What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-05-14 compared with 2026-02-12 · 652 added, 297 removed, 696 unchanged (58% of the section changed)

5 unchanged sentences

Current assets:

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

Accounts receivable,

net of allowances for credit losses of $ 92,358 as of March 31, 2026 and September 30, 2025

Contract assets

Loans Receivable - Digital Assets - related party

Prepaid expenses and other current assets

Prepaid expenses

and other current assets

Total current assets

2 unchanged sentences

Digital assets - restricted

Digital assets pledged as collateral with related party

Property and equipment, net

4 unchanged sentences

Current liabilities:

Loans payable - related

Loans payable - digital assets

Accounts payable

Accounts payable-related party

Accounts payable - related

Deferred income

Current portion of operating lease liability

Accrued expenses and other current liabilities

Total current liabilities

Current portion of operating lease

Accrued expenses

and other current liabilities

Total current

Other liabilities:

Operating lease liability, less current portion

Operating lease

liability, less current portion

Total liabilities

Commitments and contingencies

Commitments and contingencies (See Note 9 and 10)

Shareholders' equity:

1 unchanged sentence

shares authorized;

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 )

87,069,465 and 76,314,617 shares issued and outstanding, respectively, at March 31, 2026;

86,145,514 shares issued

and outstanding at September 30, 2025

Treasury Stock,

at cost, 10,754,848 and 0 shares at March 31, 2026 and September 30, 2025, respectively

Additional paid-in capital

1 unchanged sentence

1,655,874,892

Accumulated deficit

( 1,055,344,702 )

( 186,611,480 )

Total shareholders' equity

Total shareholders'

1,470,124,867

Total liabilities and shareholders' equity

Total liabilities

and shareholders' equity

$ 608,512,726

$ 1,474,942,489

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

The accompanying notes are an integral part of the

unaudited condensed consolidated financial statements.

FORWARD INDUSTRIES, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended December 31,

For the Three Months Ended

For the Six Months

Revenues, net

5 unchanged sentences

Impairment of digital assets

Derivative gain, net

Goodwill impairment

1 unchanged sentence

( 284,089,746 )

( 1,821,758 )

( 867,729,320 )

( 2,719,789 )

Interest income

4 unchanged sentences

( 283,957,489 )

Provision for income taxes

( 1,822,209 )

( 866,920,787 )

( 2,719,984 )

(Benefit from) / provision for income taxes

Loss from continuing operations

( 283,082,136 )

( 1,822,209 )

( 868,733,222 )

( 2,719,984 )

Income from discontinued operations, net of tax

1 unchanged sentence

$ ( 1,451,611 )

$ ( 868,733,222 )

$ ( 2,159,676 )

Basic (loss)/earnings per share :

7 unchanged sentences

Weighted average common shares outstanding:

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

The accompanying notes are an integral part of the

unaudited condensed consolidated financial statements.

FORWARD INDUSTRIES, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Three Months Ended December 31, 2025

the Six Months Ended March 31, 2026

Series A-1 Convertible

Preferred Stock

Treasury Stock

Balance at September 30, 2025

17 unchanged sentences

( 772,262,566 )

Share-based compensation

Proceeds from stock options exercised

Share repurchases

( 9,214,655 )

For the Three Months Ended December 31, 2024

( 47,139,381 )

Exercise of Pre-Funded Warrants

( 283,082,136 )

Balance at March 31, 2026

( 10,754,848 )

$ ( 58,022,336 )

$ 1,663,952,928

$ ( 1,055,344,702 )

$ 551,456,585

the Six Months Ended March 31, 2025

Series A-1 Convertible

Preferred Stock

Treasury Stock

Balance at September 30, 2024

3 unchanged sentences

$ ( 20,345,205 )

Share-based compensation

( 1,451,611 )

Preferred stock issued in connection with conversion of accounts payable to Forward China

Balance at March 31, 2025

$ ( 21,796,816 )

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 Three Months Ended December 31,

For the Six Months Ended

Operating Activities:

1 unchanged sentence

$ ( 2,159,676 )

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

Adjustments to reconcile net loss

to net cash used in operating activities:

Share-based compensation

8 unchanged sentences

Accounts receivable

( 1,199,050 )

Contract assets

Prepaid expenses and other current assets

Prepaid expenses and other current

( 1,673,279 )

3 unchanged sentences

Net changes in operating lease liabilities

Accrued expenses and other current liabilities

Net cash used in operating activities-continuing operations

Accrued expenses

and other current liabilities

Net cash used in operating activities-continuing

( 12,727,827 )

Net cash used in operating activities-discontinued operations

Net cash used in operating activities

Net cash used

in operating activities-discontinued operations

Net cash used

in operating activities

( 12,727,827 )

3 unchanged sentences

( 335,976,760 )

Sales of digital assets

Net cash used in investing activities

( 1,076,607 )

Sales of digital

Net cash provided

by / (used in) investing activities

Financing Activities:

Fees associated with Securities Purchase Agreement

Fees associated with Securities Purchase

Proceeds from ATM, net

Proceeds from loans payable-related

Proceeds from stock options exercised

1 unchanged sentence

( 58,022,336 )

Deferred financing costs associated with ATM

Net cash used in financing activities

Exercise of pre-funded warrants

Deferred financing

costs associated with ATM

Net cash used

in financing activities

( 10,893,861 )

6 unchanged sentences

Cash paid for taxes

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Operating lease assets obtained in exchange for operating lease liabilities

Digital assets loan receivable

Digital assets loan payable

Supplemental Disclosures of Non-Cash Investing and Financing

Operating lease assets obtained in

exchange for operating lease liabilities

Conversion of accounts payable to

convertible preferred stock

Digital assets pledged as collateral

Digital assets received in exchange

for loan payable

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

1 unchanged sentence

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Background and Nature of Business

Forward Industries, Inc.

(“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”)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Background and Nature of

Industries, Inc.

(“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

In connection with a private placement transaction in September 2025, we launched our digital asset treasury strategy, which we

have been executing to date by holding SOL, staking SOL, operating a SOL validator, engaging in the SOL decentralized finance (“DeFi”)

ecosystem and actively repurchasing shares of our common stock.

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 March 2025, the Company

committed to a plan to sell the original equipment manufacturer (“OEM”) distribution segment of the business (“OEM Plan”).

In May 2025, the Company completed the sale of this line of business and is presenting its results of operations within discontinued operations

in the prior period presented herein.

The OEM distribution segment sourced and sold carrying cases and other accessories for medical monitoring

and diagnostic kits as well as a variety of other portable electronic and non-electronic devices to OEMs or their contract manufacturers

worldwide, that either packaged our products as accessories “in box” together with their branded product offerings or sold

them through their retail distribution channels.

The Company did not manufacture any of its OEM products and sourced substantially all

of these products from independent suppliers in China, through Forward Industries Asia-Pacific Corporation, a British Virgin Islands corporation

(“Forward China”), a 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

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.

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.

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

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.

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.

March 2025, the Company committed to a plan to sell the original equipment manufacturer (“OEM”) distribution segment of the

business (“OEM Plan”).

In May 2025, the Company completed the sale of this line of business and is presenting its results

of operations within discontinued operations in the prior period presented herein.

The OEM distribution segment sourced and sold carrying

cases and other accessories for medical monitoring and diagnostic kits as well as a variety of other portable electronic and non-electronic

devices to OEMs or their contract manufacturers worldwide, that either packaged our products as accessories “in box” together

with their branded product offerings or sold them through their retail distribution channels.

The Company did not manufacture any of its

OEM products and sourced substantially all of these products from independent suppliers in China, through Forward Industries Asia-Pacific

Corporation, a British Virgin Islands corporation (“Forward China”), a former 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.

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.

had an accumulated deficit of $ 1,055,345,000 and a negative working capital of $ 32,957,000 at March 31, 2026, incurred a net loss of $ 868,733,000

and used $ 12,728,000 of cash in operating activities during the six months ended March 31, 2026.

The Company had a cash balance of approximately

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.

$ 20,000,000 at April 30, 2026.

on our forecasted cash flows, we believe our existing cash balance, digital asset holdings, and access to our ATM facility will be sufficient

to meet our liquidity needs through at least May 2027.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING POLICIES

8 unchanged sentences

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.

As a result, our operating results for the three and six months ended March 31, 2026 do not include operating results

of either of these entities.

The terms “Forward”, “we”, “our” or the “Company” as used

throughout this document are used to indicate Forward Industries, Inc.

and all of its wholly-owned subsidiaries.

All significant intercompany transactions and balances have been eliminated

in consolidation.

All significant intercompany

transactions and balances have been eliminated in consolidation.

In March 2026, the Company’s

shareholders approved a proposal to change the Company’s state of incorporation from New York to Texas.

This reincorporation was

carried out by means of merger of Forward with and into a wholly-owned Texas subsidiary.

In the opinion of management,

36 unchanged sentences

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.

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

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

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Digital assets that are not

27 unchanged sentences

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.

Digital 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

7 unchanged sentences

at fair value.

The Company may post or receive

The Company may pledge 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.

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

Where control of the collateral

6 unchanged sentences

adjusted as necessary based on specific customer situations.

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

At March 31, 2026, September 30, 2025 and September 30, 2024, the Company

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

The Company may enter into

over-the-counter (“OTC”) derivative contracts, including written options referencing the price of digital assets such as SOL.

These contracts are accounted for in accordance with ASC 815, “Derivatives and Hedging.” Derivative instruments are recognized

on the balance sheet at fair value on the trade date and are subsequently remeasured at fair value at each reporting date, with changes

in fair value recognized in earnings within “Derivative gain/(loss).” The Company does not designate any derivative instruments

as hedging instruments under ASC 815.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Written options represent

obligations of the Company and are recorded as derivative liabilities.

The Company receives an upfront premium at inception, which generally

represents the initial fair value of the written option unless model-derived fair value indicates otherwise.

Derivative instruments are

derecognized upon expiration or settlement.

Treasury Stock

1 unchanged sentence

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

As of March 31, 2026 and September 30, 2025, the Company held 10,755,000 and 0 shares of its common

stock in treasury, purchased at a total cost of $ 58,022,000 and $ 0 , respectively.

35 unchanged sentences

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

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,

segment had contract assets of $ 543,000 , $ 1,064,000 and $ 1,273,000 at March 31, 2026, 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.

The design segment had contract

liabilities of $ 612,000 , $ 293,000 and $ 399,000 at March 31, 2026, September 30, 2025 and September 30, 2024, respectively.

Disaggregation of Revenue

5 unchanged sentences

revenue amounts.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes future

2 unchanged sentences

benefits is more likely than not.

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

At March 31, 2026, 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.

3 unchanged sentences

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

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

was completed in April 2026.

The results of this study concluded an ownership change took place in connection with the Company’s

private placement transaction in September 2025, which limits the amount of NOLs the Company can use each year.

Our tax provision for

the three months ended December 31, 2025 was estimated without the benefit of NOLs as the 382 tax study had not been completed at the

time we filed our financial statements for such period.

Our tax provision for the three months ended March 31, 2026 was estimated with

the benefit of those NOLs that could be utilized as a result of the 382 tax study and included an adjustment to the first quarter tax

provision to reflect their inclusion.

Our income tax (benefit)

provision for the three and six months ended March 31, 2026 resulted from taxable income for which NOLs were not available to offset due

to the Section 382 limitations described above.

For the three and six months ended March 31, 2025, we reported no income tax provision

or benefit due to the existence of significant net operating loss carryforwards.

Our effective tax rate was 0.3 % and 0.0 % for the three

months ended March 31, 2026 and 2025, respectively.

Our effective tax rate was ( 0.2 %) and 0.0 % for the six months ended March 31, 2026

and 2025, respectively.

8 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.

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:

Digital Assets

Company applies ASC 820 in the valuation of SOL held by the Company and digital assets pledged as collateral for financial statement

The fair value of SOL uses Level 1 inputs to reflect the price that would be received for SOL in a current sale, which

assumes an orderly transaction between market participants on the measurement date in SOL’s “principal market,” or

in the absence of a principal market, the most advantageous market.

Market participants are defined as buyers and sellers in the

principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

The Company determines

its principal market (or in the absence of a principal market, the most advantageous market) on a periodic basis to determine which

market is its principal market for the purpose of calculating fair value for the creation of quarterly and annual financial

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.

The fair value of digital assets pledged as collateral uses Level 2

inputs as they are based on observable inputs other than quoted prices for identical assets in active markets.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

purposes of impairment testing, wrapped digital assets, such as fwdSOL, with a value of $ 56,854,000

at March 31, 2026, are not measured at fair value, but rather, tested for impairment each reporting period.

The value of these digital

assets is estimated using inputs that are classified within Level 2 of the fair value hierarchy, as they are based on observable inputs

other than quoted prices for identical assets in active markets.

During the three and six months ended March 31, 2026, the Company evaluated

its fwdSOL digital assets for impairment and determined that the lowest observable fair value during the respective holding periods was

approximately $67.48 per token, resulting in impairment charges of $ 85,093,000 and $ 118,137,000 for the three and six months ended March

31, 2026, respectively.

The Company applies ASC 820

in the valuation of its written SOL option contracts.

The fair value of these derivative instruments reflects the amount that a market

participant would require to assume the Company’s obligation as the writer of the option in an orderly transaction on the measurement

As the options are European-style and reference the price of SOL, the Company measures fair value using a market-participant option-pricing

model that incorporates assumptions consistent with those used in the principal market for SOL-based derivatives.

The valuation incorporates

inputs such as the current spot price of SOL, the contractual strike price, the remaining term of the option, risk-free interest rates,

and implied volatility.

While certain inputs are derived from active markets, the Company’s implied volatility assumptions require

the use of market-participant estimates due to limited depth and liquidity in the SOL options market.

As a result, the fair value measurement

includes significant unobservable inputs and is classified within Level 3 of the fair value hierarchy.

During the quarter ended

March 31, 2026, the Company entered into written option contracts referencing the price of SOL.

Implied volatility for these contracts

was derived primarily from observable market data for actively traded SOL options and supplemented with market-participant assumptions

when quoted maturities or strikes did not align with the Company’s contracts.

The Company also evaluated the effect of nonperformance

risk, including the impact of collateral pledged, and concluded that nonperformance risk did not materially affect the fair value of the

written options.

All written option contracts expired prior to March 31, 2026, and no derivative liabilities were outstanding as of the

reporting date.

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

March 31, 2026

Digital assets

1 unchanged sentence

$ 448,815,000

$ 201,560,000

Digital assets - restricted

Loans Receivable - Digital Assets - related party

Digital assets pledged for collateral with related party

Loans Payable - Digital Assets

3 unchanged sentences

$ 1,430,486,000

There were no transfers between Level 1, Level

2, or Level 3 during the period.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Compensation

6 unchanged sentences

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.

If awards contain performance conditions, compensation

expense is recognized over the estimated service period if it is determined that achievement of the performance condition is probable.

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

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 220-40):

Disaggregation of Income Statement

Expenses” and in January 2025, the FASB issued ASU No.

2025-01, “Income Statement—Reporting Comprehensive

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

Clarifying the Effective Date”, which clarified the effective

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

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

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

captions in the 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 November 2024, the

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

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

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

2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic

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

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 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.

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

In December 2023, the FASB

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

OPERATIONS AND ASSETS HELD FOR SALE

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

In March 2025, in connection

20 unchanged sentences

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.

statements of operations for the three and six months ended March 31, 2025.

The following table presents

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.

for the three and six months ended March 31, 2025.

Schedule of discontinued operations

5 unchanged sentences

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.

of depreciation, amortization, investing or financing cash flow activities in the three or six months ended March 31, 2025.

The only significant

non-cash operating cash flow activity for the discontinued operations in the three and six months ended March 31, 2025 was the conversion

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

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DIGITAL ASSETS

2 unchanged sentences

Schedule of fair value

December 31, 2025

March 31, 2026

Historical Cost

3 unchanged sentences

Digital assets measured at fair value

1,006,874,000

Digital assets not measured at fair value

not meaningful

Total Digital Assets

7 unchanged sentences

Restricted Digital Assets

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

through approximately October 2029.

The 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

The Company had

staked $ 495.6

million and $ 1,430.5

million of its digital assets, including assets staked on a liquid staking platform, as of March 31, 2026 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

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 March 31, 2026, 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 .

The staking rewards

generated from proprietary staking activities for the three and six months ended March 31, 2026 were $ 9,334,000

and $ 26,715,000 ,

respectively.

SEGMENTS AND CONCENTRATIONS

11 unchanged sentences

for each reportable segment.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The tables below represent

3 unchanged sentences

Digital Assets Segment

For the Three Months Ended December 31,

Three Months Ended

Six Months Ended

Cost of revenues

2 unchanged sentences

Loss on digital assets

Derivative gain, net

Interest income

1 unchanged sentence

$ ( 279,006,000 )

$ ( 857,539,000 )

Design Segment

For the Three Months Ended December 31,

Three Months Ended

Six Months Ended

Cost of revenues

10 unchanged sentences

$ ( 259,000 )

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.

$ ( 1,216,000 )

$ ( 1,460,000 )

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.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table is a

3 unchanged sentences

of segment loss

For the Three Months Ended

Three Months Ended

Six Months Ended

Digital asset segment loss from continuing operations before taxes

$ ( 279,006,000 )

$ ( 857,539,000 )

Design segment income (loss) from continuing operations before taxes

( 1,216,000 )

( 1,460,000 )

Corporate and other non-segment expenses

( 4,692,000 )

( 9,308,000 )

( 1,260,000 )

Consolidated loss from continuing operations before taxes

1 unchanged sentence

$ (1,822,000 )

$ (866,921,000 )

$ (2,720,000 )

Segment assets are shown

11 unchanged sentences

$ 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.

No customers represented

more than 10 %

of the Company’s consolidated net revenues for the three and six months ended March 31, 2026.

Revenues from two design customers

represented 36.4 %

of the Company’s consolidated net revenues for the three and six months ended March 31, 2025, respectively.

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

three design segment customers represented 64.4 % and 49.4 %, respectively, of the Company’s consolidated accounts receivable at March

31, 2026 and September 30, 2025.

There were no concentrations

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

SHAREHOLDERS’

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

SHAREHOLDERS’ EQUITY

At-the-Market Offering

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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

During the six months ended March 31, 2026, 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.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO 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:

March 31, 2026, the Company had a total of 127,769,478 shares reserved for future issuance as follows:

(i) 102,128,488 shares related

5 unchanged sentences

of the Company’s common stock.

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

At March 31, 2026, 5,506,301 shares of the Company’s common stock had been tokenized.

Share Repurchases

9 unchanged sentences

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

the three months ended March 31, 2026, the Company executed open market purchases of 3,050,000 shares at an average cost of $ 6.48 per

share for an aggregate cost of $ 19,770,000 , 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

During the six months

ended March 31, 2026, the Company executed open market purchases of 4,591,000 shares at an average cost of $ 6.68 per share for an aggregate

cost of $ 30,652,000 , inclusive of fees, which was recorded as a component of treasury stock.

Open market share repurchases were facilitated

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

addition to the open market purchases described above, in March 2026, the Company entered into a privately negotiated repurchase with

Multicoin Capital Master Fund, LP (“Multicoin”), an institutional investor and related party (see Note 8), pursuant to which

the Company repurchased 6,164,324 shares of its common stock at a price of $ 4.44 per share for an aggregate cost of $ 27,370,000 .

April, the Company executed open market purchases of an additional 1,634,918 shares at an average cost of $ 4.53 per share for an aggregate

cost of $ 7,404,000 .

“Blank Check” Preferred Stock

Company is authorized to issue up to 4,000,000 shares of “blank check” preferred stock.

The Board has the authority and discretion,

without shareholder approval, to issue preferred stock in one or more series for any consideration it deems appropriate, and to fix the

relative rights and preferences thereof including their redemption, dividend and conversion rights.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2021 Equity Incentive

March 3, 2026, shareholders of the Company approved an amendment to increase the shares available for future issuance under the 2021 Equity

Incentive Plan to 8,724,667 .

Stock Options

In March 2026, the Company

granted options to management to purchase an aggregate of 896,606 shares of its common stock at a weighted average exercise price of $10.05

The options vest in quarterly installments over a vesting period ranging from one to four years from the date of grant and

expire between 5 and 10 years from the date of the grant.

The options have a weighted average grant-date fair value of $ 3.07 per share

and an aggregate grant-date fair value of $ 2,755,000 , which will be recognized, net of forfeitures, ratably over the vesting period.

In March 2026, the Company

granted options to non-employee directors to purchase an aggregate of 400,000 shares of its common stock at a weighted average exercise

price of $5.02 per share.

The options vest in quarterly installments over a period of one year from the date of grant and expire five

years from the date of the grant.

The options have a weighted average grant-date fair value of $ 3.06 per share and an aggregate grant-date

fair value of $ 1,223,030 , which will be recognized, net of forfeitures, ratably over the vesting period.

applying the Black-Scholes option pricing model to options granted during the three months ended March 31, 2026, the Company used the

following assumptions:

Schedule of assumptions

Expected term (years)

Expected volatility

81.1 % - 101.0 %

Risk free interest rate

3.6 % - 3.9 %

Expected dividends

Company recognized compensation expense for stock option awards of $ 539,000 during the three months ended March 31, 2026, of which $ 256,000

was recorded as a component of sales and marketing expenses and $ 283,000 was recorded as a component of general and administrative expenses

in its condensed consolidated statements of operations.

The Company recognized compensation expense for stock option awards of $ 556,000

during the six months ended March 31, 2026, of which $ 256,000 was recorded as a component of sales and marketing expenses and $ 300,000

was recorded as a component of general and administrative expenses in its condensed consolidated statements of operations.

recognized compensation expense for stock option awards of $ 26,000 and $ 46,000 during the three and six months ended March 31, 2025, respectively,

which was recorded as a component of general and administrative expenses in its condensed consolidated statements of operations.

of March 31, 2026, there was $ 3,476,000 total unrecognized compensation cost related to nonvested stock option awards that is expected

to be recognized over a weighted average period of 1.3 years.

Restricted Stock Units

March 2026, the Company granted to certain members of management 675,996

restricted stock units (“RSUs”) that contain only service conditions for vesting.

The RSUs have an aggregate grant date

fair value of $ 3,265,061

based on the closing price of the Company’s common stock on the date of grant and vest in quarterly installments over a period

of four years.

The Company recognized compensation expense for RSUs of $ 150,000

in the three and six months ended March 31, 2026.

expense related to RSU awards in the three or six months ended March 31, 2025.

of March 31, 2026, there was $ 3,115,000 total unrecognized compensation cost related to nonvested RSUs that is expected to be recognized

over a weighted average period of 1.9 years.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Performance Stock

March 2026, the Company granted to certain members of management 881,736 restricted stock units that contain both service and performance

conditions for vesting (“PSUs”).

The PSUs have an aggregate grant date fair value of $ 4,258,785 based on the closing price

of the Company’s common stock on the date of grant.

Vesting of the PSUs occurs only if and when certain Company performance measures

are achieved.

Expense related to PSUs is recognized over the expected period of time to achieve such performance measures only when their

achievement is considered probable in accordance with the related accounting guidance.

The Company recognized compensation expense for

PSUs of $ 109,000 in the three and six months ended March 31, 2026.

of March 31, 2026, there was $ 1,310,000 total unrecognized compensation cost related to nonvested PSUs that is expected to be recognized

over a weighted average period of 0.8 years.

LOSS / EARNINGS PER SHARE

Basic loss/earnings per share

9 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Loss from continuing operations

$ (283,082,000 )

$ (1,822,000 )

$ (868,733,000 )

$ (2,720,000 )

Income from discontinued operations, net of tax

1 unchanged sentence

$ (1,452,000 )

$ (868,733,000 )

$ (2,160,000 )

Weighted average common shares outstanding

9 unchanged sentences

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:

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following options and warrants were excluded

from the calculation of diluted earnings per share for the three and six months ended March 31, 2026 and 2025 because their inclusion

would have been anti-dilutive:

Schedule of anti-dilutive shares

For the Three Months Ended December 31,

For the Three Months Ended

For the Six Months Ended

Total potentially dilutive shares

RELATED PARTY

RELATED PARTY TRANSACTIONS

Galaxy Service Agreement

5 unchanged sentences

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.

from September 2025 through March 2026, we paid Galaxy fees of approximately $ 583,000 per month.

In March, the Company and Galaxy agreed

to extend the Services Agreement to June 2026 and to reduce the monthly fees to $ 100,000 per month.

During the three and six months ended

March 31, 2026, the Company incurred fees of $ 1,407,000 and $ 3,157,000 , respectively, under the Services Agreement, which were recorded

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

to Galaxy under this agreement totaled $ 240,000 and $ 389,000 at March 31, 2026 and September 30, 2025, respectively, which were recorded

as a component of accounts payable - related party on the condensed consolidated financial statements.

Galaxy Asset Management Agreement

19 unchanged sentences

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

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

expires in September 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.

1 unchanged sentence

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.

During the three and six

months ended March 31, 2026, the Company incurred fees of $ 1,071,000 and $ 2,765,000 , respectively, related to the Asset Management Agreement,

which were recorded on the condensed consolidated financial statements as a component of general and administrative expenses - related

Amounts due to the Asset Manager under this agreement totaled $ 311,000 and $ 535,000 at March 31, 2026 and September 30, 2025, respectively,

which were recorded as a component of accounts payable - related party 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.

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

loaned 250,000 SOL to the Borrower.

This loan bore interest at an annual rate of 8% and remained outstanding until repayment

was requested by the Company.

The loan receivable was 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.

This loan was repaid in January 2026.

Master Digital Currency Loan Agreement with

In February 2026, the Company

entered into a Master Digital Currency Loan Agreement (the “Loan Agreement”) with Galaxy Digital LLC (“Galaxy LLC”),

under which the Company may borrow digital assets and/or U.S.

dollars from Galaxy LLC pursuant to individual loan term sheets (each, a

The Loan Agreement establishes the general terms governing such loans, including procedures for loan requests, collateral

requirements, borrow fees, callable and term loan structures, margin call and refund provisions, and rehypothecation rights, subject to

mutual consent.

In connection with the Loan

Agreement, in March 2026, the Company executed five separate Loans in an aggregate amount of $ 40,000,000 , all of which remained outstanding

at March 31, 2026 and are included in Loans payable – related party on the condensed consolidated balance sheet.

At March 31, 2026,

these Loans had a weighted average annual interest rate of 3.4 % and maturity dates ranging from 7 days to one year, with $15,000,000 of

these Loans having evergreen provisions allowing them to remain outstanding until repayment is requested by Galaxy LLC per the terms of

the Loan Agreement.

In April and May 2026, the

Company executed three additional Loans in an aggregate amount of $ 40,000,000

with an interest rate of 2 %

and maturity of 7 days, all of which have evergreen provisions allowing them to remain outstanding until repayment is requested by Galaxy

LLC per the terms of the Loan Agreement.

The Loans are secured

by approximately 883,000 units of the Company’s fwdSOL, which Galaxy LLC has the right to sell, pledge or rehypothecate per

the terms of the Loan Agreement.

This portion of the Company’s fwdSOL is presented as Digital assets pledged as collateral

with related party on the condensed consolidated financial statements.

Written SOL Option Contracts

During the three months ended

March 31, 2026, the Company entered into OTC European-style option contracts referencing the price of SOL with Galaxy Trading Mercury

LLC, a related party.

Under these contracts, the Company acted as the writer of call and put options and received upfront premiums at

The contracts were governed by an ISDA Master Agreement and related Credit Support Annex, which required the Company to post

collateral to secure its obligations.

All written option contracts expired prior to March 31, 2026.

Additional information regarding derivative

instruments is provided in Note 11.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

repurchase program (see Note 6) the Company paid $ 37,000 and $ 56,000 in fees to Galaxy Securities LLC during the three and six months

ended March 31, 2026, which were recorded as a component of Treasury Stock.

Multicoin Share Repurchase

In September 2025, in connection

with our private placement transaction, Multicoin invested $ 114,040,000 for 6,164,000 shares of the Company’s common stock.

time of the private placement transaction, Kyle Samani was a managing director of Multicoin and was appointed to the board of directors

of the Company.

In March 2026, the Company’s shareholders elected Mr.

Samani to the board of directors of the Company.

2026, the Company repurchased 6,164,000 of the shares Multicoin purchased for $ 27,370,000 (See Note 6).

Buying Agency and Supply Agreement

7 unchanged sentences

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

Due to the Retail Exit and

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

In November 2024, the Company and

Forward China agreed to:

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

notice, (ii) reduce the fixed portion of the sourcing fee to $35,000 per month, and (iii) change the payment terms to better align with

payments from the Company’s customers.

The Sourcing Agreement was extended until May 9, 2025, and was subsequently terminated in

connection with the sale of the OEM segment.

Due to the Company’s

exit from its retail line of business and decline in the OEM distribution segment business, this sourcing agreement expired October 31,

In November 2024, the Company and Forward China agreed to:

(i) extend the sourcing agreement until April 30, 2025, but allow either

party to cancel with 30 days’ notice, (ii) reduce the fixed portion of the sourcing fee to $35,000 per month, and (iii) change the

payment terms to better align with payments from the Company’s customers.

The Sourcing Agreement was extended until May 9, 2025,

and was subsequently terminated in connection with the sale of the OEM segment.

In connection with the sale

10 unchanged sentences

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.

of $ 133,000 and $ 292,000 during the three and six months ended March 31, 2025, 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 six months ended March 31, 2025.

The Company had purchases from Forward China of approximately $ 1,888,000 and $ 3,559,000 during the

three and six months ended March 31, 2025, respectively.

In order to preserve the

3 unchanged sentences

This agreement pertained only to payables that were outstanding at October 30, 2023 of approximately

$ 7,365,000 .

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

2 unchanged sentences

and all amounts due thereunder extinguished.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accounts Payable Conversion Agreements

5 unchanged sentences

Series A-1 Convertible Preferred Stock.

In August and September of 2025, all 4,925 outstanding shares of the Series A-1 were converted

into 656,666 shares of the Company’s common stock.

Promissory Note

On January 18, 2018, the

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

The promissory note bore

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

Monthly interest payments commenced on February

18, 2018, with the principal due at maturity.

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

months ended December 31, 2024.

On January 18, 2018,

the Company issued a $ 1,600,000

unsecured promissory note payable to Forward China to fund the acquisition of IPS.

The promissory note bore an interest rate of 8 %

per annum and had an original maturity date of January 18, 2019.

Monthly interest payments commenced on February 18, 2018, with the

principal due at maturity.

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

in the three and six months ended March 31, 2025, respectively.

The Company fully paid off this note in September 2025.

2 unchanged sentences

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

Company’s interests, the Company believes would be material to its business.

At March 31, 2026, 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 Company’s

interests, the Company believes would be material to its business.

The Company’s operating

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

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 six months ended March 31,

2026 was $ 152,000 and $ 304,000 , respectively.

Total operating lease expense for the three and six months ended March 31, 2025 was $ 155,000

and $ 310,000 , respectively.

Cash paid for amounts included in operating lease liabilities for the six months ended March 31, 2026 and

2025, which have been included in cash flows from operating activities, was $ 309,000 and $ 302,000 , respectively.

The Company renewed the term

of its Minnesota lease through June of 2031.

Payments under this operating lease commence July 1, 2026 and escalate

10% per year.

The monthly rent payment is approximately $ 13,000 per month.

At March 31, 2026, the Company’s

operating leases had a weighted average remaining lease term of 5.5 years and a weighted average discount rate of 6.3 %.

At March 31, 2026, future

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

7 unchanged sentences

Long-term portion of lease liabilities

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the quarter ended

March 31, 2026, the Company entered into OTC European-style option contracts referencing the price of SOL.

Under these contracts, the

Company acted as the writer of call and put options and received upfront premiums at inception.

The options provided the counterparty

with the right, but not the obligation, to purchase or sell a specified quantity of SOL at a fixed strike price on the contract expiration

The contracts were governed by an ISDA Master Agreement and related Credit Support Annex, which required the Company to post collateral

to secure its obligations.

The Company recognized a

net derivative gain of $ 269,000 during the three and six months ended March 31, 2026, related to written SOL option contracts, which is

presented as Derivative gain, net on the condensed consolidated statement of operations.

All written option contracts expired prior to

March 31, 2026, and no derivative assets or liabilities were outstanding as of March 31, 2026.

The counterparty to the written

option contracts was Galaxy Trading Mercury LLC which is a related party (see Note 8).

Information regarding the fair value hierarchy

classification and valuation of derivative instruments is provided in Note 2.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities

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

at March 31, 2026 and September 30, 2025 were as follows:

Schedule of accrued expenses and other current liabilities

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Professional fees

SUBSEQUENT EVENT

On April 27, 2026, the Company

invested approximately $2.2 million, through a combination of primary and secondary share purchases, as part of a $5.0 million equity

round at a $25.0 million post-money valuation in On Re Ltd., a private tokenized reinsurance company on the Solana blockchain which is

incorporated in England and Wales.

A small portion of the primary subscription remains subject to regulatory approval from the Bermuda

Monetary Authority.

In connection with the investment, the Company also committed to purchase up to $25.0 million of the ONyc token, which

is built natively and trades exclusively on the Solana blockchain, and which will meaningfully expand On Re's reinsurance underwriting

The Company’s obligation to fund this commitment is subject to the terms and conditions set forth in the applicable investment

documentation.

If the Company fails to fund this commitment within thirty days of the applicable deadline, lead co-investors would have

the right to acquire the Company’s equity stake in On Re at the original subscription price of approximately $2.2 million.

has evaluated this commitment in the context of its liquidity planning and believes it has adequate resources to fund this obligation,

subject to market conditions.

RISKS AND UNCERTAINTIES

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

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our historical financial

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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.

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

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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.

On March 17, 2026, the SEC

issued a joint interpretation with the CFTC clarifying the application of the federal securities laws to certain types of crypto assets

and transactions involving crypto assets.

The interpretation establishes a token taxonomy classifying crypto assets into five categories:

(i) digital commodities;

(ii) digital collectibles;

(iii) digital tools;

(iv) stablecoins;

and (v) digital securities.

The SEC explicitly

identified SOL as a “digital commodity” that is not itself a security.

Digital commodities are defined as crypto assets that

are intrinsically linked to and derive their value from the programmatic operation of a functional crypto system, as well as supply and

demand dynamics, rather than from the expectation of profits from the essential managerial efforts of others.

The interpretation provides

that digital commodities, digital collectibles, and digital tools are not themselves securities, though they may become subject to an

investment contract under certain circumstances.

The interpretation also clarifies that protocol staking activities do not involve the

offer and sale of securities.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Although the SEC's March

2026 interpretation provides significant clarity regarding the regulatory treatment of SOL and similar digital commodities, it is not

federal legislation and uncertainty remains regarding certain aspects of digital asset regulation.

A non-security crypto asset may become

subject to the federal securities laws if it is offered and sold as part of an investment contract and digital commodities, such as SOL,

are subject to federal commodities laws.

Additionally, U.S.

state and federal as well as foreign regulators and legislatures have taken

and may take action against digital asset businesses or enacted restrictive regimes in response to adverse publicity arising from hacks,

consumer harm, or criminal activity stemming from digital asset activity.

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

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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