What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-02-12 compared with 2025-08-14 · 709 added, 690 removed, 284 unchanged (83% of the section changed)

5 unchanged sentences

Current assets:

Accounts receivable, net of allowances for credit losses of $ 15,916 and$ 27,282 as of June 30, 2025 and September 30, 2024, respectively

Accounts receivable, net of allowances for credit losses of $ 92,358 as of December 31, 2025 and September 30, 2025

Contract assets

Loans Receivable - Digital Assets - related party

Prepaid expenses and other current assets

Assets held for sale

Total current assets

Digital assets

1,430,486,289

Digital assets - restricted

Property and equipment, net

Intangible assets, net

Operating lease right-of-use assets

Operating lease right-of-use assets, net

$ 892,946,117

$ 1,474,942,489

Liabilities and shareholders' equity

Current liabilities:

Note payable to Forward China (related party)

Due to Forward China (related party)

Loans Payable - Digital Assets

Accounts payable

Accounts payable-related party

Deferred income

1 unchanged sentence

Accrued expenses and other current liabilities

Liabilities held for sale

Total current liabilities

Other liabilities:

Warrant liability

Operating lease liability, less current portion

2 unchanged sentences

Shareholders' equity:

Series A-1 Convertible Preferred Stock, par value $0.01 per share;

of $ 1,000 per

Common stock, $ 0.01 par value;

300,000,000 shares authorized;

shares issued and outstanding at June 30, 2025 and September 30, 2024, respectively (liquidation preference of $ 4,925,000 and $ 2,200,000 at June 30, 2025 and September 30, 2024, respectively)

Series B Convertible Preferred Stock, par value $0.01 per share;

stated value of

$ 1 per share;

1,000,000 shares authorized, 1,000,000 and 0 shares issued and outstanding at June 30, 2025 and September 30, 2024,

respectively (liquidation preference of $ 1,262,848 and $ 0 at June 30, 2025 and September 30, 2024, respectively)

Common stock, 40,000,000 shares authorized;

par value $ 0.01 per share;

1,125,998 and 1,101,069 shares

issued and outstanding at June 30, 2025 and September 30, 2024, respectively

86,464,465 and 84,924,272 shares issued and outstanding, respectively, at December 31, 2025;

86,145,514 shares issued and outstanding at September 30, 2025

Treasury Stock, at cost, 1,540,193 and 0 shares at December 31, 2025 and September 30, 2025, respectively

( 10,882,955 )

Additional paid-in capital

1,663,142,458

1,655,874,892

Accumulated deficit

2 unchanged sentences

Total shareholders' equity

1,470,124,867

Total liabilities and shareholders' equity

$ 892,946,117

$ 1,474,942,489

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Nine Months Ended

For the Three Months Ended December 31,

Revenues, net

Cost of sales

Gross profit/(loss)

Sales and marketing expenses

General and administrative expenses

General and administrative expenses - related party

Loss on digital assets

Impairment of digital assets

Goodwill impairment

1 unchanged sentence

( 583,639,575 )

( 5,279,571 )

( 1,444,639 )

Interest income

Interest income - related party

Interest expense - related party

Gain on change in fair value of warrant liability

Other (income)/expense, net

Other expense, net

Loss from continuing operations before income taxes

( 582,963,298 )

( 5,124,337 )

( 1,447,085 )

Provision for income taxes

1 unchanged sentence

( 585,651,086 )

( 5,124,337 )

( 1,447,085 )

Income from discontinued operations, net of tax

1 unchanged sentence

$ ( 708,065 )

Deemed dividend on Series B Convertible Preferred Stock

Net loss attributable to common shareholders

$ ( 860,300 )

$ ( 399,585 )

$ ( 3,019,976 )

$ ( 1,307,019 )

Basic (loss)/earnings per share :

11 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Nine Months Ended June 30, 2025

For the Three Months Ended December 31, 2025

Series A-1 Convertible

Series B Convertible

Preferred Stock

Treasury Stock

Balance at September 30, 2025

$ 1,655,874,892

$ ( 186,611,480 )

$ 1,470,124,867

Share-based compensation

Proceeds from ATM, net

Proceeds from stock options exercised

Share repurchases

( 1,540,193 )

( 10,882,955 )

Fees related to Securities Purchase Agreement

( 585,651,086 )

Balance at December 31, 2025

( 1,540,193 )

Share-based compensation

$ ( 10,882,955 )

$ 1,663,142,458

Preferred stock issued in connection

with conversion of accounts payable to Forward China

Balance at March 31, 2025

$ ( 772,262,566 )

Share-based compensation

Issuance of preferred stock, net

of issuance costs

Common stock issued in connection

Balance June 30, 2025

$ 880,861,582

Nine Months Ended June 30, 2024

For the Three Months Ended December 31, 2024

Series A-1 Convertible

Series B Convertible

Preferred Stock

Treasury Stock

Balance at September 30, 2024

3 unchanged sentences

$ ( 20,345,205 )

Share-based compensation

Balance at March 31, 2024

( 18,593,987 )

Share-based compensation

Balance at June 30, 2024

$ ( 18,993,572 )

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended June 30

For the Three Months Ended December 31,

Operating Activities:

1 unchanged sentence

$ ( 708,065 )

Adjustments to reconcile net loss to net cash (used in) / provided by operating

Adjustments to reconcile net loss to net cash used in operating activities:

Share-based compensation

1 unchanged sentence

Credit loss expense

Goodwill impairment

Gain on change in fair value of warrant liability

Gain on sale of OEM segment

Loss on digital assets

Impairment of digital assets

Non-cash digital asset revenue, net

( 16,461,936 )

Goodwill impairment

Changes in operating assets and liabilities:

Accounts receivable

( 1,199,050 )

Contract assets

Prepaid expenses and other current assets

( 1,796,003 )

Accounts payable

Accounts payable-related party

Deferred income

3 unchanged sentences

( 7,929,151 )

( 1,409,653 )

Net cash provided by operating activities-discontinued operations

Net cash (used in) / provided by operating activities

Net cash used in operating activities-discontinued operations

Net cash used in operating activities

( 7,929,151 )

Investing Activities:

Cash paid for sale of OEM segment

Purchases of property and equipment

Purchases of digital assets

( 335,050,009 )

Sales of digital assets

Net cash used in investing activities

( 1,076,607 )

Financing Activities:

Proceeds from issuance of preferred stock and warrants, net of related

issuance costs

Deferred financing cost associated with equity line of credit

Repayment of note payable to Forward China (related party)

Net cash provided by/(used in) financing activities

Fees associated with Securities Purchase Agreement

Proceeds from ATM, net

Proceeds from stock options exercised

Treasury stock purchases

( 10,882,955 )

Deferred financing costs associated with ATM

Net cash used in financing activities

( 3,773,136 )

Net decrease in cash

5 unchanged sentences

Cash paid for taxes

Supplemental Disclosures of Non-Cash Information:

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Operating lease assets obtained in exchange for operating lease liabilities

Conversion of accounts payable to convertible preferred stock

Fair value of commitment shares issued for equity line of credit

Digital assets loan receivable

Digital assets loan payable

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Background and Nature of Business

Forward Industries, Inc.

(“Forward”, “we”, “our” or the “Company”) is a global design company serving top tier

medical and technology customers.

The Company provides hardware and software product design and

engineering services to customers predominantly located in the U.S.

Reverse Stock Split

The Company’s shareholders

authorized, and the Board of Directors approved, a 1-for-10 reverse stock split , which became effective on June 18, 2024.

Any fractional

shares that would have otherwise resulted from the reverse stock split were rounded up to the nearest whole share.

Accordingly, all references

made to shares, per share, or common share amounts in the accompanying condensed consolidated financial statements and applicable disclosures

have been retroactively adjusted to reflect the reverse stock split.

The reverse stock split did not change the par value of the common

stock nor the authorized number of shares of common stock or any series of preferred stock.

(“Forward”, “we”, “our” or the “Company”) is a Solana (“SOL”) 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.

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.

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.

Forward also operates an

engineering services business, which provides hardware and software product design and engineering services to customers predominantly

located in the U.S.

Discontinued Operations

In July 2023, the Company

decided to cease operations of its retail distribution segment (“Retail Exit”) and is presenting the results of operations

for this segment within discontinued operations in the periods presented herein.

Our retail distribution business sourced and sold smart-enabled

furniture, hot tubs and saunas and a variety of other products through various online retailer websites to customers predominantly located

The inventory of the retail segment was presented as discontinued assets held for sale on the balance sheet on

September 30, 2023.

In March 2025, the Company

1 unchanged sentence

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 8).

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.

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 former related party owned by the Company’s former CEO (see Note 8).

Unless otherwise noted, amounts

related to these discontinued operations are excluded from the disclosures presented herein.

See Note 3 for more information on these

discontinued operations.

Liquidity and Going Concern

The accompanying

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.

Company had an accumulated deficit and working capital of $ 22,647,000

and $ 1,211,000 , respectively, on

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.

In December 2024,

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

this to continue to cause a material decrease in our revenues relative to Fiscal 2024.

In addition, due to the uncertainty in the global

markets related to tariffs on imports, many customers have been slow to commit funds to projects with us.

Based on our forecasted cash

flows, we believe our existing cash balance and working capital may not be sufficient to meet our liquidity needs through August 2026,

12 months from the date of issuance of these condensed consolidated financial statements.

These factors raise substantial doubt about

our ability to continue as a going concern.

Management initiated

cost reduction measures to mitigate the impact of declining revenues, including two reductions in workforce in January and June of

Management continues to evaluate and adjust cost reduction efforts as deemed necessary based on the ongoing needs of the

In May 2025, the Company raised $ 1

million via the issuance of Series B Convertible Preferred Stock (see Note 6).

From July 1 to August 12, 2025, the Company

raised $2,432,000

additional capital via its equity line of credit (see Note 6) and $2,230,000 in a registered direct offering (See Note 12).

the Company continues to meet its obligations under the Series B Preferred Stock Purchase Agreement (see Note 6), 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.

The condensed consolidated financial statements do not include any adjustments

that might result if the Company is unable to continue as a going concern.

Such adjustments could be material.

The accompanying 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.

The Company had an accumulated

deficit of $ 772,263,000 and working capital of $ 52,862,000 at December 31, 2025, incurred a net loss of $ 585,651,000 and used $ 7,929,000

of cash in operating activities during the three months ended December 31, 2025.

The Company had a cash balance of approximately $ 12,000,000

at January 31, 2026.

forecasted cash flows, we believe our existing cash balance and working capital will be sufficient to meet our liquidity needs through

at least February 2027.

ACCOUNTING POLICIES

4 unchanged sentences

Forward Industries

(“Forward US”), Forward Industries (Switzerland) GmbH (“Forward Switzerland”), Forward Industries UK

Limited (“Forward UK”), Intelligent Product Solutions, Inc.

(“IPS”) and Kablooe, Inc.

The terms “Forward”, “we”, “our” or the “Company” as used throughout this document are

used to indicate Forward Industries, Inc.

(“Forward US”), DE Sub 1 LLC (“Forward Delaware”), Forward Industries (Switzerland) GmbH (“Forward

Switzerland”), Forward Industries UK Limited (“Forward UK”), Intelligent Product Solutions, Inc.

and Kablooe, Inc.

In May 2025, the Company sold all of its equity interests in Forward Switzerland and

As a result, our operating results for the 2026 Quarter do not include operating results of either entity.

“Forward”, “we”, “our” or the “Company” as used throughout this document are used to indicate

Forward Industries, Inc.

and all of its wholly-owned subsidiaries.

All significant intercompany transactions and balances

have been eliminated in consolidation.

All significant intercompany transactions and balances have been eliminated

in consolidation.

In the opinion of management,

16 unchanged sentences

Segment Reporting

As a result of the Retail

Exit and the OEM Plan, the design segment is the Company’s only reportable segment at June 30, 2025.

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.

See Note 5 for more information on

As a result of the Company’s

digital asset treasury strategy and the OEM Plan, the Company now has two reportable segments:

digital assets and design.

assets segment captures SOL-based yield generated by participating in the Solana network’s staking protocol, which currently comprises

rewards received from native staking.

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.

See Note 5 for additional information on our segments.

Digital Assets

The Company accounts for

its holdings of digital assets, including cryptocurrencies such as Solana, as indefinite-lived intangible assets in accordance with Accounting

Standards Codification (“ASC”) 350-60, “Intangibles – Goodwill and Other – Crypto Assets (“ASC 350-60”).

Digital assets under ASC 350-60 are initially measured at cost and subsequently measured at fair value, with changes in fair value recognized

in net income/(loss) each reporting period.

Digital assets are classified as current assets if the Company intends to sell them or otherwise

realize their value within twelve months after the reporting date, or as noncurrent assets if the Company intends to hold them for longer

than twelve months.

The Company evaluates its intent and ability to hold digital assets at each reporting date.

Upon disposal of a digital

asset (e.g., by sale, exchange or transfer) the Company derecognizes the asset and recognizes a realized gain or loss in net loss, calculated

as the difference between the sale proceeds and the asset’s carrying amount, which is determined using a first in-first out method.

Digital assets that are not

in scope of ASC 350-60, primarily wrapped tokens that provide the holder with an enforceable right to redeem the underlying digital assets,

such as fwdSOL, are accounted for as indefinite-lived intangible assets subject to impairment testing, or as financial assets if they

are redeemable for cash.

These digital assets are accounted for as intangible assets and measured at the lower of cost or market value.

The Company determines market value using the lowest observed transaction price of the asset during the holding period.

The Company elected

to apply the fair value option to digital assets that meet the definition of financial assets.

The Company has developed

fwdSOL, a Liquid Staking Token (“LST”) in collaboration with Socean Labs Inc.

on the Solana blockchain.

fwdSOL allows

Forward and other SOL holders to stake native SOL and continue earning staking rewards while receiving and using fwdSOL elsewhere in the

Solana ecosystem.

fwdSOL is backed by SOL staked on Forward Industries' institutional grade validator infrastructure which automatically

accrues staking rewards.

Digital Asset Loan Receivable and Payable

The Company engages in digital

asset lending and borrowing activities.

Digital asset loans receivable are typically fixed short-term loans or loans with no specified

maturity dates that are callable or prepayable with a short notice period and no penalties.

The borrower has the ability to use the loaned

digital assets at its discretion for the duration of the loan.

The Company derecognizes the underlying digital assets upon loan origination

and recognizes a digital asset loan receivable that represents the Company’s right to receive the loaned digital asset upon settlement

The digital asset loan receivable is measured at the fair value of the underlying digital assets that the Company expects

to receive under the arrangement.

The Company evaluates its digital asset loan receivables for possible credit losses using the current

expected credit loss framework outlined in ASC Topic 326, Financial Instruments—Credit Losses , (“ASC 326”).

asset loan interest is denominated in the same underlying digital asset that is loaned out.

The Company recognizes interest income over

the life of the loan using the effective rate method.

The Company also borrows

digital assets from counterparties.

As borrower, the Company has the ability to use the borrowed digital assets at its discretion.

Company pays interest on borrowed digital assets that is denominated in the borrowed digital assets and recognizes interest expense over

the term of the loan.

The borrowed digital assets are recognized as digital assets in accordance with the Company’s accounting policies

for digital assets.

The obligation to repay digital assets in the future is recorded as a Loan Payable - Digital Assets and is remeasured

at fair value.

The Company may post or receive

digital assets as collateral associated with its digital asset lending and borrowing activities.

The Company evaluates the nature of the

arrangement with counterparties to determine whether it obtains or losses control of the collateral assets.

Where control of the collateral

assets transfers to or from the Company, it is accounted for in the same manner as digital asset loans receivable or payable.

Accounts Receivable

Accounts receivable consist

Accounts receivable consists

of unsecured trade accounts with customers net of an allowance for credit losses.

2 unchanged sentences

adjusted as necessary based on specific customer situations.

At June 30, 2025 and September 30, 2024, the Company had allowances for credit

losses of $ 16,000 and $ 27,000 , respectively.

Inventories consisted primarily

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

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

If needed, an allowance was established through charges to cost of sales in the Company’s condensed consolidated statements

of operations.

In determining the adequacy of any allowance, management’s estimates were based upon several factors, including analyses

of inventory levels, historical loss trends, sales history and projections of future sales demand.

Due to the Retail Exit and the OEM

Plan the Company has no remaining inventory at June 30, 2025.

Inventory on hand at September 30, 2024 is presented as a component of assets

held for sale.

At December 31, 2025, September 30, 2025 and September 30, 2024, the Company

had allowances for credit losses of $ 92,000 , $ 92,000 and $ 27,000 respectively.

Treasury Stock

The Company accounts for

treasury stock using the cost method.

As of December 31, 2025 and September 30, 2025, the Company held 1,540,000 and 0 shares of its common

stock in treasury, purchased at a total cost of $ 10,883,000 and $ 0 , respectively.

Revenue Recognition

Discontinued OEM Distribution Segment

The OEM distribution segment

recognized revenue when:

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

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

(ii) there were no other deliverables or performance

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

If the Company

received consideration before achieving the criteria previously mentioned, it recorded a contract liability, which was classified as a

component of deferred income in the accompanying condensed consolidated balance sheets.

The OEM distribution segment had no contract liabilities

at June 30, 2025 or September 30, 2024.

The results of operations of the OEM segment are reported as discontinued operations for the three

and nine months ended June 30, 2025 and 2024.

Discontinued Retail Distribution Segment

The discontinued retail distribution

segment sold products primarily through online websites operated by authorized third-party retailers.

Revenue was recognized when control

(as defined in Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”) of the

related goods were transferred to the retailer, which generally occurred upon shipment to the end customer.

Other than product delivery,

the retail distribution segment did not typically have other deliverables or performance obligations associated with its products.

was measured as the amount of consideration expected to be received in exchange for the products provided, net of allowances taken by

retailers for product returns and any taxes collected from customers that would be remitted to governmental authorities.

When the Company

received consideration before achieving the criteria previously mentioned, it recorded a contract liability, which was classified as a

component of deferred income in the accompanying condensed consolidated balance sheets.

The retail distribution segment had no contract

liabilities at June 30, 2025 or September 30, 2024.

The results of operations of the retail segment are reported as discontinued operations

for the three and nine months ended June 30, 2025 and 2024.

Digital Asset Staking

The Company participates

in proof-of-stake validation.

Proof-of-stake validation, also referred to as staking, requires the Company to delegate its digital assets

to a validator.

Staking can be performed on proprietary validation infrastructure or through the use of third-party infrastructure or

service providers.

The Company concluded that where it controls the validation infrastructure, it is a principal in the provision of staking

services to the blockchain and recognizes staking revenue on a gross basis.

Blockchain rewards distributed to third parties staking on

the Company’s validation infrastructure are included in cost of sales.

The Company recognizes noncash

consideration from staking activities related to its digital asset holdings in accordance with ASC 606, “Revenue from Contracts

with Customers”.

Staking income is generated when the Company participates in digital asset networks to validate transactions and,

in return, earns rewards in the form of additional digital assets.

The Company considers its performance obligation to be satisfied at

the point in time when it has successfully provided validation services to the network and the reward is determinable and collectible.

Revenue is measured as the fair value of digital assets received as staking rewards at contract inception, which occurs at the beginning

of each epoch of the respective blockchain.

Design Segment

13 unchanged sentences

will not be billed until a later date are recorded as contract assets in the accompanying condensed consolidated balance sheets.

segment had contract assets of $ 725,000 , $ 1,273,000 and $ 976,000 at June 30, 2025, September 30, 2024 and September 30, 2023, respectively.

Contracts where collections to date have exceeded recognized revenues, or contract liabilities, are recorded as a liability and classified

as a component of deferred income in the accompanying condensed consolidated balance sheets.

The design segment had contract liabilities

of $ 310,000 , $ 399,000 , and $ 297,000 at June 30, 2025, September 30, 2024 and September 30, 2023, respectively.

design segment had contract assets of $ 1,067,000 , $ 1,064,000 and $ 1,273,000 at December 31, 2025, September 30, 2025 and September

30, 2024, respectively.

Contracts where collections to date have exceeded recognized revenues, or contract liabilities, are recorded

as a liability and classified as a component of deferred income in the accompanying condensed consolidated balance sheets.

segment had contract liabilities of $ 720,000 , $ 293,000 and $ 399,000 at December 31, 2025, September 30, 2025 and September 30, 2024,

respectively.

Disaggregation of Revenue

Digital assets staking revenue

is recognized at a point in time.

Design segment revenue is predominantly recognized over time and has similar other economic factors,

including, but not limited to, the geographic location and type of customer, payment terms and length of contracts.

See Note 5 for disaggregated

revenue amounts.

The Company recognizes future

tax benefits and liabilities measured at enacted rates attributable to temporary differences between financial statement and income tax

bases of assets and liabilities and to net tax operating loss carryforwards (“NOLs”) to the extent that realization of these

benefits is more likely than not.

At December 31, 2025, there was no change to our assessment that a full valuation allowance was required

against all net deferred tax assets as it is not probable that such deferred tax assets will be realized.

Utilization of NOLs may be

subject to substantial limitation under Section 382 of the Internal Revenue Code of 1986, due to ownership change limitations that have

occurred previously or could occur in the future, which may limit the amount of NOLs that can be used to offset future taxable income.

Similar rules may apply under state tax laws.

The Company has engaged external tax experts to perform a comprehensive Section 382 study,

but as of the date of this filing, this study has not been completed and therefore, the effects of any Section 382 limitations cannot

be determined as of the date of this filing.

If the Company earns taxable income, such limitations could result in an increased future

income tax liability, and its future cash flows could be adversely affected.

Our income tax provision

for the three months ended December 31, 2025 resulted from taxable income for which NOLs may not be available to offset due to the Section

382 limitations described above.

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.

Our effective tax rate was ( 0.5 %) and 0.0 % for the three months ended December

31, 2025 and 2024, respectively.

Fair Value Measurements

We perform fair value measurements in accordance

with the guidance provided by ASC 820, “Fair Value Measurement.” ASC 820 defines fair value as the price that would be received

from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal

or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets

or liabilities, such as inherent risk, transfer restrictions, and risk of nonperformance.

ASC 820 establishes a fair value hierarchy that

requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant

ASC 820 establishes a fair

value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring

An asset's or liability's categorization within the fair value hierarchy is based upon the lowest level of input that is significant

to the fair value measurement.

3 unchanged sentences

unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

The carrying amounts of cash, accounts receivable, accounts payable, due to Forward China, and the Note payable to Forward China approximate

fair value due to their short-term maturities.

The Company reviews goodwill

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

The Company has two reporting units with goodwill (the IPS

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

the occurrence of a triggering event.

The Company has the option to perform a qualitative assessment to determine if an impairment is

more likely than not to have occurred.

If the Company can support the conclusion that it is not more likely than not that the fair value

of a reporting unit is less than its carrying amount, then the Company would not need to perform a quantitative impairment test for the

reporting unit.

If the Company cannot support such a conclusion or does not elect to perform the qualitative assessment, then the Company

will perform the quantitative assessment by comparing the fair value of the reporting unit with its carrying amount, including goodwill.

If the fair value of the reporting unit exceeds its carrying value, no impairment charge is recognized.

If the fair value of the reporting

unit is less than its carrying value, an impairment charge will be recognized for the amount by which the reporting unit’s carrying

amount exceeds its fair value.

A significant amount of judgment is required in performing goodwill impairment tests including estimating

the fair value of a reporting unit.

Intangible Assets

Intangible assets include

trademarks and customer relationships, which were acquired as part of the acquisitions of IPS in Fiscal 2018 and Kablooe in Fiscal 2020

and are amortized over their estimated useful lives, which are periodically evaluated for reasonableness.

Our intangible assets are

reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In assessing the recoverability of our intangible assets, we must make estimates and assumptions regarding future cash flows and other

factors to determine the fair value of the respective assets.

These estimates and assumptions could have a significant impact on whether

an impairment charge is recognized and the magnitude of any such charge.

Fair value estimates are made at a specific point in time, based

on relevant information.

These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore

cannot be determined with precision.

Changes in assumptions could significantly affect the estimates.

If these estimates or material related

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

Management evaluated

and concluded that there were no indications of impairments of intangible assets at June 30, 2025.

Company applies ASC 820 in the valuation of SOL held by the Company for financial statement purposes.

The fair value of SOL uses Level

1 inputs to reflect the price that would be received for SOL in a current sale, which assumes an orderly transaction between market participants

on the measurement date in SOL’s “principal market,” or in the absence of a principal market, the most advantageous

Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable,

and willing and able to transact.

The Company determines its principal market (or in the absence of a principal market, the most advantageous

market) on a periodic basis to determine which market is its principal market for the purpose of calculating fair value for the creation

of quarterly and annual financial statements.

Issuer-specific events, market trends, bid/ask quotes of brokers and information providers

and other data may be reviewed in the course of making a good faith determination of the digital asset’s fair value.

purposes of fair value disclosures and impairment testing, wrapped digital assets, such as fwdSOL, are classified within Level 2 of the

fair value hierarchy, as the valuation is based on observable inputs other than quoted prices for identical assets in active markets.

The following tables present

information about the Company’s assets and liabilities measured at fair value on a recurring basis and the Company’s estimated

level within the fair value hierarchy for each of those assets and liabilities:

Schedule of fair value assets and liabilities

December 31, 2025

Digital assets

$ 824,335,000

$ 622,775,000

$ 201,560,000

Digital assets - restricted

Loans Receivable - Digital Assets - related party

Loans Payable - Digital Assets

September 30, 2025

Digital assets

$ 1,430,486,000

1,430,486,000

Share-Based Compensation

Company estimates the fair value of employee and non-employee director share-based compensation on the date of grant using the Black-Scholes

option pricing model, which includes variables such as the expected volatility of the Company’s share price, the exercise behavior

of its grantees, interest rates, and dividend yields.

These variables are projected based on the Company’s historical data, experience,

and other factors.

The fair value of employee and non-employee director share-based compensation is recognized in the condensed consolidated

statements of operations over the related service or vesting period of each grant.

In the case of awards with multiple vesting periods,

the Company has elected to use the graded vesting attribution method, which recognizes compensation cost on a straight-line basis over

each separately vesting portion of the award as if the award was, in substance, multiple awards.

Lease assets and liabilities

12 unchanged sentences

Recent Accounting Pronouncements

In November 2024, the

Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)

2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic

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

2025-01, “Income

In November 2024, the Financial

Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2024-03, “Income

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

Clarifying the Effective

Date”, which clarified the effective date of ASU 2024-03 for non-calendar year-end companies.

ASU 2024-03 will

require the Company to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset

amortization, as applicable, included in certain expense captions in the consolidated statements of operations, as well as

qualitatively describe remaining amounts included in those captions.

ASU 2024-03 will also require the Company to disclose

both the amount and the Company’s definition of selling expenses.

This ASU is effective for fiscal years beginning after

December 15, 2026 and interim periods within fiscal years beginning after December 31, 2027.

The Company is currently evaluating the

effects of the pronouncement on its condensed consolidated financial statements.

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 condensed consolidated statements of operations, as well as qualitatively describe remaining amounts included in those

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

This ASU is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after

December 31, 2027.

The Company is currently evaluating the effects of the pronouncement on its condensed consolidated financial statements.

In December 2023, the FASB

issued ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets

(“ASU 2023-08”).

ASU 2023-08 requires certain crypto assets meeting defined criteria to be measured at fair value each reporting

period with changes in fair value recognized in net income, presented separately from other intangible assets and accompanied by enhanced

This standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

adopted this standard in the fourth quarter of Fiscal 2025, in conjunction with its new treasury strategy.

The adoption of this standard

had no impact to prior reported financial statements and no cumulative adjustment to retained earnings was required or recorded.

In December 2023, the FASB

issued ASU 2023-09, "Income Taxes - Improvements to Income Tax Disclosures", requiring enhancements and further transparency

2 unchanged sentences

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 condensed 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 condensed

consolidated financial statements.

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

In July 2023, the Company

decided to cease operations of its retail distribution segment (“Retail Exit”).

The primary assets of the retail segment were

inventory and accounts receivable.

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

remaining retail accounts receivable by September 30, 2024, at which time the retail segment was considered fully discontinued.

to have no further significant continuing involvement with this segment.

The Retail Exit was considered a strategic shift that would have

a significant impact on the Company’s operations and financial results.

The inventory of the retail segment met the criteria to

be considered “held-for-sale” in accordance with ASC 205-20, “Discontinued Operations.” Accordingly, the retail

inventory was classified on our condensed consolidated balance sheets as “discontinued assets held for sale” at September

30, 2023, and the results of operations for the retail segment have been classified as “Discontinued Operations” on the condensed

consolidated statements of operations for the three and nine months ended June 30, 2025 and 2024.

The Company adopted this pronouncement

in the first quarter of Fiscal 2026 with no material impact on its condensed consolidated financial statements.

OPERATIONS AND ASSETS HELD FOR SALE

In March 2025, in connection

4 unchanged sentences

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

US entered into a transaction agreement with Forward China, pursuant to which:

(i) the Company sold all equity interest in Forward Switzerland

and Forward UK and sold certain other net assets related to Forward US’ OEM segment to Forward China to satisfy outstanding payables

due to Forward China under the Sourcing Agreement;

Additionally, the Company and Forward China terminated the Supply Agreement and extended

the term of the Note Payable (see Note 8) 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.

(ii) the Company and Forward China terminated the Sourcing Agreement and extended the

term of the Note Payable (see Note 8) to December 31, 2025;

and (iii) the Company paid Forward China $ 200,000 at closing plus $ 150,000

on each of July 31, 2025, August 31, 2025 and September 30, 2025.

Results of operations for Forward Switzerland and Forward UK were included

in the Company’s results of operations through and including May 16, 2025.

The sale of the OEM business

is considered a strategic shift that will have a significant impact on the Company’s operations and financial results.

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.

The condensed consolidated balance sheets

and statements of operations for comparable periods have been reclassified to conform to this presentation in accordance with the accounting

was considered a strategic shift that had 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, 2025.

The results of operations for the OEM segment have been classified as discontinued operations on the condensed consolidated

statements of operations for the three months ended December 31, 2024.

The following table presents

the major components of the “Income from discontinued operations, net of tax” in our condensed consolidated statements of

the major classes of the “income from discontinued operations, net of tax” in our condensed consolidated statement of operations

for the quarter ended December 31, 2024.

Schedule of discontinued operations

For the Three Months Ended

For the Nine Months Ended

Revenues, net

2 unchanged sentences

General and administrative expenses

Operating income from discontinued operations

Gain on sale of discontinued operations

Net income from discontinued operations

There were no depreciation,

amortization, or financing cash flow activities for the discontinued operations in the three or nine months ended June 30, 2025 or 2024.

Investing cash flows related to the discontinued operations included $ 200,000 paid for the sale of the OEM segment in May 2025.

significant non-cash activity for the discontinued operations in the three and nine months ended June 30, 2025 and 2024 was the conversion

of accounts payable to Forward China into preferred stock in February and March of 2025 (See Note 8).

The following table presents

the major components of assets and liabilities held for sale on our condensed consolidated balance sheet at September 30, 2024:

Schedule of major components of assets and liabilities

Accounts receivable, net

Prepaid expenses and other current assets

Total assets held for sale

Accounts payable

Due to Forward China

Other current liabilities

Total liabilities held for sale

INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The Company’s intangible

assets consist of the following:

Schedule of intangible assets

Relationships

Gross carrying amount

Less accumulated amortization

Income from discontinued operations

There were no material amounts

of depreciation, amortization, investing or financing cash flow activities, or other significant non-cash operating cash flow activities

for the discontinued operations in December 31, 2025 or 2024.

DIGITAL ASSETS

The following table shows the quantity of tokens,

cost basis and carrying value of digital assets held by the Company as of:

Schedule of fair value

December 31, 2025

Historical Cost

Carrying Value

$ 972,822,000

$ 619,277,000

Digital assets measured at fair value

Digital assets not measured at fair value

not meaningful

Total Digital Assets

$ 1,178,882,000

$ 826,763,000

Net carrying amount

The Company’s intangible

assets resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively.

Intangible assets are amortized

over their expected useful lives of 15

years for the trademarks and eight

8 years for the customer relationships.

Amortization expense related to intangible assets was $ 53,000

for the three months ended June 30, 2025 and 2024, and $ 160,000

for the nine months ended June 30, 2025 and 2024, which is included in general and administrative expenses on the condensed consolidated

statements of operations.

At June 30, 2025, estimated

amortization expense for the Company’s intangible assets is as follows:

Schedule of estimated amortization expense

Remainder of Fiscal 2025

represents the future economic benefits of assets acquired in a business combination that are not individually identified or separately

The Company’s goodwill resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively.

The goodwill associated with the IPS acquisition is not deductible for tax purposes, but the goodwill associated with the Kablooe acquisition

is deductible for tax purposes.

December 2024, IPS was notified by its largest customer of its plan to discontinue its insulin patch pump program, on which IPS was working,

and was beginning to wind down all activities related to it.

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 concluded an impairment was more likely than not to have occurred and performed a quantitative goodwill impairment

test for the IPS reporting unit at December 31, 2024.

Using primarily an income approach methodology, the fair value of the IPS reporting

unit was estimated using a discounted cash flow analysis incorporating variables categorized within Level 3 of the fair value hierarchy

such as projected revenues, growth rate and discount rate.

The quantitative testing indicated the carrying amount of the IPS reporting

unit exceeded its fair value, resulting in a goodwill impairment charge of $ 225,000 in the three months ended December 31, 2024, primarily

driven by a reduction in the expected future performance of the IPS reporting unit.

the 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, primarily in the second quarter of fiscal 2025, many IPS customers were slow to commit funds to projects 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 concluded an impairment was more likely than not to have occurred and performed

a quantitative goodwill impairment analysis for the IPS reporting unit at June 30, 2025.

Using primarily an income approach methodology,

the fair value of the IPS reporting unit was estimated using a discounted cash flow analysis incorporating variables categorized with

Level 3 of the fair value hierarchy, such as projected revenues, growth rate and discount rate.

Considering the workforce reductions in

January and June of 2025, modest expectations of revenue growth for this reporting unit, and the reduction in its carrying value, the

quantitative testing indicated the fair value of the IPS reporting unit exceeded its carrying amount, resulting in no further goodwill

impairment in the nine months ended June 30, 2025.

is rollforward of goodwill:

Schedule of roll forward

Balance at September 30, 2024

Impairment of IPS reporting unit

Balance at June 30, 2025

September 30, 2025

Historical Cost

Carrying Value

$ 1,590,521,000

$ 1,430,486,000

Restricted Digital Assets

doublezero (“2Z”) tokens are considered restricted digital assets and are subject to certain lockup restrictions

through approximately October 2029.

Staked Digital Assets

The Company had staked $ 820.8

million and $ 1,430.5 million of digital assets, including assets staked on a liquid staking platform, as of December 31, 2025 and

September 30, 2025, respectively.

The Company’s ability to sell or transfer staked digital assets is subject to restrictions

related to unbonding periods, which are based on network traffic on the Solana blockchain.

As of December 31, 2025, the majority of the

Company’s staked digital assets on the Solana blockchain could be unbonded within three days.

The staking rewards generated

from proprietary staking activities for the three months ended December 31, 2025 were $ 17,381,000 .

SEGMENTS AND CONCENTRATIONS

As a result of the Retail

Exit and the OEM Plan, the Company now has only one reportable segment.

The prior year segment disclosures have been reformatted from

what was previously disclosed to conform to the current year presentation and omit certain disclosures that are no longer required.

Revenues from two customers

represented 32.4 % of the Company’s consolidated net revenues for the three months ended June 30, 2025.

Revenues from three customers

represented 42.5 % of the Company’s consolidated net revenues for the nine months ended June 30, 2025.

Revenues from two customer

represented 49.7 % and 50.1 % of the Company’s consolidated net revenues for the three and nine months ended June 30, 2024, respectively.

Accounts receivable and contract

assets from three customers represented 50.1 % and 57.9 % of the Company’s consolidated accounts receivable and contract asset balances

at June 30, 2025 and September 30, 2024, respectively.

In December 2024, our largest

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

The Company expects

this to continue to cause a material decrease in revenues relative to Fiscal 2024.

SHAREHOLDERS’ EQUITY

In July 2023, the Company

was notified by Nasdaq that it was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”).

in February 2024, the Company was notified that it was not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’

Equity Rule”) (collectively, with the Minimum Bid Price Rule, the “Minimum Requirements”).

In April 2024, the Company

presented a plan of action to the Nasdaq Hearings Panel to meet compliance with the Minimum Requirements.

a result of the reverse stock split effected in June 2024 and the entrance into the first Accounts Payable Conversion Agreement (described

in Note 8), the Company regained compliance with the Minimum Requirements in July 2024 and was formally notified by Nasdaq that

the Minimum Requirements were met.

Until July 24, 2025, the Company was subject to a Nasdaq “Panel Monitor” which provided

that in the event the Company fails to satisfy the Stockholders’ Equity Rule (not the Minimum Bid Price Rule) during the monitoring

period, the Company would be required to request a hearing before the Panel in order to maintain its listing rather than taking the interim

step of submitting a compliance plan for the Listing Qualifications Staff’s review or receiving any otherwise applicable grace period.

On February 21, 2025, the

Company was notified by Nasdaq that due to its reported Shareholders’ Equity of $2,279,297 at December 31, 2024, it was not in compliance

with the Stockholders’ Equity Rule.

Due to the Panel Monitor, the Company was not eligible for any grace period and Nasdaq determined

the Company’s common stock would be scheduled for delisting from Nasdaq.

On February 27, 2025, the Company requested a hearing on

this matter with the Panel, which stayed any trading suspension or delisting of the Company’s common stock until the completion

of the hearings process.

As a result of the fourth

conversion agreement with Forward China (see Note 8), the Company regained compliance with the Stockholders’ Equity Rule in March

2025 and was formally notified by Nasdaq in April that it was in compliance with all applicable continued listing standards and that the

scheduled hearing had been canceled.

Preferred Stock

Series A-1 Convertible Preferred Stock

connection with the Accounts Payable Conversion Agreements with Forward China (see Note 8), the Company filed three Certificates of Amendment

to the Certificate of Incorporation (the “COD”) designating 6,700 shares of Series A-1 Convertible Preferred Stock (the “Series

A-1”), with a stated value of $ 1,000 per share (the “Stated Value”).

holders of the Series A-1 have no voting rights and rank senior to all classes or series of the Company’s common stock with respect

to the distribution of assets upon liquidation, dissolution, or winding up.

Subject to a 19.9% Share Cap (as defined in the COD), the

Series A-1 shall be convertible into a number of shares of the Company’s common stock as determined by (i) multiplying the number

of shares to be converted by the Stated Value, (ii) adding the result of all accrued and accumulated and unpaid dividends on such shares

to be converted, and then (iii) dividing the result by the conversion price of $7.50, subject to adjustment as defined in the COD.

Series A-1 is not redeemable.

Series B Convertible

Preferred Stock

May 21, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “COD”) designating 1,000,000

shares of Series B Convertible Preferred Stock (the “Series B”), with a par value of $ 0.01 per share and a stated value of

$ 1.00 per share.

The Series B shares:

(i) accrue dividends at 10% per annum, payable quarterly in arrears in cash, provided that the Company

may elect to pay dividends in common stock or by increasing the stated value if specified equity conditions are met (as defined in the

COD), (ii) are convertible into common stock at $ 4.50 per share, subject to customary anti-dilution and other adjustments as set forth

in the COD, (iii) are mandatorily convertible if certain conditions are met, (iv) have liquidation rights equal to the greater of 125%

of the conversion amount and the amount the holder would have received if the holder converted the shares into common stock immediately

prior to liquidation, (v) are not redeemable, (vi) have such voting rights as required by New York law, including class voting rights

on matters affecting the Series B rights and preferences and (vii) have senior rights to all classes of common stock with respect to dividends,

distributions, and liquidation preferences.

The Series B shares contain certain beneficial ownership limitations and are subject to a

maximum number of shares of common stock that may be issued without triggering shareholder approval requirements under the Nasdaq Stock

Market rules.

Dividends through June 30, 2025 were capitalized by increasing the stated value of each share of the Series B.

May 23, 2025 the Company entered into a Preferred Stock Purchase Agreement (the “PS Agreement”) and related Registration Rights

Agreement with two accredited investors whereby the Company granted the investors an aggregate of 1,000,000 shares of the Series B and

warrants to purchase an additional 111,111 shares of common stock in exchange for $ 1,000,000 .

The PS Agreement contains restrictions

on the Company’s ability to incur debt, issue additional preferred shares, enter into a change of control transaction or make restricted

payments without prior written consent of the investors.

The Company paid third-party fees of $ 66,500 associated with this agreement,

of which $29,000 related to the preferred stock portion of the agreement and has been deducted from the proceeds and recorded as a reduction of additional paid-in capital, and $37,500 related to the warrants and has been recorded as a component of general and administrative expenses on the condensed consolidated financial

statements at June 30, 2025.

connection with the PS Agreement, the Company issued warrants to purchase 111,111 shares of its common stock with an exercise price of

$ 6.50 per share and an expiration date of May 23, 2030.

The warrants have been classified as a liability because the nature of certain settlement provisions prevent them from meeting the fixed-for-fixed equity

classification criteria in ASC 815, “Derivatives and Hedging.” The fair value of the warrants was measured on the grant date

and is remeasured every reporting period with the resulting gain or loss from the change in fair value recorded as a component of other

income/expense on the condensed consolidated financial statements.

The fair value of the warrants was estimated using a Black-Scholes valuation

methodology using the assumptions in the following table, which are categorized within Level 3 of the fair value hierarchy.

term represents the remaining contractual term of the warrants.

The expected volatility is based on the historical price of the Company’s

common stock over the most recent periods commensurate with the expected term of the warrants.

The risk-free interest rate is based on

the implied yield of U.S.

Treasury zero-coupon issues with a remaining term equivalent to the warrants’ expected term.

historically has not paid any dividends on its common stock and has no intention to do so in the foreseeable future.

Schedule of warrant assumptions

Expected term (years)

Expected volatility

Risk free interest rate

Expected dividends

change in fair value of the warrants is as follows:

Schedule of change in warrant fair value

Warrant liability at May 23, 2025

Change in fair value of warrant liability

Warrant liability at June 30, 2025

Equity Line of Credit

On May 16, 2025, the Company entered into a Securities

Purchase Agreement (the “ELOC”) and related Registration Right Agreement with an accredited investor (the “Purchaser”)

pursuant to which the Company has the right, in its sole discretion, to sell, and the Purchaser agrees to purchase, shares of the Company’s

common stock having an aggregate value of up to $ 35 million, subject to certain limitations and conditions set forth in the underlying

The Company will control the timing and amount of any sales of common stock under this agreement.

connection with the execution of the ELOC, the Company issued 25,000 commitment shares to the Purchaser and paid third-party fees of $ 60,000 ,

which have been recorded as a component of other assets on the condensed consolidated financial statements.

Pursuant to the terms of the

ELOC, the Company may issue and sell shares to the Purchaser at prices discounted below the then-current market price of the Company’s

common stock.

As of June 30, 2025, no other shares of common stock were issued in connection with this agreement.

On June 10, 2025, the Company

filed a registration statement to register shares of common stock issuable under the ELOC.

The registration statement was declared effective

by the SEC on June 20, 2025.

Stock Options

On June 1, 2025, the Company

granted options to three of its non-employee directors to purchase an aggregate of 36,000 shares of its common stock at an exercise price

of $ 6.37 per share.

The options vest one year from the date of grant and expire five years from the date of grant.

The options have a

grant-date fair value of $ 3.29 per share and an aggregate grant-date fair value of $ 120,000 , which will be recognized, net of forfeitures,

ratably over the vesting period.

On February 1, 2025, the

Company granted options to one of its non-employee directors to purchase 14,000 shares of its common stock at an exercise price of $ 6.01

The options vest one year from the date of grant and expire 5 years from the date of grant.

The options have a grant-date fair

value of $ 2.90 per share and an aggregate grant-date fair value of $ 40,000 , which will be recognized, net of forfeitures, ratably over

the vesting period.

On October 1, 2024, the Company

granted options to two of its non-employee directors to purchase an aggregate of 48,000 shares of its common stock at an exercise price

of $ 3.73 per share.

The options vest one year from the date of grant and expire five years from the date of grant.

The options have a

grant-date fair value of $ 1.67 per share and an aggregate grant-date fair value of $ 80,000 , which will be recognized, net of forfeitures,

ratably over the vesting period.

On October 1, 2023, the Company

granted options to three of its non-employee directors to purchase an aggregate of 33,000 shares of its common stock at an exercise price

of $ 7.60 per share.

The options vested one year from the date of grant, expire five years from the date of the grant and 11,000 were forfeited

prior to vesting.

The options have a grant-date fair value of $ 3.60 per share and an aggregate grant-date fair value of $ 120,000 , which

was recognized, net of forfeitures, ratably over the vesting period.

On May 31, 2023, the Company

granted options to three of its non-employee directors to purchase an aggregate of 12,000 shares of its common stock at an exercise price

of $ 10.30 per share.

The options vested six months from the date of grant and expire five years from the date of the grant.

have a grant-date fair value of $ 4.80 per share and an aggregate grant-date fair value of $ 60,000 , which was recognized, net of forfeitures,

ratably over the vesting period.

were no options exercised during the three or nine months ended June 30, 2025 or 2024.

Company recognized compensation expense for stock option awards of $ 39,000 and $ 20,000 during the three months ended June 30, 2025 and

2024, respectively, and $ 86,000 and $ 81,000 for the nine months ended June 30, 2025 and 2024, respectively, which was recorded as a component

of general and administrative expenses in its condensed consolidated statements of operations.

At June 30, 2025 there was $ 154,000 of

total unrecognized compensation cost related to nonvested stock option awards that is expected to be recognized over a weighted average

period of 0.8 years.

Options outstanding and exercisable at June 30, 2025 had a weighted average exercise price of $ 8.06 and $ 12.29 , respectively.

EARNINGS PER SHARE

Basic earnings per share

data for each period presented is computed using the weighted average number of shares of common stock outstanding during each such period.

Diluted earnings per share data is computed using the weighted average number of common and dilutive common equivalent shares outstanding

during each period.

Dilutive common-equivalent shares consist of shares that would be issued upon the exercise of stock options and warrants,

computed using the treasury stock method, and convertible securities, computed using the if-converted method.

A reconciliation of basic

and diluted earnings per share is as follows:

Schedule of reconciliation of basic and diluted earnings per share

For the Three Months Ended June

For the Nine Months Ended June

Loss from continuing operations

As a result of our new digital

asset treasury strategy and discontinuing the OEM segment, the Company now has two reportable segments:

digital assets and design.

Note 2 for more information on the composition and accounting policies of our reportable segments.

The results of the OEM segment were

classified as discontinued operations as discussed in Note 3.

The prior year segment disclosures have been reformatted from what was previously

disclosed to conform to the current year presentation.

The Company’s Chief

Executive Officer serves as the Chief Operating Decision Maker (“CODM”) and evaluates the financial performance of the business

and makes resource allocation decisions on the basis of revenue, gross profit and net loss from continuing operations before income taxes

for each reportable segment.

The tables below represent

the primary measure of segment performance evaluated by the CODM, as well as additional measures that are regularly provided to the CODM

on a segment level.

Schedule of segment performance

Digital Assets Segment

For the Three Months Ended December 31,

Cost of revenues

Asset management fees (a)

Impairment of digital assets

Loss on digital assets

Interest income

Loss from continuing operations before income taxes

$ ( 578,533,000 )

Design Segment

For the Three Months Ended December 31,

Cost of revenues

Depreciation expense (a)

Sales and marketing personnel costs

Sales promotion and marketing expenses

General and administrative personnel costs

Occupancy costs

Amortization expense (a)

Impairment of goodwill and intangible assets

Interest income

Other segment expenses (b)

Income/(loss) from continuing operations before income taxes

$ ( 244,000 )

Depreciation expense, amortization expense and asset management fees are not regularly provided to the CODM, however they are components

of loss from continuing operations before income taxes and identified as a "specific profit or loss" item and therefore disclosed

separately in accordance with the related accounting guidance.

Other segment expenses include insurance expense, office, software and computer related expenses, bad debt expense, bank and payroll

processing fees, and various other general and administrative expenses.

The following table is a

reconciliation of segment income/loss from continuing operations before taxes to our condensed consolidated loss from continuing operations

before taxes.

Schedule of reconciliation

of segment loss

For the Three Months Ended

Digital asset segment loss from continuing operations before taxes

$ ( 578,533,000 )

Design segment income (loss) from continuing operations before taxes

Corporate and other non-segment expenses

( 4,615,000 )

deemed dividend on Series B Convertible Preferred Stock

from continuing operations attributable to common shareholders

Consolidated loss from continuing operations before taxes

$ ( 582,963,000 )

$ ( 898,000 )

Segment assets are shown

in the table below and consist of digital assets and accounts receivable.

Schedule of segment assets

September 30,

Digital assets segment

$ 858,324,000

Income from discontinued operations, net

Net loss attributable to common shareholders

$ 1,430,486,000

Design segment

Total segment assets

1,433,866,000

General corporate assets

$ 892,946,000

$ 1,474,942,000

Revenues from two design

customers represented 43.1 % of the Company’s consolidated net revenues for the three months ended December 31, 2024.

represented more than 10 % of the Company’s consolidated net revenues for the three months ended December 31, 2025.

Accounts receivable from

4 design segment customers represented 71.7 % of the Company’s consolidated accounts receivable at December 31, 2025 and accounts

receivable from three design segment customers represented 49.4 % of the Company’s consolidated accounts receivable at September

There were no concentrations

of revenue or accounts receivable with any significant customers in our digital assets segment.

SHAREHOLDERS’

At-the-Market Offering

September 16, 2025, the Company entered into a Controlled Equity Offering Sales Agreement (the “ATM”) with Cantor Fitzgerald

& Company (“Cantor”), as principal and/or agent, pursuant to which it may offer and sell, from time to time, through Cantor,

shares of its common stock, having an aggregate offering price of up to $4 billion.

Shares will be issued and sold pursuant to the Company’s

effective registration statement on Form S-3 as previously filed with, and declared effective by, the SEC.

The Company filed a prospectus

supplement, dated September 16, 2025, with the SEC in connection with the offer and sale of shares under the ATM.

We pay Cantor a commission

of up to 3% of the gross proceeds from each sale of shares under the ATM.

During the three months ended December 31, 2025, we sold 312,000

shares of common stock under the ATM for gross proceeds of $ 7,648,000 and incurred fees related to the ATM of $ 191,000 , which have been

recorded as a reduction to additional paid-in capital on the condensed consolidated financial statements.

Shares Reserved for

Future Issuance

December 31, 2025, the Company had a total of 128,369,478 shares reserved for future issuance as follows:

(i) 102,128,488 shares related

to the ATM, (ii) 12,864,602 shares related to pre-funded warrants, and (iii) 13,376,388 shares related to other warrants.

Tokenization of Common

September 2025, the Company entered into a digital transfer agent agreement with Superstate Services LLC (“Superstate”) as

its co-transfer agent, to give shareholders the ability to tokenize their holdings of the Company’s common stock on the Solana blockchain.

Any tokenized shares are recorded and maintained by Superstate and represent the same ownership interests as the corresponding shares

of the Company’s common stock.

At December 31, 2025, 1,489,896 shares of the Company’s common stock had been tokenized.

Share Repurchases

November 2025, the Company’s Board of Directors authorized a share repurchase program permitting the Company to purchase up to $ 1

billion of its common stock through September 30, 2027.

Repurchases may be made from time to time through open-market purchases, block

trades, and/or privately negotiated transactions (including accelerated share repurchases), and may include Rule 10b5-1 trading plans.

Any repurchase will be executed in compliance with Rule 10b-18 of the Securities Exchange Act of 1934.

The Company may determine the timing,

amount and method of repurchases based on market conditions, share price, legal and regulatory requirements, and other considerations

in its sole discretion.

The program does not obligate the Company to repurchase any specific number of shares and may be modified, suspended

or terminated at any time.

the three months ended December 31, 2025, the Company executed open market purchases of 1,540,000 shares at an average cost of $ 7.07 per

share for an aggregate cost of $ 10,883,000 , inclusive of fees, which was recorded as a component of treasury stock.

Share repurchases

were facilitated with Galaxy Securities LLC as broker, a related party (See Note 8).

January 2026, the Company executed open market purchases of an additional 1,790,000 shares at an average cost of $ 7.54 per share for

an aggregate cost of $ 13,504,000 .

LOSS/ EARNINGS

Basic loss/earnings per share

data for each period presented is computed using the weighted average number of shares of common stock outstanding during each such period

and includes pre-funded warrants from their date of issuance.

Diluted loss/earnings per share data is computed using the weighted average

number of common and dilutive common equivalent shares outstanding during each period.

Dilutive common equivalent shares consist of shares

that would be issued upon the exercise of stock options and warrants, computed using the treasury stock method.

A reconciliation of basic and diluted earnings/loss

per share is as follows:

Schedule of reconciliation of basic and diluted earnings per share

For the Three Months Ended

Loss from continuing operations

$ (585,651,000 )

Income from discontinued operations, net of tax

$ ( 585,651,000 )

$ ( 708,000 )

Weighted average common shares outstanding

4 unchanged sentences

Basic earnings per share from discontinued operations

Basic loss per share attributable to common shareholders

Basic loss per share

Diluted (loss) / earnings per share:

1 unchanged sentence

Diluted earnings per share from discontinued operations

Diluted loss per share attributable to common shareholders

The following securities

were excluded from the calculation of diluted earnings per share in each period because their inclusion would have been anti-dilutive:

Diluted loss per share

The following options and

warrants were excluded from the calculation of diluted earnings per share for the three months ended December 31, 2025 and 2024 because

their inclusion would have been anti-dilutive:

Schedule of anti-dilutive shares

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Convertible preferred stock

For the Three Months Ended December 31,

Total potentially dilutive shares

RELATED PARTY TRANSACTIONS

Buying Agency and Supply

RELATED PARTY

Galaxy Service Agreement

The Company has a services

agreement (the “Services Agreement”) with Galaxy Digital LP (“Galaxy”), pursuant to which the Company engaged

Galaxy to provide certain operational, financial and human resources services to assist with the inception of its new digital assets treasury

Galaxy will not be providing any (i) tax advice or services, (ii) legal advice or services, or (iii) advice in connection with

the Investment Company Act of 1940, as amended (the “Investment Company Act”), or any related analyses thereto.

As compensation for its services,

we will pay Galaxy fees of approximately $ 583,000 per month.

The Services Agreement expires in March 2026, but may be extended for an

additional six-month period if mutually agreed in writing by the parties.

During the three months ended December 31, 2025, the Company

incurred fees of $ 1,750,000 under the Services Agreement, which were recorded as a component of general and administrative expenses -

related party on the condensed consolidated financial statements.

Amounts due to Galaxy under this agreement totaled $ 1,161,000 and $ 389,000

at December 31, 2025 and September 30, 2025, respectively, which were recorded as a component of related party payables on the condensed

consolidated financial statements.

Galaxy Asset Management Agreement

The Company has an asset

management agreement (the “Asset Management Agreement”) with Galaxy Digital Capital Management LP, an SEC-registered investment

adviser (the “Asset Manager”), pursuant to which the Company appointed the Asset Manager to provide discretionary investment

management services with respect to all of the Company’s cash, cash equivalents, stablecoins, cryptocurrency and other investible

assets (excluding (i) publicly-traded equities acquired pursuant to mergers, acquisitions, combinations or other similar transactions

pursuant to which the Company acquires or otherwise combines or merges with another publicly-traded digital asset treasury company, (ii)

privately offered equity securities and (iii) non-publicly traded convertible debt instruments).

Title to the account and all account

assets will be held in our name.

The Asset Manager is not authorized to act as custodian of our assets, nor to take possession or title

to any assets.

As compensation for the Asset

Manager’s services, we will pay management fees of 0.6 % per annum of the value of the Account Assets (as defined in the Asset Management

In addition, the Asset Manager is authorized to appoint an affiliate to stake some or all of the SOL purchased for, maintained

in the account, or otherwise owned or controlled by the Company.

Such Asset Manager affiliate will be entitled to mutually agreed upon

staking-based fees, subject to certain parameters according to a schedule set forth in the Asset Management Agreement.

The Asset Manager

is otherwise responsible for all of its overhead costs and the custody fees of any custodian selected by the Asset Manager, and the Company

will pay or reimburse the Asset Manager for all reasonable and documented expenses related to the operation of the account.

The Asset Management Agreement

expires in March 2028 and renews for successive one-year renewal periods unless the Company or the Asset Manager terminates or elects

not to continue effectiveness of the Asset Management Agreement.

The Asset Management Agreement may be terminated by either party without

cause after the initial term or any subsequent renewal period upon 90 days’ prior written notice before the expiration of such term.

During the three months ended

December 31, 2025, the Company incurred fees of $ 1,695,000 related to the Asset Management Agreement, which were recorded on the condensed

consolidated financial statements as a component of general and administrative expenses - related party.

Amounts due to the Asset Manager

under this agreement totaled $ 455,000 and $ 535,000 at December 31, 2025 and September 30, 2025, respectively, which were recorded as a

component of related party payables on the condensed consolidated financial statements.

Digital Asset Loan Receivable from Galaxy

In November 2025,

the Company and Galaxy Digital LLC (“Borrower”) entered into a loan agreement whereby the Company loaned

250,000 SOL to the Borrower.

This loan bears interest at an annual rate of 8 % and will remain outstanding until repayment

is requested by the Company.

The loan receivable is shown as Loan Receivable-Digital Assets-related party on the

condensed consolidated balance sheet and the related interest income is shown as interest income-related party on the condensed consolidated statement

of operations.

Galaxy Securities LLC Agreement

In connection with its share

repurchase program (see Note 6) the Company paid $ 19,000 in fees to Galaxy Securities LLC during the three months ended December 31, 2025,

which were recorded as a component of Treasury Stock.

Buying Agency and Supply Agreement

The Company had a Buying

3 unchanged sentences

Products (as defined in the Supply Agreement) in the Asia-Pacific region.

The Company purchased products at Forward China’s

cost and, from October 2023 through October 2024, paid Forward China a monthly service fee equal to the sum of (i) $65,833, and (ii) 4%

of “Adjusted Gross Profit”, which is defined as the selling price less the cost from Forward China.

Due to the Retail Exit

and decline in the OEM distribution segment business, this sourcing agreement expired October 31, 2024.

In November 2024, the Company

and Forward China agreed to:

The Company purchased products at Forward China’s cost

and, from October 2023 through October 2024, paid Forward China a monthly service fee equal to the sum of (i) $65,833, and (ii) 4% of

“Adjusted Gross Profit”, which is defined as the selling price less the cost from Forward China.

Due to the Retail Exit and

decline in the OEM distribution segment business, this sourcing agreement expired October 31, 2024.

In November 2024, the Company and

Forward China agreed to:

(i) extend the sourcing agreement until April 30, 2025, but allow either party to cancel with 30 days’

3 unchanged sentences

connection with the sale of the OEM segment.

In connection with the sale of the OEM segment,

effective May 16, 2025, the Company and Terence Wise, who served as the Chief Executive Officer of the Company, the Chairman of the Board,

and a director, entered into a Separation Agreement pursuant to which, Mr.

Wise resigned from all of these positions with the Company.

In connection with the sale

of the OEM segment, effective May 16, 2025, the Company and Terence Wise, who served as the Chief Executive Officer of the Company, the

Chairman of the Board of Directors, and a director, entered into a Separation Agreement pursuant to which, Mr.

Wise resigned from all

of these positions with the Company.

Terence Wise, former Chief

Executive Officer and Chairman of the Company, is the owner of Forward China and beneficially owns more than 5% of the Company’s

common stock.

Executive Officer and Chairman of the Company, is the owner of Forward China and beneficially owned more than 5% of the Company’s

common stock prior to our September 2025 financing.

In addition, Jenny P.

Yu, a Managing Director of Forward China, beneficially owns more than 5% of the Company’s common

The Company recorded service fees to Forward China of $ 39,000 and $ 221,000 during the three

months ended June 30, 2025 and 2024, respectively, and $ 331,000 and $ 674,000 for the nine months ended June 30, 2025 and 2024, respectively,

which were included as a component of cost of sales upon sales of the related products.

Due to the OEM Plan, these costs are now included

in income from discontinued operations for the three and nine months ended June 30, 2025 and 2024.

The Company had purchases from Forward

China of approximately $ 480,000 and $ 2,149,000 , for the three months ended June 30, 2025 and 2024, respectively, and $ 4,040,000 and $ 5,672,000

for the nine months ended June 30, 2025 and 2024, respectively.

Yu, a Managing Director of Forward China, beneficially owned

more than 5% of the Company’s common stock prior to our September 2025 financing.

The Company recorded service fees to Forward China

of $ 159,000 during the three months ended December 31, 2024, which were included as a component of cost of sales upon sales of the related

Due to the OEM Plan, these costs are now included in income from discontinued operations for the three months ended December

The Company had purchases from Forward China of approximately $ 1,671,000 during the three months ended December 31, 2024.

In order to preserve the

4 unchanged sentences

$ 7,365,000 .

Purchases from Forward China made after October 30, 2023 were not covered by this agreement and were expected to be paid according

to normal payment terms.

In connection with the sale of the OEM segment in May 2025 (see Note 3), this agreement was terminated and all

amounts due thereunder extinguished.

Purchases from Forward China made after October 30, 2023, were not covered by this agreement and were expected to be paid

according to normal payment terms.

In connection with the sale of the OEM segment in May 2025 (see Note 3), this agreement was terminated

and all amounts due thereunder extinguished.

Accounts Payable Conversion Agreements

2 unchanged sentences

pursuant to which Forward China agreed to convert an aggregate $ 4,925,000 of amounts due to Forward China into shares of preferred stock.

Under the terms of the Conversion Agreements, in the fourth quarter of fiscal 2024 and the second quarter of fiscal 2025, respectively,

Forward China agreed to convert $ 2,200,000 and $ 2,725,000 , respectively, of amounts due to Forward China into 2,200 shares and 2,725

shares, respectively, of the Company’s Series A-1.

Under the terms of the Conversion Agreements, in Fiscal 2025 and Fiscal 2024, respectively, Forward China agreed to convert $ 2,725,000

and $ 2,200,000 , respectively, of amounts due to Forward China into 2,725 shares and 2,200 shares, respectively, of the Company’s

Series A-1 Convertible Preferred Stock.

Promissory Note

1 unchanged sentence

Company issued a $ 1,600,000 unsecured promissory note payable to Forward China to fund the acquisition of IPS.

The promissory note bears

The promissory note bore

an interest rate of 8 % per annum and had an original maturity date of January 18, 2019.

1 unchanged sentence

18, 2018, with the principal due at maturity.

The Company incurred and paid interest associated with this note of $ 12,000 and $ 14,000

in the three months ended June 30, 2025 and 2024, respectively and $ 36,000 and $ 50,000 in the nine months ended June 30, 2025 and 2024,

respectively.

In connection with the sale of the OEM segment, the maturity date of this note was extended to December 31, 2025 .

date of this note has been extended multiple times pursuant to amendments between the parties, with the current maturity date being December

This note has a remaining balance of $ 600,000 at June 30, 2025.

Other Related Party Activity

The Company’s retail

division sold smart-enabled furniture, which was sourced by Forward China and sold in the U.S.

under the Koble brand name.

The Koble brand

is owned by The Justwise Group Ltd.

(“Justwise”), a company owned by Terence Wise, former Chief Executive Officer and Chairman

of the Company.

The Company recognized revenues from the sale of Koble products of $ 4,000 and $ 380,000 in the three and nine months ended

June 30, 2024, respectively.

Due to the Retail Exit, these revenues are included in the income from discontinued operations for the three

and nine months ended June 30, 2024.

The Company had an agreement

with Justwise, under which (i) Justwise performed design, marketing and inventory management services related to the Koble products sold

by the Company and (ii) the Company was granted a license to sell Koble products.

In exchange for such services, the Company paid Justwise

$10,000 per month plus 1% of the cost of Koble products purchased from Forward China.

This agreement expired November 30, 2023.

incurred costs under this agreement of $ 0 and $ 20,000 for the three months and nine months ended June 30, 2024, respectively.

Retail Exit, these costs are included in the income from discontinued operations for the three and nine months ended June 30, 2024.

Company had no accounts payable to Justwise at June 30, 2025 or September 30, 2024.

The Company recorded revenue

from a customer whose principal owner is an immediate family member of Jenny P.

The Company recognized revenue from this customer

of $ 108,000 and $ 122,000 for the three and nine months ended June 30, 2024, respectively.

The Company had accounts receivable from this

customer of $ 96,000 at September 30, 2024.

There were no revenues from this customer for the three or nine months ended June 30, 2025

or accounts receivable balances at June 30, 2025.

Due to the OEM Plan, these revenues are included in income from discontinued operations

for the three and nine months ended June 30, 2024 and the accounts receivable balance is included in assets held for sale at September

The Company incurred and paid interest associated with this note of $ 12,000 for the three

months ended December 31, 2024.

The Company fully paid off this note in September 2025.

LEGAL PROCEEDINGS

From time to time, the Company

is or may become a party to legal actions or proceedings in the ordinary course of its business.

At June 30, 2025, and through the date

may become a party to legal actions or proceedings in the ordinary course of its business.

At December 31, 2025, and through the date

of this filing, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the

1 unchanged sentence

The Company’s operating

leases are primarily for corporate, engineering, and administrative office space and the related expense is recorded in general and administrative

expenses on the condensed consolidated financial statements.

Total operating lease expense for the three and nine months ended June 30,

2025 was $ 155,000 and $ 465,000 , respectively and total operating lease expense for the three and nine months ended June 30, 2024 was $ 155,000

and $ 464,000 , respectively.

Cash paid for amounts included in operating lease liabilities for the nine months ended June 30, 2025 and

2024, which have been included in cash flows from operating activities, was $ 452,000 and $ 441,000 , respectively.

The Company signed a renewal

to extend the lease term of one of its New York locations through April 2027.

Payments under this operating lease commenced February 1,

2025 and escalate 4.0% per year .

The monthly rent payment is $ 6,000 per month.

At June 30, 2025, the Company’s

operating leases had a weighted average remaining lease term of 6.1 years and a weighted average discount rate of 5.9 %.

At June 30, 2025, future

leases are primarily for corporate, engineering, and administrative office space.

Total operating lease expense for the three months ended

December 31, 2025 was $ 152,000 , all of which was recorded in general and administrative expense on the condensed consolidated financial

Total operating lease expense for the three months ended December 31, 2024 was $ 155,000 , of which $ 4,000 was recorded in sales

and marketing expenses and $ 151,000 was recorded in general and administrative expenses on the condensed consolidated financial statements.

Cash paid for amounts included in operating lease liabilities for the three months ended December 31, 2025 and 2024, which have been included

in cash flows from operating activities, was $ 152,000 and $ 151,000 , respectively.

At December 31, 2025, the

Company’s operating leases had a weighted average remaining lease term of 5.8 years and a weighted average discount rate of 5.9 %.

At December 31, 2025, future

minimum payments under non-cancellable operating leases were as follows:

9 unchanged sentences

Accrued expenses and other current liabilities

at June 30, 2025 and September 30, 2024 are as follows:

at December 31, 2025 and September 30, 2025 were as follows:

Schedule of accrued expenses and other current liabilities

September 30,

Income taxes payable

Accrued commissions/bonuses

Paid time off

SUBSEQUENT EVENTS

On August 8, 2025, the Company’s shareholders

approved, among other proposals, (i) of the issuance of shares of the Company’s common stock in excess of the Nasdaq 19.9%

(exchange cap) limitations pursuant to the conversion of the Series B and exercise of the warrants issued pursuant to the PS Agreement,

(ii) of the issuance of shares that may be issued under the ELOC without giving effect to the 19.9% (exchange cap) limitations

in the underlying agreements and (iii) an amendment to the 2021 Equity Incentive Plan to increase the number of shares of the Company’s

common stock available and reserved for issuance thereunder by 300,000 shares.

On August 8, 2025, Forward China converted 610

shares of the Series A-1 into 81,333 shares of common stock in accordance with the Company’s Certificate of Incorporation (as amended).

On August 11, 2025, the Company entered into subscription

agreements with six investors pursuant to which it agreed to issue and sell, in a registered direct offering (the “Offering”),

an aggregate of approximately 263,000 shares of its common stock at a price of $8.50 per share.

The Offering closed on August 11,

2025 and the aggregate gross proceeds from the Offering were approximately $2,230,000.

From July 1 – August 12, 2025, the Company

received gross proceeds of $2,432,000 from the sale of 246,000 shares of common stock under the ELOC.

Professional fees

RISKS AND UNCERTAINTIES

The Company is subject to

various risks including market risk, liquidity risk and other risks related to its concentration in SOL.

Investing in SOL is currently

highly speculative and volatile.

The price of SOL has been,

and will likely continue to be, highly volatile.

Our financial results and the market price of our common stock could be materially adversely

affected if the price of SOL decreases substantially, as it has in the past, including as a result of shifts in market sentiment, speculative

trading, macroeconomic trends, technology-related disruptions and regulatory announcements.

Our historical financial

statements do not reflect the potential variability in earnings that we may experience in the future from holding or selling digital assets.

Accordingly, volatility in our earnings may be significantly more than what we experienced in prior periods, and it may be difficult to

evaluate the Company’s business and future prospects.

We also may need to perform an analysis each quarter to identify whether events

or changes in circumstances indicate that our digital assets are impaired.

The Company faces risks

relating to the custody of its digital assets.

Cybersecurity threats, including hacking, phishing and other malicious attacks, could result

in the loss, theft or misappropriation of our SOL.

If we or our third-party service providers experience a security breach or cyberattack

and unauthorized parties obtain access to our private keys, or if our private keys are lost or destroyed, or other similar circumstances

or events occur, we may lose some or all of our digital assets and our financial condition and results of operations could be materially

adversely affected.

The Company interacts with

smart contracts deployed on the Solana network.

Smart contracts are self-executing code that operate without human intervention once deployed

and are subject to known risks such as technical vulnerabilities, coding errors, security flaws and exploits.

Any vulnerability in a smart

contract we interact with could result in the loss or theft of SOL or other digital assets.

There is no assurance that the smart contracts

we integrate with or rely upon will function as intended or remain secure.

These vulnerabilities, flaws and potential exploitations could

have a materially adverse impact on our business and financial condition.

We use our digital assets

in DeFi applications, which may include over-collateralized borrow-lend vaults, token-exchange pools, and other financial or commercial

agreements, which introduce novel risks relating to software code bugs, liquidation risks, and governance risks, and can be subject to

failures or exploits.

Network congestion or downtime can increase the likelihood of asset loss or liquidation.

The volatility of digital

assets deployed into DeFi applications may increase the likelihood of liquidation.

DeFi applications generally operate on a user-to-protocol

basis where a user does not know the identity of other parties.

The use of monitoring and forensics software may not prevent the Company

from engaging in DeFi protocols that are also used by bad actors or sanctioned persons.

There is no clearing house

for SOL, nor is there a central or major depository for the custody of SOL.

There is a risk that some or all of the Company’s SOL

could be lost or stolen.

There can be no assurance that our custodians will maintain adequate insurance or that such coverage will cover

any losses with respect to the Company’s SOL.

Further, transactions in SOL are irrevocable.

Stolen or incorrectly transferred SOL

may be irretrievable.

As a result, any incorrectly executed transactions of the Company’s SOL could adversely affect an investment

in the Company’s common stock.

The Company’s shareholders

have no specific rights to any specific SOL or other digital assets held by the Company.

Shareholders own equity interests in the Company,

not direct interests in the Company's digital assets.

In the event of the insolvency or bankruptcy of the Company, its assets, including

digital assets, would be subject to the claims of creditors, and such assets may be inadequate to satisfy claims by shareholders.

Additionally,

in a bankruptcy proceeding, there may be disputes regarding the characterization and treatment of digital assets, which could further

delay or reduce any potential recovery by shareholders.

The legal and regulatory framework for digital assets in bankruptcy proceedings

remains uncertain and evolving.

The SEC has stated that certain

digital assets may be considered securities under federal securities laws.

The test for determining whether a particular digital asset

is a security is complex and difficult to apply, and the outcome is difficult to predict.

Future developments could change the legal status

of digital assets we hold.

If SOL is determined to be a security under federal or state securities laws or in a proceeding in a court

of law, or otherwise, it may have material adverse consequences for SOL, making it more difficult to be traded, cleared or custodied compared

to other digital assets that are not considered securities.

In addition, if SOL is considered a security, the Company could be considered

an unregistered investment company under the Investment Company Act of 1940, which could require the Company to register as an investment

company (which may not be feasible given our current structure and operations), restructure our business model, or liquidate.

If the Company

is required to comply with additional regulatory obligations, it could result in a significant increase in operating expenses and make

it difficult to continue our current operations, which would materially and adversely affect our business, financial condition and results

of operations.

The Company relies on certain

third-party providers to perform certain functions essential to its operations.

Any disruptions to the Company’s service providers’

business operations resulting from business failures, financial instability, security failures, government mandated regulation or operational

problems could have an adverse impact on the Company’s ability to access critical services and would be disruptive to the operations

of the Company.

The Company may be subject

to various litigation, regulatory investigations and other proceedings that arise in the ordinary course of business.

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-Q

Item 1. Financial Statements