Forward Industries, Inc.

NOTE 1 OVERVIEW

Forward Industries, Inc. (“Forward”, “we”, “our” or the “Company”) is a global 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 (see Note 8), we announced the launch of our digital asset treasury strategy, pursuant to which we plan to pursue a number of strategic initiatives to acquire Solana (“SOL”) and other digital assets. In September 2025, we entered into the Asset Management Agreement with Galaxy Digital Capital Management LP and the Services Agreement with Galaxy Digital LP (see Note 14) to guide us through the implementation of our new digital assets treasury business.

Under our new treasury policy and strategy, the principal holding in our treasury reserve on the balance sheet will be allocated to digital assets, primarily SOL by 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 planned approach involves acquiring SOL directly through market purchases and 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 new 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.

The Company’s shareholders authorized, and the Board of Directors approved, a 1-for-10 reverse stock split, which became effective on June 18, 2024. Any fractional shares that would have otherwise resulted from the reverse stock split were rounded up to the nearest whole share. Accordingly, all references made to shares, per share, or common share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the reverse stock split. The reverse stock split did not change the par value of the common stock nor the authorized number of shares of common stock or any series of preferred stock.

In July 2023, the Company’s Board of Directors approved the decision to cease operations of its retail distribution segment (“Retail Exit”) and is presenting the results of operations for this segment within discontinued operations in the periods presented herein. Our retail distribution business sourced and sold smart-enabled furniture, hot tubs and saunas and a variety of other products through various online retailer websites to customers predominantly located in the U.S. and Canada. The inventory of the retail segment was presented as discontinued assets held for sale on the balance sheet on September 30, 2023.

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.

Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. The Company had an accumulated deficit and working capital of $186,611,000 and $38,498,000, respectively, on September 30, 2025, a net loss of $166,974,000 in Fiscal 2025 and a cash balance of approximately $41.2 million at November 30, 2025.

In the prior reporting period, the Company identified certain conditions that raised substantial doubt about its ability to continue as a going concern. These conditions included the loss of a significant customer, the resulting decline in revenues and cash, and recurring operating losses. During the period from May 2025 to September 2025, the Company raised gross proceeds of over $1.65 billion through multiple equity financing transactions (see Note 8). As a result, the Company believes it now has sufficient liquidity to fund anticipated cash requirements for operations and working capital purposes through at least December 2026. As a result, the previously disclosed going concern uncertainty language has been removed as substantial doubt no longer exists regarding the Company’s ability to continue as a going concern.

NOTE 2 ACCOUNTING POLICIES

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. Within this report, certain dollar amounts and percentages have been rounded to their approximate values.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Forward Industries, Inc. and all of its wholly-owned subsidiaries: Forward Industries (IN), Inc. (“Forward US”), DE Sub 1 LLC (“Forward Delaware”), Forward Industries (Switzerland) GmbH (“Forward Switzerland”), Forward Industries UK Limited (“Forward UK”), Intelligent Product Solutions, Inc. (“IPS”) and Kablooe, Inc. (“Kablooe”). The terms “Forward”, “we”, “our” or the “Company” as used throughout this document are used to indicate Forward Industries, Inc. and all of its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Segment Reporting

As a result of the Retail Exit, the OEM Plan and the Company’s new digital asset treasury strategy, the Company now has two reportable segments: design and digital assets. The design segment consists of two operating segments (IPS and Kablooe, which have been aggregated into one reportable segment) that provide a full spectrum of hardware and software product design and engineering services to customers predominantly located in the U.S. The digital assets segment captures SOL-based yield generated by participating in the Solana network’s staking protocol, which currently comprises rewards received from native staking. See Note 16 for additional information on our segments.

Goodwill

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. The Company has the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. If the Company can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company would not need to perform a quantitative impairment test for the reporting unit. If the Company cannot support such a conclusion or does not elect to perform the qualitative assessment, then the Company will perform the quantitative assessment by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying value, no impairment charge is recognized. If the fair value of the reporting unit is less than its carrying value, an impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value. A significant amount of judgment is required in performing goodwill impairment tests including estimating the fair value of a reporting unit. See Note 4.

Digital Assets

The Company accounts for its holdings of digital assets, including cryptocurrencies such as Solana, as indefinite-lived intangible assets in accordance with Accounting Standards Codification (“ASC”) 350-60, “Intangibles – Goodwill and Other – Crypto Assets (“ASC 350-60”). Digital assets are initially measured at cost and subsequently measured at fair value, with changes in fair value recognized in net income/(loss) each reporting period. Digital assets are classified as noncurrent assets unless the Company intends to sell them or otherwise realize their value within twelve months after the reporting date. Upon disposal of a digital asset (e.g., by sale, exchange or transfer) the Company derecognizes the asset and recognizes a realized gain or loss in net income, calculated as the difference between the sale proceeds and the asset’s carrying amount, which is determined using a first-in, first-out method.

Digital assets that are not in scope of ASC 350-60 are accounted for as indefinite-lived intangible assets subject to impairment testing, or as financial assets if they are redeemable for cash.

Intangible Assets

Intangible assets include trademarks and customer relationships, which were acquired as part of the acquisitions of IPS in Fiscal 2018 and Kablooe in Fiscal 2020 and are amortized over their estimated useful lives, which are periodically evaluated for reasonableness.

Our intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In assessing the recoverability of our intangible assets, we must make estimates and assumptions regarding future cash flows and other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is recognized and the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 4.

Cash

The Company maintains cash deposits and money market accounts with financial institutions in the United States that at times may exceed federally insured limits of $250,000 per financial institution. At September 30, 2025, there were deposits totaling approximately $37,471,000 held in excess of federally insured limits. Historically, we have not experienced any losses due to such cash concentrations.

Accounts Receivable

****Accounts receivable consist of unsecured trade accounts with customers net of an allowance for credit losses. Collectability of accounts receivable is estimated by evaluating the number of days accounts are outstanding, customer payment history, recent payment trends and perceived creditworthiness, adjusted as necessary based on specific customer situations. At September 30, 2025 and September 30, 2024, the Company had allowances for credit losses of $92,000 and $27,000, respectively.

Inventories

Inventories consisted primarily of finished goods and were stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. Based on management’s estimates, an allowance was made to reduce excess, obsolete, or otherwise unsellable inventories to net realizable value. If needed, an allowance was established through charges to cost of sales, which is now presented as a component of income/(loss) from discontinued operations in the Company’s consolidated statements of operations. In determining the adequacy of any allowance, management’s estimates were based upon several factors, including analyses of inventory levels, historical loss trends, sales history and projections of future sales demand. Due to the Retail Exit and the OEM Plan the Company hasno remaining inventory at September 30, 2025. Inventory on hand at September 30, 2024 is presented as a component of assets held for sale.

Property and Equipment

Property and equipment consist of computer hardware and software, furniture, fixtures and equipment and are recorded at cost. Expenditures for major additions and improvements are capitalized, and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives for all property and equipment ranges from three to five years.

Equity Offering Costs

Offering costs include underwriting commissions, professional fees, filing fees and other costs directly associated with the Company’s recent financing transactions. Prior to the completion of an offering, offering costs related to common and preferred stock issuances are recorded as a component of other assets on the consolidated balance sheet and recorded a reduction to additional paid-in capital when the shares related to such offering are issued. Offering costs associated with warrant liabilities are expensed as incurred and recorded as a component of general and administrative expenses.

Leases

Lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, using the Company’s incremental borrowing rate commensurate with the lease term, since the Company’s lessors do not provide an implicit rate, nor is one readily available. The Company has certain leases that may include an option to renew and when it is reasonably probable to exercise such option, the Company will include the renewal option terms in determining the lease asset and lease liability. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Operating lease assets are shown as right-of-use assets on the consolidated balance sheets. The current and long-term portions of operating lease liabilities are shown separately as such on the consolidated balance sheets.

Income Taxes

The Company recognizes future tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax bases of assets and liabilities and to net tax operating loss carryforwards to the extent that realization of these benefits is more likely than not. At September 30, 2025, there was no change to our assessment that a full valuation allowance was required against all net deferred tax assets. Accordingly, any deferred tax provision or benefit was offset by an equal and opposite change to the valuation allowance. Our income tax provision or benefit is generally not significant due to the existence of significant net operating loss carryforwards.

**Revenue Recognition **

Discontinued OEM Distribution Segment

The OEM distribution segment recognized revenue when: (i) finished goods were shipped to its customers (in general, these conditions occurred at either point of shipment or point of destination, depending on the terms of sale and transfer of control); (ii) there were no other deliverables or performance obligations; and (iii) there were no further obligations to the customer after the title of the goods had transferred. If the Company received consideration before achieving the criteria previously mentioned, it recorded a contract liability, which would be classified as a component of liabilities held for sale in the accompanying consolidated balance sheets. The OEM distribution segment hadno contract liabilities at September 30, 2025, 2024 or 2023. The results of operations of the OEM segment are reported as discontinued operations for Fiscal 2025 and Fiscal 2024 (see Note 3).

Discontinued Retail Distribution Segment

The retail distribution segment sold products primarily through online websites operated by authorized third-party retailers. Revenue was recognized when control (as defined in Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”) of the related goods was transferred to the retailer, which generally occurred upon shipment to the end customer. Other than product delivery, the retail distribution segment did not typically have other deliverables or performance obligations associated with its products. Revenue was measured as the amount of consideration expected to be received in exchange for the products provided, net of allowances taken by retailers for product returns and any taxes collected from customers that will be remitted to governmental authorities. When the Company received consideration before achieving the criteria previously mentioned, it recorded a contract liability, which would be classified as a component of deferred income in the accompanying consolidated balance sheets. The retail distribution segment hadno contract liabilities at September 30, 2025, 2024 or 2023. The results of operations of the retail segment are reported as discontinued operations for Fiscal 2025 and Fiscal 2024 (see Note 3).

Design Segment

The Company applies the “cost to cost” and “right to invoice” methods of revenue recognition to the contracts with customers in the design segment. The design segment typically engages in two types of contracts: (i) time and material and (ii) fixed price. The Company recognizes revenue over time on its time and material contracts utilizing a “right to invoice” method. Revenues from fixed price contracts that require performance of services that are not related to the production of tangible assets are recognized by using cost inputs to measure progress toward the completion of its performance obligations, or the “cost to cost” method. Revenues from fixed price contracts that contain specific deliverables are recognized when the performance obligation has been satisfied or the transfer of goods to the customer has been completed and accepted.

Recognized revenues that will not be billed until a later date are recorded as contract assets in the accompanying consolidated balance sheets. The design segment had contract assets of $1,064,000, $1,273,000 and $976,000 at September 30, 2025, 2024 and 2023, respectively. Contracts where collections to date have exceeded recognized revenues, or contract liabilities, are recorded as a liability and classified as a component of deferred income in the accompanying consolidated balance sheets. The design segment had contract liabilities of $293,000, $399,000 and $297,000 at September 30, 2025, 2024 and 2023, respectively.

Digital Asset Staking

The Company participates in proof-of-stake validation. Proof-of-stake validation, also referred to as staking, requires the Company to delegate its digital assets to a validator. Staking can be performed on proprietary validation infrastructure or through the use of third-party infrastructure or service providers. The Company concluded that where it controls the validation infrastructure, it is a principal in the provision of staking services to the blockchain, and recognizes staking revenue on a gross basis. Blockchain rewards distributed to third parties staking on the Company’s validation infrastructure are included in the Cost of sales.

The Company recognizes noncash consideration from staking activities related to its digital asset holdings in accordance with ASC 606. Staking income is generated when the Company participates in digital asset networks to validate transactions and, in return, earns rewards in the form of additional digital assets. The Company considers its performance obligation to be satisfied at the point in time when it has successfully provided validation services to the network and the reward is determinable and collectible. Revenue is measured as the fair value of digital assets received as staking rewards at contract inception, which generally occurs at the beginning of each epoch of the respective blockchain.

Disaggregation of Revenue

Design segment revenue is predominantly recognized over time and has similar other economic factors, including, but not limited to, the geographic location and type of customer, payment terms and length of contracts. Digital assets staking revenue is recognized at a point in time. See Note 16 for disaggregated revenue amounts.

Foreign Currency Transactions

The Company’s functional currency is the U.S. dollar. Foreign currency transactions may generate receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. Fluctuations in exchange rates between such foreign currency and the functional currency increase or decrease the expected amount of functional currency cash flows upon settlement of the transaction. These increases or decreases in expected functional currency cash flows are foreign currency transaction gains or losses that are included in other income or expense in the accompanying consolidated statements of operations. The approximate net losses from foreign currency transactions were $5,000 and $8,000 in Fiscal 2025 and Fiscal 2024, respectively.

Fair Value Measurements

We perform fair value measurements in accordance with the guidance provided by ASC 820, “Fair Value Measurement.” ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions, and risk of nonperformance.

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:

The acquisition of Kablooe provided annual contingent earnout payments based on results of Kablooe’s operations through August 2025. In accordance with ASC 820, the fair value of this earnout liability was measured on a recurring basis at each reporting date using inputs categorized within Level 3 of the fair value hierarchy. Due to the low likelihood of Kablooe reaching the specified earnout targets, the fair value of this earnout liability was $0 at September 30, 2024. The carrying amounts of cash, accounts receivable, accounts payable, due to Forward China, and the Note payable to Forward China approximate fair value due to their short-term maturities.

The Company applies ASC 820 in the valuation of SOL held by the Company for financial statement purposes. The fair value of SOL uses Level 1 inputs to reflect the price that would be received for SOL in a current sale, which assumes an orderly transaction between market participants on the measurement date in SOL’s “principal market,” or in the absence of a principal market, the most advantageous market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. The Company determines its principal market (or in the absence of a principal market, the most advantageous market) on a periodic basis to determine which market is its principal market for the purpose of calculating fair value for the creation of quarterly and annual financial statements. Issuer-specific events, market trends, bid/ask quotes of brokers and information providers and other data may be reviewed in the course of making a good faith determination of the digital asset’s fair value.

Share-Based Compensation Expense

The Company estimates the fair value of employee and non-employee director share-based compensation on the date of grant using the Black-Scholes option pricing model, which includes variables such as the expected volatility of the Company’s share price, the exercise behavior of its grantees, interest rates, and dividend yields. These variables are projected based on the Company’s historical data, experience, and other factors. The fair value of employee and non-employee director share-based compensation is recognized in the consolidated statements of operations over the related service or vesting period of each grant. In the case of awards with multiple vesting periods, the Company has elected to use the graded vesting attribution method, which recognizes compensation cost on a straight-line basis over each separately vesting portion of the award as if the award was, in substance, multiple awards (see Note 9).

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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.

In December 2023, the FASB issued 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 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 December 2023, the FASB issued ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures”, requiring enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024, on a prospective basis and retrospective application is permitted. The Company is currently evaluating the effects of this pronouncement on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires expanded segment reporting and disclosure and is effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this guidance in Fiscal 2025, which did not have a material impact on its financial statements.

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:

**NOTE 4 INTANGIBLE ASSETS AND GOODWILL **

Intangible Assets

The Company’s intangible assets consist of the following:

The Company’s intangible assets resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively, and relate to the design segment of our business. Intangible assets were amortized over their expected useful lives of 15 years for the trademarks andeight years for the customer relationships. During Fiscal 2025 and Fiscal 2024, the Company recorded amortization expense related to intangible assets of $213,000, which is included in general and administrative expenses in the Company’s consolidated statements of operations.

At September 30, 2025, due to declining revenues and continuing losses in the design segment, the Company reviewed its intangible assets for impairment. Based on the estimated future cash flows of the design business, the Company determined these intangible assets wereno longer recoverable at September 30, 2025 and recorded an impairment charge for their remaining net carrying value.

Goodwill

Goodwill represents the future economic benefits of assets acquired in a business combination that are not individually identified or separately recognized. The Company’s goodwill resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively. The goodwill associated with the IPS acquisition is not deductible for tax purposes, but the goodwill associated with the Kablooe acquisition is deductible for tax purposes.

Due to the historical losses of the Kablooe reporting unit, the Company elected to bypass the qualitative assessment and perform quantitative goodwill impairment testing for the Kablooe reporting unit at September 30, 2024. Using an income approach methodology, the fair value of the Kablooe reporting unit was estimated with a discounted cash flow analysis incorporating variables categorized within level 3 of the fair value hierarchy such as projected revenues, growth rate and discount rate. This quantitative testing indicated the carrying amount of the Kablooe reporting unit exceeded its fair value, resulting in a goodwill impairment charge of $200,000 in Fiscal 2024, primarily driven by a reduction in the expected future performance of the Kablooe reporting unit. The Company reviewed the fair value of the Kablooe reporting unit at September 30, 2025, in connection with its annual goodwill impairment evaluation. Based on a decrease in its estimated future cash flows, driven by declining revenues and continued losses, the Company determined the carrying amount of this reporting unit exceeded its fair value and recorded an impairment charge of $391,000 for the remaining goodwill balance.

In December 2024, IPS was notified by its largest customer of its plan to discontinue its insulin patch pump program, on which IPS was working, and was beginning to wind down all activities related to it. Due to the historically high concentration of revenue with this customer, the loss of its business was considered a triggering event which prompted the Company to evaluate the goodwill of the IPS reporting unit. Management concluded an impairment was more likely than not to have occurred and performed a quantitative goodwill impairment test for the IPS reporting unit at December 31, 2024. Using primarily an income approach methodology, the fair value of the IPS reporting unit was estimated using a discounted cash flow analysis incorporating variables categorized within Level 3 of the fair value hierarchy such as projected revenues, growth rate and discount rate. The quantitative testing indicated the carrying amount of the IPS reporting unit exceeded its fair value, resulting in a goodwill impairment charge of $225,000 in the three months ended December 31, 2024, primarily driven by a reduction in the expected future performance of the IPS reporting unit.

The Company reviewed the fair value of the IPS reporting unit at September 30, 2025, in connection with its annual goodwill impairment evaluation. Based on a decrease in its estimated future cash flows, driven by declining revenues and continued losses, the Company determined the carrying amount of this reporting unit exceeded its fair value and recorded an additional impairment charge of $943,000 for the remaining goodwill balance.

Below is the rollforward of goodwill for the design segment, the only reportable segment with goodwill:

NOTE 5 PROPERTY AND EQUIPMENT

Property and equipment and related accumulated depreciation and amortization are summarized in the table below:

Depreciation expense was $119,000 and $120,000 for Fiscal 2025 and Fiscal 2024, respectively.

NOTE 6 DIGITAL ASSETS

The following table shows the quantity of tokens, cost basis and fair value of Solana held by the Company as of September 30, 2025:

The following table summarizes the Company’s Solana related activity for Fiscal 2025:

Staked Digital Assets

The Company had staked $1.43 billion of digital assets as of September 30, 2025. The Company’s ability to sell or transfer staked digital assets is subject to restrictions related to unbonding periods, which are based on network traffic on the Solana blockchain. As of September 30, 2025, the majority of the Company’s staked digital assets on the Solana blockchain could be unbonded within three days. The staking rewards generated from proprietary staking activities for Fiscal 2025 were $4.36 million.

NOTE 7 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities at September 30, 2025 and 2024 are as follows:

NOTE 8 SHAREHOLDERS’ EQUITY

The Company’s shareholders authorized, and the Board of Directors approved a 1-for-10 reverse stock split, which became effective on June 18, 2024. Any fractional shares that would have otherwise resulted from the reverse stock split were rounded up to the nearest whole share. Accordingly, all references made to shares, per share, or common share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the reverse stock split. The reverse stock split did not change the par value of the common stock nor the authorized number of shares of common stock or any series of preferred stock.

Securities Purchase Agreement

In September 2025, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain accredited investors (the “Purchasers”) pursuant to which we sold and issued to the Purchasers in a private placement (the “Private Placement”) an aggregate of (i)77,144,562 shares (the “Shares”) of common stock of the Company, par value $0.01 per share (the “Common Stock”), at an offering price of $18.50 and (ii) pre-funded warrants (the “Pre-Funded Warrants” and together with the Shares, the “Securities”) to purchase 12,031,364 shares of Common Stock (the “Pre-Funded Warrant Shares”) with $18.49999 of the exercise price per Pre-Funded Warrant that was pre-funded at closing (the “Per Share Purchase Price”). In the Private Placement, the Purchasers tendered U.S. dollars, USD Coin (USDC) or Tether (USDT) to the Company as consideration for the Securities. We received aggregate proceeds of approximately $1.65 billion, before deducting placement agent fees and other expenses.

In connection with the Private Placement, we entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, providing for the registration for resale of the Shares, the Advisor Shares (as defined below), the Lead Investor Shares (as defined below), the Pre-Funded Warrant Shares and the shares of Common Stock underlying each of the Advisor Warrants and Lead Investor Warrants on an effective registration statement, pursuant to a registration statement which was filed on November 3, 2025 and amended on November 10, 2025 and November 14, 2025.

On October 10, 2025, we entered into a Waiver and Consent (the “Waiver and Consent”) with certain holders of the Company’s securities (who collectively beneficially own at least 50.1% of the then outstanding Registrable Securities, as defined in the Registration Rights Agreement). The Waiver and Consent waived the compliance of the Filing Date (as defined in the Registration Rights Agreement) and extended the deadline for the Company to file the initial resale registration statement with the Securities and Exchange Commission to November 10, 2025. Such registration statement was filed and automatically effective on November 3, 2025.

Galaxy Strategic Advisor Agreement

In September 2025, we entered into a Strategic Advisor and Lead Investor Agreement (the “Strategic Advisor Agreement”) with Galaxy Digital LP (“Galaxy”) pursuant to which we engaged Galaxy to serve as our strategic advisor with respect to the Private Placement. In consideration of Galaxy’s services, we issued to Galaxy, in addition to the Securities acquired by Galaxy pursuant to the Securities Purchase Agreement,1,783,519 of Pre-Funded Warrants and 4,458,796 warrants (the “Advisor Warrants”) to purchase an amount of shares of our Common Stock (the “Advisor Shares”).

Lead Investor Agreement

In September 2025, we entered into a Lead Investor Agreement (the “Lead Investor Agreement”) with J Digital 6 Cayman Ltd. (“Jump Crypto”) and Multicoin Capital Master Fund, LP (“Multicoin,” and together with Galaxy and Jump Crypto, the “Sponsors”) to secure the commitment of Jump Crypto and Multicoin in the Private Placement. In consideration of Jump Crypto and Multicoin’s participation, we issued to each of Jump Crypto and Multicoin, in addition to the Securities acquired by Jump Crypto and Multicoin pursuant to the Securities Purchase Agreement,1,783,519 shares of our Common Stock (the “Lead Investor Shares”) and 4,458,796 warrants to purchase an amount of shares of the Common Stock (the “Lead Investor Warrants”). Pursuant to the Lead Investor Agreement, for so long as Multicoin continues to beneficially own at least 5% of the Company’s issued and outstanding shares of Common Stock, Multicoin has the right to nominate one individual for election to the Board of Directors, who shall also be chairperson of the Board of Directors (such nominee, the “Investor Designee”), and the Company agreed to use its reasonable best efforts to cause the Investor Designee to be elected to the Board of Directors (including recommending that the Company’s shareholders vote in favor of the election of the Investor Designee).

Registered Direct Offering

On August 11, 2025, the Company entered into subscription agreements with six investors pursuant to which it agreed to issue and sell, in a registered direct offering (the “Offering”), an aggregate of approximately 263,000 shares of its common stock at a price of $8.50 per share. The Offering closed on August 11, 2025 and the aggregate gross proceeds from the Offering were approximately $2,238,000.

Preferred Stock

Series A-1 Convertible Preferred Stock

In connection with the Accounts Payable Conversion Agreements with Forward China (see Note 14), the Company filed three Certificates of Amendment to the Certificate of Incorporation (the “COD”) designating 6,700 shares of Series A-1 Convertible Preferred Stock (the “Series A-1”), with a stated value of $1,000 per share (the “Stated Value”).

The holders of the Series A-1 have no voting rights and rank senior to all classes or series of the Company’s common stock with respect to the distribution of assets upon liquidation, dissolution, or winding up. Subject to a 19.9% Share Cap (as defined in the COD) the Series A-1 shall be convertible into a number of shares of the Company’s common stock as determined by (i) multiplying the number of shares to be converted by the Stated Value, (ii) adding the result of all accrued and accumulated and unpaid dividends on such shares to be converted, and then (iii) dividing the result by the conversion price of $7.50, subject to adjustment as defined in the COD. The Series A-1 is not redeemable.

In August and September 2025, all 4,925 outstanding shares of the Series A-1 were converted into 656,666 shares of the Company’s common stock. Following this conversion, no shares of the Series A-1 remain outstanding.

Series B Convertible Preferred Stock

On May 21, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “COD”) designating 1,000,000 shares of Series B Convertible Preferred Stock (the “Series B”), with a par value of $0.01 per share and a stated value of $1.00 per share. The Series B shares: (i) accrued dividends at 10% per annum, payable quarterly in arrears in cash, provided that the Company may elect to pay dividends in common stock or by increasing the stated value if specified equity conditions are met (as defined in the COD), (ii) were convertible into common stock at $4.50 per share, subject to customary anti-dilution and other adjustments as set forth in the COD, (iii) were mandatorily convertible if certain conditions are met, (iv) had liquidation rights equal to the greater of 125% of the conversion amount and the amount the holder would have received if the holder converted the shares into common stock immediately prior to liquidation, (v) were not redeemable, (vi) had such voting rights as required by New York law, including class voting rights on matters affecting the Series B rights and preferences and (vii) had senior rights to all classes of common stock with respect to dividends, distributions, and liquidation preferences. The Series B shares contained certain beneficial ownership limitations and until August 8, 2025, were subject to a maximum number of shares of common stock that could be issued without triggering shareholder approval requirements under the Nasdaq Stock Market rules. On August 8, 2025, the Company received shareholder approval to issue shares of the Series B in excess of these limitations. Dividends through September 30, 2025, were capitalized by increasing the stated value of each share of the Series B.

On May 23, 2025, the Company entered into a Preferred Stock Purchase Agreement (the “PS Agreement”) and related Registration Rights Agreement (the “Series B Registration Rights Agreement”) with two accredited investors (the “Series B Investors”) whereby the Company granted the investors an aggregate of 1,000,000 shares of the Series B and warrants to purchase an additional 111,111 shares of common stock (the “Series B Warrants”) in exchange for $1,000,000. The PS Agreement contained restrictions on the Company’s ability to incur debt, issue additional preferred shares, enter into a change of control transaction or make restricted payments without prior written consent of the investors. These restrictions were terminated pursuant to the Waiver and Leak-out Agreement described below. The Company paid third-party fees of $66,500 associated with this agreement, of which $29,000 related to the preferred stock portion of the agreement and has been deducted from the proceeds and recorded as a reduction of additional paid-in capital, and $37,500 related to the warrants and has been recorded as a component of general and administrative expenses on the consolidated financial statements at September 30, 2025.

In September 2025, in connection with the Securities Purchase Agreement, the Company entered into a waiver and leak-out agreement (the “Waiver and Leak-out Agreement”) with the Series B Investors, pursuant to which the Series B Investors agreed to (i) the termination, waiver or amendment of all covenants and provisions to forgo all of their rights under the Series B Warrants, the PS Agreement and the Series B Registration Rights Agreement, including a general release from any liability for prior non-performance, and (ii) provide conversion notices and such other documentation reasonably requested by the Company in order to complete the conversion of all of the Series B into shares of common stock. On September 10, 2025, all outstanding shares of the Series B were converted into 228,765 shares of the Company’s common stock. Following the conversion, no shares of Series B remain outstanding.

In connection with the Waiver and Leak-out Agreement, the Company granted the Series B Investors the right to purchase up to $33,000,000 worth of shares of Common Stock at a purchase price of $18.50 per share; and has included for registration on the resale registration statement filed November 3, 2025, on behalf of the Series B Investors as a selling shareholder, all shares of Common Stock previously underlying the Series B Stock and Series B Warrants held by them. In September 2025, the Series B Investors purchased 1,783,783 shares of the Company’s common stock in connection with this agreement.

Warrants

Series B Warrants

In connection with the PS Agreement, the Company issued warrants to purchase 111,111 shares of its common stock with an exercise price of $6.50 per share and an expiration date of May 23, 2030 (the “Series B Warrants”). At the time of grant, and through August 8, 2025, the warrants had been classified as a liability because the nature of certain settlement provisions prevented them from meeting the fixed-for-fixed equity classification criteria in ASC 815, “Derivatives and Hedging.” On August 8, 2025, upon receiving shareholder approval to issue shares of the Company’s common stock in excess of the Nasdaq 19.9% (exchange cap) limitations upon exercise of the Series B Warrants, these warrants met the requirements to be classified as equity. The fair value of the warrants was measured on the grant date and was remeasured every reporting period through August 8, 2025, with the resulting gain or loss from the change in fair value recorded as a component of other income/expense on the consolidated financial statements. Upon receiving the aforementioned shareholder approval, the Series B Warrants were reclassified to equity and are no longer subject to fair value measurement. A final Black-Scholes valuation was performed prior to reclassifying the Series B Warrants to equity. The fair value of the warrants was estimated using a Black-Scholes valuation methodology using the assumptions in the following table, which are categorized within Level 3 of the fair value hierarchy. The expected term represents the remaining contractual term of the warrants. The expected volatility is based on the historical price of the Company’s common stock over the most recent periods commensurate with the expected term of the warrants. The risk-free interest rate is based on the implied yield of U.S. Treasury zero-coupon issues with a remaining term equivalent to the warrants’ expected term. The Company historically has not paid any dividends on its common stock and has no intention to do so in the foreseeable future.

A rollforward of the warrant liability is follows:

Pre-Funded Warrants

The unfunded exercise price of each Pre-Funded Warrant equals $0.00001 per underlying Pre-Funded Warrant Share. The exercise price and the number of shares of Common Stock issuable upon exercise of each Pre-Funded Warrant is subject to appropriate adjustment in the event of certain stock dividends, stock splits, stock combinations, or similar events affecting our Common Stock. The Pre-Funded Warrants are exercisable in cash or by means of a cashless exercise and will not expire until the date such Pre-Funded Warrants are fully exercised. The Pre-Funded Warrants may not be exercised if the aggregate number of shares of Common Stock beneficially owned by the holder thereof (together with its affiliates) immediately following such exercise would exceed a specified beneficial ownership limitation; provided, however, that a holder may increase or decrease the beneficial ownership limitation by giving notice to the Company (61 days’ notice for increases), but not to any percentage in excess of 9.99%. In September 2025,950,282 of the Pre-Funded Warrants were exercised via the cashless exercise provisions of the related agreement and the Company issued 950,281 shares of its common stock in connection with such exercise.

Advisor Warrants

The exercise price per share of the Advisor Warrants shall equal $0.01 per share and shall be exercisable as follows: (1) one-third (1/3) on and after the first date on which the closing trading price of the Company’s Common Stock on its principal stock exchange is equal to or greater than 150% of the cash Per Share Purchase Price for 20 out of 30 trading days following November 3, 2025 (the effective date of the resale registration statement); (2) one-third (1/3) on and after the first date on which the closing trading price of the Company’s Common Stock on its principal stock exchange is equal to or greater than 200% of the cash Per Share Purchase Price for 20 out of 30 trading days following November 3, 2025; and (3) one-third (1/3) on and after the first date on which the closing trading price of the Company’s Common Stock on its principal stock exchange is equal to or greater than 250% of the cash Per Share Purchase Price for 20 out of 30 trading days following November 3, 2025. The Advisor Warrants will not expire until the date such warrants are fully exercised.

Lead Investor Warrants

The exercise price per share of the Lead Investor Warrants shall equal $0.01 per share and shall be exercisable as follows: (1) one-third (1/3) on and after the first date on which the closing trading price of the Company’s Common Stock on its principal stock exchange is equal to or greater than 150% of the cash Per Share Purchase Price for 20 out of 30 trading days following November 3, 2025; (2) one-third (1/3) on and after the first date on which the closing trading price of the Company’s Common Stock on its principal stock exchange is equal to or greater than 200% of the cash Per Share Purchase Price for 20 out of 30 trading days following November 3, 2025; and (3) one-third (1/3) on and after the first date on which the closing trading price of the Company’s Common Stock on its principal stock exchange is equal to or greater than 250% of the cash Per Share Purchase Price for 20 out of 30 trading days following November 3, 2025. The Lead Investor Warrants will not expire until the date such warrants are fully exercised.

Below is a rollforward of warrant activity for Fiscal 2025:

Equity Line of Credit

On May 16, 2025, the Company entered into a Securities Purchase Agreement (the “ELOC”) and related Registration Rights Agreement with one of the Series B Investors pursuant to which the Company had the right, in its sole discretion, to sell, and the Series B Investor agreed to purchase, shares of the Company’s common stock having an aggregate value of up to $35 million, subject to certain limitations and conditions set forth in the underlying agreement. The Company had control over the timing and amount of any sales of common stock under this agreement. In connection with the execution of the ELOC, the Company issued 26,000 commitment shares to the Series B Investor and paid third-party fees of $71,000, which have been recorded to shareholders equity as a reduction of the related proceeds on the consolidated financial statements as of September 30, 2025. Pursuant to the terms of the ELOC, the Company could issue and sell shares to the Series B Investor at prices discounted below the then-current market price of the Company’s common stock.

On June 10, 2025, the Company filed a registration statement to register shares of common stock issuable under the ELOC. The registration statement was declared effective by the SEC on June 20, 2025. In Fiscal 2025, the Company received gross proceeds of $2,432,000 from the sale of 248,000 shares of Common Stock under the ELOC. In September 2025, the Company and the Series B Investor mutually agreed to terminate the ELOC.

At-the Market Offering

On September 16, 2025, the Company entered into a Controlled Equity Offering Sales Agreement (the “ATM”) with Cantor Fitzgerald & Company (“Cantor”), as principal and/or agent, pursuant to which it may offer and sell, from time to time, through Cantor, shares of its common stock, having an aggregate offering price of up to $4 billion. Shares will be issued and sold pursuant to the Company’s effective registration statement on Form S-3 as previously filed with, and declared effective by, the SEC. The Company filed a prospectus supplement, dated September 16, 2025, with the SEC in connection with the offer and sale of shares under the ATM. We will pay Cantor a commission of up to 3% of the gross proceeds from each sale of shares under the ATM. In Fiscal 2025, we sold 124,000 shares of common stock under the ATM for gross proceeds of $4,064,000 and incurred fees related to the ATM of $839,000, of which $102,000 have been recorded as a reduction to additional paid-in capital and $737,000 have been recorded as deferred financing costs and presented as a component of other assets on the consolidated financial statements.

Nasdaq

In July 2023, the Company was notified by Nasdaq that it was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”). Thereafter, in February 2024, the Company was notified that it was not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Shareholders’ Equity Rule”) (collectively, with the Minimum Bid Price Rule, the “Minimum Requirements”). In April 2024, the Company presented a plan of action to the Nasdaq Hearings Panel to meet compliance with the Minimum Requirements. As a result of the reverse stock split effected in June 2024 and the entrance into the first Accounts Payable Conversion Agreement (described in Note 14), the Company regained compliance with the Minimum Requirements in July 2024 and was formally notified by Nasdaq that the Minimum Requirements were met. Until July 24, 2025, the Company was subject to a Nasdaq “Panel Monitor” which provided that in the event the Company fails to satisfy the Shareholders’ Equity Rule (not the Minimum Bid Price Rule) during the monitoring period, the Company would be required to request a hearing before the Panel in order to maintain its listing rather than taking the interim step of submitting a compliance plan for the Listing Qualifications Staff’s review or receiving any otherwise applicable grace period.

On February 21, 2025, the Company was notified by Nasdaq that due to its reported Shareholders’ Equity of $2,279,297 at December 31, 2024, it was not in compliance with the Shareholders’ Equity Rule. Due to the Panel Monitor, the Company was not eligible for any grace period and Nasdaq determined the Company’s common stock would be scheduled for delisting from Nasdaq. On February 27, 2025, the Company requested a hearing on this matter with the Panel, which stayed any trading suspension or delisting of the Company’s common stock until the completion of the hearings process.

As a result of the fourth conversion agreement with Forward China (see Note 14), the Company regained compliance with the Shareholders’ Equity Rule in March 2025 and was formally notified by Nasdaq in April that it was in compliance with all applicable continued listing standards and that the scheduled hearing had been canceled.

Shares Reserved for Future Issuance

At September 30, 2025, the Company had a total of 128,681,429 shares reserved for future issuance as follows: (i)102,440,439 shares related to the ATM, (ii)11,081,083 related to the Pre-Funded Warrants, (iii)6,242,315 related to the Advisor Warrants and (iv)8,917,592 related to the Lead Investor Warrants.

Tokenization of Common Stock

In September 2025, the Company entered into a digital transfer agent agreement with Superstate Services LLC (“Superstate”) as its co-transfer agent, to give shareholders the ability to tokenize their holdings of the Company’s common stock on the Solana blockchain. Any tokenized shares are recorded and maintained by Superstate and represent the same ownership interests as the corresponding shares of the Company’s common stock. At September 30, 2025, no shares of the Company’s common stock had been tokenized.

NOTE 9 SHARE-BASED COMPENSATION

2021 Equity Incentive Plan

In February 2021, shareholders of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”), which is administered by the Compensation Committee of the Board of Directors and authorized 129,100 shares of common stock for grants of various types of equity awards to officers, directors, employees and consultants. Upon approval of the 2021 Plan, no additional awards were granted under the 2011 Long Term Incentive Plan (the “2011 Plan”), which expired according to its terms in March 2021. Shares authorized under the 2021 Plan included 100,000 new shares and 29,100 shares that remained available under the 2011 Plan. Awards which are forfeited or expire are eligible for regrant under the 2021 Plan. The exercise prices of stock options granted may not be less than the fair market value of the common stock as quoted on the Nasdaq stock market on the grant date and the expiration date of option awards may not exceed 10 years from the date of grant. On August 8, 2025, shareholders of the Company approved an increase of 300,000 authorized shares under the 2021 Plan. At September 30, 2025, there were approximately 53,000 shares of common stock available for grants under the 2021 Plan.

Stock Options

The fair value of option awards is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions in the following table. The expected term represents the period over which the stock option awards are expected to be outstanding. The Company utilizes the simplified method to develop an estimate of the expected term of “plain vanilla” option grants. The expected volatility used is based on the historical price of the Company’s stock over the most recent period commensurate with the expected term of the award. The risk-free interest rate used is based on the implied yield of U.S. Treasury zero-coupon issues with a remaining term equivalent to the award’s expected term. The Company has not historically paid any dividends on its common stock and had no intention to do so on the date the share-based awards were granted. The Company accounts for forfeitures in the period they occur.

In applying the Black-Scholes option pricing model to options granted, the Company used the following assumptions:** **

In Fiscal 2025, the Company made the following option grants:

In Fiscal 2024, the Company granted options to three of its non-employee directors to purchase an aggregate of 33,243 shares of its common stock at an exercise price of $7.60 per share. The options vested one year from the date of grant, expire five years from the date of grant and 11,081 were forfeited prior to vesting. The options had a weighted average grant-date fair value of $3.60 per share and an aggregate grant-date fair value of $120,000, which was recognized, net of forfeitures, ratably over the vesting period.

The options granted in Fiscal 2025 had a weighted average grant-date fair value of $5.99 per share. The Company recognized compensation expense for stock option awards of $1,574,000 and $101,000 during Fiscal 2025 and Fiscal 2024, respectively, which was recorded as a component of general and administrative expenses in its consolidated statements of operations.

During Fiscal 2025, the Company issued 3,907 shares of its common stock pursuant to the exercise of stock options for aggregate cash proceeds of $61,000, which had an aggregate intrinsic value of $75,000. No options were exercised in Fiscal 2024.

At September 30, 2025, there was $94,000 of unrecognized compensation cost related to nonvested stock option awards that is expected to be recognized over a weighted average period of 0.6 years. In connection with the Securities Purchase Agreement (see Note 8), certain stock options are subject to a lockup period, which prohibits the sale of the underlying common stock until March 2026, without prior written consent from the Company.

The following table summarizes stock option activity during Fiscal 2025:

Options outstanding at September 30, 2025 have an exercise price between $3.73 and $23.90 per share.

Restricted Stock Awards

In Fiscal 2025, the Company granted 50,000 shares of restricted stock to one of its non-employee directors. These shares are fully vested and had an aggregate grant date fair value of $1,298,000 based on the closing price of the Company’s common stock on the date of grant, which was recorded as compensation expense on the date of grant and included as a component of general and administrative expenses on the consolidated financial statements. In connection with the Securities Purchase Agreement (see Note 8), these shares are subject to a lockup period, which prohibits their sale until March 2026 without prior written consent from the Company.

NOTE 10 ** INCOME TAXES**

The following table summarizes the Company’s consolidated provision from continuing operations for U.S. federal, state and foreign taxes on income:

The deferred tax provision is the change in the deferred tax assets and liabilities representing the tax consequences of changes in the amounts of temporary differences, net operating loss carryforwards and changes in tax rates during the fiscal year.

The Company’s deferred tax assets and liabilities are comprised of the following:

The Company recorded a provision for income taxes which includes net expense of $20,000 and $23,000 in Fiscal 2025 and Fiscal 2024, respectively, primarily for state income tax expenses in states where net operating loss carryforwards (“NOLs”) were not available.

At September 30, 2025, the Company had available NOLs for U.S. federal income tax purposes of $15,776,000 and NOLs for state income tax purposes of $9,711,000. NOLs generated prior to 2018 expire beginning in 2031 while NOLs generated after 2018 have an indefinite carryforward period. The NOLs result in a deferred tax asset of $3,313,000 with respect to U.S. federal income taxes and $713,000 for state income taxes. Total net deferred tax assets, before valuation allowance, were $45,643,000 and $4,307,000 at September 30, 2025 and 2024, respectively.

At September 30, 2025, as part of its periodic evaluation of the necessity to maintain a valuation allowance against its deferred tax assets, and after consideration of all factors, including, among others, projections 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 of the date of this filing. If the Company earns taxable income, such limitations could result in an increased future income tax liability, and its future cash flows could be adversely affected.

The significant elements contributing to the difference between the U.S. federal statutory tax rate and the Company’s effective tax rate are as follows:

At September 30, 2025 and 2024, the Company had no significant uncertain tax positions or related interest or penalties requiring accrual. It is the Company’s policy to recognize interest and/or penalties, if any, related to income tax matters in income tax expense in the consolidated statements of operations. For the periods presented in the accompanying consolidated statements of operations, no material income tax related interest or penalties were assessed or recorded. All fiscal years prior to the fiscal year ended September 30, 2022, are closed to federal and state examination.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. The OBBBA introduced multiple tax law and other legislative changes, including modifications to income tax provisions such as domestic research and development expenses, capital expenditures, and U.S. taxation of international earnings. The OBBBA is not expected to materially impact the Company’s effective tax rate or cash flows for Fiscal 2025 or future periods.

NOTE 11 LOSS/EARNINGS PER SHARE

Basic loss/earnings per share data for each period presented is computed using the weighted average number of shares of common stock outstanding during each such period and includes Pre-Funded Warrants (see Note 8) from their date of issuance. Diluted loss/earnings per share data is computed using the weighted average number of common and dilutive common equivalent shares outstanding during each period. Dilutive common equivalent shares consist of shares that would be issued upon the exercise of stock options and warrants, computed using the treasury stock method.

A reconciliation of basic and diluted earnings/loss per share is as follows:

The following options and warrants were excluded from the calculation of diluted earnings per share in Fiscal 2025 and Fiscal 2024 because their inclusion would have been anti-dilutive:

NOTE 12 COMMITMENTS AND CONTINGENCIES

From time to time, the Company may become a party to legal actions or proceedings in the ordinary course of its business. At September 30, 2025, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to its interests, the Company believes would be material to its business.

NOTE 13 LEASES

The Company’s operating leases are primarily for corporate, engineering, and administrative office space and the related expense is recorded in general and administrative expenses on the consolidated financial statements. Total operating lease expense in Fiscal 2025 and Fiscal 2024 was $617,000 and $619,000, respectively. Cash paid for amounts included in operating lease liabilities in Fiscal 2025 and Fiscal 2024, which have been included in cash flows from operating activities, was $607,000 and $592,000, respectively.

The Company signed a renewal to extend the lease term of one of its New York locations through April 2027. Payments under this operating lease commenced February 1, 2025, and escalate 4.0% per year. The monthly rent payment is $6,000 per month.

At September 30, 2025, the Company’s operating leases had a weighted average remaining lease term of 6.0 years and a weighted average discount rate of 5.9%.

At September 30, 2025, future minimum payments under non-cancellable operating leases were as follows:

Future minimum payments under non-cancellable operating leases are as follows:

NOTE 14 ** RELATED PARTY TRANSACTIONS**

Galaxy Service Agreement

In September 2025, the Company entered into a services agreement (the “Services Agreement”) with Galaxy, pursuant to which the Company engaged Galaxy to provide certain operational, financial and human resources services to assist with the inception of its new digital assets treasury business. Galaxy will not be providing any (i) tax advice or services, (ii) legal advice or services, or (iii) advice in connection with the Investment Company Act of 1940, as amended (the “Investment Company Act”), or any related analyses thereto.

As compensation for its services, we will pay Galaxy fees of approximately $583,000 per month. The Services Agreement has an initial term of six months but may be extended for one additional six month period if mutually agreed in writing by the parties. During Fiscal 2025, the Company incurred fees of $389,000 related to the Servies Agreement, which were recorded as a component of related party expenses and related party payables on the consolidated financial statements at and for the fiscal year ended September 30, 2025.

Galaxy Asset Management Agreement

On September 10, 2025, we entered into an asset management agreement (the “Asset Management Agreement”) with Galaxy Digital Capital Management LP, an SEC-registered investment adviser (the “Asset Manager”), pursuant to which we appointed the Asset Manager to provide discretionary investment management services with respect to all of our cash, cash equivalents, stablecoins, cryptocurrency and other investible assets (excluding (i) publicly-traded equities acquired pursuant to mergers, acquisitions, combinations or other similar transactions pursuant to which we acquire or otherwise combine or merge with another publicly-traded digital asset treasury company, (ii) privately offered equity securities and (iii) non-publicly traded convertible debt instruments). Title to the account and all account assets will be held in our name. The Asset Manager is not authorized to act as custodian of our assets, nor to take possession or title to any assets.

As compensation for the Asset Manager’s services, we will pay management fees of 0.6% per annum of the value of the Account Assets (as defined in the Asset Management Agreement). In addition, the Asset Manager is authorized to appoint an affiliate to stake some or all of the SOL purchased for, maintained in the account, or otherwise owned or controlled by the Company. Such Asset Manager affiliate will be entitled to mutually agreed upon staking-based fees, subject to certain parameters according to a schedule set forth in the Asset Management Agreement. The Asset Manager is otherwise responsible for all of its overhead costs and the custody fees of any custodian selected by the Asset Manager, and the Company will pay or reimburse the Asset Manager for all reasonable and documented expenses related to the operation of the account.

The Asset Management Agreement has an initial term of three years and renews for successive one-year renewal periods unless the Company or the Asset Manager terminates or elects not to continue effectiveness of the Asset Management Agreement. The Asset Management Agreement may be terminated by either party without cause after the initial term or any subsequent renewal period upon ninety (90) days’ notice prior to the expiration of such term. In addition, at any time, the Asset Management Agreement may be terminated either for cause or upon certain acts of insolvency, each as described therein. While the Asset Manager is the exclusive asset manager for the Company, the Asset Manager may nonetheless provide similar services to other clients, and the Asset Manager or its affiliates may engage in transactions for their own accounts. The Asset Management Agreement contains customary representations, warranties, confidentiality, indemnification and limitation of liability provisions, and is governed by the laws of the State of New York.

During Fiscal 2025, the Company incurred fees of $535,000 related to the Asset Management Agreement, which were recorded on the consolidated financial statements as a component of related party expenses and related party payables at and for the fiscal year ended September 30, 2025.

Buying Agency and Supply Agreement

The Company had a Buying Agency and Supply Agreement (the “Supply Agreement”) with Forward China. The Supply Agreement provided that, upon the terms and subject to the conditions set forth therein, Forward China would act as the Company’s exclusive buying agent and supplier of Products (as defined in the Supply Agreement) in the Asia-Pacific region. The Company purchased products at Forward China’s cost and, from October 2023 through October 2024, paid Forward China a monthly service fee equal to the sum of (i) $65,833, and (ii) 4% of “Adjusted Gross Profit”, which is defined as the selling price less the cost from Forward China. Due to the Retail Exit and decline in the OEM distribution segment business, this sourcing agreement expired October 31, 2024. In November 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. The Sourcing Agreement was extended until May 9, 2025, and was subsequently terminated in connection with the sale of the OEM segment. See Note 3.

In connection with the sale of the OEM segment, effective May 16, 2025, the Company and Terence Wise, who served as the Chief Executive Officer of the Company, the Chairman of the Board of Directors, and a director, entered into a Separation Agreement pursuant to which, Mr. Wise resigned from all of these positions with the Company.

Terence Wise, former Chief Executive Officer and Chairman of the Company, is the owner of Forward China and beneficially owned more than 5% of the Company’s common stock prior to the Private Placement (see Note 8). In addition, Jenny P. Yu, a Managing Director of Forward China, beneficially owned more than 5% of the Company’s common stock prior to the Private Placement. The Company recorded service fees to Forward China of $331,000 and $891,000 during Fiscal 2025 and Fiscal 2024, respectively, which were included as a component of cost of sales upon sales of the related products. Due to the OEM Plan, these costs are now included in income from discontinued operations for Fiscal 2025 and Fiscal 2024. The Company had purchases from Forward China of approximately $4,040,000 and $7,862,000 during Fiscal 2025 and Fiscal 2024, respectively.

In order to preserve the Company’s 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 pertained only to payables that were outstanding at October 30, 2023 of approximately $7,365,000. Purchases from Forward China made after October 30, 2023, were not covered by this agreement and were expected to be paid according to normal payment terms. In connection with the sale of the OEM segment in May 2025 (see Note 3), this agreement was terminated and all amounts due thereunder extinguished.** **

Accounts Payable Conversion Agreement

In order to maintain compliance with Nasdaq’s listing standards, the Company entered into four separate agreements with Forward China (the “Conversion Agreements”) pursuant to which Forward China agreed to convert an aggregate $4,925,000 of amounts due to Forward China into shares of preferred stock. Under the terms of the Conversion Agreements, in Fiscal 2025 and Fiscal 2024, respectively, Forward China agreed to convert $2,725,000 and $2,200,000, respectively, of amounts due to Forward China into 2,725 shares and 2,200 shares, respectively, of the Company’s Series A-1. See Note 8.

Promissory Note

On January 18, 2018, the Company issued a $1,600,000 unsecured promissory note payable to Forward China to fund the acquisition of IPS. The promissory note bears interest at a rate of 8% per annum and had an original maturity date of January 18, 2019. Monthly interest payments commenced on February 18, 2018, with the principal due at maturity. The Company incurred and paid interest associated with this note of $49,000 and $63,000 in Fiscal 2025 and Fiscal 2024, respectively. At September 30, 2024, the maturity date of this note was December 31, 2024. In October 2024, the maturity date of this note was extended to June 30, 2025. In connection with the sale of the OEM segment, the maturity date of this note was extended to December 31, 2025. The maturity date of the note has been extended on several occasions to assist the Company with liquidity. The Company fully paid off this note in September 2025.

Other Related Party Activity

In October 2020, the Company began selling smart-enabled furniture, which was sourced by Forward China and sold in the U.S. under the Koble brand name. The Koble brand is owned by The Justwise Group Ltd. (“Justwise”) a company owned by Terence Wise, former Chief Executive Officer and Chairman of the Company. The Company recognized revenues from the sale of Koble products of $380,000 in Fiscal 2024. Due to the Retail Exit, these revenues are included in the loss from discontinued operations.

The Company had an agreement with Justwise, under which (i) Justwise performed design, marketing and inventory management services related to the Koble products sold by the Company and (ii) the Company was granted a license to sell Koble products. In exchange for such services, the Company paid Justwise $10,000 per month plus 1% of the cost of Koble products purchased from Forward China. This agreement was effective until August 31, 2023, and was extended on a month-to-month basis until November 30, 2023. The Company incurred costs under this agreement of $20,000 for Fiscal 2024. Due to the Retail Exit, these costs are included in the loss from discontinued operations. The Company hadno accounts payable to Justwise at September 30, 2025 or 2024.

The Company recorded revenue from a customer whose principal owner is an immediate family member of Jenny P. Yu, a shareholder of the Company and managing director of Forward China. In Fiscal 2024, the Company recognized revenues of $523,000 from this customer and had accounts receivable of $96,000 as of September 30, 2024. There were no revenues from this customer in Fiscal 2025, and no accounts receivable balances were outstanding as of September 30, 2025. Due to the OEM plan, Fiscal 2024 revenues are reported as income from discontinued operations and the accounts receivable as of September 30, 2024 are included in assets held for sale.

**NOTE 15401(k) PLAN **

The Company maintains a 401(k) benefit plan allowing eligible employees to make pre-tax and/or after-tax contributions of a portion of their salary in amounts subject to Internal Revenue Service limitations. The Company made immediately vested contributions based on a percentage of the employees’ salary of $355,000 during Fiscal 2025, of which $285,000 was recorded to cost of sales, $9,000 was recorded to sales and marketing expense and $61,000 was recorded to general and administrative expense on the consolidated statement of operations. The Company made immediately vested contributions based on a percentage of the employee’s salary of $442,000 during Fiscal 2024, of which $341,000 was recorded to cost of sales, $24,000 was recorded to sales and marketing expense and $77,000 was recorded to general and administrative expense on the consolidated statement of operations.

NOTE 16 SEGMENTS AND CONCENTRATIONS

Segments

As a result of discontinuing the retail and OEM segments (Note 3) and our new digital asset treasury strategy, the Company now hastwo reportable segments: design and digital assets. See Note 2 for more information on the composition and accounting policies of our reportable segments. The results of the retail and OEM segments were classified as discontinued operations as discussed in Note 3. The prior year segment disclosures have been reformatted from what was previously disclosed to conform to the current year presentation.

The Company’s Chief Executive Officer serves as the Chief Operating Decision Maker (“CODM”) and evaluates the financial performance of the business and makes resource allocation decisions on the basis of revenue, gross profit and net income or loss from continuing operations before income taxes for each reportable segment.

The tables below represent the primary measure of segment performance evaluated by the CODM, as well as additional measures that are regularly provided to the CODM on a segment-level.

The following table is a reconciliation of segment loss from continuing operations before taxes to our consolidated loss from continuing operations before income taxes.

Segment assets consist of accounts receivable and digital assets, which are regularly reviewed by the CODM, as well as goodwill and intangible assets resulting from design segment acquisitions.

Geographic Concentrations

The Company’s long-lived assets consist of property and equipment and operating lease right-of-use assets, all of which are located in the United States. The Company’s consolidated net revenues for Fiscal 2025 and 2024 are from customers predominantly located in the United States.

Customer Concentrations

Revenues from one design segment customer represented 12.4% of the Company’s consolidated net revenues in Fiscal 2025 and revenue from two design customers represented 48.4% of the Company’s consolidated net revenues in Fiscal 2024.

Accounts receivable from three design segment customers represented 49.4% of the Company’s consolidated accounts receivable balance at September 30, 2025 and accounts receivable from two design segment customers represented 48.7% of the Company’s consolidated accounts receivable balance at September 30, 2024.

There were no concentrations of revenue or accounts receivable with any significant customer in our digital assets segment.

**NOTE 17 RISKS AND UNCERTAINTIES **

The Company is subject to various risks including market risk, liquidity risk and other risks related to its concentration in SOL. Investing in SOL is currently highly speculative and volatile.

The price of SOL has been, and will likely continue to be, highly volatile. Our financial results and the market price of our common stock could be materially adversely affected if the price of SOL decreases substantially, as it has in the past, including as a result of shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions and regulatory announcements.

Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future from holding or selling digital assets. Accordingly, volatility in our earnings may be significantly more than what we experienced in prior periods, and it may be difficult to evaluate the Company’s business and future prospects. We also may need to perform an analysis each quarter to identify whether events or changes in circumstances indicate that our digital assets are impaired.

The Company will face risks relating to the custody of its digital assets. Cybersecurity threats, including hacking, phishing and other malicious attacks, could result in the loss, theft or misappropriation of our SOL. If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our private keys, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.

There is no clearing house for SOL, nor is there a central or major depository for the custody of SOL. There is a risk that some or all of the Company’s SOL could be lost or stolen. There can be no assurance that our custodians will maintain adequate insurance or that such coverage will cover any losses with respect to the Company’s SOL. Further, transactions in SOL are irrevocable. Stolen or incorrectly transferred SOL may be irretrievable. As a result, any incorrectly executed transactions of the Company’s SOL could adversely affect an investment in the Company’s common stock.

The Company’s shareholders have no specific rights to any specific SOL. In the event of the insolvency of the Company, its assets may be inadequate to satisfy a claim by its shareholders.

The SEC has stated that certain digital assets may be considered securities under federal securities laws. The test for determining whether a particular digital asset is a security is complex and difficult to apply, and the outcome is difficult to predict. Future developments could change the legal status of digital assets we hold. If SOL is determined to be a security under federal or state securities laws or in a proceeding in a court of law, or otherwise, it may have material adverse consequences for SOL, making it more difficult to be traded, cleared or custodied compared to other digital assets that are not considered securities. In addition, if SOL is considered a security, the Company could be considered an unregistered investment company under the Investment Company Act of 1940, which could necessitate the Company’s liquidation. If the Company is required to comply with additional regulatory obligations, it could result in a significant increase in operating expenses and make it difficult to continue our current operations, which would materially and adversely affect our business, financial condition and results of operations.

The Company relies on certain third-party providers to perform certain functions essential to its operations. Any disruptions to the Company’s service providers’ business operations resulting from business failures, financial instability, security failures, government mandated regulation or operational problems could have an adverse impact on the Company’s ability to access critical services and would be disruptive to the operations of the Company.

The Company may be subject to various litigation, regulatory investigations and other proceedings that arise in the ordinary course of business.

NOTE 18 SUBSEQUENT EVENT

On November 3, 2025, the Company’s Board of Directors authorized a share repurchase program permitting the Company to repurchase up to $1 billion of its common stock. Repurchases may be made from time to time through open-market purchases, block trades, and/or privately negotiated transactions (including accelerated share repurchases), and may include Rule 10b5-1 trading plans. Any repurchase will be executed in compliance with Rule 10b-18 of the Securities Exchange Act of 1934. The Company may determine the timing, amount, and method of repurchases based on market conditions, share price, legal and regulatory requirements, and other considerations in its sole discretion. The program does not obligate the Company to repurchase any specific number of shares and may be modified, suspended, or terminated at any time. Through the date of this filing, no shares have been repurchased under this program.