What changed in this filing

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Item 1. Financial Statements

2026-08-12 compared with 2026-05-14 · 694 added, 492 removed, 856 unchanged (58% of the section changed)

FINANCIAL STATEMENTS

ITEM 1 FINANCIAL STATEMENTS

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

September 30,

Current assets:

Accounts receivable,

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

Marketable equity securities, at fair value

Accounts receivable, net of allowances for credit losses of

as of June 30, 2026 and September 30, 2025, respectively

Contract assets

Prepaid expenses

and other current assets

Digital assets receivable - related party

Derivative assets

Prepaid expenses and other current assets

Total current assets

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Current liabilities:

Loans payable - related

Loans payable - related party

$ 105,000,000

Loans payable - digital assets

Accounts payable

Accounts payable - related

Accounts payable - related party

Deferred income

Current portion of operating lease

Accrued expenses

and other current liabilities

Total current

Derivative liabilities

Current portion of operating lease liability

Accrued expenses and other current liabilities

Total current liabilities

Other liabilities:

Operating lease

liability, less current portion

Operating lease liability, less current portion

Total liabilities

Commitments and contingencies (See Note 9 and 10)

Commitments and contingencies (See Notes 4, 10 and 11)

Shareholders’ equity:

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300,000,000 shares authorized;

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

87,163,107 and

73,846,883 shares issued and outstanding, respectively, at June 30, 2026;

86,145,514 shares issued and outstanding at September

Treasury Stock, at cost, 13,316,224 and 0 shares at June 30, 2026 and September 30,

2025, respectively

Additional paid-in capital

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1,655,874,892

Accumulated deficit

( 1,124,303,875 )

( 186,611,480 )

Total shareholders'

Total shareholders’ equity

1,470,124,867

Total liabilities

and shareholders' equity

Total liabilities and shareholders’ equity

$ 602,534,664

$ 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.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Six Months

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Revenues, net

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Impairment of digital assets

Derivative gain, net

Derivative loss, net

Goodwill impairment

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Interest expense - related party

Other expense, net

Gain on change in fair value of marketable equity securities

Gain on change in fair value of warrant liability

Other (income)/ expense, net

Loss from continuing operations before income taxes

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(Benefit from) / provision for income taxes

( 1,732,100 )

Loss from continuing operations

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( 3,009,698 )

Deemed dividend on Series B Convertible Preferred Stock

Net loss attributable to common shareholders

$ ( 68,959,173 )

$ ( 860,300 )

$ ( 937,692,395 )

$ ( 3,019,976 )

Basic (loss)/earnings per share :

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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.

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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

the Six Months Ended March 31, 2026

For the Nine Months Ended June 30, 2026

Series A-1 Convertible

Series B Convertible

Preferred Stock

Treasury Stock

Balance at September 30, 2025

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$ 551,456,585

the Six Months Ended March 31, 2025

Share-based compensation

Proceeds from ATM, net

Share repurchases

( 2,561,376 )

( 11,840,450 )

( 68,959,173 )

Balance at June 30, 2026

( 13,316,224 )

$ ( 69,862,786 )

$ 1,667,506,242

$ ( 1,124,303,875 )

$ 474,211,212

For the Nine Months Ended June 30, 2025

Series A-1 Convertible

Series B Convertible

Preferred Stock

Treasury Stock

Balance at September 30, 2024

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( 1,451,611 )

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

Preferred stock issued in connection with conversion of accounts payable

to Forward China

Balance at March 31, 2025

( 21,796,816 )

Share-based compensation

Issuance of preferred stock, net of issuance costs

Common stock issued in connection with ELOC

Balance at June 30, 2025

$ ( 22,646,838 )

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

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

Nine Months Ended June 30,

Operating Activities:

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( 31,106,976 )

Loss on derivatives, net

Goodwill impairment

Gain on change in fair value of

marketable equity securities

Gain on change in fair value of

warrant liability

Gain on sale of OEM segment

( 1,405,972 )

Changes in operating assets and liabilities:

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Contract assets

Prepaid expenses and other current

Prepaid expenses and other current assets

( 1,028,280 )

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Net changes in operating lease liabilities

Accrued expenses

and other current liabilities

Net cash used in operating activities-continuing

Accrued expenses and other current

Net cash used in operating activities-continuing operations

( 16,078,546 )

Net cash used

in operating activities-discontinued operations

Net cash used

in operating activities

( 2,595,483 )

Net cash provided by operating

activities-discontinued operations

Net cash used in operating activities

( 16,078,546 )

( 2,199,330 )

Investing Activities:

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( 386,292,183 )

Sales of digital

Net cash provided

by / (used in) investing activities

Sales of digital assets

Purchase of marketable equity securities

( 2,300,164 )

Purchase of investment

( 1,900,943 )

Premiums paid on derivatives

( 9,481,156 )

Premiums received on derivatives

Cash paid for sale of OEM segment

Net cash used in investing activities

( 53,714,757 )

Financing Activities:

Fees associated with Securities Purchase

Proceeds from loans payable-related party

Payments of loans payable-related party

( 7,500,000 )

Fees associated with Securities Purchase Agreement

Proceeds from ATM, net

Proceeds from loans payable-related

Proceeds from stock options exercised

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Exercise of pre-funded warrants

Deferred financing

costs associated with ATM

Net cash used

in financing activities

( 10,893,861 )

Deferred financing costs associated with ATM

Proceeds from issuance of preferred stock and warrants,

net of related issuance costs

Deferred financing costs associated

with equity line of credit

Net cash provided by financing

Net decrease in cash

( 27,201,808 )

( 1,513,963 )

Cash at beginning of period

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Cash paid for taxes

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

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Operating lease assets obtained in exchange for operating

lease liabilities

Digital assets pledged as collateral

Digital assets received in exchange

for loan payable

Conversion of accounts payable to convertible preferred

Digital assets received in exchange for loan payable

Fair value of commitment shares issued for equity line

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

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AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 OVERVIEW

Background and Nature of

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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.

have been executing to date by holding SOL, staking SOL, operating a SOL validator, investing in SOL ecosystem participants, engaging

in SOL decentralized finance (“DeFi”) and actively repurchasing shares of our common stock.

our new treasury policy and strategy, the principal holding in our treasury reserve on the balance sheet will be allocated to digital

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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.

had an accumulated deficit of $ 1,124,304,000 and negative working capital of $ 105,655,000 at June 30, 2026, incurred a net loss of $ 937,692,000

and used $ 16,079,000 of cash in operating activities during the nine months ended June 30, 2026.

The Company had a cash balance of approximately

$ 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.

$ 4,500,000 at August 3, 2026.

FORWARD INDUSTRIES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING POLICIES

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 August 2027.

NOTE 2 ACCOUNTING POLICIES

Basis of Presentation

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Forward Industries

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

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

and Kablooe, Inc.

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

As a result, our operating results for the 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.

(“Forward US”), DE Sub 1 LLC (“Forward Delaware”), Forward Investments 1, LLC (“Forward Investments”),

Forward Industries (Switzerland) GmbH (“Forward Switzerland”), Forward Industries UK Limited (“Forward UK”), Intelligent

Product Solutions, Inc.

(“IPS”) and Kablooe, Inc.

In May 2025, the Company sold all of its

equity interests in Forward Switzerland and Forward UK.

As a result, our operating results for the three and nine months ended June

30, 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.

In March 2026, the Company’s

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

In April 2026, the Company

invested approximately $ 1.9 million, through a combination of primary and secondary share purchases, in On Re Ltd (“On Re”),

a private tokenized reinsurance company on the Solana blockchain.

An additional $ 266,000 primary subscription remains subject to regulatory

approval from the Bermuda Monetary Authority.

The Company’s investment in On Re is accounted for under the cost method (see Note

In the opinion of management,

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See Note 6 for additional information on our segments.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Digital Assets

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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

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at fair value.

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 loses control of the collateral assets.

Where control of the collateral

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

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 loses control of the collateral assets.

Where control of the

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

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable

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adjusted as necessary based on specific customer situations.

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

At June 30, 2026, September 30, 2025 and September 30, 2024, the Company

had allowances for credit losses of $ 98,000 , $ 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.

The Company enters into over-the-counter

(“OTC”) derivative contracts, including options referencing the price of digital assets such as SOL primarily for the purpose

of trading, risk management and treasury management of its digital assets.

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.

The Company does not

offset cash collateral paid or received against derivative assets or liabilities.

Written options represent

obligations of the Company and are recorded as derivative liabilities and purchased options represent rights of the Company and are recorded

as derivative assets.

The Company receives or pays an upfront premium at inception, which generally represents the initial fair value

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

Derivative instruments are derecognized upon expiration or settlement.

Cost / Equity Method Investments

The Company accounts for

investments in entities over which it has the ability to exercise significant influence, but not control, using the equity method of accounting

in accordance with ASC Topic 323, “Investments—Equity Method and Joint Ventures.” Significant influence is generally

presumed to exist when the Company holds 20% or more of the voting interest of an investee, although the determination requires judgment

and consideration of all relevant facts and circumstances, including representation on the investee’s board of directors, participation

in policy-making processes, material intra-entity transactions, interchange of managerial personnel, and technological dependency.

the Company does not exercise significant influence, it will generally account for investments using the cost method.

Under the equity method,

the investment is initially recorded at cost and subsequently adjusted to recognize the Company’s proportionate share of the investee’s

net income or loss.

The Company’s proportionate share of the investee’s earnings or losses is recognized in the condensed

consolidated statements of operations on a three-month lag.

The Company evaluates its

equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment

may not be recoverable.

An impairment loss is recognized when the decline in fair value below the carrying amount is determined to be

other than temporary.

Investments in Marketable Equity Securities

In June 2026, the Company

purchased certain marketable equity securities.

The Company carries its investments in marketable equity securities at fair value, which

is based on quoted prices for the securities, which is categorized within Level 1 of the fair value hierarchy.

Marketable securities

are categorized as current assets if the Company intends to sell them or otherwise realize their value within twelve months after the

reporting date, or as noncurrent assets if the Company intends to hold them for longer than twelve months.

The Company evaluates its

intent and ability to hold marketable equity securities at each reporting date.

Changes in market value are recorded through earnings

each reporting period.

At June 30, 2026, the Company held the following marketable equity securities:

Schedule of marketable equity securities

Strategy Series A Perpetual Preferred Stock (“STRF”)

FORWARD INDUSTRIES, INC.

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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.

The following table summarizes

the Company’s marketable equity securities and adjustments to fair value at June 30, 2026:

Schedule of adjustments to fair value

Marketable equity securities at cost

Cumulative unrealized gain on marketable equity securities

Marketable equity securities at fair value

There were no sales of marketable

equity securities during the three or nine months ended June 30, 2026.

Treasury Stock

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treasury stock using the cost method.

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

As of June 30, 2026 and September 30, 2025, the Company held 13,316,000 and 0 shares of its common

stock in treasury, purchased at a total cost of $ 69,863,000 and $ 0 , respectively.

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

segment had contract assets of $ 543,000 , $ 1,064,000 and $ 1,273,000 at March 31, 2026, September 30, 2025 and September 30, 2024,

segment had contract assets of $ 476,000 , $ 1,064,000 and $ 1,273,000 at June 30, 2026, September 30, 2025 and September 30, 2024,

respectively.

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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.

liabilities of $ 505,000 , $ 293,000 and $ 399,000 at June 30, 2026, September 30, 2025 and September 30, 2024, respectively.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Disaggregation of Revenue

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revenue amounts.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes future

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

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

benefits is more likely than not.

At 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.

Utilization of NOLs may be

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

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

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

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

these benefits is more likely than not.

At June 30, 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 more likely than not that such deferred tax assets will be realized.

Utilization of NOLs may be subject to substantial

limitation under Section 382 of the Internal Revenue Code of 1986, as amended, due to ownership changes that have occurred previously

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

In addition, NOLs

generated in tax years beginning after December 31, 2017 are subject to an annual limitation that restricts their use to 80% of taxable

income in any given year.

Similar rules may apply under state tax laws.

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.

The Company engaged external tax advisors to perform a comprehensive

Section 382 study, which was completed in April 2026.

The study concluded that an ownership change occurred in connection with the Company’s

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

Our tax provision

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

at the time we filed our financial statements for that period.

Following completion of the study, our tax provision for the three months

ended March 31, 2026 was estimated with the benefit of those NOLs that could be utilized under the annual Section 382 limitation and the

80% taxable income limitation and included a cumulative adjustment to reflect the NOLs benefit that was not recognized in the first quarter.

Our tax provision for the three months ended June 30, 2026 was likewise estimated with the benefit of those NOLs, subject to the annual

Section 382 limitation and the 80% taxable income limitation.

Our income tax (benefit)/provision

for the three and nine months ended June 30, 2026 was primarily attributable to taxable income for which NOLs were not available to fully

offset due to the Section 382 and 80% taxable income limitations described above, as well as changes to our forecasted full year taxable

income each quarter.

For the three and nine months ended June 30, 2025, we reported no income tax provision or benefit due to the existence

of significant net operating loss carryforwards.

Our effective tax rate was 2.5 % and 0.0 % for the three months ended June 30, 2026 and

2025, respectively.

Our effective tax rate was - 0.01 % and 0.0 % for the nine months ended June 30, 2026 and 2025, respectively.

Fair Value Measurements

ASC 820 establishes a fair

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

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

to the fair value measurement.

ASC 820 establishes three levels of inputs that may be used to measure fair value:

ASC 820, “Fair Value

Measurements,” establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize

the use of unobservable inputs when measuring fair value.

An asset’s or liability’s categorization within the fair value hierarchy is

based upon the lowest level of input that is significant to the fair value measurement.

ASC 820 establishes three levels of inputs that

may be used to measure fair value:

quoted prices in active markets for identical assets or liabilities;

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

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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

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

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.

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.

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.

For purposes of

impairment testing, digital assets outside the scope of ASC 350-60 – wrapped tokens such as fwdSOL, which provide the holder

an enforceable right to redeem the underlying digital assets, and ONyc, which provides the holder rights to economic returns on On

Re’s reinsurance program with a value of $ 62,133,000

and $ 17,426,000 ,

respectively at June 30, 2026, are not measured at fair value, but rather, tested for impairment each reporting period.

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 nine months ended June 30,

2026, the Company evaluated its fwdSOL digital assets for impairment and determined that the lowest observable fair value during

each of the respective holding periods was approximately $60.35 per token, resulting in impairment charges of $ 14,600,000

and $ 132,737,000

for the three and nine months ended June 30, 2026, respectively.

During the three and nine months ended June 30, 2026, the Company

evaluated its ONyc digital assets for impairment and determined that the lowest observable fair value during each of the respective

holding periods was approximately $1.06 per token, resulting in an impairment charge of $ 622,000

for the three and nine months ended June 30, 2026.

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.

in the valuation of its 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 or the amount they would pay to acquire the Company’s

rights as the seller of options in an orderly transaction on the measurement date.

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

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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.

During the three and nine

months ended June 30, 2026, the Company entered into option contracts referencing the price of SOL.

Implied volatility for these contracts

2 unchanged sentences

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.

risk, including the impact of collateral pledged, and concluded that nonperformance risk, including the Company’s own credit risk

with respect to written options and counterparty credit risk with respect to purchased options, did not materially affect the fair value

of its derivative instruments.

See Note 12 for more information on derivative contracts.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

Schedule of fair value assets and liabilities

March 31, 2026

June 30, 2026

Digital assets

2 unchanged sentences

Digital assets - restricted

Digital assets pledged for collateral with related party

Digital assets pledged as collateral with related party

Derivative assets

Marketable equity securities

Loans Payable - Digital Assets

Derivative liabilities

September 30, 2025

4 unchanged sentences

2, or Level 3 during the period.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

following tables summarize changes in assets and liabilities measured and reported at fair value for which Level 3 inputs have been

used to determine fair value for the three months ended June 30, 2026:

Schedule of assets and liabilities measured and reported at fair value

March 31, 2026

Net Unrealized

June 30, 2026

Derivative Assets

$ ( 2,809,000 )

$ ( 2,354,000 )

Derivative Liabilities

( 8,511,000 )

( 1,044,000 )

$ ( 7,344,000 )

following table presents additional information about valuation methodologies and significant unobservable inputs used for assets and

liabilities that are measured and reported at fair value and categorized within Level 3 as of June 30, 2026:

Schedule of significant unobservable inputs

Financial Instrument

Derivative assets and liabilities

Implied volatility

Share-Based Compensation

10 unchanged sentences

compensation cost on a straight-line basis over each separately vesting portion of the award as if the award was, in substance, multiple

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Lease assets and liabilities

2 unchanged sentences

one readily available.

The Company has certain leases that may include an option to renew and when it is reasonably probable to exercise

such option, the Company will include the renewal option terms in determining the lease asset and lease liability.

Lease assets represent

the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation

to make lease payments arising from the lease.

Lease expense for lease payments is recognized on a straight-line basis over the lease

The Company has certain leases that may include an option to renew and when it is reasonably probable that the

Company will exercise such option, the Company will include the renewal option terms in determining the lease asset and lease liability.

Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s

obligation to make lease payments arising from the lease.

Lease expense for lease payments is recognized on a straight-line basis over

the lease term.

Operating lease assets are shown as right-of-use assets on the condensed consolidated balance sheets.

The current and long-term

portions of operating lease liabilities are shown separately as such on the condensed consolidated balance sheets.

The current and

long-term portions of operating lease liabilities are shown separately as such on the condensed consolidated balance sheets.

Recent Accounting Pronouncements

3 unchanged sentences

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.

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 captions.

ASU 2024-03 will also require the Company to disclose

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

This ASU is effective for fiscal years beginning after

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

The Company is currently evaluating the

effects of the pronouncement on its condensed consolidated financial statements.

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.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

NOTE 3 DISCONTINUED

OPERATIONS AND ASSETS HELD FOR SALE

In March 2025, in connection

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

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

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

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 three and six months ended March 31, 2025.

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

Schedule of discontinued operations

3 unchanged sentences

General and administrative expenses

Operating income from discontinued operations

Gain on sale of discontinued operations

Income from discontinued operations

There were no material amounts

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

of depreciation, amortization or financing cash flow activities in the three or nine months ended June 30, 2025.

Investing cash flows

related to the discontinued operations for the three and nine months ended June 30, 2025 included $ 200,000 paid for the sale of the OEM

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

conversion of accounts payable to Forward China into preferred stock in February and March of 2025 (See Note 9).

NOTE 4 INVESTMENT

During the three months ended

June 30, 2026, the Company acquired 126,000 shares of On Re, a private tokenized reinsurance company on the Solana blockchain which is

incorporated in England and Wales.

The shares acquired represent approximately 9.9 % of On Re’s shares on a fully diluted basis and

were purchased in a combination of newly issued shares and shares purchased from existing On Re shareholders.

An additional $ 266,000 primary

subscription for 18,000 additional shares remains subject to regulatory approval from the Bermuda Monetary Authority.

At June 30, 2026,

the Company did no t have significant influence over On Re and therefore accounted for this investment under the cost method.

The investment

in On Re was recorded at $ 1,901,000 , representing the cash paid for the shares purchased.

The Company will evaluate the accounting for

this investment in future periods as needed.

In connection with the Company’s

investment in On Re, the Company committed to purchase up to $ 25 .0 million of On Re’s ONyc token, which is built natively and trades

exclusively on the Solana blockchain.

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,

the lead co-investors have the right to acquire the Company’s equity stake in On Re at the original purchase price.

During the three

and nine months ended June 30, 2026, the Company purchased $ 18,048,000 of On Re’s ONyc token.

The Company has evaluated its remaining

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

NOTE 5 DIGITAL ASSETS

The following table shows the quantity of tokens,

1 unchanged sentence

Schedule of fair value

March 31, 2026

June 30, 2026

Historical Cost

3 unchanged sentences

Digital assets measured at fair value

1,006,874,000

Digital assets not measured at fair value

2 unchanged sentences

$ 337,066,000

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025

4 unchanged sentences

Restricted Digital Assets

The doublezero

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

approximately October 2029.

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 $ 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 March 31, 2026, the majority of the

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

The Company had staked digital

assets, including assets staked on a liquid staking platform, with a carrying value of $ 314.1 million and $ 1,430.5 million as of

June 30, 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 June 30, 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 and six months ended March 31, 2026 were $ 9,334,000

and $ 26,715,000 ,

respectively.

SEGMENTS AND CONCENTRATIONS

generated from proprietary staking activities for the three and nine months ended June 30, 2026 were $ 7,345,000 and $ 34,060,000 , respectively.

NOTE 6 SEGMENTS AND CONCENTRATIONS

As a result of our new digital

10 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

Three Months Ended

Six Months Ended

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Cost of revenues

2 unchanged sentences

Loss on digital assets

Derivative gain, net

Derivative loss, net

Interest income

2 unchanged sentences

$ ( 921,882,000 )

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Design Segment

Three Months Ended

Six Months Ended

For the Three Months Ended June

For the Nine Months Ended June 30,

Cost of revenues

8 unchanged sentences

Other segment expenses (b)

Income/(loss) from continuing operations before income taxes

Loss from continuing operations before income taxes

$ ( 1,552,000 )

1 unchanged sentence

$ ( 3,027,000 )

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

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

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

separately in accordance with the related accounting guidance.

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

processing fees, and various other general and administrative expenses.

The following table is a

3 unchanged sentences

of segment loss

Three Months Ended

Six Months Ended

For the Three Months Ended June

For the Nine Months Ended June 30,

Digital asset segment loss from continuing operations before taxes

1 unchanged sentence

$ ( 921,882,000 )

Design segment income (loss) from continuing operations before taxes

Design segment loss from continuing operations before taxes

( 1,552,000 )

10 unchanged sentences

Segment assets are shown

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

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

Schedule of segment assets

10 unchanged sentences

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.

more than 10 % of the Company’s consolidated net revenues for the three and nine months ended June 30, 2026.

Revenues from two design

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

Revenues from three

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

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accounts receivable from

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

two design segment customers represented 59.1 % of the Company’s consolidated accounts receivable at June 30, 2026.

Accounts receivable

from three design segment customers represented 49.4 % of the Company’s consolidated accounts receivable at September 30, 2025.

There was no concentration

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

SHAREHOLDERS’ EQUITY

NOTE 7 SHAREHOLDERS’

At-the-Market Offering

8 unchanged sentences

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

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

During the three months ended June 30, 2026, we sold 94,000

shares of common stock under the ATM for gross proceeds of $ 435,000 and incurred fees related to the ATM of $ 11,000 , which have been recorded

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

During the nine months ended June 30,

2026, we sold 406,000 shares of common stock under the ATM for gross proceeds of $ 8,084,000 and incurred fees related to the ATM of $ 202,000 ,

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

Shares Reserved for

Future Issuance

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

to the ATM, (ii) 12,264,602 shares related to pre-funded warrants, and (iii) 13,376,388 shares related to other warrants.

June 30, 2026, the Company had a total of 127,675,836 shares reserved for future issuance as follows:

(i) 102,034,846 shares related to

the ATM, (ii) 12,264,602 shares related to pre-funded warrants, and (iii) 13,376,388 shares related to other warrants.

Tokenization of Common

3 unchanged sentences

of the Company’s common stock.

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

At June 30, 2026, approximately 7,290,000 shares of the Company’s common stock had been tokenized.

Share Repurchases

9 unchanged sentences

or terminated at any time.

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.

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.

the three months ended June 30, 2026, the Company executed open market purchases of 2,561,000 shares at an average cost of $ 4.62 per share

for an aggregate cost of $ 11,840,000 , inclusive of fees, which was recorded as a component of treasury stock.

During the nine months ended

June 30, 2026, the Company executed open market purchases of 7,152,000 shares at an average cost of $ 5.94 per share for an aggregate cost

of $ 42,493,000 , 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 9).

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

the Company repurchased 6,164,000 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

3 unchanged sentences

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

2 unchanged sentences

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.

During the nine months ended

June 30, 2026, the Company granted options to management to purchase an aggregate of 1,186,606 shares of its common stock at a weighted

average exercise price of $10.32 per share.

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 $ 2.99 per share and an aggregate grant-date fair value of $ 3,554,000 , which will be recognized, net of forfeitures, ratably

over the vesting period.

During the nine months ended

June 30, 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 $ 1,223,000 , 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:

applying the Black-Scholes option pricing model to options granted during fiscal 2026, the Company used the following assumptions:

Schedule of assumptions

5 unchanged sentences

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.

Company recognized compensation expense for stock option awards of $ 1,425,000 during the three months ended June 30, 2026, of which $ 337,000

was recorded as a component of sales and marketing expenses and $ 1,088,000 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 $ 1,980,000 during the nine months ended June 30, 2026, of which $ 593,000 was recorded as a component of sales and marketing expenses

and $ 1,387,000 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 $ 39,000 and $ 86,000 during the three and nine months ended June

30, 2025, respectively, which was recorded as a component of general and administrative expenses in its condensed consolidated statements

of operations.

As of June 30, 2026, there was $ 2,850,000 total unrecognized compensation cost related to nonvested stock option

awards that is expected to be recognized over a weighted average period of 1.6 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.

the nine months ended June 30, 2026, the Company granted to certain members of management 950,996 restricted stock units (“RSUs”)

that contain only service conditions for vesting.

The RSUs have an aggregate grant date fair value of $ 4,527,000 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.

recognized compensation expense for RSUs of $ 744,000 and $ 893,000 in the three and nine months ended June 30, 2026, respectively, which

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

statements of operations .

There was no expense related to RSU awards in the three or nine months ended June 30, 2025.

FORWARD INDUSTRIES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of June 30, 2026, there was $ 3,634,000 total unrecognized compensation cost related to nonvested RSUs that is expected to be recognized

over a weighted average period of 1.9 years.

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

the nine months ended June 30, 2026, the Company granted to certain members of management 1,156,736 restricted stock units that contain

both service and performance conditions for vesting (“PSUs”).

The PSUs have an aggregate grant date fair value of $ 5,521,000

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 $ 962,000 and $ 1,071,000 in the three and nine months ended June 30, 2026, respectively, which was

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

no expense related to PSU awards in the three or nine months ended June 30, 2025.

of June 30, 2026, there was $ 980,000 total unrecognized compensation cost related to nonvested PSUs that is expected to be recognized

over a weighted average period of 0.3 years.

LOSS / EARNINGS PER SHARE

NOTE 8 LOSS / EARNINGS

Basic loss/earnings per share

9 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Loss from continuing operations

3 unchanged sentences

$ (5,124,000 )

Income from discontinued operations, net of tax

Less deemed dividend on Series B Convertible Preferred Stock

Loss from continuing operations attributable to common shareholders

( 68,959,000 )

2 unchanged sentences

( 5,134,000 )

Income from discontinued operations, net of tax

Net loss attributable to common shareholders

$ (68,959,000 )

$ (937,692,000 )

$ (3,020,000 )

Weighted average common shares outstanding

4 unchanged sentences

Basic earnings per share from discontinued operations

Basic loss per share

Basic loss per share attributable to common shareholders

Diluted (loss) / earnings per share:

1 unchanged sentence

Diluted earnings per share from discontinued operations

Diluted loss per share

Diluted loss per share attributable to common shareholders

FORWARD INDUSTRIES, INC.

1 unchanged sentence

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:

The following securities were excluded from the

calculation of diluted earnings per share for the three and nine months ended June 30, 2026 and 2025 because their inclusion would have

been anti-dilutive:

Schedule of anti-dilutive shares

For the Three Months Ended

For the Six Months Ended

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Convertible preferred stock

Options and RSUs

Total potentially dilutive shares

RELATED PARTY TRANSACTIONS

Galaxy Service Agreement

The Company has a services

NOTE 9 RELATED PARTY

Galaxy Services Agreement

The Company had a services

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

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

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

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

Galaxy did not provide any (i) tax advice or services, (ii) legal advice or services, or (iii) advice in connection with the

Investment Company Act of 1940, as amended, or any related analyses thereto.

As compensation for its services

1 unchanged sentence

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.

to extend the Services Agreement through June 10, 2026 and to reduce the monthly fees to $ 100,000 per month, at which point it expired

according to its terms.

During the three and nine months ended June 30, 2026, the Company incurred fees of $ 233,000 and $ 3,390,000 , respectively,

under the Services Agreement, which were recorded as a component of general and administrative expenses - related party on the condensed

consolidated financial statements.

Amounts due to Galaxy under this agreement totaled $ 133,000 and $ 389,000 at June 30, 2026 and September

30, 2025, respectively, which were recorded as a component of accounts payable - related party on the condensed consolidated financial

Galaxy Asset Management Agreement

11 unchanged sentences

As compensation for the Asset

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

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

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

13 unchanged sentences

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 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,

During the three and nine

months ended June 30, 2026, the Company incurred fees of $ 792,000 and $ 3,557,000 , 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,

Amounts due to the Asset Manager under this agreement totaled $ 216,000 and $ 535,000 at June 30, 2026 and September 30, 2025, respectively,

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

1 unchanged sentence

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 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

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.

Digital Assets Receivable

In connection with the operation

of its validator, the Company and the Asset Manager share certain staking rewards earned.

The Company’s share, which is due from

Galaxy, is shown as Digital assets receivable – related party on the condensed consolidated financial statements.

Master Digital Currency Loan Agreement with

7 unchanged sentences

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.

Agreement, through June 30, 2026, the Company executed Loans in an aggregate amount of $ 112,500,000 , which included the refinancing of

a $ 7,500,000 Loan into a Loan with a shorter maturity.

Aggregate borrowings of $ 105,000,000 remained outstanding at June 30, 2026, and

are included in Loans payable – related party on the condensed consolidated balance sheet.

At June 30, 2026, these Loans had a weighted

average annual interest rate of 2.6 % and maturity dates ranging from 7 days to one year, with $87,500,000 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.

due to Galaxy for interest under these borrowings totaled $ 203,000 at June 30, 2026, which were recorded as a component of accounts payable

- related party on the condensed consolidated financial statements.

At June 30, 2026, these

Loans were secured by approximately 3,144,000

units of the Company’s SOL and/or fwdSOL, which Galaxy LLC had the right to sell, pledge or rehypothecate per the terms of the

Loan Agreement.

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

related party on the condensed consolidated financial statements.

FORWARD INDUSTRIES, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Galaxy Securities LLC Agreement

In July 2026, the Company

executed additional Loans in an aggregate amount of $ 15,000,000 .

These additional Loans have an interest rate of 2.5 % and evergreen provisions

allowing them to remain outstanding until repayment is requested by Galaxy LLC per the terms of the Loan Agreement.

SOL Option Contracts

During the three and nine

months ended June 30, 2026, the Company entered into OTC European-style option contracts referencing the price of SOL, some of which were

with Galaxy Trading Mercury LLC, a related party.

Under these contracts, the Company acted as the writer or seller of call and put options

and received or paid upfront premiums at inception.

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.

Additional information regarding derivative instruments

is provided in Note 12.

Galaxy Securities LLC Shares Repurchase Agreements

In connection with its share

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.

repurchase program (see Note 7) the Company paid $ 32,000 and $ 89,000 in fees to Galaxy Securities LLC as its agent during the three and

nine months ended June 30, 2026, which were recorded as a component of Treasury Stock.

Multicoin Share Repurchase

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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).

2026, the Company repurchased these 6,164,000 shares from Multicoin for $ 27,370,000 (See Note 7).

Buying Agency and Supply Agreement

5 unchanged sentences

The Company purchased products at Forward China’s cost

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

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

Due to the 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.

and paid Forward China a monthly service fee for sourcing such products.

This sourcing agreement was terminated in May 2025 in connection

with the sale of the OEM segment.

In connection with the sale

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Terence Wise, former Chief

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

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

common stock prior to our September 2025 financing.

3 unchanged sentences

The Company recorded service fees to Forward China

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

of $ 39,000 and $ 331,000 during the three and nine months ended June 30, 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.

and nine months ended June 30, 2025.

The Company had purchases from Forward China of approximately $ 480,000 and $ 4,040,000 during the

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

three and nine months ended June 30, 2025, respectively.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In order to preserve the

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to pay within 30 days of any such request.

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

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

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

1 unchanged sentence

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

and all amounts due thereunder extinguished.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

and all amounts due there under extinguished.

Accounts Payable Conversion Agreements

In order to maintain compliance

with Nasdaq’s listing standards, the Company entered into four separate agreements with Forward China (the “Conversion Agreements”),

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

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

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

Series A-1 Convertible Preferred Stock.

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.

with Nasdaq’s listing standards, in Fiscal 2024 and Fiscal 2025, the Company entered into four separate agreements with Forward

China (the “Conversion Agreements”), pursuant to which Forward China agreed to convert an aggregate $4,925,000 of amounts

due to Forward China into shares of preferred stock.

Under the terms of the Conversion Agreements, in Fiscal 2025 and Fiscal 2024, respectively,

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

respectively, of the Company’s Series A-1 Convertible Preferred Stock.

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

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

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

The Company fully paid off this note in September 2025.

LEGAL PROCEEDINGS

NOTE 10 LEGAL PROCEEDINGS

From time to time, the Company

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

At June 30, 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.

NOTE 11 LEASES

The Company’s operating

1 unchanged sentence

expenses on the condensed consolidated financial statements.

Total operating lease expense for the three and six months ended March 31,

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

2026 was $ 90,000 and $ 396,000 , respectively.

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

Total operating lease expense for the three and nine months ended June 30, 2025 was $ 155,000

and $ 465,000 , respectively.

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

Cash paid for amounts included in operating lease liabilities for the nine months ended June 30, 2026 and

2025, which have been included in cash flows from operating activities, was $ 464,000 and $ 452,000 , 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

In March 2026, the Company

renewed the term of its Minnesota lease through June of 2031.

Payments under this operating lease commenced July 1, 2026 and

escalate 10% per year.

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

In April 2026, due to IPS headcount reductions,

the Company decided not to exercise the renewal option that was previously considered reasonably probable on one of its New York leases.

As a result, the Company reduced its right of use asset and lease liability for this lease by approximately $ 1,824,000 in April 2026.

Remaining rent expense will be reduced ratably in accordance with the related accounting guidance.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At June 30, 2026, the Company’s

operating leases had a weighted average remaining lease term of 3.5 years and a weighted average discount rate of 7.4 %.

At March 31, 2026, future

At June 30, 2026, future

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

7 unchanged sentences

Long-term portion of lease liabilities

NOTE 12 DERIVATIVES

During the three and nine

months ended June 30, 2026, the Company entered into OTC European-style option contracts referencing the price of SOL.

Under these contracts,

the Company purchased and sold call and put options and received or paid upfront premiums at inception.

The options resulted in the Company

obtaining the right to purchase or the obligation to sell a specified quantity of SOL at a fixed strike price on the contract expiration

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

to secure its obligations.

The Company recognized a

net derivative loss of $ 4,561,000 and $ 4,292,000 , respectively, during the three and nine months ended June 30, 2026, related to SOL option

contracts, which is presented as derivative loss, net on the condensed consolidated statement of operations.

The details of the Company’s

open derivative positions at June 30, 2026 were as follows:

Schedule of open derivative positions

Derivative Liabilities

Digital asset derivatives

Galaxy Trading Mercury LLC,

a related party (see Note 9), was the counterparty to option contracts representing $ 75,534,000 of notional amount on open positions,

$ 4,926,000 of derivative assets and $ 7,344,000 of derivative liabilities at June 30, 2026, and $ 4,281,000 and $ 4,012,000 of the net derivative

loss for the three and nine months ended June 30, 2026, respectively.

The remaining contracts were entered into with unrelated third-party

counterparties.

Information regarding the fair value hierarchy classification and valuation of derivative instruments is provided in Note

FORWARD INDUSTRIES, INC.

1 unchanged sentence

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

NOTE 13 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities

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

at June 30, 2026 and September 30, 2025 were as follows:

Schedule of accrued expenses and other current liabilities

September 30,

Income taxes payable

Accrued commissions/bonuses

1 unchanged sentence

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

NOTE 14 SUBSEQUENT EVENTS

As of August 3, 2026, the Company’s total

SOL and SOL equivalent holdings were approximately 7,807,000, comprised of the following:

3,685,000 SOL held as digital assets and 199,000 SOL pledged as collateral;

7,000 (8,000 SOL equivalent) fwdSOL held as digital assets and 3,754,000 (3,915,000 SOL equivalent) fwdSOL pledged as

Additionally, as of August 3, 2026, The

Company had approximately:

21,851,000 ONyc tokens;

$4,500,000 cash;

$120,000,000 of outstanding Loans with Galaxy LLC and $3,572,000 of outstanding on-chain debt;

73,847,000 shares of common stock outstanding and 103,526,000 shares of common stock outstanding on a fully diluted basis.

NOTE 15 RISKS AND UNCERTAINTIES

The Company is subject to

4 unchanged sentences

and will likely continue to be, highly volatile.

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

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

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

The Company’s financial results and the market price of the Company’s common

stock could be materially adversely affected if the price of SOL decreases substantially, as it has in the past, including as a result

of shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions and regulatory announcements.

The Company’s historical

financial statements do not reflect the potential variability in earnings that it may experience in the future from holding or selling

digital assets.

Accordingly, volatility in the Company’s earnings may be significantly more than what it experienced in prior periods,

and it may be difficult to evaluate the Company’s business and future prospects.

The Company also may need to perform an analysis

each quarter to identify whether events or changes in circumstances indicate that its digital assets are impaired.

FORWARD INDUSTRIES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our historical financial

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

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

evaluate the Company’s business and future prospects.

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

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

The Company faces risks relating

1 unchanged sentence

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

the loss, theft or misappropriation of our SOL.

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

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

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

adversely affected.

the loss, theft or misappropriation of the Company’s SOL.

If the Company or its third-party service providers experience a security

breach or cyberattack and unauthorized parties obtain access to the Company’s private keys, or if the Company’s private keys

are lost or destroyed, or other similar circumstances or events occur, the Company may lose some or all of its digital assets and its

financial condition and results of operations could be materially adversely affected.

The Company interacts with

3 unchanged sentences

Any vulnerability in a smart

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

There is no assurance that the smart contracts

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

These vulnerabilities, flaws and potential exploitations could

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

We use our digital assets

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

contract the Company interacts with could result in the loss or theft of SOL or other digital assets.

There is no assurance that the smart

contracts the Company integrates with or relies upon will function as intended or remain secure.

These vulnerabilities, flaws and potential

exploitations could have a materially adverse impact on the Company’s business and financial condition.

The Company uses its digital

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

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

48 unchanged sentences

offer and sale of securities.

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Although the SEC’s March

8 unchanged sentences

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

FORWARD INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

If SOL is determined to be

16 unchanged sentences

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