Forward Industries, Inc.

Current report

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

Current report

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

Current report

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

Current report

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

Previous report

The Company has incurred significant indebtedness under a loan agreement with Galaxy Digital LLC, secured by the Company’s SOL holdings, to fund share repurchases and other corporate purposes. This strategy exposes the Company to substantial risks related to margin calls, failure to make interest payments, loan defaults, and forced liquidation of its collateral.

Previous report

On February 27, 2026, the Company entered into a Master Digital Currency Loan Agreement (the “Loan Agreement”) with Galaxy Digital LLC (“Galaxy”), under which Galaxy may extend loans of digital currency or U.S. dollars (“Dollars”) to the Company in its sole discretion. The Company has used Dollar loan proceeds to repurchase shares of its common stock and other corporate purposes. These obligations are secured exclusively by the Company’s SOL holdings, over which Galaxy holds a first priority security interest. This strategy subjects the Company to significant risks that could materially adversely affect its financial condition, results of operations, and stock price.

Previous report

SOL’s market price is highly volatile. If the value of the Company’s SOL collateral falls below the margin call rate, Galaxy may require additional collateral to restore the initial level within one business day. If collateral value falls below an urgent margin call rate, the Company may have as little as six hours to post additional collateral or repay outstanding principal. There is no assurance the Company will have sufficient SOL or other eligible assets to satisfy margin calls, acquire additional collateral, or pay down principal.

Previous report

The Company may not generate sufficient cash flow to service its debt. Under the Loan Agreement, failure to repay borrowed amounts, make interest payments, pay fees, or provide additional collateral constitutes an event of default. Upon default, Galaxy may accelerate all amounts due, terminate the agreement, and liquidate, convert, or otherwise realize upon the pledged SOL without notice. Galaxy also has partial liquidation rights to restore the loan-to-value ratio if the Company fails to meet margin calls. Any liquidation could occur when SOL prices are depressed or markets are illiquid, resulting in significant losses. Galaxy may enter into hedging transactions, the costs and losses of which the Company would bear. Forced sales could also trigger adverse tax consequences.

Previous report

The regulatory treatment of digital assets remains uncertain. If legal changes eliminate or materially impair a party’s ability to own or transfer digital currency used as collateral, the Company may be required to settle in Dollars at prices determined under the Loan Agreement, and the agreement would terminate. Such changes could impair the collateral’s value or restrict the Company’s ability to hold or transact in SOL.

Previous report

Because debt-funded share repurchases do not generate revenue or cash flow to service indebtedness, leverage amplifies these risks. The loan facility also contains termination triggers unrelated to payment defaults—including equity declines exceeding specified thresholds or changes in key management—that could allow acceleration of all outstanding obligations. In an extreme scenario, declining SOL values combined with margin call failures or a default could result in loss of all or substantially all SOL holdings, acceleration of indebtedness, and potential insolvency.

Previous report

A default under the Company’s Loan Agreement could render the Company ineligible to use Registration Statement on Form S-3 for securities offerings, which would materially impair the Company’s ability to raise capital in the public markets.

Previous report

The Company currently relies on the availability of Form S-3 registration statements under the Securities Act of 1933 (the “Securities Act”), to conduct primary and secondary offerings of its securities and to facilitate its share repurchase program. Eligibility to use Form S-3 is conditioned upon, among other things, the Company’s compliance with the timely filing requirements and other registrant eligibility conditions set forth in General Instruction I.B of Form S-3, including that the Company has not failed to pay any dividend or sinking fund installment on preferred stock, or defaulted on any installment on indebtedness for borrowed money, or on any material lease, since the end of the last fiscal year.

Previous report

If the Company were to default on its obligations under the Loan Agreement -including any failure to make required interest or principal payments, satisfy margin calls, or comply with other covenants - such default could cause the Company to fail to satisfy the registrant eligibility requirements of Form S-3. In such event, the Company would be required to conduct any future public offerings of its securities on Form S-1, which is subject to more extensive disclosure requirements, longer SEC review periods, and greater time and expense to prepare. The loss of Form S-3 eligibility would significantly impair the Company’s flexibility to access the capital markets on a timely and cost-effective basis, which could adversely affect the Company’s ability to fund operations, pursue strategic opportunities, or respond to adverse business conditions.