FWDI 10-K & 10-Q changes, risk factors and insider trading

Summary Risk Factors

Our business is subject to numerous risks and uncertainties that you should consider before investing in our common stock. Set forth below is a summary of the principal risks we face:

We purchase digital assets, including SOL, the price of which has been, and will likely continue to be, highly volatile. Our operating results and share price may significantly fluctuate, including due to the highly volatile nature of the price of such digital assets and erratic market movements.

We purchase or otherwise acquire SOL for the establishment of our digital asset treasury operations. Digital assets, such as SOL, are highly volatile assets, as a result of many factors including shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions and regulatory announcements. In addition, digital assets do not pay interest or other returns, unless utilized in staking or financial applications, and so the ability to generate a return on investment from the net proceeds of any capital raisings will principally depend on whether there is appreciation in the value of digital assets following our purchases of digital assets with the net proceeds from such capital raisings. Future fluctuations in digital asset trading prices may result in our converting digital assets into cash with a value substantially below what we paid for such digital assets.

We adopted a digital asset treasury strategy with a focus on SOL, and we may be unable to successfully implement this new strategy.

We adopted a digital asset treasury primarily dedicated to SOL, including SOL acquisitions, staking and other decentralized finance activities. There is no assurance that we will be able to successfully implement this new strategy or operate Solana-related activities at the scale or profitability currently anticipated. Solana operates with a proof-of-stake combined with proof-of-history consensus mechanism, which differs significantly from bitcoin’s proof-of-work mining mechanism. This strategic shift requires specialized employee skillsets and operational, technical and compliance infrastructure to support SOL and related staking activities. This also requires that we implement different security protocols and treasury management practices. Further, there is ongoing scrutiny and limited formal guidance from regulatory agencies, including Nasdaq and the SEC, with respect to the treatment of public company cryptocurrency strategies. There is no assurance that we will be able to execute this strategy by building out the needed infrastructure within the timeframe that we currently anticipate. Errors by key management could result in significant loss of funds and reduced rewards. As a result, our shift towards SOL could have a material adverse effect on our business and financial condition.

Our management relies upon the advice of the Asset Manager through the Asset Management Agreement to assist in building our new Treasury Policy and the execution of the Company’s Treasury Policy and may not yield the desired return.

We have engaged the Asset Manager to manage our digital assets holdings and provide discretionary investment management services with respect to all of the Company’s cash, cash equivalents, stablecoins, cryptocurrency and certain other investible assets (the “Treasury Assets”) including all digital assets, the proceeds of any bona fide capital raise or other financing transaction conducted by or on behalf of the Company or any of our subsidiaries and any investments of the Treasury Assets. Such Asset Manager (i) will have broad discretion in the application of our Treasury Policy and management of our Treasury Assets, (ii) will have sole responsibility and authority with respect to the discretionary investment management of the Treasury Assets and, (iii) from time to time direct the investment and reinvestment of our Treasury Assets. The Asset Manager’s investments decisions and use of the Treasury Assets could not improve our results of operations or enhance the value of our common stock. The failure to apply and manage these Treasury Assets effectively could result in financial losses that could cause the price of our common stock to decline.

Our shift towards a Solana-focused strategy requires substantial changes in our day-to-day operations and exposes us to significant operational risks.

Our shift towards a SOL treasury-focused strategy, including staking, liquid staking, and other decentralized finance activities, exposes us to significant operational risks. To participate in Solana’s Proof-of-Stake consensus mechanism, we must either operate or delegate to validator nodes, and such validator nodes must keep software updated, maintain validator uptime and employ secure key management. In addition, the Solana ecosystem rapidly evolves, with frequent upgrades and protocol changes that may require significant adjustments to our operational setup if we are operating a validator node. The upgrades and protocol changes may require that we incur unanticipated costs and could cause temporary service disruptions to the Solana network. We may also need to employ third-party service providers in our operations, which may introduce risks outside of our control, including significant cybersecurity risks. Any of these operational risks could materially and adversely affect our ability to execute our SOL treasury strategy and may prevent us from realizing positive returns and could severely hurt our financial condition.

The concentration of our SOL holdings enhances the risks inherent in our Solana-focused strategy.

We have and intend to purchase SOL and increase our overall holdings of SOL in the future. The intended concentration of our SOL holdings limits the risk mitigation that we could achieve if we were to purchase a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent in our Solana-focused strategy. The price of SOL experienced a significant decline in 2022, and any similar future significant declines in the price of SOL could have a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets. Our initial purchases of SOL were valued at approximately $232 per SOL, or $1.58 billion in the aggregate, in early September. At September 30, 2025, the fair value of our SOL holdings was approximately $209 per SOL, or $1.43 billion in the aggregate, and at November 30, 2025, the fair value of our SOL holdings was approximately $133 per SOL, or $920.5 million in the aggregate.

Solana is created and transmitted through the operations of the peer-to-peer Solana network, a decentralized network of computers running software following the Solana protocol. If the Solana network is disrupted or encounters any unanticipated difficulties, the value of SOL could be negatively impacted.

If the Solana network is disrupted or encounters any unanticipated difficulties, then the processing of transactions on the Solana network may be disrupted, which in turn may prevent us from depositing or withdrawing SOL from our accounts with our custodian or otherwise affecting SOL transactions. Such disruptions could include, for example: the insolvency, business failure, interruption, default, failure to perform, security breach, or other problems of participants, custodians, or others; the closing of SOL trading platforms due to fraud, failures, security breaches or otherwise; or network outages or congestion, power outages, or other problems or disruptions affecting the Solana network. In 2021 and 2022, the Solana network experienced performance degradation including liveness disruptions due to network congestion; although the Solana network has been upgraded to address those congestion issues, there is no assurance that future issues may not arise. The implementation of material network upgrades, such as the proposed Alpenglow consensus upgrade or the continued integration of the Firedancer validator client, two initiatives taking place on the Solana blockchain, could result in future degradation of performance. Any disruption of the Solana network could materially impact the operation of decentralized finance on the network, resulting in the inability of the Company to transfer or sell SOL, and the price of SOL.

SOL and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty, which could materially adversely affect the Company’s financial position, operations and prospects.

SOL and other digital assets, as well as applications on blockchain networks such as Solana, are relatively novel and are subject to significant uncertainty, which could adversely impact their price. The application of state and federal securities laws and other laws and regulations to digital assets and blockchain-based applications is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of SOL or other digital assets, or the ability of blockchain-based applications to operate.

The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of SOL or the ability of individuals or institutions such as us to own or transfer SOL and utilize blockchain-based applications on networks such as Solana. For example, the U.S. executive branch, the SEC, the European Union’s Markets in Crypto Assets Regulation, among others, have been active in recent years, and in the United Kingdom, the Financial Services and Markets Act 2023 became law. It is not possible to predict whether, or when, any of these developments will lead to Congress granting additional authorities to the SEC, Commodity Futures Trading Commission (“CFTC”), or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally and SOL specifically. The consequences of increased regulation of digital assets and digital asset activities could adversely affect the market price of SOL and in turn adversely affect the market price of our common stock.

Moreover, the risks of engaging in a digital asset treasury strategy are relatively novel and have created, and could continue to create complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.

The growth of the digital assets industry in general, and the use and acceptance of SOL in particular, may also impact the price of SOL and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of the Solana network and SOL may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to SOL, institutional demand for SOL as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for SOL as a means of payment, and the availability and popularity of alternatives to SOL. Even if growth in SOL adoption occurs in the near or medium term, there is no assurance that SOL and Solana network usage will continue to grow over the long term.

Because SOL have no physical existence beyond the record of transactions on the Solana blockchain, a variety of technical factors related to the Solana blockchain could also impact the price of SOL. For example, malicious attacks by validators, inadequate validation and staking rewards to incentivize validating of Solana transactions, hard “forks” of the Solana blockchain into multiple blockchains, difficulties with upgrades to the Solana network (such as the proposed Alpenglow consensus upgrade or integration of the Firedancer validator client) and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the Solana blockchain and negatively affect the price of SOL. The liquidity of SOL may also be reduced and damage to the public perception of Solana may occur, if financial institutions were to deny or limit banking services to businesses that hold SOL, provide Solana-related services or accept SOL as payment, which could also decrease the price of SOL. Similarly, the open-source nature of the Solana blockchain means the contributors and developers of the Solana blockchain are generally not directly compensated for their contributions in maintaining and developing the blockchain, and any failure to properly monitor and upgrade the Solana blockchain could adversely affect the Solana blockchain and negatively affect the price of SOL.

The liquidity of SOL may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for SOL and other digital assets.

In connection with our SOL treasury strategy, we expect to interact with various smart contracts deployed on the Solana network, which may expose us to risks and technical vulnerabilities.

In connection with our SOL treasury strategy, including staking, liquid staking, and other decentralized finance activities, we expect to interact with various smart contracts deployed on the Solana network in order to optimize our strategy and generate income. Smart contracts are self-executing code that operate without human intervention once deployed. Although smart contracts are integral to the functionality of staking deposit contracts, liquid staking protocols, and decentralized finance applications, they are subject to many known risks such as technical vulnerabilities, coding errors, security flaws, and exploits. Any vulnerability in a smart contract we interact with could result in the loss or theft of SOL or other digital assets, which could have a materially adverse impact on our business. In addition, certain smart contracts are upgradable or subject to certain governance controls which could result in unforeseen code errors, asset or account freezing, or the loss of digital assets. A vulnerability in a smart contract could create an unintended and unforeseeable consequence that has adverse financial consequences, such as the loss of or inability to access funds. There is no assurance that the smart contracts we integrate with or rely upon will function as intended or remain secure. Exploitation of such vulnerabilities could have a material adverse effect on our business and financial condition.

Part of our future business strategy may include acquisitions and investments in companies with Solana-focused or blockchain strategies, and there are risks associated with the integration of any assets or operations acquired and our ability to manage those risks. In addition, we may be unable to make attractive acquisitions or successfully integrate acquired businesses, assets or properties, and any inability to do so may disrupt our business and hinder our ability to grow.

We intend to pursue a strategy focused on both SOL accumulation and future acquisitions. Accordingly, in the future we may make acquisitions of businesses or assets that we expect to complement or expand our current assets. However, we may not be able to identify attractive acquisition opportunities in the future. Even if we do identify attractive acquisition opportunities, we may not be able to complete the acquisition or do so on commercially acceptable terms. No assurance can be given that we will be able to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquire identified targets.

The success of any acquisition will depend on our ability to integrate effectively the acquired business or asset into our existing operations. The process of integrating acquired businesses and assets may involve unforeseen difficulties and may require a disproportionate amount of our managerial and financial resources. The integration of acquisitions is a complex, costly and time-consuming process, and our management may face significant challenges in such process. Some of the factors affecting integration will be outside of our control, and any one of them could result in increased costs and diversion of management’s time and energy, as well as decreases in the amount of expected revenue.

Additional ability to achieve the objectives of our business strategy depends in significant part on our ability to obtain equity and debt financing. If we are unable to obtain equity or debt financing on favorable terms or at all, we may not be able to successfully execute on our business strategy.

Certain of the Sponsors and their affiliates have been, and may continue to be, the subjects of legal and regulatory proceedings and investigations.

Certain of the Sponsors and their affiliates have been, and may continue to be, the subjects of legal and regulatory proceedings and investigations. For example, Galaxy Digital Inc. agreed to pay $200 million as part of an agreement with the New York Attorney General to resolve civil claims related to certain investments, trading, and public statements made in connection with the LUNA digital asset from late 2020 to 2022. Separately, Multicoin Capital Management, LLC and its managing partner Kyle Samani have been named as co-defendants along with Solana Labs in a putative class-action litigation related to the promotion and sale of SOL for which a motion to dismiss is pending. Certain of these matters have involved, among other things, allegations of improper marketing practices and misrepresentations, as well as unregistered securities offerings with respect to SOL and other digital assets. Any adverse outcome in these proceedings or other future litigation or regulatory inquiries could negatively affect public perception of the Sponsors, the Company, and Solana itself, which could constrain trading activity and suppress the price and liquidity of SOL. Any such development could materially and adversely affect the value of our digital asset treasury, the market price of our stock and our ability to execute on our digital asset treasury strategy.

Changes in regulatory interpretations could require us to register as a money services business or money transmitter, leading to increased compliance costs or operational shutdowns.

The regulatory regime for digital assets in the U.S. and elsewhere is uncertain. The Company may be unable to effectively react to proposed legislation and regulation of digital assets, which could adversely affect its business.

If regulatory changes or interpretations require us to register as a money services business with The Financial Crimes Enforcement Network (FinCEN) under the U.S. Bank Secrecy Act, or as a money transmitter under state laws, we may be subject to extensive regulatory requirements, resulting in significant compliance costs and operational burdens. In such a case, we may incur extraordinary expenses to meet these requirements or, alternatively, may determine that continued operations are not viable. If we decide to cease certain operations in response to new regulatory obligations, such actions could occur at a time that is unfavorable to investors.

Multiple states have implemented or proposed regulatory frameworks for digital asset businesses. Compliance with such state-specific regulations may increase costs or impact our business operations. Further, if we or our service providers are unable to comply with evolving federal or state regulations, we may be forced to dissolve or liquidate certain operations, which could materially impact our investors.

If any of the digital assets that we hold are classified as a security, we may be subject to extensive regulation, which could result in significant costs or force us to cease operations.

Regulatory changes or interpretations that classify digital assets that we hold as a security under the Securities Act of 1933 or the Investment Company Act, could require us to register as an investment company and comply with additional regulations. Compliance with these requirements could impose extraordinary, non-recurring expenses on our business. If the costs and regulatory burdens become too great, we may be forced to modify or cease certain operations, which could be detrimental to our investors.

The SEC has previously indicated that certain digital assets may be considered securities depending on their structure and use. Future developments could change the legal status of digital assets that we may hold, requiring us to comply with securities laws. If we fail to do so, we may be forced to discontinue some or all of our business activities, negatively impacting investments in our securities.

If the SEC or other regulators determine that digital assets that we may hold qualify as securities, we may be required to change our operations, wind down our operations, or register as an investment company under the Investment Company Act. This classification would subject us to additional periodic reporting, disclosure requirements, and regulatory compliance obligations, significantly increasing our operational costs. Compliance with the requirements of the Investment Company Act applicable to registered investment companies may make it difficult for us to continue our current operations, and this would materially and adversely affect our business, financial condition and results of operations. In addition, if SOL or another digital asset we hold were determined to constitute a security for purposes of the federal securities laws, we would likely take steps to reduce the percentage of SOL or such other digital assets that constitute investment assets under the Investment Company Act. These steps may include, among others, selling SOL that we might otherwise hold for the long term and deploying our cash in non-investment assets, and we may be forced to sell our SOL or other digital assets at unattractive prices, or cease our operations.

Although we do not currently engage in investing, reinvesting, or trading securities, and we do not hold ourselves out as an investment company, we could inadvertently be deemed one under the Investment Company Act. If we are unable to rely on an exclusion, we would be required to register with the SEC, which could impose additional financial and regulatory burdens.

Further, state regulators may conclude that the digital assets we hold are securities under state laws, requiring us to comply with state-specific securities regulations. States like California have stricter definitions of “investment contracts” than the SEC, increasing the risk of additional regulatory scrutiny.

The classification of digital assets that we hold as a commodity could subject us to additional CFTC regulation, resulting in significant compliance costs or the cessation of certain operations.

Under current interpretations, SOL are classified as a commodity under the Commodity Exchange Act and are subject to regulation by the CFTC. If our activities require CFTC registration, we may be required to comply with extensive regulatory obligations, which could result in significant costs and operational disruptions. Additionally, current and future legislative or regulatory developments, including new CFTC interpretations, could further impact how SOL and SOL derivatives are classified and traded.

If SOL are further regulated as a commodity, we may be required to register as a commodity pool operator and register the Company as a commodity pool with the CFTC through the National Futures Association. Compliance with these additional regulatory requirements could result in substantial, non-recurring expenses, adversely affecting an investment in our securities. If we determine not to comply with such regulations, we may be forced to cease certain operations, which could negatively impact our investors.

We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.

Mutual funds, exchange-traded funds (ETFs) and their management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of our changes to our digital asset strategy, our use of leverage, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers.

Due to the unregulated nature and lack of transparency surrounding the operations of many digital asset trading venues, digital asset trading venues experience greater risk of fraud, market manipulation and other deceptive marketing practices, as well as security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in digital asset trading venues and adversely affect the value of digital assets, and the Company’s financial position, operations and prospects.

Digital asset trading venues are relatively new and, in many cases, unregulated. Furthermore, there are many digital asset trading venues that do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in digital asset trading venues, including prominent exchanges that handle a significant volume of such trading and/or are subject to regulatory oversight, in the event one or more digital asset trading venues cease or pause for a prolonged period the trading of digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.

Negative perception, a lack of stability in the broader digital asset markets and the closure, temporary shutdown or operational disruption of digital asset trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the digital asset ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in digital assets and the broader digital asset ecosystem and greater volatility in the price of digital assets. The price of our listed securities may be affected by the value of our future digital asset holdings, and the failure of a major participant in the ecosystem could have a material adverse effect on the market price of our listed securities.

Forward Industries, Inc. is a design company serving top tier medical and technology customers. The Company provides hardware and software product design and engineering services to customers predominantly located in the U.S. The Company also acquires and holds Solana (“SOL”) and other digital assets and has adopted SOL as its primary treasury reserve asset. On November 17, 2025, the Company changed its ticker symbol on the Nasdaq Capital Market from FORD to FWDI.

New Digital Asset Treasury Strategy

On September 8, 2025, in connection with a private placement with certain accredited investors, we announced the launch of our digital asset treasury strategy, pursuant to which we plan to pursue a number of strategic initiatives to acquire SOL and other digital assets. On September 10, 2025, we entered into the Asset Management Agreement and Services Agreement with Galaxy Digital Capital Management LP (“Galaxy Digital”) to guide us through the implementation of our new digital assets treasury business. On September 15, 2025, we announced our initial liquid SOL purchases of 6,822,000 SOL at an average price of $232 per SOL, or approximately $1.58 billion in the aggregate.

Under our new treasury policy and strategy (the “Treasury Policy”), the principal holding in our treasury reserve on the balance sheet will be allocated to digital assets, primarily SOL. Our strategy involves applying a public-market treasury model to an asset that we believe is earlier in its lifecycle, structurally reflexive, and underexposed as compared to Bitcoin. Our approach involves acquiring SOL directly through market purchases, staking our holdings via our own or third-party operated validators and generating incremental revenue through strategic partnerships and deployments within the Solana ecosystem.

In addition to operating our hardware and software product design and engineering services business, our management will focus its resources on our Treasury Policy, and a significant portion of the balance sheet will be allocated to holding SOL and other digital assets in our digital asset treasury. As of November 30, 2025, we estimated that our digital asset holdings comprised more than 90% of our total assets.

Reverse Stock Split

Discontinued Operations

In March 2025, the Company committed to a plan to sell the original equipment manufacturer (“OEM”) distribution segment of the business (“OEM Plan”). In May 2025, the Company completed the sale of this line of business and is presenting its results of operations within discontinued operations in the current and prior periods presented herein. The OEM distribution segment sourced and sold carrying cases and other accessories for medical monitoring and diagnostic kits as well as a variety of other portable electronic and non-electronic devices to OEMs or their contract manufacturers worldwide, that either packaged our products as accessories “in box” together with their branded product offerings or sold them through their retail distribution channels. The Company did not manufacture any of its OEM products and sourced substantially all of these products from independent suppliers in China, through Forward Industries Asia-Pacific Corporation, a British Virgin Islands corporation (“Forward China”), a related party owned by the Company’s former CEO (see Note 14).

Unless otherwise noted, amounts related to these discontinued operations are excluded from the disclosures presented herein. See Note 3 for more information on these discontinued operations.

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which requires the use of certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although we base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances at the time of evaluation, changes in our business strategy, adverse changes in market conditions or various other factors could cause actual results to differ from these estimates and such differences could be significant.

We have identified the below critical accounting estimates. An accounting estimate is considered critical if both: (a) the nature of the estimate or assumption is material due to the levels of subjectivity and judgment involved, and (b) the impact of changes in the estimate and assumption has had or is reasonably likely to have a material effect on the consolidated financial statements. This listing is not a comprehensive list of all our accounting policies. For further information regarding the application of these and other accounting policies, see Note 2 of the consolidated financial statements.

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. Evaluating goodwill for impairment will often require the estimation of the fair value of the underlying reporting unit, the inputs to which require a significant amount of judgment, such as future cash flows, future growth rates and profitability. Changes in our business strategy or adverse changes in market conditions could impact impairment analyses and require the recognition of an impairment charge. Although we base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances at the time of evaluation, actual results could differ from these estimates.

Share-Based Compensation

We measure share-based compensation expense related to employee and non-employee director share-based awards based on the estimated fair value of the awards as determined on the date of grant, which is recognized as expense over the requisite service period. We utilize the Black-Scholes option pricing model to estimate the fair value of stock options issued as compensation. The Black-Scholes model requires the input of highly subjective and complex assumptions, including the expected term of the stock option, and the expected volatility of our common stock over the period commensurate with the expected term of the option. Uncontrollable uncertainties, such as fluctuation in interest rates, can have an effect on our Black-Scholes estimate calculations. Such fluctuations and other unforeseen changes in inputs could have a material impact on the general and administrative expenses within our financial statements.

In December 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 requires certain crypto assets meeting defined criteria to be measured at fair value each reporting period with changes in fair value recognized in net income, presented separately from other intangible assets and accompanied by enhanced disclosures. This standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company early adopted this standard in the fourth quarter of Fiscal 2025, in conjunction with its new treasury strategy. Since the Company held no digital assets until September 2025, the adoption of this standard had no impact to prior reported financial statements and no cumulative adjustment to retained earnings was required or recorded.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” and in January 2025, the FASB issued ASU No. 2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”, which clarified the effective date of ASU 2024-03 for non-calendar year-end companies. ASU 2024-03 will require the Company to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization, as applicable, included in certain expense captions in the consolidated statements of operations, as well as qualitatively describe remaining amounts included in those captions. ASU 2024-03 will also require the Company to disclose both the amount and the Company’s definition of selling expenses. This ASU is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 31, 2027. The Company is currently evaluating the effects of the pronouncement on its consolidated financial statements.

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The decline in net revenues from Fiscal 2024 to Fiscal 2025 resulted from a $6,385,000 decline in design segment revenue, primarily attributable to the loss of a major design customer in December 2024 and a net decrease in volume of work and projects with other customers, partially offset by $4,582,000 in staking revenue generated by our digital assets segment.

Our gross profit increased slightly, and gross margin increased from 25.9% in Fiscal 2024 to 28.5% in Fiscal 2025. This increase in both gross profit and margin resulted from the high margin staking revenue generated in our digital assets segment, which generated gross profit of $4,412,000 and gross margin of 96.3%. This was partially offset by lower gross profit and margin in the design segment, a decrease of $4,405,000 in gross profit and a reduction in gross margin from 25.9% in Fiscal 2024 to 5.7% in Fiscal 2025, driven by lower utilization rates, partially mitigated by staff reductions in January and June 2025.

Sales and marketing expenses increased primarily due to increased corporate marketing spend of $500,000 related to corporate market research related activities and was partially offset by a $240,000 reduction in the design segment, driven by cost reduction efforts, including lower personnel costs and lower marketing spend.

The change in other expense/(income), net is due to a $160,035,000 reduction in the fair value of our digital assets resulting from a decline in the market value of SOL, a $658,000 increase in the estimated fair value of the warrant liability from July 1, 2025 through August 8, 2025 based on changes in the inputs to the valuation model, and lower interest income, interest expense and foreign currency exchange rate losses.

We have entered into, and may in the future enter into, derivative contracts referencing the price of SOL, and losses on these instruments could be substantial, difficult to predict, and could adversely affect our results of operations, financial condition, and the trading price of our common stock.

As part of our digital asset treasury strategy, we have entered into option contracts referencing the price of SOL, including European-style options that obligate us to deliver SOL, accept delivery of SOL, or make a cash settlement payment upon exercise or expiration. We have entered into these instruments with the intent of generating premium income on our existing SOL holdings and otherwise managing our treasury position, and we expect to continue to use SOL-referenced options and may in the future use other SOL-referenced derivatives, including futures, forwards, and swaps, as part of our overall strategy of buying, holding, staking, trading, and investing in SOL and SOL-related digital assets. We recognized net derivative losses of $4,561,000 million and $4,292,000 million for the three and nine months ended June 30, 2026, respectively.

As a party to derivative option contracts, our potential loss is not limited to the premium we pay or receive and, depending on the structure of the instrument, may be substantial. If the price of SOL moves significantly beyond the applicable strike price prior to expiration, we may be required to deliver SOL at a price below its then-current market value, purchase or accept delivery of SOL at a price above its then-current market value, or make a cash settlement payment that materially exceeds the premium we received for writing the contract. SOL has historically experienced significant price volatility, and this volatility increases both the likelihood that our option contracts will be exercised against us and the potential magnitude of any resulting loss.

Our SOL-referenced derivatives are transacted over-the-counter with a limited number of counterparties willing to trade instruments referencing SOL, which exposes us to the risk that a counterparty fails to perform its obligations to us, particularly during periods of market stress when counterparty credit quality and our own liquidity may be under the greatest strain. As of June 30, 2026, a significant portion of our open derivative positions were with Galaxy Trading Mercury LLC, a related party. The market for SOL derivatives may also lack the depth and liquidity of markets for more established asset classes, which could limit our ability to close out, unwind, or roll existing positions on favorable terms, or at all, when we determine it is in our interest to do so. Additionally, our derivative contracts require us to post collateral, including pledging our digital assets, which reduces the liquidity of those assets and could result in margin calls requiring additional collateral during periods of adverse price movements.

Fair Value of Derivatives

We account for our derivative contracts in accordance with ASC 815, which requires our derivative assets and liabilities to be measured and reported at their estimated fair values each reporting period. We estimate the fair value using valuation models that incorporate various assumptions, some of which are derived from active markets and others which are estimated when active market data is not available or sufficient. As a result, the estimated fair value of our derivative contracts includes significant unobservable inputs. The reported fair value estimates of our derivative assets and liabilities could vary materially if different unobservable inputs or other assumptions were used.

Cash used in investing activities in the 2026 Period consisted of purchases of digital assets of $386,292,000, purchase of marketable equity securities of $2,300,000, purchase of investment of $1,901,000, premiums paid on derivatives, net of $1,208,000, and purchases of property and equipment of $3,000, offset by proceeds from the sale of digital assets of $337,990,000.

Cash used in investing activities in the 2025 Period resulted from payments for the sale of the OEM segment of $200,000 and purchases of property and equipment of $26,000.

Cash provided by financing activities in the 2026 Period consisted of net proceeds from loans payable – related party of $105,000,000, net proceeds from the ATM of $7,882,000 and proceeds from stock options exercised of $45,000, partially offset by share repurchases of $69,863,000, fees associated with financing activities of $230,000 and deferred financing costs associated with our ATM of $243,000.

Cash provided by financing activities in the 2025 Period consisted of $971,000 net proceeds from the issuance of preferred stock and warrants, partially offset by deferred financing costs of $60,000 related to the equity line of credit.