What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-12-11 compared with 2024-12-27 · 306 added, 387 removed, 50 unchanged (93% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion

and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report

The following discussion and

analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report

on Form 10-K.

10 unchanged sentences

statements”, as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements include,

among other things, statements regarding our liquidity, plans on repaying outstanding debt obligations, 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

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 and adversely from those reflected in the forward-looking statements.

that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K,

and in particular, the risks discussed under the caption "Risk Factors" in Item 1A of this report and those discussed in other

documents we file with the SEC.

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking

statements, except as required by law.

Given these risks and uncertainties, readers are cautioned not to place undue reliance on such

forward-looking statements.

All statements other

than historical factual information are forward-looking statements, including, without limitation, statements regarding future performance

and management’s plans and strategies for future operations, including the implementation and anticipated benefits of our digital

asset treasury strategy, intentions of our staking activities, our liquidity and the management of our liquidity, our beliefs regarding

SOL, the SOL blockchain and ecosystem, anticipated sales under the ATM offering or purchases under the share buyback program, anticipated

hirings, 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 and adversely from those reflected in

the forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to those discussed

in this report, and in particular, the risks discussed under the caption “Risk Factors” in Item 1A of this report and those

discussed in other documents we file with the SEC.

Forward-looking statements herein speak only as of the date of this report.

undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required

Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Business Overview

Forward Industries, Inc.

is a global design, sourcing and distribution Company serving top tier medical and technology customers worldwide.

Our design division provides

hardware and software product design and engineering services to customers predominantly located in the U.S.

Our OEM distribution division

sources and sells 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 package our products as accessories

“in box” together with their branded product offerings or sell them through their retail distribution channels.

Company does not manufacture any of its OEM products and sources substantially all of these products from independent suppliers in China,

through Forward Industries Asia-Pacific Corporation, a British Virgin Islands corporation (“Forward China”).

Forward China

is owned by our Chairman of the Board and Chief Executive Officer.

is a design company serving top tier medical and technology customers.

The Company provides hardware and software product design and engineering

services to customers predominantly located in the U.S.

The Company also acquires and holds Solana (“SOL”) and other digital

assets and has adopted SOL as its primary treasury reserve asset.

On November 17, 2025, the Company changed its ticker symbol on the Nasdaq

Capital Market from FORD to FWDI.

New Digital Asset Treasury Strategy

On September 8, 2025, in connection

with a private placement with certain accredited investors, we announced the launch of our digital asset treasury strategy, pursuant to

which we plan to pursue a number of strategic initiatives to acquire SOL and other digital assets.

On September 10, 2025, we entered into

the Asset Management Agreement and Services Agreement with Galaxy Digital Capital Management LP (“Galaxy Digital”) to guide

us through the implementation of our new digital assets treasury business.

On September 15, 2025, we announced our initial liquid SOL

purchases of 6,822,000 SOL at an average price of $232 per SOL, or approximately $1.58 billion in the aggregate.

Under our new treasury policy

and strategy (the “Treasury Policy”), the principal holding in our treasury reserve on the balance sheet will be allocated

to digital assets, primarily SOL.

Our strategy involves applying a public-market treasury model to an asset that we believe is earlier

in its lifecycle, structurally reflexive, and underexposed as compared to Bitcoin.

Our approach involves acquiring SOL directly through

market purchases, staking our holdings via our own or third-party operated validators and generating incremental revenue through strategic

partnerships and deployments within the Solana ecosystem.

In addition to operating our

hardware and software product design and engineering services business, our management will focus its resources on our Treasury Policy,

and a significant portion of the balance sheet will be allocated to holding SOL and other digital assets in our digital asset treasury.

As of November 30, 2025, we estimated that our digital asset holdings comprised more than 90% of our total assets.

Reverse Stock Split

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

shareholders 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.

1 unchanged sentence

financial statements and applicable disclosures have been retroactively adjusted to reflect the reverse stock split.

Considering the recurring

losses incurred by the retail segment, in July 2023, the Company decided to cease operations of our retail distribution segment, 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 represents a strategic shift in the Company’s business.

The primary assets of the retail

segment are inventory and accounts receivable.

The Company sold, liquidated, or otherwise disposed of the remaining retail inventory and

collected the remaining retail accounts receivable as of September 30, 2024.

As of September 30, 2024, the retail segment was fully discontinued,

and we expect to have no further significant involvement in this segment.

The inventory of the retail segment is presented as discontinued

assets held for sale on the balance sheet 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, 2024 and 2023.

All information

and results in this annual report on Form 10-K exclude the discontinued retail segment unless otherwise noted.

See Note 3 to our consolidated

financial statements for additional information on the discontinued retail segment.

Discontinued Operations

Considering the recurring losses

incurred by the retail segment, in July 2023, the Company decided to cease operations of our retail distribution segment, 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 represents a strategic shift in the Company’s business.

The primary assets of the retail segment are inventory

and accounts receivable.

The Company sold, liquidated, or otherwise disposed of the remaining retail inventory and collected the remaining

retail accounts receivable as of September 30, 2025.

As of September 30, 2025, the retail segment was fully discontinued, and we expect

to have no further significant involvement in this segment.

The inventory of the retail segment was presented as discontinued assets held

for sale on the balance sheet 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.

All information and results in

this annual report on Form 10-K exclude the discontinued retail segment unless otherwise noted.

See Note 3 to our consolidated financial

statements for additional information on the discontinued retail segment.

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.

Variability of Revenues and Results of Operations

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.

Critical Accounting Policies and Estimates

We have identified the accounting

policies and significant estimation processes below as critical to our business operations and the understanding of our results of operations.

The discussion below is not intended to be comprehensive.

In many cases, the accounting treatment of a particular transaction is specifically

dictated by U.S.

GAAP, with no need for management’s judgment.

In other cases, management is required to exercise judgment in the

application of accounting principles with respect to particular transactions.

The impact and any associated risks related to these policies

on our business operations are discussed throughout this “Management’s Discussion and Analysis of Financial Condition and

Results of Operations” where such policies affect reported and expected financial results.

For a detailed discussion of the applications

of these and other accounting policies, see “Item 8.

Financial Statements and Supplementary Data” in this report.

The preparation

of our consolidated financial statements requires us to make estimates and assumptions that are believed to be reasonable under the circumstances.

There can be no assurance that actual results will not differ from those estimates and such differences could be significant.

Revenue Recognition

OEM Distribution Segment

The OEM distribution segment

recognizes revenue when:

(i) finished goods are shipped to its customers (in general, these conditions occur at either point of shipment

or point of destination, depending on the terms of sale and transfer of control);

(ii) there are no other deliverables or performance

and (iii) there are no further obligations to the customer after the title of the goods has transferred.

If the Company receives

consideration before achieving the criteria previously mentioned, it records a contract liability, which is classified as a component

of deferred income in the accompanying consolidated balance sheets.

Design Segment

The design segment applies

the “cost to cost” and “right to invoice” methods of revenue recognition to its contracts with customers.

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, or contract assets, are recorded as an asset and classified as a component of accounts receivable

in the accompanying consolidated balance sheets.

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.

Segment Reporting

As a result of discontinuing

our retail reportable segment, we now have two reportable segments:

OEM distribution and design.

The OEM distribution segment sources

and distributes carrying cases and other accessories for medical monitoring and diagnostic kits and a variety of other portable electronic

and non-electronic devices directly to OEMs or their contract manufacturers worldwide.

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.

Our chief operating decision

maker (“CODM”) regularly reviews revenue and operating income for each segment to assess financial results and allocate resources.

For our OEM distribution segment, we exclude general and administrative and general corporate expenses from its measure of profitability

as these expenses are not allocated to the segments and therefore not included in the measure of profitability used by the CODM.

design segment, general and administrative expenses directly attributable to that segment are included in its measure of profitability

as these expenses are included in the measure of its profitability reviewed by the CODM.

We do not include intercompany activity in our

segment results to be consistent with the information that is presented to the CODM.

Segment assets consist of accounts receivable and

inventory, which are regularly reviewed by the CODM, as well as goodwill and intangible assets resulting from design segment acquisitions (see

Note 16 to the consolidated financial statements).

Inventory Valuation

Inventories consist primarily

of finished goods and are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value.

management’s estimates, an allowance is made to reduce excess, obsolete, or otherwise unsellable inventories to net realizable value.

The allowance is established through charges to cost of sales in the Company’s consolidated statements of operations.

In determining

the adequacy of the allowance, management’s estimates are based upon several factors, including analyses of inventory levels, historical

loss trends, sales history and projections of future sales demand.

The Company’s estimates of the allowance may change from time

to time based on management’s assessments, and such changes could be material.

A significant portion of our

design segment revenue is concentrated with several large customers, some of which are the same and some of which change over time.

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.

Critical Accounting Estimates

Our financial statements have

been prepared in accordance with accounting principles generally accepted in the United States, which requires the use of certain estimates

and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

Although we base our estimates on historical

experience and various other assumptions that we believe to be reasonable under the circumstances at the time of evaluation, changes in

our business strategy, adverse changes in market conditions or various other factors could cause actual results to differ from these estimates

and such differences could be significant.

We have identified the below

critical accounting estimates.

An accounting estimate is considered critical if both:

(a) the nature of the estimate or assumption is

material due to the levels of subjectivity and judgment involved, and (b) the impact of changes in the estimate and assumption has had

or is reasonably likely to have a material effect on the consolidated financial statements.

This listing is not a comprehensive list of

all our accounting policies.

For further information regarding the application of these and other accounting policies, see Note 2 of the

consolidated financial statements.

Goodwill and Intangible Assets

We review goodwill for impairment

at least annually, or more often if triggering events occur.

We have 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.

We have the option to perform a qualitative assessment to determine if an impairment is more likely than not to have

If we 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 we would not need to perform a quantitative impairment test for the reporting unit.

If we cannot support such a

conclusion or do not elect to perform the qualitative assessment, then we will perform the quantitative impairment test 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

amount, no impairment charge is recognized.

If the fair value of the reporting unit is less than its carrying amount, 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.

During Fiscal 2024,

the Company recorded an impairment charge of $200,000 related to goodwill (See Note 4 to the consolidated financial statements).

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.

The Company reviews goodwill

for impairment at least annually, or more often if triggering events occur.

The Company has two reporting units with goodwill (the IPS

and Kablooe operating segments) and we perform our annual goodwill impairment test on September 30, the end of the fiscal year, or upon

the occurrence of a triggering event.

Evaluating goodwill for impairment will often require the estimation of the fair value of the underlying

reporting unit, the inputs to which require a significant amount of judgment, such as future cash flows, future growth rates and profitability.

Changes in our business strategy or adverse changes in market conditions could impact impairment analyses and require the recognition

of an impairment charge.

Although we base our estimates on historical experience and various other assumptions that we believe to be reasonable

under the circumstances at the time of evaluation, actual results could differ from these estimates.

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 their carrying amount 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.

estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with

Changes in assumptions could significantly affect the estimates.

If these estimates or material related

assumptions change in the future, we may be required to record impairment charges related to our intangible assets.

There were no indications

of impairment of intangible assets in Fiscal 2024 or Fiscal 2023.

Share-Based Compensation

We measure share-based compensation

expense related to employee and non-employee director share-based awards based on the estimated fair value of the awards as determined

on the date of grant, which is recognized as expense over the requisite service period.

We utilize the Black-Scholes option pricing model

to estimate the fair value of stock options issued as compensation.

The Black-Scholes model requires the input of highly subjective and

complex assumptions, including the expected term of the stock option, and the expected volatility of our common stock over the period

commensurate with the expected term of the option.

Uncontrollable uncertainties, such as fluctuation in interest rates, can have an effect

on our Black-Scholes estimate calculations.

Such fluctuations and other unforeseen changes in inputs could have a material impact on the

general and administrative expenses within our financial statements.

Recent Accounting Pronouncements

In December 2023, the Financial

Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 is currently evaluating the effects of this pronouncement on its consolidated

Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-08, Intangibles - Goodwill

and Other - Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”).

ASU 2023-08 requires

certain crypto assets meeting defined criteria to be measured at fair value each reporting period with changes in fair value recognized

in net income, presented separately from other intangible assets and accompanied by enhanced disclosures.

This standard is effective for

fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company early adopted this standard in the fourth quarter

of Fiscal 2025, in conjunction with its new treasury strategy.

Since the Company held no digital assets until September 2025, the adoption

of this standard had no impact to prior reported financial statements and no cumulative adjustment to retained earnings was required or

In November 2024, the FASB issued

ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses” and in January 2025, the FASB issued ASU No.

2025-01, “Income Statement—Reporting

Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date”, which clarified

the effective date of ASU 2024-03 for non-calendar year-end companies.

ASU 2024-03 will require the Company to disclose the amounts of

purchases of inventory, employee compensation, depreciation and intangible asset amortization, as applicable, included in certain expense

captions in the consolidated statements of operations, as well as qualitatively describe remaining amounts included in those captions.

ASU 2024-03 will also require the Company to disclose both the amount and the Company’s definition of selling expenses.

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 2023-09, “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 standard in Fiscal 2025 with no material impact to its consolidated

financial statements.

In November 2019, the FASB

issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU 2019-11 is

an accounting pronouncement that provides clarity to and amends earlier guidance on this topic and would be effective concurrently with

the adoption of such earlier guidance.

This pronouncement is effective for the Company for fiscal years beginning after December 15, 2022,

and interim periods within those fiscal years.

The Company adopted this guidance in the first quarter of Fiscal 2024 with no material

impact on its consolidated financial statements.

RESULTS OF OPERATIONS FOR FISCAL 2025 COMPARED

TO FISCAL 2024

Consolidated Results

The table below summarizes our consolidated results

of continuing operations for Fiscal 2024 as compared to Fiscal 2023:

Consolidated Results of Continuing Operations

from continuing operations for Fiscal 2025 as compared to Fiscal 2024:

$ (1,803,000 )

3 unchanged sentences

Goodwill impairment

Operating (loss) income

Other income, net

Operating loss

Other expense/(income), net

Income tax provision

(Loss) / income from continuing operations

Loss from continuing operations

$ (169,088,000 )

$ (2,166,000 )

The decrease in net revenues

in Fiscal 2024 was primarily driven by a decline in revenue in the OEM distribution segment and, to a lesser extent, the design segment.

Gross profit decreased and

gross margin declined from 22.8% in Fiscal 2023 to 20.6% in Fiscal 2024.

This decrease was mainly driven by lower utilization rates in

our design segment and a change in the mix of our OEM distribution segment revenue, partially offset by a reduction in our sourcing fee

with Forward China.

$ (166,922,000 )

n/m - not meaningful

The decline in net revenues from

Fiscal 2024 to Fiscal 2025 resulted from a $6,385,000 decline in design segment revenue, primarily attributable to the loss of a major

design customer in December 2024 and a net decrease in volume of work and projects with other customers, partially offset by $4,582,000

in staking revenue generated by our digital assets segment.

Our gross profit increased slightly,

and gross margin increased from 25.9% in Fiscal 2024 to 28.5% in Fiscal 2025.

This increase in both gross profit and margin resulted from

the high margin staking revenue generated in our digital assets segment, which generated gross profit of $4,412,000 and gross margin of

This was partially offset by lower gross profit and margin in the design segment, a decrease of $4,405,000 in gross profit and

a reduction in gross margin from 25.9% in Fiscal 2024 to 5.7% in Fiscal 2025, driven by lower utilization rates, partially mitigated by

staff reductions in January and June 2025.

Sales and marketing expenses

decreased primarily due to staff reduction in our OEM distribution segment and lower sales related expenses in the design segment.

and marketing expenses as a percentage of revenue increased from 4.5% in Fiscal 2023 to 4.7% in Fiscal 2024.

General and administrative

expenses decreased slightly in Fiscal 2024.

Lower payroll costs were partially offset by increased corporate expenses, primarily driven

by costs related to Nasdaq non-compliance issues, and a credit loss recovery of approximately $200,000 in Fiscal 2023 that did not recur

in Fiscal 2024.

Management continues to monitor the various components of general and administrative expenses and how these costs are

affected by inflationary and other factors.

increased primarily due to increased corporate marketing spend of $500,000 related to corporate market research related activities and

was partially offset by a $240,000 reduction in the design segment, driven by cost reduction efforts, including lower personnel costs

and lower marketing spend.

Corporate general and administrative

expenses increased $4,392,000 due to higher share-based compensation, professional fees related to the sale of the OEM segment and our

recent financing transactions, costs associated with additional shareholder meetings and higher investor relations spending.

Design segment

expenses decreased $769,000 due to lower personnel costs related to staff reductions and other cost-cutting measures in response to the

decline in revenues.

Digital assets general and administrative expenses of $539,000 are asset management fees to Galaxy Digital.

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.

During Fiscal 2025, the Company

recorded a goodwill impairment charge of $200,000 related to the Kablooe reporting unit, which is included in the design segment.

impairment charge resulted from the quantitative goodwill impairment testing performed at September 30, 2024 and was driven by historical

losses and a reduction in expected future performance of the Kablooe reporting unit.

We reported other income

of $7,000 in Fiscal 2024 as compared to $19,000 in Fiscal 2023.

The variance is due to fair value adjustments of $70,000 in Fiscal 2023

to reduce to the fair value of the earnout consideration related to the Kablooe acquisition, $18,000 of net duty drawback income received

in Fiscal 2023 offset by an increase in interest income from interest bearing deposits and a decrease in interest expense resulting from

a reduction in the amount of debt outstanding.

In Fiscal 2024, we recorded

a tax provision of $23,000, incurred a loss from continuing operations before income taxes of $1,925,000 and had an effective tax rate

In Fiscal 2023, we recorded a tax provision of $20,000, generated income from continuing operations before income taxes of

recorded goodwill impairment charges of $1,167,000 related to the IPS reporting unit and $391,000 related to the Kablooe reporting unit,

and intangible asset impairment charges of $271,000 related to the IPS reporting unit and $197,000 related to the Kablooe reporting unit,

all of which are included in the design segment.

These impairment charges resulted from recurring impairment testing and were driven by

historical losses and a reduction in expected future performance of the reporting units.

The change in other expense/(income),

net is due to a $160,035,000 reduction in the fair value of our digital assets resulting from a decline in the market value of SOL, a

$658,000 increase in the estimated fair value of the warrant liability from July 1, 2025 through August 8, 2025 based on changes in the

inputs to the valuation model, and lower interest income, interest expense and foreign currency exchange rate losses.

In Fiscal 2025, we recorded a

tax provision of $20,000, incurred a loss from continuing operations before income taxes of $169,069,000 and had an effective tax rate

In Fiscal 2024, we recorded a tax provision of $23,000, generated a loss from continuing operations before income taxes of $2,143,000

and had an effective tax rate of (1.3%).

We maintain significant net operating loss carryforwards and do not recognize a significant income

tax provision or benefit as our deferred tax provision is typically offset by a full valuation allowance on our net deferred tax assets.

Consolidated basic and diluted

(loss)/earnings per share from continuing operations was ($1.77) and $0.14 for Fiscal 2024 and Fiscal 2023, respectively.

Segment Results

The discussion that follows

below provides further details about the results of operations for each continuing segment as compared to the prior year.

Segment Results of Operations

OEM Distribution

Corporate Expenses

Fiscal 2024 revenues

Fiscal 2023 revenues

$ (3,798,000 )

$ (2,695,000 )

$ (6,493,000 )

Fiscal 2024 operating income/(loss)

$ (2,327,000 )

$ (1,932,000 )

Fiscal 2023 operating income/(loss)

$ (2,156,000 )

$ (2,092,000 )

OEM Distribution

Net revenues in the OEM distribution

segment decreased from lower sales volume from our diabetic customers, slightly offset by an increase in revenues from other OEM customers.

As consumer demand increases for diabetic testing products which require no carrying case, we expect diabetic product sales to continue

to represent a smaller portion of our OEM distribution revenue.

In March 2023, a contract with one of our major diabetic customers expired.

Due to increased pricing pressures, we did not extend our contract with this customer.

Revenue from this customer represented approximately

7.8% of our consolidated net revenues in Fiscal 2023.

We expect the loss of this customer to cause a significant decline in OEM distribution

segment revenues in future periods.

The following tables set

forth revenues by product line of our OEM distribution segment customers for the periods indicated:

OEM Revenues by Product Line

Diabetic products

$ (3,920,000 )

Other products

Total net revenues

$ (3,798,000 )

Diabetic Product Revenues

Our OEM distribution segment

sources to the order of, and sells carrying cases for, blood glucose diagnostic kits directly to OEMs (or their contract manufacturers).

The OEM customer or its contract manufacturer packages our carry cases “in box” as a custom accessory for the OEM’s

blood glucose testing and monitoring kits or, to a lesser extent, sells them through their retail distribution channels.

Revenues from diabetic products

decreased due to the loss of a major customer in March 2023, lower demand from our major diabetic customers and the loss of one product

to a competitor.

As mentioned above, management believes that revenues from diabetic customers will continue to decline.

Revenues from diabetic products

represented 77% of net revenues for the OEM distribution segment in Fiscal 2024 compared to 84% in Fiscal 2023.

Other Product Revenues

Our OEM distribution segment

also sources and sells cases and protective solutions for a diverse array of portable electronic and non-electronic products (such as

sporting and recreational products, bar code scanners, GPS devices, tablets and firearms) on a made-to-order basis that are customized

to fit the products sold by our OEM customers.

Revenues from other products

increased due to new customers and higher sales volume with some existing customers, partially offset by reduced demand from other customers.

We will continue to focus on our sales and sales support teams in our continued efforts to expand and diversify our other products customer

Operating Income

Operating income for the

OEM distribution segment decreased but operating income margin increased to 3.6% in Fiscal 2024, compared to 3.1% in Fiscal 2023, driven

by a decrease in the sourcing fee and lower sales and marketing expenses.

While revenues decreased in diabetic products, a large portion

of this decrease was from lower margin products, driving overall gross margins up.

Lower selling and marketing costs further improved

the operating income margin.

We continue to work on expanding our product offerings to include higher margin products and enhancing our

sales efforts to grow revenue and increase gross profit.

Considering the loss of a

significant diabetic customer, management reduced its OEM distribution segment sales and marketing personnel in March 2023 and reduced

its sourcing fee with Forward China.

Effective April 1, 2023, the Company and Forward China agreed to reduce the fixed portion of the

sourcing fee from $100,000 to $83,333 per month for the remaining term of the sourcing agreement.

The Company and Forward China signed

a new Supply Agreement effective October 2023, which further reduced the fixed portion of the sourcing fee to $65,833 per month and expired

October 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.

See Note 14 to the consolidated financial statements for

more information on the sourcing agreement with Forward China.

Design Segment

The decrease in net revenues

in the design segment was primarily driven by one customer whose revenue declined approximately $2,600,000, 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 the Company of its plan to discontinue their insulin patch program, on which the Company was working.

this to cause a material decrease in our revenues beginning with the second quarter of fiscal 2025.

We are currently working on cost reduction

efforts to mitigate the reduction in revenue.

Operating income for the

design segment decreased and operating income margin decreased from 9.6% in Fiscal 2023 to 0.1% in Fiscal 2024.

This decrease was driven

by lower utilization rates, impairment of goodwill and credit loss recoveries in Fiscal 2023 that did not recur in Fiscal 2024, partially

offset by lower payroll costs and increased billing rates on some projects.

loss per share from continuing operations was $24.90 and $1.97 for Fiscal 2025 and Fiscal 2024, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Our primary source of liquidity

is our operations.

The primary demand on our working capital has historically been (i) operating losses, (ii) repayment of debt obligations,

and (iii) any increases in accounts receivable and inventories arising in the ordinary course of business.

Historically, our sources of

liquidity have been adequate to satisfy working capital requirements arising in the ordinary course of business.

At September 30, 2024,

our working capital was $273,000 compared to $26,000 at September 30, 2023, which excludes discontinued assets held for sale.

was primarily due to the equity conversion of amounts due to Forward China (see Note 14 to the consolidated financial statements), lower

accrued expenses, partially offset by a decrease in accounts receivable and cash.

At November 30, 2024, we had approximately $2,300,000

cash on hand.

Forward China, our largest

vendor and an entity owned by our Chairman of the Board and Chief Executive Officer, holds a $1,600,000 promissory note (the “FC

Note”) issued by us which matures on June 30, 2025 (see Note 14 to the consolidated financial statements).

The balance of the FC

Note was reduced to $600,000 after we made principal payments of $1,000,000 through Fiscal 2024.

Although the FC Note has been extended

on multiple occasions to assist us with our liquidity position, we plan on funding the repayment at maturity using existing cash balances

and/or obtaining additional extensions as deemed necessary.

Additionally, Forward China has extended payment terms on our outstanding

payables due to them when necessary.

At September 30, 2024, our accounts payable due to Forward China was approximately $7,226,000.

connection with the new sourcing agreement entered into October 2023 (see Note 14 to the consolidated financial statements) and in order

to preserve our future liquidity, Forward China agreed to limit the amount of outstanding payables it would seek to collect from us to

$500,000 in any 12-month period, which we agreed to pay within 30 days of any such request.

This agreement pertains only to payables that

were outstanding at October 30, 2023 of $7,365,000.

Purchases from Forward China made after October 30, 2023, are not covered by this

agreement and are expected to be paid according to normal payment terms.

At September 30, 2024, the remaining balance covered by this

agreement was approximately $4,881,000.

We can provide no assurance that (i) Forward China will extend the FC Note again if we request

an extension, (ii) Forward China will extend additional payment terms on any payables not covered by the agreement if needed, or (iii)

any additional credit facility will be available on terms acceptable to us or at all.

Our 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 $19,637,000 and $273,000,

respectively, at September 30, 2024, a net loss of $1,951,000 in Fiscal 2024 and a cash balance of approximately $2,300,000 at November

In December 2024, our largest design customer

notified us of its plan to discontinue their insulin patch program, on which we were working.

We expect this to cause a material

decrease in our revenues beginning with the second quarter of Fiscal 2025.

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 consolidated

financial statements.

If we have the opportunity

to make a strategic acquisition (as we have in the past with the acquisitions of IPS and Kablooe) or an investment in a product or partnership,

Prior to our recent financings,

our primary source of liquidity has been our operations.

The primary demand on our working capital is and has historically been (i) operating

losses, (ii) repayment of debt obligations, and (iii) any increases in accounts receivable and inventories arising in the ordinary course

Historically, our sources of liquidity have been adequate to satisfy working capital requirements arising in the ordinary

course of business and we anticipate that our liquidity and financial resources will remain adequate to manage our operating and financial

requirements until at least December 2026.

At September 30, 2025, our working capital was approximately $38.5 million.

At November 30,

2025, our cash balance was approximately $41.2 million.

Recent Financings

On September 9, 2025, we sold

and issued to certain accredited investors in a private placement an aggregate of:

(i) 77,144,562 shares of our common stock at an offering

price of $18.50 per share, and (ii) pre-funded warrants to purchase 12,031,364 shares of our common stock with $18.49999 of the exercise

price pre-funded at closing.

Pre-funded warrants to purchase an additional 1,783,519 shares of our common stock with $18.49999 of the

exercise price pre-funded were also issued in connection with a related strategic advisor agreement.

We received aggregate proceeds of

approximately $1.65 billion, before deducting placement agent fees and other offering expenses.

Net proceeds to the Company, after deducting

placement agent fees and other offering expenses, were approximately $1.58 billion.

From July 1 through August 12,

2025, we sold 246,000 shares of common stock under the $35 million ELOC and received gross proceeds of $2,432,000 in connection with such

We have sold all shares registered under the ELOC, which was mutually terminated on September 9, 2025.

On August 11, 2025, we sold,

in a registered direct offering, approximately 263,000 shares of our common stock at a price of $8.50 per share to six investors and received

gross proceeds of approximately $2,230,000.

From September 17, 2025 through

November 30, 2025, we sold 436,000 shares of our common stock under our Controlled Equity Offering Sales Agreement for gross proceeds

of approximately $11.7 million.

On September 11, 2025, in connection

with a Waiver and Leak-out Agreement, we sold 1,784,000 shares of our common stock to the Series B Investors for gross proceeds of $33

See Note 8 to our consolidated

financial statements for more information about each of these financings.

Other Liquidity Factors

In the prior reporting period,

we identified certain conditions that raised substantial doubt about our 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 the multiple equity financing transactions

described above.

Management has evaluated the Company’s ability to continue as a going concern and has concluded that the Company

now has sufficient liquidity to fund anticipated cash requirements for operations and working capital purposes for at least one year from

the date of issuance of these financial statements.

As a result, substantial doubt about the Company’s ability to continue as a

going concern no longer exists.

If we have the opportunity to

make a strategic acquisition (as we have in the past with the acquisitions of IPS and Kablooe) or an investment in a product or partnership,

we may require additional capital beyond our current cash balance to fund the opportunity.

If we seek to raise additional capital or obtain

additional borrowings, there is no assurance that we will be able to raise funds on terms that are acceptable to us or at all.

current environment of rising interest rates, any future borrowing is expected to result in higher interest expense.

Although we do not anticipate

the need to purchase any additional material capital assets in order to carry out our business, it may be necessary for us to purchase

equipment and other capital assets in the future, depending on need.

During Fiscal 2025 and Fiscal

1 unchanged sentence

Operating Activities

During Fiscal 2024, cash

provided by operating activities of $407,000 resulted from a decrease in accounts receivable of $1,244,000, a decrease in discontinued

assets held for sale of $508,000, an increase in amounts due to Forward China (excluding the non-cash impact of the Conversion Agreements)

of $1,180,000, and non-cash charges for depreciation, amortization, share-based compensation, credit loss expense and goodwill impairment

of $654,000, partially offset by the net loss of $1,951,000, a decrease in accrued expenses and other current liabilities $745,000, a

decrease in accounts payable $390,000 and the net change in other operating assets and liabilities of $93,000.

During Fiscal 2023, cash

provided by operating activities of $1,041,000 resulted from a decrease in discontinued assets held for sale of $2,642,000, an increase

in accounts payable and amounts due to Forward China of $783,000, an increase in accounts receivable of $495,000, non-cash charges for

depreciation, amortization, share-based compensation and credit loss expense of $481,000 and the net change in other operating assets

and liabilities of $447,000, partially offset by the $70,000 non-cash adjustment to the fair value of the Kablooe earnout consideration

and the net loss of $3,737,000.

During Fiscal 2025, cash used

in operating activities of $4,502,000 resulted from the net loss of $166,974,000, non-cash net digital asset revenue of $4,412,000, the

$1,406,000 gain on sale of the OEM business, and the net change in other operating assets and liabilities of $120,000, partially offset

by non-cash charges of $160,035,000 related to the fair value adjustment to digital assets, non-cash charges of $3,309,000 for depreciation,

amortization, share-based compensation and credit loss expense, non-cash charges of $658,000 related to the fair value adjustment to the

warrant liability, non-cash charges of $2,026,000 for the impairment of goodwill and intangible assets, a $1,153,000 increase in accounts

payable and related party payables, an $833,000 decrease in accounts receivable and contract assets and $396,000 cash provided by discontinued

During Fiscal 2024, cash provided

by operating activities of $520,000 resulted from a net decrease in accounts receivable and contract assets of $1,224,000, cash provided

by discontinued operations of $1,672,000, non-cash charges for depreciation, amortization, share-based compensation, credit loss expense

and goodwill impairment of $653,000 and the net change in other operating assets and liabilities of $53,000, partially offset by the net

loss of $1,951,000, a decrease in accrued expenses and other current liabilities $739,000, a decrease in accounts payable $392,000.

Investing Activities

In Fiscal 2024 and Fiscal

2023, cash used for investing activities of $65,000 and $136,000, respectively, resulted from purchases of property and equipment.

In Fiscal 2025 cash used for

investing activities included $900,791,000 used to purchase digital assets, $650,000 in payments related to the sale of the OEM business,

and $26,000 used to purchase property and equipment.

In Fiscal 2024, cash used for investing activities of $65,000 resulted from purchases

of property and equipment.

Financing Activities

In Fiscal 2024 and Fiscal

2023, cash used in financing activities of $500,000 and $300,000, respectively, consisted of principal payments on the promissory note

held by Forward China.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In Fiscal 2025, the Company generated

$900,104,000 in cash from the sale of shares under our securities purchase agreement and related pre-funded warrants, $33,000,000 from

the Series B waiver and leak-out agreement, $3,962,000 from our ATM, $2,361,000 from our Equity Line of Credit, $2,238,000 from our registered

direct offering, $971,000 from the issuance of the Series B preferred stock, net of fees, and $61,000 related to the exercise of stock

options, which was partially offset by $737,000 of deferred financing costs related to the ATM and $600,000 to pay off the remaining balance

of our note payable to Forward China.

In Fiscal 2024, cash used in

financing activities of $500,000 consisted of principal payments on the promissory note held by Forward China.

QUANTITATIVE AND

QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial

statements and notes thereto included in this Annual Report may be found beginning on page F-1 of this Annual Report on Form 10-K.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The consolidated financial statements

and notes thereto included in this Annual Report may be found beginning on page F-1 of this Annual Report on Form 10-K.

CHANGES IN AND

DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis