DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

6 Months Ended

Mar. 31, 2025

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

NOTE 3 DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Considering the recurring losses incurred by the retail segment, in July 2023, the Company decided to cease operations of its retail distribution segment (“Retail Exit”). The primary assets of the retail segment were inventory and accounts receivable. The Company sold, liquidated, or otherwise disposed of 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 condensed 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 condensed consolidated statements of operations for the three and six months ended March 31, 2025 and 2024.

In March 2025, in connection with the fourth Conversion Agreement (see Note 8), Forward China determined it would not renew the Buying Agency and Supply Agreement, which was scheduled to expire on April 30, 2025 (see Note 11). 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 in the next three months, after which it does not plan to have any significant continuing involvement with this segment. 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 are classified as assets and liabilities held for sale on the condensed consolidated balance sheets at March 31, 2025 and September 30, 2024. The results of operations for the OEM segment have been classified as discontinued operations on the condensed consolidated statement of operations for the three and six months ended March 31, 2025 and 2024. The condensed 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 components of the “Income from discontinued operations, net of tax” in our condensed consolidated statements of operations:

	For the Three Months Ended March 31,				For the Six Months Ended March 31,
	2025		2024		2025		2024
Revenues, net	$	2,727,000	$	2,851,000	$	4,718,000	$	5,526,000
Cost of sales		2,162,000		2,479,000		3,785,000		4,758,000
Gross profit		565,000		372,000		933,000		768,000
Sales and marketing expenses		152,000		243,000		297,000		548,000
General and administrative expenses		42,000		55,000		76,000		135,000
Income from discontinued operations	$	371,000	$	74,000	$	560,000	$	85,000

There were no depreciation, amortization, investing or financing cash flow activities for the discontinued operations in the three or six months ended March 31, 2025 or 2024. The only significant non-cash operating cash flow activity for the discontinued operations in the three and six months ended March 31, 2025 and 2024 was the conversion of accounts payable to Forward China into preferred stock in February and March of 2025 (See Note 8).

The following table presents the major components of assets and liabilities held for sale on our condensed consolidated balance sheets:

	March 31,		September 30,
	2025		2024
Cash	$	253,000	$	245,000
Accounts receivable, net		1,992,000		2,124,000
Inventories		609,000		490,000
Prepaid expenses and other assets		55,000		49,000
Total assets held for sale	$	2,909,000	$	2,908,000
Accounts payable	$	44,000	$	25,000
Due to Forward China		4,398,000		7,226,000
Other liabilities		35,000		42,000
Total liabilities held for sale	$	4,477,000	$	7,293,000