Forward Industries, Inc.

Current report

This report contains forward-looking statements, including statements regarding our liquidity, our growth strategy, and our future business plans. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “may,” “potential,” “continues,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods.

Current report

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (i) the rewards and costs associated with staking or validating transactions; (ii) regulatory issues related to our business model, including potential classification of crypto assets as securities and changing regulatory frameworks; (iii) fluctuations in the price of our crypto assets; (iv) potential decreases in the value of our crypto assets and rewards; (v) competition, (vi) risks related to the loss or theft of private withdrawal keys resulting in the complete loss of crypto assets and rewards; (vii) failure to keep our Registration Statement on Form S-3 effective and (viii) other risks and uncertainties described in our filings with the SEC, including our Form 10-K for the fiscal year ended September 30, 2025. Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Current report

Background and Business Overview

Current report

We are a Solana focused digital asset treasury company, with the strategy to buy, hold, stake, trade, invest in, and grow SOL and SOL related digital assets, protocols and businesses. Our mission is to expand and strengthen the Solana ecosystem by acquiring and staking SOL and engaging with, providing tools to and investing in the Solana protocol, Solana developers and Solana related projects in order to increase shareholder value. In connection with a private placement transaction in September 2025, we launched our digital asset treasury strategy, which we have been executing to date by holding SOL, staking SOL, operating a SOL validator, engaging in the SOL decentralized finance (“DeFi”) ecosystem and actively repurchasing shares of our common stock.

Current report

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, fwdSOL (a Liquid Staking Token, or “LST”, developed by the Company in collaboration with Socean Labs Inc., doing business as Sanctum, on the Solana blockchain) and similar assets. We have selected SOL as our primary treasury asset because we believe it is earlier in its lifecycle, operationally superior, higher yield generating and underexposed as compared to Bitcoin and other digital assets, presenting a unique opportunity for Forward to become the largest Solana asset treasury operator in the industry. Our planned approach involves acquiring SOL, staking our holdings via our own validator, deploying SOL into various DeFi protocols to earn yield, fees or rewards, lending SOL to earn interest, pledging SOL as collateral to borrow other assets and generating revenue through strategic acquisitions, partnerships and deployments within the Solana ecosystem.

Current report

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 prior period 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 8 to the condensed consolidated financial statements).

Current report

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

Current report

Critical Accounting Estimates

Current report

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

Current report

We have identified the below critical accounting estimates. An accounting estimate is considered critical if both: (a) the nature of the estimate or assumption is material due to the levels of subjectivity and judgment involved, and (b) the impact of changes in the estimate and assumption has had or is reasonably likely to have a material effect on the condensed consolidated financial statements. This listing is not a comprehensive list of all our accounting policies. For further information regarding the application of these and other accounting policies, see Note 2 of the consolidated financial statements in our Annual Report on Form 10-K.

Current report

Share-Based Compensation

Current report

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

Current report

Impairment of Digital Assets

Current report

We account for some of our digital assets, specifically fwdSOL, as indefinite-lived intangible assets in accordance with ASC Subtopic 350-30. These digital assets are initially recorded at cost and subsequently measured at cost less any impairment losses. We perform an impairment analysis each reporting period or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized when the fair value of these digital asset is less than their carrying value at any time during the period. The impaired digital asset is written down to its fair value at the time of impairment, and the impairment loss cannot be reversed in future periods even if fair values subsequently increase.

Current report

The determination of fair value requires significant judgment and involves the use of market prices from digital asset exchanges. We consider factors including trading volume, market liquidity, and the reliability of pricing sources when determining fair value. For fwdSOL, which may have limited trading activity, we may use alternative valuation methods including discounted cash flow analysis or other market-based approaches. Changes in market conditions, trading volumes, or the availability of reliable pricing information could materially affect our impairment assessments and results of operations.

Current report

2026 Quarter Highlights

Current report

Consolidated Results

Current report

The increase in net revenues from the 2025 Quarter to the 2026 Quarter resulted from $17,381,000 in staking and other related revenue generated by our digital assets segment and was partially offset by a $570,000 decline in design segment revenue, primarily attributable to the loss of a major design customer in December 2024 and partially offset by the net increase in volume of work and projects with other customers.

Current report

Our gross profit increased and gross margin increased from 24.5% in the 2025 Quarter to 78.6% in the 2026 Quarter. The increase in both gross profit and gross margin resulted from the high margin staking revenue generated by our digital assets segment, which generated gross profit of $15,983,000 and gross margin of 92.0%. In the design segment, gross profit decreased $267,000 and gross margin decreased from 24.5% in the 2025 Quarter to 21.4% in the 2026 Quarter driven by a change in the mix of revenue coupled with higher labor costs.

Current report

Sales and marketing expenses increased primarily due to increased corporate marketing spend of $446,000 related to corporate market research related activities and was partially offset by a $71,000 reduction in the design segment, driven by cost reduction efforts, including lower personnel costs and lower marketing spend.

Current report

During the 2025 Quarter, the Company recorded a design segment goodwill impairment charge of $225,000 related to the IPS reporting unit. This impairment charge resulted from recurring impairment testing and was driven by a reduction in expected future performance of the reporting unit.

Current report

The loss on digital assets in the 2026 Quarter of $560,212,000 was driven by the reduction in the fair value of our digital assets resulting from the decline in the market value of SOL. The non-cash impairment charge of $33,044,000 relates to our holdings of fwdSOL and is also driven by the decline in market value of SOL. These amounts reflect the volatility inherent in digital asset holdings and the Company’s accounting policy that does not permit the reversal of impairment losses even if fair values subsequently increase. The change in interest income, net is due to non-cash interest income of $479,000 related to loaned SOL plus an increase in cash interest income of $193,000 related to higher cash balances during the 2026 Quarter compared to the 2025 Quarter.

Current report

The income tax provision in the 2026 Quarter resulted from taxable income generated for which NOLs may not be available to offset due to certain IRS limitations. For the three months ended December 31, 2024, we reported no income tax provision or benefit due to the existence of significant net operating loss carryforwards.

Current report

In December 2025 and January 2026, we executed open market purchases totaling 3,330,000 shares at an average cost of $7.32 per share for an aggregate cost of $24,387,000, inclusive of fees.

Current report

During the 2026 Quarter, cash used in operating activities of $7,929,000 resulted from a net loss of $585,651,000, non-cash net digital asset revenue of $16,462,000, an increase in accounts receivable and contract assets of $1,202,000, an increase in prepaid expenses and other current assets of $1,796,000, partially offset by the loss on digital assets of $560,212,000, the digital asset impairment charge of $33,044,000, an increase in accrued expenses and other liabilities $2,813,000, a net increase in accounts payable and related party payables of $642,000, an increase in deferred income of $428,000 and non-cash charges for depreciation, amortization and share-based compensation of $43,000.

Current report

Cash used in financing activities in the 2026 Quarter consisted of share repurchases of $10,883,000, fees associated with financing activities of $229,000, and deferred financing costs associated with our ATM of $144,000, partially offset by net proceeds from ATM of $7,457,000 and proceeds from stock options exercised of $26,000. There was no cash used in or provided by financing activities in the 2025 Quarter.

Previous report

This report contains “forward-looking statements” (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements include, among other things, statements regarding our liquidity, plans on repaying outstanding debt obligations, plans on utilizing the equity line of credit, plans for other financing as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. These risks include the inability to expand our customer base, loss of additional customers, pricing pressures, lack of success of our marketing efforts, economic or other factors resulting in the failure to enter into purchase agreements for the sale of equity, failure to raise capital when needed, the inability to maintain compliance with Nasdaq listing standards, and the inability of our customers to pay for our services. No assurance can be given that the actual results will be consistent with the forward-looking statements. Investors should read carefully the factors described in the “Risk Factors” section of the Company’s filings with the SEC, including the Company’s Form 10-K for the year ended September 30, 2024 for information regarding risk factors that could affect the Company’s results. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by applicable law or regulation. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Previous report

Business Overview

Previous report

In June 2024, the Company’s stockholders authorized, and the Company’s Board of Directors approved, a 1-for-10 reverse stock split of our common stock, which became effective on June 18, 2024. Accordingly, all references made to share, per share, or common share amounts in the accompanying condensed consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the reverse stock split.

Previous report

In July 2023, we decided to cease operations of our retail distribution segment (“Retail Exit”) and we are presenting the results of operations for this segment within discontinued operations in the current and prior periods presented herein. The discontinuation of the retail segment represented a strategic shift in the Company’s business. The primary assets of the retail segment were inventory and accounts receivable. The Company sold, liquidated, or otherwise disposed of the remaining retail inventory and collected the 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 inventory of the retail segment met the criteria to be considered “held-for-sale” in accordance with ASC 205-20, “Discontinued Operations.” Accordingly, the retail inventory was classified on our condensed consolidated balance sheet as “discontinued assets held for sale” at September 30, 2023, and the results of operations for the retail segment have been classified as “Discontinued Operations” on the condensed consolidated statements of operations for the three and nine months ended June 30, 2025 and 2024.

Previous report

In March 2025, in connection with the fourth Conversion Agreement (see Note 8 to the condensed consolidated financial statements), Forward China determined it would not renew the Buying Agency and Supply Agreement, which subsequently expired on May 9, 2025. 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 the Company sold all equity interest in Forward Switzerland and Forward UK and 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. Additionally, the Company and Forward China terminated the Supply Agreement and extended the term of the Note Payable (see Note 8 to the condensed consolidated financial statements) to December 31, 2025. The Company paid $200,000 at closing and agreed to make additional cash payments of $150,000 on each of July 31, 2025, August 31, 2025 and September 30, 2025, which are shown as Due to Forward China on the condensed consolidated financial statements. 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 condensed consolidated balance sheets at September 30, 2024. The results of operations for the OEM segment have been classified as discontinued operations on the condensed consolidated statements of operations for the three and nine months ended June 30, 2025 and 2024. Unless otherwise noted, results for discontinued operations are excluded from the discussion that follows.

Previous report

Variability of Revenues and Results of Operations

Previous report

A significant portion of our revenue is concentrated with several large customers, some of which are the same and some of which change over time. Orders from some of these customers can be highly variable, with short lead times, which can cause our quarterly revenues, and consequently our results of operations, to vary over a relatively short period of time.

Previous report

Critical Estimates

Previous report

We discussed the significant estimation processes that are critical to our business operations and the understanding of our financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” There have been no material changes in critical accounting policies or estimation processes during the period covered by this report, but the following accounting estimates had a material impact on our results of operations for the 2025 Period and fiscal 2024.

Previous report

We review goodwill for impairment annually, or more often if events or changes in circumstances indicate the carrying value of a reporting unit may exceed its fair value. Evaluating goodwill for impairment requires a significant amount of judgment, including the estimation of future cash flows, future growth rates and profitability. Changes in our business strategy or adverse changes in market conditions could impact impairment analyses and require the recognition of an impairment charge. Although we base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances at the time of evaluation, actual results could differ from these estimates.

Previous report

In December 2024, the Company was notified by its largest design customer of its plan to discontinue their insulin patch pump program, on which IPS was working, and was beginning to wind down all activities related to it. Revenue from this customer (all of which related to this program) represented more than 30% of the Company’s consolidated net revenues in fiscal 2024. 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 performed quantitative testing on this reporting unit, which indicated its carrying amount exceeded its fair value, resulting in a goodwill impairment charge of $225,000 in December 2024, primarily driven by a reduction in its expected future performance at that time.

Previous report

In the second and third quarters of fiscal 2025, the IPS reporting unit continued to experience low levels of staff utilization due in part to the loss of the aforementioned major customer, which was anticipated. In addition, due to the uncertainty in the global markets related to tariffs on imports, many IPS customers were slow to commit funds to projects, primarily in the second quarter of fiscal 2025, as they were unsure how tariffs and other macroeconomic factors would impact their business. The combination of these events resulted in negative gross profit for the IPS reporting unit in the second and third quarters, which the Company considered triggering events to evaluate the goodwill of the IPS reporting unit for impairment. Management performed a quantitative goodwill impairment analysis for the IPS reporting unit at March 31, 2025 and June 30, 2025, both of which indicated the fair value of the IPS reporting unit exceeded its carrying amount, resulting in no further goodwill impairment in the three months ended March 31, 2025 or June 30, 2025.

Previous report

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. 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 September 2024, primarily driven by a reduction in its expected future performance.

Previous report

We will continue to monitor the IPS and Kablooe goodwill for impairment as needed in future periods. Changes in economic, industry or market conditions, business operations, competition, the price of our common shares or market capitalization or our actual performance compared with estimates of our future performance may affect the fair value of goodwill and could result in additional impairment charges in the future.

Previous report

The decline in net revenues from the 2024 Quarter to the 2025 Quarter is primarily attributable to the loss of a major customer in December 2024 as well as a net decrease in volume of work and projects with continuing customers, partially offset by projects from new customers. In December 2024, our largest design customer notified us of its plan to discontinue their insulin patch pump program, on which we were working. We expect this to continue to cause a material decrease in our revenues relative to fiscal 2024. Management initiated cost reduction measures to mitigate the impact of declining revenues, including two reductions in workforce in January 2025.

Previous report

Our gross profit/(loss) margin declined significantly, from 26.0% in the 2024 Quarter to (24.9%) in the 2025 Quarter, driven by lower revenues and utilization rates and was partially mitigated by staff reductions in January 2025.

Previous report

Sales and marketing expenses decreased primarily due to lower personnel costs and lower marketing spend but increased as a percentage of revenues from 3.7% in the 2024 Quarter to 5.6% in the 2025 Quarter.

Previous report

The change in other income, net is primarily due to the change in fair value of the warrant liability and the decrease in interest income resulting from lower cash balances in interest bearing accounts.

Previous report

We generated a loss from continuing operations of $2,404,000 in the 2025 Quarter compared to $455,000 in the 2024 Quarter. We maintain significant net operating loss carryforwards and do not recognize a significant income tax expense or benefit as our deferred tax provision is typically offset by a full valuation allowance on our net deferred tax asset.

Previous report

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2025 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 2024

Previous report

The decline in net revenues from the 2024 Period to the 2025 Period is primarily attributable to the loss of a major customer in December 2024 as well as a net decrease in volume of work and projects with continuing customers, partially offset by projects from new customers. In December 2024, our largest design customer notified us of its plan to discontinue their insulin patch pump program, on which we were working. We expect this to continue to cause a material decrease in our revenues relative to fiscal 2024. Management initiated cost reduction measures to mitigate the impact of declining revenues, including two reductions in workforce in January and June 2025.

Previous report

Our gross margin decreased from 26.7% in the 2024 Period to 3.3% in the 2025 Period, driven by lower revenue and utilization rates and was partially offset by staff reductions in January and June of 2025.

Previous report

Sales and marketing expenses decreased primarily due to lower personnel costs and lower marketing spend but increased as a percentage of revenues from 4.0% in the 2024 Period to 4.4% in the 2025 Period.

Previous report

The change in other (income)/expense, net is primarily due to the change in fair value of the warrant liability, a decrease in interest income resulting from lower cash balances in interest bearing accounts, and a decrease in interest expense resulting from a reduction in the amount of debt outstanding.

Previous report

We generated a loss from continuing operations of $5,124,000 in the 2025 Period compared to $1,447,000 in the 2024 Period. We maintain significant net operating loss carryforwards and do not recognize a significant income tax expense or benefit as our deferred tax provision is typically offset by a full valuation allowance on our net deferred tax asset.

Previous report

Recent Financings

Previous report

From July 1 – August 12, 2025, the Company sold 246,000 shares of common stock under the $35 million ELOC and received gross proceeds of $2,432,000 in connection with such sales. Assuming the Company continues to meet its obligations under the Purchase Agreement, management plans to raise additional capital through the ELOC in the near future. We cannot provide any assurance that: (i) we will be able to continue selling under the ELOC, (ii) if we are able to sell under the ELOC, that we will be able to do so at prices that we believe are beneficial to the Company and its shareholders, or (iii) that our registration statement on form S-1 registering shares to be sold under the ELOC in the future will be declared and remain effective. As of the filing date of this Form 10-Q, the Company has sold all shares registered by it under the ELOC.

Previous report

On August 11, 2025, the Company sold, in a registered direct offering, approximately 263,000 shares of its common stock at a price of $8.50 per share to six investors and received gross proceeds of approximately $2,230,000.

Previous report

Other Liquidity Factors

Previous report

Forward China, an entity owned by our former Chairman of the Board and Chief Executive Officer, holds a $600,000 promissory note issued by the Company which matures on December 31, 2025 (see Note 8 to the condensed consolidated financial statements). We plan on repaying the note on or prior to its maturity date. In connection with the sale of the OEM business, we are obligated to pay Forward China $150,000 on each of August 31, 2025 and September 30, 2025 (in addition to the payment made on July 31, 2025).

Previous report

Our condensed 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. We had an accumulated deficit and working capital of $22,647,000 and $1,211,000, respectively, at June 30, 2025, a net loss of $3,010,000 for the nine months ended June 30, 2025 and $1,951,000 in Fiscal 2024 and a cash balance of approximately $5,600,000 at August 12, 2025.

Previous report

Based on our forecasted cash flows, we believe that there is substantial doubt about our ability to continue as a going concern for a period of 12 months from the date of issuance of the condensed consolidated financial statements.

Previous report

Although we do not anticipate the need to purchase additional material capital assets in order to carry out our business, it may be necessary for us to purchase a material amount of equipment and other capital assets in the future, depending on need.

Previous report

During the 2025 Period, cash used in operating activities of $2,199,000 resulted from a net loss of $3,010,000, the gain on sale of the OEM segment of $1,406,000, the gain on the change in fair value of the warrant liability of $160,000, a decrease in accrued expenses and other current liabilities of $261,000, partially offset by non-cash expenses of $589,000 related to depreciation, amortization, share-based compensation, credit loss expense and goodwill impairment charges, a decrease in accounts receivable and contract assets of $1,634,000, the net change in other operating assets and liabilities of $19,000 and the net cash provided by discontinued operations of $396,000.

Previous report

Cash provided by financing activities in the 2025 Period consisted of $971,000 net proceeds from the issuance of preferred stock and warrants, partially offset by deferred financing costs of $60,000 related to the equity line of credit. Cash used in financing activities in the 2024 Period consisted of principal payments on the promissory note held by Forward China of $500,000.

Previous report — wording carried elsewhere

General and administrative expenses increased in the 2025 Quarter. Lower personnel costs related to staff reductions and a reduction in expenses related to the June 2024 reverse stock split were offset by higher professional fees primarily related to the sale of the OEM division. Management continues to monitor the various components of general and administrative expenses and how these costs are affected by inflationary and other factors. We intend to adjust these costs as needed based on the overall needs of the business.

Previous report — wording carried elsewhere

The table below summarizes our consolidated results from continuing operations for the 2025 Period as compared to the 2024 Period:

Previous report — wording carried elsewhere

The discussion that follows below provides further details about our results from continuing operations for the 2025 Period as compared to the 2024 Period.

Previous report — wording carried elsewhere

Consolidated basic and diluted loss per share from continuing operations were $4.65 and $1.31 for the 2025 Period and the 2024 Period, respectively.