Forward Industries, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements, and the notes thereto, and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (the “2025 Form 10-K”). 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 presented herein have been rounded to approximate values. Cautionary Note Regarding Forward-Looking Statements This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These forward-looking statements include, but are not limited to, statements regarding our liquidity, capital resources and financial condition, our growth strategy and future business plans, our expectations regarding the acquisition, holding, staking and disposition of digital assets, anticipated trends in the digital asset industry and the Solana ecosystem, and our ability to execute our digital asset treasury strategy. Forward-looking statements can generally be identified by words such as “anticipates,” “intends,” “may,” “might,” “will,” “would,” “should,” “could,” “potential,” “continues,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” “forecasts,” “targets,” “outlook,” “guidance,” “goal,” “objective” and similar expressions, or the negative of such terms, or other comparable terminology. Forward-looking statements are based on our current expectations, estimates, projections and assumptions regarding our business, the economy, the regulatory environment for digital assets and other future conditions as of the date of this report. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are beyond our control. Our actual results, performance or achievements may differ materially from those contemplated by the forward-looking statements. We caution you therefore against placing undue reliance on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation: fluctuations in the price of SOL and other digital assets, which have been and may continue to be highly volatile; regulatory developments affecting digital assets, including potential classification of SOL or other crypto assets as securities under federal or state securities laws; risks related to cybersecurity threats, hacking, phishing and other malicious attacks that could result in the loss, theft or misappropriation of our digital assets; risks related to custody arrangements for our digital assets and the potential loss of private keys; smart contract vulnerabilities, coding errors, security flaws and exploits in blockchain protocols we interact with; risks associated with our participation in DeFi protocols, including liquidation risks, governance risks and protocol failures; concentration risk from our significant holdings in SOL and the Solana ecosystem; the rewards and costs associated with staking or validating transactions, which may fluctuate based on network conditions; operational risks related to our validator infrastructure and third-party service providers; risks related to our At-the-Market offering facility and our ability to access capital markets; competition from other digital asset treasury companies; risks related to our share repurchase program and its impact on liquidity; macroeconomic conditions and their impact on digital asset markets; failure to keep our Registration Statement on Form S-3 effective or current; our 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 obligations; 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. 31 Background and Business Overview We are a Solana focused digital asset treasury company, with the strategy to buy, hold, stake, trade, invest in, and grow SOL and SOL related digital assets, protocols and businesses. Our mission is to expand and strengthen the Solana ecosystem by acquiring and staking SOL and engaging with, providing tools to and investing in the Solana protocol, Solana developers and Solana related projects in order to increase shareholder value. In connection with a private placement transaction in September 2025, we launched our digital asset treasury strategy, which we have been executing to date by holding SOL, staking SOL, operating a SOL validator, engaging in the SOL decentralized finance (“DeFi”) ecosystem and actively repurchasing shares of our common stock. Under our new treasury policy and strategy, the principal holding in our treasury reserve on the balance sheet will be allocated to digital assets, primarily SOL, fwdSOL (a Liquid Staking Token, or “LST”, developed by the Company in collaboration with Socean Labs Inc., doing business as Sanctum, on the Solana blockchain) and similar assets. We have selected SOL as our primary treasury asset because we believe it is earlier in its lifecycle, operationally superior, 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. Our planned approach involves acquiring SOL, staking our holdings via our own validator, deploying SOL into various DeFi protocols to earn yield, fees or rewards, lending SOL to earn interest, pledging SOL as collateral to borrow other assets and generating revenue through strategic acquisitions, partnerships and deployments within the Solana ecosystem. Forward also operates an engineering services business, which provides hardware and software product design and engineering services to customers predominantly located in the U.S. Discontinued Operations In March 2025, the Company committed to a plan to sell the original equipment manufacturer (“OEM”) distribution segment of the business (“OEM Plan”). In May 2025, the Company completed the sale of this line of business and is presenting its results of operations within discontinued operations in the prior period presented herein. The OEM distribution segment sourced and sold carrying cases and other accessories for medical monitoring and diagnostic kits as well as a variety of other portable electronic and non-electronic devices to OEMs or their contract manufacturers worldwide, that either packaged our products as accessories “in box” together with their branded product offerings or sold them through their retail distribution channels. The Company did not manufacture any of its OEM products and sourced substantially all of these products from independent suppliers in China, through Forward Industries Asia-Pacific Corporation, a British Virgin Islands corporation (“Forward China”), a former related party owned by the Company’s former CEO (see Note 9 to the condensed consolidated financial statements). Unless otherwise noted, amounts related to discontinued operations are excluded from the disclosures presented herein. See Note 3 for more information on discontinued operations. Critical Accounting Estimates Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which requires the use of certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although we base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances at the time of evaluation, changes in our business strategy, adverse changes in market conditions or various other factors could cause actual results to differ from these estimates and such differences could be significant. 32 We have identified the below critical accounting estimates. An accounting estimate is considered critical if both: (a) the nature of the estimate or assumption is material due to the levels of subjectivity and judgment involved, and (b) the impact of changes in the estimate and assumption has had or is reasonably likely to have a material effect on the condensed consolidated financial statements. This listing is not a comprehensive list of all our accounting policies. For further information regarding the application of these and other accounting policies, see Note 2 of the consolidated financial statements in our 2025 Form 10-K. Share-Based Compensation We measure share-based compensation expense related to employee and non-employee director share-based awards based on the estimated fair value of the awards as determined on the date of grant, which is recognized as expense over the requisite service period. We utilize the Black-Scholes option pricing model to estimate the fair value of stock options issued as compensation. The Black-Scholes model requires the input of highly subjective and complex assumptions, including the expected term of the stock option, and the expected volatility of our common stock over the period commensurate with the expected term of the option. Uncontrollable uncertainties, such as fluctuation in interest rates, can have an effect on our Black-Scholes estimate calculations. Such fluctuations and other unforeseen changes in inputs could have a material impact on the selling, general and administrative expenses within our financial statements. Certain equity grants vest upon the achievement of specified performance conditions. Compensation expense is recognized over the estimated service period if it is determined that achievement of the performance condition is probable. Estimating the probability and timing of achieving performance conditions is subjective and requires a significant amount of judgment. Changes to these estimates and the actual timing of any performance conditions achieved as compared to these estimates could have a material impact on the selling, general and administrative expenses within our financial statements. Impairment of Digital Assets We 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. 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. The determination of fair value requires significant judgment and involves the use of market prices from digital asset exchanges. We consider factors including trading volume, market liquidity, and the reliability of pricing sources when determining fair value. For digital assets which may have limited trading activity, we may use alternative valuation methods including discounted cash flow analysis or other market-based approaches. 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 We 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 sufficient. 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 used. 33 Recent Accounting Pronouncements For information on recent accounting pronouncements and impacts, see Note 2 to the unaudited condensed consolidated financial statements. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2026 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2025 2026 Quarter Highlights · Revenues increased more than four times to $10.8 million in the 2026 Quarter compared to $2.5 million in the 2025 Quarter, largely driven by our new digital asset treasury strategy. · Gross margin increased significantly, from a negative 24.9% in the 2025 Quarter to 62.2% in the 2026 Quarter, driven by the high margin staking revenue generated by our digital asset treasury strategy. · We secured $65 million of additional debt financing through Galaxy Digital LLC; the outstanding borrowings at June 30, 2026 having a weighted average interest rate of 2.6% per year, providing access to capital at a cost that is advantageous relative to other companies in our business. Consolidated Results The table below summarizes our consolidated results from continuing operations for the 2026 Quarter as compared to the 2025 Quarter. Dollar amounts and percentages have been rounded to approximate values. Consolidated Results of Operations 2026 Quarter 2025 Quarter Change ($) Change (%) Revenues, net $ 10,780,000 $ 2,495,000 $ 8,285,000 332.1% Cost of sales 4,076,000 3,116,000 960,000 30.8% Gross profit 6,704,000 (621,000 ) 7,325,000 (1179.5% ) Sales and marketing expenses 639,000 140,000 499,000 356.4% General and administrative expenses 6,793,000 1,799,000 4,994,000 277.6% Loss on digital assets 49,753,000 – 49,753,000 – Impairment of digital assets 15,222,000 – 15,222,000 – Derivative loss, net 4,561,000 – 4,561,000 – Operating loss (70,264,000 ) (2,560,000 ) (67,704,000 ) 2644.7% Interest income, net (72,000 ) (7,000 ) (65,000 ) 928.6% Interest expense, net 516,000 12,000 504,000 4200.0% Gain on change in fair value of marketable equity securities (17,000 ) – (17,000 ) – Gain on change in fair value of warrant liability – (160,000 ) 160,000 (100.0% ) Other expense, net – (1,000 ) 1,000 (100.0% ) Benefit from income taxes (1,732,000 ) – (1,732,000 ) – Loss from continuing operations $ (68,959,000 ) $ (2,404,000 ) $ (66,555,000 ) 2768.5% The discussion that follows below provides further details about our results from continuing operations for the 2026 Quarter as compared to the 2025 Quarter. 34 The increase in net revenues from the 2025 Quarter to the 2026 Quarter resulted from $7,345,000 in staking and other related revenue generated by our digital assets segment and $940,000 increase in design segment revenue, primarily attributable to the net increase in volume of work and projects with existing and new customers. Our gross profit increased and gross margin increased from a negative 24.9% in the 2025 Quarter to 62.2% in the 2026 Quarter. The increase in both gross profit and gross margin resulted from the high margin staking revenue generated by our digital assets segment, which generated gross profit of $5,977,000 and gross margin of 81.4%. 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 of 2025. 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 administrative expenses include $820,000 of asset management and related fees. Corporate general and administrative expenses increased $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. Design 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 $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 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 loss per share from continuing operations were $0.80 and $2.17 for the 2026 Quarter and the 2025 Quarter, respectively. 2026 Period Highlights · Revenues increased more than four times to $45.2 million in the 2026 Period compared to $10.2 million in the 2025 Period, largely driven by our new digital asset treasury strategy. · 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 $105 million in debt financing through Galaxy Digital LLC; the outstanding borrowings at June 30, 2026 having a weighted average interest rate of 2.6% per year, providing access to capital at a cost that is advantageous relative to other companies in our business. 35 Consolidated Results The table below summarizes our consolidated results from continuing operations for the 2026 Period as compared to the 2025 Period. Dollar amounts and percentages have been rounded to approximate values. Consolidated Results of Operations 2026 Period 2025 Period Change ($) Change (%) Revenues, net $ 45,176,000 $ 10,242,000 $ 34,934,000 341.1% Cost of sales 12,551,000 9,909,000 2,642,000 26.7% Gross profit 32,625,000 333,000 32,292,000 9697.3% Sales and marketing expenses 1,744,000 448,000 1,296,000 289.3% General and administrative expenses 19,551,000 4,940,000 14,611,000 295.8% Loss on digital assets 811,672,000 – 811,672,000 – Impairment of digital assets 133,359,000 – 133,359,000 – Derivative loss, net 4,292,000 – 4,292,000 – Goodwill impairment – 225,000 (225,000 ) (100.0% ) Operating loss (937,993,000 ) (5,280,000 ) (932,713,000 ) 17665.0% Interest income, net (940,000 ) (36,000 ) (904,000 ) 2511.1% Interest expense, net 576,000 36,000 540,000 1500.0% Gain on change in fair value of marketable equity securities (17,000 ) – (17,000 ) 0.0% Gain on change in fair value of warrant liability – (160,000 ) 160,000 (100.0% ) Other expense, net – 4,000 (4,000 ) (100.0% ) Provision for income taxes 80,000 – 80,000 – Loss from continuing operations $ (937,692,000 ) $ (5,124,000 ) $ (932,568,000 ) 18200.0% The discussion that follows below provides further details about our results from continuing operations for the 2026 Period as compared to the 2025 Period. The increase in net revenues from the 2025 Period to the 2026 Period resulted from $34,060,000 in staking and other related revenue generated by our digital assets 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 and gross margin increased from 3.3% in the 2025 Period to 72.2% in the 2026 Period. The increase in both gross profit and gross margin resulted from the high margin staking revenue generated by our digital assets segment, which generated gross profit of $30,476,000 and gross margin of 89.5%. In the design segment, gross profit increased $1,816,000 and gross margin increased from 3.3% in the 2025 Period to 19.3% in the 2026 Period driven by improved utilization and cost cutting measures implemented in January and June of 2025. Sales and marketing expenses 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 spend. Digital assets general and administrative expenses include $3,666,000 of asset management and related fees. Corporate general and administrative expenses increased $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. 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. 36 During the 2025 Period, the Company recorded a design segment goodwill impairment charge of $225,000 related to the IPS reporting unit. This impairment charge resulted from recurring impairment testing and was driven by a reduction in expected future performance of the reporting unit. The loss on digital assets in the 2026 Period of $811,672,000 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 $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 in the 2026 Period resulted from taxable income generated for which NOLs may not be available to offset due to certain IRS limitations. For the 2025 Period, we reported no income tax provision or benefit due to the existence of significant net operating loss carryforwards. Consolidated basic and diluted loss per share from continuing operations were $10.02 and $4.65 for the 2026 Period and the 2025 Period, respectively. LIQUIDITY AND CAPITAL RESOURCES Prior to our recent financings, our primary source of liquidity has been our operations. Following our strategic pivot to a digital asset treasury strategy in September 2025, our liquidity profile has fundamentally changed. While we anticipate that our current liquidity and financial resources will remain adequate to manage our operating and financial requirements for at least the next twelve months from the date of this filing, this assessment assumes that we will be able to liquidate digital assets in amounts and at times necessary to meet our obligations, which may not be possible during periods of market stress or reduced liquidity. Additionally, our liquidity assessment does not account for potential margin calls or collateral requirements that may arise from our DeFi activities, lending arrangements, or borrowing against pledged digital assets. Our ability to maintain adequate liquidity depends on various factors including the market value of our digital assets, our ability to liquidate digital assets when needed, the parameters of our share repurchase program and our ongoing operating expenses. At 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 entered into a Master Digital Currency Loan Agreement (the “Loan Agreement”) with Galaxy Digital LLC (“Galaxy LLC”), under which the Company may borrow digital assets and/or U.S. dollars from Galaxy LLC pursuant to individual loan term sheets (each, a “Loan”). The Loan Agreement establishes the general terms governing such loans, including procedures for loan requests, collateral requirements, borrow fees, callable and term loan structures, margin call and refund provisions, and rehypothecation rights, subject to mutual consent. In connection with the Loan Agreement, 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. 37 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 acquisitions or investments in a product or partnership, we may require additional capital beyond our current cash balance to fund the opportunity. Cash Flows During the 2026 Period and 2025 Period, our sources and uses of cash were as follows: Operating Activities During the 2026 Period, cash 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, 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 $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 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. Financing Activities 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 For information on related party transactions and their financial impact, see Note 9 to the unaudited condensed consolidated financial statements contained herein. 38 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, the Company is not required to provide the information called for by this Item.