What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-12 compared with 2026-05-14 · 159 added, 140 removed, 262 unchanged (53% of the section changed)

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

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

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

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

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

30, 2026 (the “2026 Quarter” and the “2026 Period”, respectively) with those for the three and nine months ended

June 30, 2025 (the “2025 Quarter” and the “2025 Period”, respectively).

All dollar amounts and percentages

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conditions and their impact on digital asset markets;

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

our ability to

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

other filings with the SEC.

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

We expressly disclaim any

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

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

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

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

ability to service our debt;

risks related to margin calls, collateral requirements and potential forced liquidation of our digital assets

under our loan agreements;

risks related to our derivative activities, including written option contracts;

our significant reliance on

related parties for financing, asset management and other services;

the impact of digital asset impairment charges on our results of operations;

our ability to satisfy our investment commitments;

our ability to liquidate digital assets in amounts and at times necessary to meet our

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

on Form 10-Q for the fiscal quarter ended March 31, 2026, and in our other filings with the SEC.

All forward-looking statements speak

only as of the date on which they are made.

We expressly disclaim any obligation or undertaking to release publicly any updates or revisions

to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events,

conditions or circumstances on which any such statement is based, except as required by applicable law, including federal securities laws.

Background and Business

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Under our new treasury policy

and strategy, the principal holding in our treasury reserve on the balance sheet will be allocated to digital assets, primarily SOL,

fwdSOL (a Liquid Staking Token, or “LST”, developed by the Company in collaboration with Socean Labs Inc., doing business

as Sanctum, on the Solana blockchain) and similar assets.

We have selected SOL as our primary treasury asset because we believe it is

earlier in its lifecycle, operationally superior, higher yield generating and underexposed as compared to Bitcoin and other digital assets,

presenting a unique opportunity for Forward to become the largest Solana asset treasury operator in the industry.

Our planned approach

involves acquiring SOL, staking our holdings via our own validator, deploying SOL into various DeFi protocols to earn yield, fees or

rewards, lending SOL to earn interest, pledging SOL as collateral to borrow other assets and generating revenue through strategic

and strategy, the principal holding in our treasury reserve on the balance sheet will be allocated to digital assets, primarily SOL, fwdSOL

(a Liquid Staking Token, or “LST”, developed by the Company in collaboration with Socean Labs Inc., doing business as Sanctum,

on the Solana blockchain) and similar assets.

We have selected SOL as our primary treasury asset because we believe it is earlier in its

lifecycle, operationally superior, has higher yield generation potential and is underexposed as compared to Bitcoin and other digital

assets, presenting a unique opportunity for Forward to become the largest Solana asset treasury operator in the industry.

approach involves acquiring SOL, staking our holdings via our own validator, deploying SOL into various DeFi protocols to earn yield,

fees or rewards, lending SOL to earn interest, pledging SOL as collateral to borrow other assets and generating revenue through strategic

acquisitions, partnerships and deployments within the Solana ecosystem.

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

2 of the consolidated financial statements in our Annual Report on 2025 Form 10-K.

2 of the consolidated financial statements in our 2025 Form 10-K.

Share-Based Compensation

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Impairment of Digital

account for some of our digital assets, specifically fwdSOL, as indefinite-lived intangible assets in accordance with ASC Subtopic 350-30.

These digital assets are initially recorded at cost and subsequently measured at cost less any impairment losses.

We perform an impairment

analysis each reporting period or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized when the fair value of these digital asset is less than their carrying value at any time during the period.

The impaired digital asset is written down to its fair value at the time of impairment, and the impairment loss cannot be reversed in

future periods even if fair values subsequently increase.

account for some of our digital assets as indefinite-lived intangible assets in accordance with ASC Subtopic 350-30.

These digital assets

are initially recorded at cost and subsequently measured at cost less any impairment losses.

We perform an impairment analysis each reporting

period or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment

loss is recognized when the fair value of these digital assets is less than their carrying value at any time during the period.

digital asset is written down to its fair value at the time of impairment, and the impairment loss cannot be reversed in future periods

even if fair values subsequently increase.

determination of fair value requires significant judgment and involves the use of market prices from digital asset exchanges.

factors including trading volume, market liquidity, and the reliability of pricing sources when determining fair value.

For fwdSOL, which

may have limited trading activity, we may use alternative valuation methods including discounted cash flow analysis or other market-based

For digital assets

which may have limited trading activity, we may use alternative valuation methods including discounted cash flow analysis or other market-based

Changes in market conditions, trading volumes, or the availability of reliable pricing information could materially affect

our impairment assessments and results of operations.

Fair Value of Derivatives

account for our derivative contracts in accordance with ASC 815, which requires our derivative assets and liabilities to be measured and

reported at their estimated fair values each reporting period.

We estimate the fair value using valuation models that incorporate various

assumptions, some of which are derived from active markets and others which are estimated when active market data is not available or

As a result, the estimated fair value of our derivative contracts includes significant unobservable inputs.

The reported fair

value estimates of our derivative assets and liabilities could vary materially if different unobservable inputs or other assumptions were

Recent Accounting Pronouncements

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RESULTS OF OPERATIONS FOR

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

THE THREE MONTHS ENDED JUNE 30, 2026 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2025

2026 Quarter Highlights

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staking revenue generated by our digital asset treasury strategy.

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

by 10.1% from December 31, 2025.

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

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

· We secured $65 million of additional debt financing through Galaxy Digital LLC;

the outstanding borrowings at June 30, 2026 having

a weighted average interest rate of 2.6% per year, providing access to capital at a cost that is advantageous relative to other companies

in our business.

Consolidated Results

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Impairment of digital assets

Derivative gain, net

Derivative loss, net

Operating loss

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Interest expense, net

Gain on change in fair value of marketable equity securities

Gain on change in fair value of warrant liability

Other expense, net

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and gross margin of 81.4%.

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

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

Sales and marketing expenses

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

both related to our new digital asset treasury strategy.

In the design segment, gross profit increased $1,348,000 and gross margin increased from a negative 24.9% in

the 2025 Quarter to 21.2% in the 2026 Quarter driven by improved utilization and cost cutting measures implemented in January and June

Corporate sales and marketing

expenses increased $412,000 primarily due to personnel costs, including $337,000 of non-cash share-based compensation expense, related

to our new digital asset treasury strategy.

Design sales and marketing expense increased $87,000 due to higher marketing spend.

Digital assets general and

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Corporate general and administrative expenses increased

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

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

non-cash share-based compensation expense.

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

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

Management continues to monitor

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

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

$4,425,000 primarily due to a $2,755,000 increase in non-cash share-based compensation expense for management and directors, higher personnel

costs associated with hiring personnel necessary to execute our new digital assets treasury strategy, and higher insurance premiums.

segment general and administrative expenses decreased $251,000 primarily due to lower personnel costs related to staff reductions and

other cost-cutting measures in response to the decline in revenues.

Management continues to monitor the various components of general

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

We intend to adjust these costs as needed

based on the overall needs of the business.

The loss on digital assets

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

the market value of SOL.

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

value of SOL.

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

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

The derivative gain is the net impact of written

SOL option contracts during the 2026 Quarter.

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

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

the 2025 Quarter.

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

in the 2026 Quarter of $49,753,000 was driven by the reduction in the fair value of our digital assets resulting from the decline in the

market value of SOL.

The impairment charge of $15,222,000 relates to our holdings of fwdSOL, which is also driven by the decline in market

value of SOL, and ONyc.

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

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

The net derivative loss is the net impact

of written and purchased SOL option contracts during the 2026 Quarter.

The increase in interest expense, net is primarily due to cash

borrowings from Galaxy Digital LLC and was partially offset by higher interest income from digital asset lending and higher cash balances

during the 2026 Quarter compared to the 2025 Quarter.

The income tax benefit in

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

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

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

carryforwards.

the 2026 Quarter resulted from changes to our forecasted full year taxable income in the 2026 Quarter.

In the 2025 Quarter, we reported

no income tax provision or benefit due to the existence of significant net operating loss carryforwards.

Consolidated basic and diluted

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Period compared to $10.2 million in the 2025 Period, largely driven by our new digital asset treasury strategy.

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

revenue generated by our digital asset treasury strategy.

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

by 11.4% from September 30, 2025.

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

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

· Gross margin increased significantly from 3.3% in the 2025 Period to 72.2% in the 2026 Period, driven by the high margin staking revenue

generated by our digital asset treasury strategy.

· We secured $105 million in debt financing through Galaxy Digital LLC;

the outstanding borrowings at June 30, 2026 having a weighted

average interest rate of 2.6% per year, providing access to capital at a cost that is advantageous relative to other companies in our

Consolidated Results

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Impairment of digital assets

Derivative gain, net

Derivative loss, net

Goodwill impairment

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Interest expense, net

Gain on change in fair value of marketable equity securities

Gain on change in fair value of warrant liability

Other expense, net

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from the 2025 Period to the 2026 Period resulted from $34,060,000 in staking and other related revenue generated by our digital assets

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

customer in December 2024 and partially offset by the net increase in volume of work and projects with other customers.

segment and an $874,000 increase in design segment revenue, primarily attributable to the net increase in volume of work and projects

with customers.

Our gross profit increased

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Sales and marketing expenses

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

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

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

increased due to a $1,251,000 increase in outside marketing spend and marketing personnel costs related to our new digital asset treasury

strategy, including $593,000 of non-cash share-based compensation expense, coupled with a $45,000 increase in design segment marketing

Digital assets general and

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Corporate general and administrative expenses increased

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

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

non-cash share-based compensation expense.

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

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

Management continues to monitor

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

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

$11,889,000 due to higher professional fees related to our services agreement with Galaxy, an increase of $3,266,000 in non-cash share-based

compensation for management and directors, higher personnel costs associated with hiring personnel necessary to execute our new digital

assets treasury strategy and higher insurance premiums.

Design segment general and administrative expenses decreased $943,000 primarily

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

continues to monitor the various components of general and administrative expenses and how these costs are affected by inflationary and

other factors.

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

During the 2025 Period, the

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market value of SOL.

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

value of SOL.

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

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

The derivative gain is the net impact of written

SOL option contracts during the 2026 Period.

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

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

the 2025 Period.

The impairment charge of $133,359,000 relates to our holdings of fwdSOL, which is also driven by the decline in market

value of SOL, and ONyc.

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

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

The net derivative loss is the net impact

of written and purchased SOL option contracts during the 2026 Period.

The change in interest income/(expense), net is due to higher interest

income from digital asset lending and higher cash balances during the 2026 Period compared to the 2025 Period and was offset by an increase

in interest expense related to borrowing from Galaxy Digital LLC.

The income tax provision

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

At March 31, 2026, we had

negative working capital of approximately $33.0 million.

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

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

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

From October 1, 2025 through

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

At August 3, 2026, our cash

balance was approximately $4,500,000.

At June 30, 2026, we had negative working capital of approximately $105,655,000.

The Company believes

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

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

During Fiscal 2026, the Company

repurchased 13,316,000 shares at an aggregate cost of $69,863,000, inclusive of fees.

In February 2026, the Company

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mutual consent.

In connection with the Loan Agreement, from March through May 2026,

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

of this report.

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

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

of the Loan Agreement.

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

per the terms of the Loan Agreement.

On April 27, 2026, the Company

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

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

incorporated in England and Wales.

A small portion of the investment remains subject to regulatory approval from the Bermuda Monetary

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

natively and trades exclusively on the Solana blockchain, and which will meaningfully expand On Re’s reinsurance underwriting capacity.

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

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

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

The Company has evaluated

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

In connection with the Loan

Agreement, the Company executed separate Loans, of which $120,000,000 remains outstanding as of August 3, 2026.

These Loans have a weighted

average interest rate of 2.6% and maturity dates ranging from 7 days to 1 year, with $102,500,000 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.

The Loans are secured

by the Company’s SOL and/or fwdSOL, which Galaxy LLC has the right to sell, pledge or rehypothecate per the terms of the Loan Agreement.

In Fiscal 2026, the Company

invested approximately $1,901,000, 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 (“On Re”), a private tokenized reinsurance company on the Solana blockchain

which is incorporated in England and Wales.

An additional $266,000 of the investment 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 on and trades exclusively on the Solana blockchain, and which is expected to meaningfully expand On Re’s reinsurance

underwriting capacity.

As of August 3, 2026, the Company has invested approximately $20.6 million of the committed $25 million.

If we have the opportunity to make other strategic

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used in operating activities of $16,079,000 resulted from a net loss of $937,692,000 non-cash net digital asset revenue of $31,107,000,

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

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

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

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

and an increase in prepaid expenses and other current assets of $1,028,000, partially offset by the loss on digital assets of $811,672,000

the digital asset impairment charge of $133,359,000, other non-cash charges of $8,294,000 and the net change in other operating assets

and liabilities of $423,000.

During the 2025 Period, cash

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

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

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

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

used in operating activities of $2,199,000 resulted from a net loss of $3,010,000, the gain on sale of the OEM segment of $1,406,000,

the gain on the change in fair value of the warrant liability of $160,000, a decrease in accrued expenses and other current liabilities

of $261,000, partially offset by non-cash expenses of $589,000 related to depreciation, amortization, share-based compensation, credit

loss expense and goodwill impairment charges, a decrease in accounts receivable and contract assets of $1,634,000, the net change in other

operating assets and liabilities of $19,000 and the net cash provided by discontinued operations of $396,000.

Investing Activities

Cash provided by investing

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

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

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

from purchases of property and equipment.

Cash used in financing activities

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

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

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

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

Cash used in investing activities

in the 2026 Period consisted of purchases of digital assets of $386,292,000, purchase of marketable equity securities of $2,300,000, purchase

of investment of $1,901,000, premiums paid on derivatives, net of $1,208,000, and purchases of property and equipment of $3,000, offset

by proceeds from the sale of digital assets of $337,990,000.

Cash used in investing activities

in the 2025 Period resulted from payments for the sale of the OEM segment of $200,000 and purchases of property and equipment of $26,000.

Cash provided by financing

activities in the 2026 Period consisted of net proceeds from loans payable – related party of $105,000,000, net proceeds from the

ATM of $7,882,000 and proceeds from stock options exercised of $45,000, partially offset by share repurchases of $69,863,000, fees associated

with financing activities of $230,000 and deferred financing costs associated with our ATM of $243,000.

Cash provided by financing

activities in the 2025 Period consisted of $971,000 net proceeds from the issuance of preferred stock and warrants, partially offset by

deferred financing costs of $60,000 related to the equity line of credit.

Related Party Transactions

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis