What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-14 compared with 2026-02-12 · 277 added, 144 removed, 125 unchanged (77% of the section changed)

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other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements

and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.

The following discussion

and analysis compares our condensed consolidated results of operations for the three months ended December 31, 2025 (the “2026 Quarter”)

with those for the three months ended December 31, 2024 (the “2025 Quarter”).

All dollar amounts and percentages presented

herein have been rounded to approximate values.

Cautionary Note Regarding Forward-Looking

report contains forward-looking statements, including statements regarding our liquidity, our growth strategy, and our future business

Forward-looking statements can be identified by words such as “anticipates,” “intends,” “may,”

“potential,” “continues,” “plans,” “seeks,” “believes,” “estimates,”

“expects” and similar references to future periods.

and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (the “2025 Form 10-K”).

The following discussion and analysis compares our condensed consolidated results of operations for the three and six months ended March

31, 2026 (the “2026 Quarter” and the “2026 Period”, respectively) with those for the three and six months ended

March 31, 2025 (the “2025 Quarter” and the “2025 Period”, respectively).

All dollar amounts and percentages

presented herein have been rounded to approximate values.

Cautionary Note Regarding Forward-Looking Statements

report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, and Section

21E of the Securities Exchange Act of 1934 (the “Exchange Act”).

These forward-looking statements include, but are not limited

to, statements regarding our liquidity, capital resources and financial condition, our growth strategy and future business plans, our

expectations regarding the acquisition, holding, staking and disposition of digital assets, anticipated trends in the digital asset industry

and the Solana ecosystem, and our ability to execute our digital asset treasury strategy.

Forward-looking statements can generally be

identified by words such as “anticipates,” “intends,” “may,” “might,” “will,”

“would,” “should,” “could,” “potential,” “continues,” “plans,”

“seeks,” “believes,” “estimates,” “expects,” “projects,” “forecasts,”

“targets,” “outlook,” “guidance,” “goal,” “objective” and similar expressions,

or the negative of such terms, or other comparable terminology.

Forward-looking

statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions.

forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are

difficult to predict.

Our actual results may differ materially from those contemplated by the forward-looking statements.

We caution you

therefore against relying on any of these forward-looking statements.

They are neither statements of historical fact nor guarantees or

assurances of future performance.

The results anticipated by any or all of these forward-looking statements might not occur.

factors that could cause actual results to differ materially from those in the forward-looking statements include:

(i) the rewards and

costs associated with staking or validating transactions;

(ii) regulatory issues related to our business model, including potential classification

of crypto assets as securities and changing regulatory frameworks;

(iii) fluctuations in the price of our crypto assets;

(iv) potential

decreases in the value of our crypto assets and rewards;

(v) competition, (vi) risks related to the loss or theft of private withdrawal

keys resulting in the complete loss of crypto assets and rewards;

(vii) failure to keep our Registration Statement on Form S-3 effective

and (viii) other risks and uncertainties described in our filings with the SEC, including our Form 10-K for the fiscal year ended September

Any forward-looking statement made by us speaks only as of the date on which it is made.

Factors or events that could cause

our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.

We undertake no obligation

to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as

may be required by law.

statements are based on our current expectations, estimates, projections and assumptions regarding our business, the economy, the regulatory

environment for digital assets and other future conditions as of the date of this report.

Because forward-looking statements relate to

the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which

are beyond our control.

Our actual results, performance or achievements may differ materially from those contemplated by the forward-looking

We caution you therefore against placing undue reliance on any of these forward-looking statements.

They are neither statements

of historical fact nor guarantees or assurances of future performance.

The results anticipated by any or all of these forward-looking

statements might not occur.

Important factors that could cause actual results to differ materially from those in the forward-looking statements

include, without limitation:

fluctuations in the price of SOL and other digital assets, which have been and may continue to be highly

regulatory developments affecting digital assets, including potential classification of SOL or other crypto assets as securities

under federal or state securities laws;

risks related to cybersecurity threats, hacking, phishing and other malicious attacks that could

result in the loss, theft or misappropriation of our digital assets;

risks related to custody arrangements for our digital assets and

the potential loss of private keys;

smart contract vulnerabilities, coding errors, security flaws and exploits in blockchain protocols

we interact with;

risks associated with our participation in DeFi protocols, including liquidation risks, governance risks and protocol

concentration risk from our significant holdings in SOL and the Solana ecosystem;

the rewards and costs associated with staking

or validating transactions, which may fluctuate based on network conditions;

operational risks related to our validator infrastructure

and third-party service providers;

risks related to our At-the-Market offering facility and our ability to access capital markets;

from other digital asset treasury companies;

risks related to our share repurchase program and its impact on liquidity;

macroeconomic

conditions and their impact on digital asset markets;

failure to keep our Registration Statement on Form S-3 effective;

our ability to

service our debt and other risks and uncertainties described in Item 1A, “Risk Factors” of our 2025 Form 10-K, and in our

other filings with the SEC.

All forward-looking statements speak only as of the date on which they are made.

We expressly disclaim any

obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any

change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based,

except as required by applicable law, including federal securities laws.

Background and Business

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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.

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

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

(“Forward China”), a related party owned by the Company’s former CEO (see Note 8 to the condensed consolidated financial

(“Forward China”), a former related party owned by the Company’s former CEO (see Note 8 to the condensed consolidated

financial statements).

Unless otherwise noted, amounts

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Such fluctuations and other unforeseen changes in inputs

could have a material impact on the general and administrative expenses within our financial statements.

could have a material impact on the selling, general and administrative expenses within our financial statements.

equity grants vest upon the achievement of specified performance conditions.

Compensation expense is recognized over the estimated service

period if it is determined that achievement of the performance condition is probable.

Estimating the probability and timing of achieving

performance conditions is subjective and requires a significant amount of judgment.

Changes to these estimates and the actual timing of

any performance conditions achieved as compared to these estimates could have a material impact on the selling, general and administrative

expenses within our financial statements.

Impairment of Digital

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RESULTS OF OPERATIONS FOR

THE THREE MONTHS ENDED DECEMBER 31, 2025 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2024

THE THREE MONTHS ENDED MARCH 31, 2026 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2025

2026 Quarter Highlights

· We generated revenues of $21.4 million in the 2026 Quarter compared

to revenues of $4.6 million in the 2025 Quarter, largely driven by our new digital asset treasury strategy.

· Gross margin increased from 24.5% in the 2025 Quarter to 78.6% in the 2026 Quarter, driven by the high margin staking revenue generated

by our digital asset treasury strategy.

· In the 2026 Quarter, we launched fwdSOL, an LST developed in collaboration with Socean Labs Inc., doing

business as Sanctum, on the Solana blockchain, which enables us to generate staking yield on SOL while unlocking additional sources of

return through DeFi and institutional borrowing strategies.

· At December 31, 2025, 1,489,896 shares of the Company’s common stock had been tokenized on the Solana blockchain through Superstate

Services LLC, our co-transfer agent.

Tokenization allows for shares of common stock to be self-custodied, transferred on a peer-to-peer

basis, used in the DeFi ecosystem as collateral and to be programmed into the execution of smart contracts.

All issued shares, regardless

of form, represent identical rights and investors may switch their ownership form at their discretion upon instructions subject to applicable

procedures and requirements and processing times.

· Revenues increased more than four times to $13.0 million in the 2026

Quarter compared to $3.1 million in the 2025 Quarter, largely driven by our new digital asset treasury strategy.

· Gross margin increased significantly, from a negative 5.7% in the 2025 Quarter to 70.0% in the 2026 Quarter, driven by the high margin

staking revenue generated by our digital asset treasury strategy.

· We repurchased 9,215,000 shares of our common stock during the 2026 Quarter at a cost of $47,139,000, reducing our shares outstanding

by 10.1% from December 31, 2025.

· We secured $40 million in debt financing through Galaxy Digital LLC with a weighted average interest rate of 3.4% per year, providing

access to capital at a cost that is advantageous relative to other companies in our business.

Consolidated Results

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from continuing operations for the 2026 Quarter as compared to the 2025 Quarter.

Dollar amounts and percentages have been rounded to

approximate values.

Dollar amounts and percentages have been rounded to approximate

Consolidated Results of Operations

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Impairment of digital assets

Goodwill impairment

Derivative gain, net

Operating loss

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Interest income, net

Interest expense, net

Other expense, net

Provision for income taxes

Benefit from income taxes

Loss from continuing operations

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$ (1,822,000 )

$ (281,260,000 )

The discussion that follows

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from the 2025 Quarter to the 2026 Quarter resulted from $9,334,000 in staking and other related revenue generated by our digital assets

segment and $504,000 increase in design segment revenue, primarily attributable to the net increase in volume of work and projects with

existing and new customers.

Our gross profit increased

and gross margin increased from a negative 5.7% in the 2025 Quarter to 70.0% in the 2026 Quarter.

The increase in both gross profit and

gross margin resulted from the high margin staking revenue generated by our digital assets segment, which generated gross profit of $8,517,000

and gross margin of 91.2%.

In the design segment, gross profit increased $734,000 and gross margin increased from a negative 5.7% in the

2025 Quarter to 15.3% in the 2026 Quarter driven by improved utilization and cost cutting measures implemented in January and June of

Sales and marketing expenses

increased primarily due to personnel costs, including $256,000 of non-cash share-based compensation expense, and increased marketing spend,

both related to our new digital asset treasury strategy.

Digital assets general and

administrative expenses include $1,107,000 of asset management and related fees.

Corporate general and administrative expenses increased

$3,722,000 due to higher professional fees related to our services agreement with Galaxy, higher investor relations spending and higher

personnel costs associated with hiring personnel necessary to execute our new digital assets treasury strategy, including $542,000 of

non-cash share-based compensation expense.

Design segment general and administrative expenses decreased $263,000 due to lower personnel

costs related to staff reductions and other cost-cutting measures in response to the decline in revenues.

Management continues to monitor

the various components of general and administrative expenses and how these costs are affected by inflationary and other factors.

to adjust these costs as needed based on the overall needs of the business.

The loss on digital assets

in the 2026 Quarter of $201,706,000 was driven by the reduction in the fair value of our digital assets resulting from the decline in

the market value of SOL.

The impairment charge of $85,093,000 relates to our holdings of fwdSOL and is also driven by the decline in market

value of SOL.

These amounts reflect the volatility inherent in digital asset holdings and the Company’s accounting policy that does

not permit the reversal of impairment losses even if fair values subsequently increase.

The derivative gain is the net impact of written

SOL option contracts during the 2026 Quarter.

The change in interest income, net is due to non-cash interest income of $114,000 related

to loaned SOL plus an increase in cash interest income of $64,000 related to higher cash balances during the 2026 Quarter compared to

the 2025 Quarter.

Interest expense – related party of $59,000 represents interest expense on the $40,000,000 loan payable with Galaxy

The income tax benefit in

the 2026 Quarter resulted from the reversal of income tax expense recorded in the first quarter of fiscal 2026 resulting from the recently

completed section 382 tax study, partially offset by taxable income generated in the 2026 Quarter for which NOLs may not be available

In the 2025 Quarter, we reported no income tax provision or benefit due to the existence of significant net operating loss

carryforwards.

Consolidated basic and diluted

loss per share from continuing operations were $2.98 and $1.65 for the 2026 Quarter and the 2025 Quarter, respectively.

2026 Period Highlights

· Revenues increased more than four times to $34.4 million in the 2026

Period compared to $7.7 million in the 2025 Period, largely driven by our new digital asset treasury strategy.

· Gross margin increased significantly from 12.3% in the 2025 Period to 75.4% in the 2026 Period, driven by the high margin staking

revenue generated by our digital asset treasury strategy.

· We repurchased 10,755,000 shares of our common stock during the 2026 Period at a cost of $58,022,000, reducing our shares outstanding

by 11.4% from September 30, 2025.

· We secured $40 million in debt financing through Galaxy Digital LLC with a weighted average interest rate of 3.4% per year, providing

access to capital at a cost that is advantageous relative to other companies in our business.

Consolidated Results

The table below summarizes our consolidated results

from continuing operations for the 2026 Period as compared to the 2025 Period.

Dollar amounts and percentages have been rounded to approximate

Consolidated Results of Operations

Revenues, net

Cost of sales

Sales and marketing expenses

General and administrative expenses

Loss on digital assets

Impairment of digital assets

Derivative gain, net

Goodwill impairment

Operating loss

(867,730,000 )

(865,010,000 )

Interest income, net

Interest expense, net

Other expense, net

Provision for income taxes

Loss from continuing operations

$ (868,733,000 )

$ (2,720,000 )

$ (866,013,000 )

The discussion that follows

below provides further details about our results from continuing operations for the 2026 Period as compared to the 2025 Period.

The increase in net revenues

from the 2025 Period to the 2026 Period resulted from $26,715,000 in staking and other related revenue generated by our digital assets

segment and was partially offset by a $66,000 decline in design segment revenue, primarily attributable to the loss of a major design

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Our gross profit increased

and gross margin increased from 24.5% in the 2025 Quarter to 78.6% in the 2026 Quarter.

and gross margin increased from 12.3% in the 2025 Period to 75.4% in the 2026 Period.

The increase in both gross profit and gross margin

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gross margin of 91.7%.

In the design segment, gross profit decreased $267,000 and gross margin decreased from 24.5% in the 2025 Quarter

to 21.4% in the 2026 Quarter driven by a change in the mix of revenue coupled with higher labor costs.

In the design segment, gross profit increased $467,000 and gross margin increased from 12.3% in the 2025 Period

to 18.5% in the 2026 Period driven by improved utilization and cost cutting measures implemented in January and June of 2025.

Sales and marketing expenses

increased primarily due to increased corporate marketing spend of $446,000 related to corporate market research related activities and

was partially offset by a $71,000 reduction in the design segment, driven by cost reduction efforts, including lower personnel costs

and lower marketing spend.

increased $839,000 due to increased outside marketing spend and marketing personnel costs related to our new digital asset treasury strategy,

including $256,000 of non-cash share-based compensation expense, which was partially offset by a $42,000 reduction in design segment marketing

expenses, driven by cost reduction efforts, including lower personnel costs and lower marketing spend.

Digital assets general and

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$7,449,000 due to higher professional fees related to our services agreement with Galaxy, higher investor relations spending and higher

personnel costs associated with hiring personnel necessary to execute our new digital assets treasury strategy.

Design segment general

and administrative expenses decreased $415,000 due to lower personnel costs related to staff reductions and other cost-cutting measures

in response to the decline in revenues.

Management continues to monitor the various components of general and administrative expenses

and how these costs are affected by inflationary and other factors.

We intend to adjust these costs as needed based on the overall needs

of the business.

During the 2025 Quarter,

the Company recorded a design segment goodwill impairment charge of $225,000 related to the IPS reporting unit.

This impairment charge

resulted from recurring impairment testing and was driven by a reduction in expected future performance of the reporting unit.

personnel costs associated with hiring personnel necessary to execute our new digital assets treasury strategy, including $559,000 of

non-cash share-based compensation expense.

Design segment general and administrative expenses decreased $676,000 due to lower personnel

costs related to staff reductions and other cost-cutting measures in response to the decline in revenues.

Management continues to monitor

the various components of general and administrative expenses and how these costs are affected by inflationary and other factors.

to adjust these costs as needed based on the overall needs of the business.

During the 2025 Period, the

Company recorded a design segment goodwill impairment charge of $225,000 related to the IPS reporting unit.

This impairment charge resulted

from recurring impairment testing and was driven by a reduction in expected future performance of the reporting unit.

The loss on digital assets

in the 2026 Quarter of $560,212,000 was driven by the reduction in the fair value of our digital assets resulting from the decline in

the market value of SOL.

The non-cash impairment charge of $33,044,000 relates to our holdings of fwdSOL and is also driven by the decline

in market value of SOL.

These amounts reflect the volatility inherent in digital asset holdings and the Company’s accounting policy

that does not permit the reversal of impairment losses even if fair values subsequently increase.

The change in interest income, net is

due to non-cash interest income of $479,000 related to loaned SOL plus an increase in cash interest income of $193,000 related to higher

cash balances during the 2026 Quarter compared to the 2025 Quarter.

in the 2026 Period of $761,919,000 was driven by the reduction in the fair value of our digital assets resulting from the decline in the

market value of SOL.

The impairment charge of $118,137,000 relates to our holdings of fwdSOL and is also driven by the decline in market

value of SOL.

These amounts reflect the volatility inherent in digital asset holdings and the Company’s accounting policy that does

not permit the reversal of impairment losses even if fair values subsequently increase.

The derivative gain is the net impact of written

SOL option contracts during the 2026 Period.

The change in interest income, net is due to non-cash interest income of $594,000 related

to loaned SOL plus an increase in cash interest income of $245,000 related to higher cash balances during the 2026 Period compared to

the 2025 Period.

The income tax provision

in the 2026 Quarter resulted from taxable income generated for which NOLs may not be available to offset due to certain IRS limitations.

For the three months ended December 31, 2024, we reported no income tax provision or benefit due to the existence of significant net operating

loss carryforwards.

in the 2026 Period resulted from taxable income generated for which NOLs may not be available to offset due to certain IRS limitations.

For the 2025 Period, we reported no income tax provision or benefit due to the existence of significant net operating loss carryforwards.

Consolidated basic and diluted

loss per share from continuing operations were $5.91 and $0.82 for the 2026 Quarter and the 2025 Quarter, respectively.

loss per share from continuing operations were $8.95 and $2.47 for the 2026 Period and the 2025 Period, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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our primary source of liquidity has been our operations.

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

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

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

course of business.

Following our strategic pivot to a digital asset treasury strategy in September 2025, our liquidity profile has fundamentally

While we anticipate that our current liquidity and financial resources will remain adequate to manage our operating and financial

requirements for at least the next twelve months from the date of this filing, this assessment assumes that we will be able to liquidate

digital assets in amounts and at times necessary to meet our obligations, which may not be possible during periods of market stress or

reduced liquidity.

Additionally, our liquidity assessment does not account for potential margin calls or collateral requirements that

may arise from our DeFi activities, lending arrangements, or borrowing against pledged SOL.

Our ability to maintain adequate liquidity

depends on various factors including the market value of our digital assets, our ability to liquidate digital assets when needed, the

parameters of our share repurchase program and our ongoing operating expenses.

At December 31, 2025, our working capital was approximately

$52.9 million.

At January 31, 2026, our cash balance was approximately $12 million.

In December 2025 and January

2026, we executed open market purchases totaling 3,330,000 shares at an average cost of $7.32 per share for an aggregate cost of $24,387,000,

inclusive of fees.

If we have the opportunity

to make a strategic acquisition or an investment in a product or partnership, we may require additional capital beyond our current cash

balance to fund the opportunity.

During the 2026 Quarter and

2025 Quarter, our sources and uses of cash were as follows:

During the 2026 Quarter,

cash used in operating activities of $7,929,000 resulted from a net loss of $585,651,000, non-cash net digital asset revenue of $16,462,000,

an increase in accounts receivable and contract assets of $1,202,000, an increase in prepaid expenses and other current assets of $1,796,000,

partially offset by the loss on digital assets of $560,212,000, the digital asset impairment charge of $33,044,000, an increase in accrued

expenses and other liabilities $2,813,000, a net increase in accounts payable and related party payables of $642,000, an increase in deferred

income of $428,000 and non-cash charges for depreciation, amortization and share-based compensation of $43,000.

During the 2025 Quarter,

cash used in operating activities of $434,000 resulted from a net loss of $708,000, a decrease in deferred income of $121,000, a decrease

in accrued expenses and other current liabilities of $131,000 and cash used in discontinued operations of $81,000, partially offset by

a net decrease in accounts receivable and contract assets of $172,000, non-cash charges for depreciation, amortization, share-based compensation,

credit losses and goodwill impairment of $353,000 and the net change in other operating assets and liabilities of $82,000.

Following our strategic pivot to a digital asset treasury strategy in September

2025, our liquidity profile has fundamentally changed.

While we anticipate that our current liquidity and financial resources will remain

adequate to manage our operating and financial requirements for at least the next twelve months from the date of this filing, this assessment

assumes that we will be able to liquidate digital assets in amounts and at times necessary to meet our obligations, which may not be possible

during periods of market stress or reduced liquidity.

Additionally, our liquidity assessment does not account for potential margin calls

or collateral requirements that may arise from our DeFi activities, lending arrangements, or borrowing against pledged digital assets.

Our ability to maintain adequate liquidity depends on various factors including the market value of our digital assets, our ability to

liquidate digital assets when needed, the parameters of our share repurchase program and our ongoing operating expenses.

At March 31, 2026, we had

negative working capital of approximately $33.0 million.

At April 30, 2026, our cash balance was approximately $20.0 million.

believes this negative working capital position does not raise substantial doubt about its ability to continue as a going concern because

of our significant digital asset holdings, access to our ATM facility, and our ability to liquidate digital assets as needed to meet our

From October 1, 2025 through

April 30, 2026, we repurchased 12,390,000 shares for an aggregate cost of $65,427,000, inclusive of fees.

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, from March through May 2026,

the Company executed eight separate Loans in an aggregate amount of $80,000,000, all of which remains outstanding as of the filing date

of this report.

These Loans have a weighted average interest rate of 2.7% and maturity dates ranging from 7 days to 1 year, with $55,000,000

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.

The Loans are secured by the Company’s fwdSOL, which Galaxy LLC has the right to sell, pledge or rehypothecate

per the terms of the Loan Agreement.

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 investment remains subject to regulatory approval from the Bermuda Monetary

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 capacity.

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.

The Company has evaluated

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

If we have the opportunity to make other strategic

acquisitions or investments in a product or partnership, we may require additional capital beyond our current cash balance to fund the

During the 2026 Period and

2025 Period, our sources and uses of cash were as follows:

During the 2026 Period, cash

used in operating activities of $12,728,000 resulted from a net loss of $868,733,000, non-cash net digital asset revenue of $25,093,000,

an increase in prepaid expenses and other current assets of $1,673,000, and a decrease in accounts payable and related party payables

of $530,000 partially offset by the loss on digital assets of $761,919,000, the digital asset impairment charge of $118,137,000, an increase

in accrued expenses and other liabilities $2,009,000, non-cash charges for depreciation, amortization and share-based compensation of

$864,000, and the net change in other operating assets and liabilities of $372,000.

During the 2025 Period, cash

used in operating activities of $972,000 resulted from a net loss of $2,160,000, a decrease in accrued expenses and other current liabilities

of $153,000 and net cash used in discontinued operations of $92,000, partially offset by non-cash expenses of $462,000 related to depreciation,

amortization, share-based compensation, credit loss expense and goodwill impairment and a decrease in accounts receivable and contract

assets of $912,000 and the net change in other operating assets and liabilities of $59,000.

Investing Activities

Cash used in investing activities

in the 2026 Quarter consisted of purchases of digital assets of $335,050,000 and sales of digital assets of $333,973,000.

investing activities in the 2025 Quarter of $5,000 resulted from purchases of property and equipment.

Cash provided by investing

activities in the 2026 Period consisted of proceeds from the sale of digital assets of $338,068,000, offset by purchases of digital assets

of $335,977,000 and purchases of property and equipment of $3,000.

Cash used in investing activities in the 2025 Period of $7,000 resulted

from purchases of property and equipment.

Cash used in financing activities

in the 2026 Quarter consisted of share repurchases of $10,883,000, fees associated with financing activities of $229,000, and deferred

financing costs associated with our ATM of $144,000, partially offset by net proceeds from ATM of $7,457,000 and proceeds from stock options

exercised of $26,000.

There was no cash used in or provided by financing activities in the 2025 Quarter.

in the 2026 Period consisted of share repurchases of $58,022,000, fees associated with financing activities of $230,000 and deferred financing

costs associated with our ATM of $144,000, partially offset by proceeds from loans payable of $40,000,000, net proceeds from the ATM of

$7,457,000 and proceeds from stock options exercised of $45,000.

There was no cash used in or provided by financing activities in the

Related Party Transactions

2 unchanged sentences

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

As a smaller reporting company,

the Company is not required to provide the information called for by this Item.

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 2. Management’s Discussion and Analysis