involvement with this segment. The Retail Exit was considered a strategic shift that would have a significant impact on the Company’s operations and financial results. The inventory of the retail segment met the criteria to be considered “held-for-sale” in accordance with ASC 205-20, “Discontinued Operations.” Accordingly, the retail inventory was classified on our consolidated balance sheets as “discontinued assets held for sale” at September 30, 2023, and the results of operations for the retail segment have been classified as “Discontinued Operations” on the consolidated statements of operations for the years ended September 30, 2025 and 2024.

In March 2025, in connection with the fourth Conversion Agreement (see Note 14), Forward China determined it would not renew the Buying Agency and Supply Agreement (“Sourcing Agreement”), which subsequently expired on May 9, 2025 (see Note 14). Without this agreement, the Company determined it would not continue the OEM segment of the business and committed to a plan to sell the segment. On May 16, 2025, the Company and Forward US entered into a transaction agreement with Forward China, pursuant to which: (i) the Company sold all equity interest in Forward Switzerland and Forward UK and sold certain other net assets related to Forward US’ OEM segment to Forward China to satisfy outstanding payables due to Forward China under the Sourcing Agreement; (ii) the Company and Forward China terminated the Sourcing Agreement and extended the term of the Note Payable (see Note 14) to December 31, 2025; and (iii) the Company paid Forward China $200,000 at closing plus $150,000 on each of July 31, 2025, August 31, 2025 and September 30, 2025. Results of operations for Forward Switzerland and Forward UK were included in the Company’s results of operations through and including May 16, 2025.

The sale of the OEM business is considered a strategic shift that will have a significant impact on the Company’s operations and financial results. The assets and liabilities of the OEM segment were classified as assets and liabilities held for sale on the consolidated balance sheets at September 30, 2024. The results of operations for the OEM segment have been classified as discontinued operations on the consolidated statements of operations for the years ended September 30, 2025 and 2024.

The consolidated balance sheets and statements of operations for comparable periods have been reclassified to conform to this presentation in accordance with the accounting guidance.

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

There were no material amounts of depreciation, amortization, investing or financing cash flows for the discontinued operations in Fiscal 2025 or Fiscal 2024. The only significant non-cash activity for the discontinued operations in Fiscal 2025 and 2024 was the conversion of accounts payable to Forward China into preferred stock in July and September of 2024 (see Note 14).

The following table presents the major components of assets and liabilities held for sale on our consolidated financial statements at September 30, 2024: