Forward Industries, Inc.

ITEM 1A.RISK FACTORS

Except as set forth below, there have been no material changes in our risk factors from those disclosed in the 2025 Form 10-K for the fiscal year ended September 30, 2025. T and the risk factors set Quarterly Report on Form 10-Q forth below, together with those previously the fiscal quarter ended March 31, 2026. The risk factors disclosed in our 2025 Form 10-K, those filings constitute important cautionary statements and qualifications with respect to the forward-looking statements and other representations contained in this Quarterly Report on Form 10-Q. While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business to the extent practicable under the circumstances, some level of risk and uncertainty will always be present. Item 1A - Risk Factors in the 2025 Form 10-K descrfor the fiscal year ended September 30, 2025 and the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2026 describes some of the risks and uncertainties associated with our business, which we strongly encourage you to review. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects.

The Company has incurrWe have entered significant indebtedness uninto, and may in the future enter into, der a loan agreement with Galaxy Digital LLC, secured by the Companysivative contracts referencing the price of SOL holdings, to fu, and share repurchalosses and oon ther corporate purposes. This strategy exposes the Company to se instruments could be substantial risks related, difficult to margin calls, failure to make interest paymentpredict, and could adversely affect our results of operations, loan defaultsfinancial condition, and forced liquidation the trading price of itsour collateral.

On Februammon stock.

As part of our digital asset treasury 27, 2026, the Company strategy, we have entered into a Master Digital Currency Loan Agreement (option contracts referencing the Loan Agreement) with Galaxy Digital LLC (Galaxy), under which Galaxy may extend loans of digital currencprice of SOL, including European-style options that obligate us to deliver SOL, accept delivery or U.S. dollars (Dollars) to the Company in its sole discref SOL, or make a cash settlement payment upon exercise or expiration. The Company has used Dollar loan proceeds We have entered into repurchathese shares of its common stock and other corporate purposes. These obliginstruments with the intent of generations are securedng premium income on our exclusively by the Companysisting SOL holdings, over which Galaxy holds a first priority security interest. This strategy subjects the Company to significant risks that could materially adversely affe and otherwise managing our treasury position, and we expect its financial condition, results ofto continue to use SOL-referenced operations, and stock price.

SOLs market price is highly volatile. If the valumay in the future use of the Companys r SOL collateral falls below the margin call rate, Galaxy may require additional collateral to restore the initial level within one business day. If collateral value falls below an urgent margin call rate, the Company may have as little -referenced derivatives, including futures, forwards, and swaps, as six hours to post additional collatpart of our overal or repal strategy outstandf buying principal. There is no assurance the Company will have sufficient, holding, staking, trading, and investing in SOL or other eland SOL-related digibletal assets to satisfy margin calls, acquire additional collateral, or pay down principal.

The Company may not generate sufficient cash flow to service its debt. Under the Loan Agreement, failure to repay borrow. We recognized net derivative losses of $4,561,000 million and $4,292,000 million for the three and nine months ended amounts, make inteJune 30, 2026, rest payments, pay fees, or provide addipectively.

As a party to derivative optional collateral constitutes an event of default. Upon default, Galaxy may accelerate all amounts due, terminate the agreement, and liquidate, convert, or ontracts, our potential loss is not limited to therwise realize upon the pledged SOL without notice. Galaxy also has partial liquidation rights to restore t premium we pay or receive and, depending on the loan-to-value ratio istructure of the Company fails to meetinstrument, margin calls. Any liquidation could occur when SOL y be substantial. If the prices are depressed or markets are illiquid, resulting in signi of SOL moves significant losses. Galaxy may enter inly beyond the applicable strike price prior to hedging transacexpirations, the costs and losses of which the Company would bear. Forced sales could also trigger ad, we may be required to deliverse tax consequences.

The regulatory treatment of digital assets remains uncertain. If legal  SOL at a price below its then-current market value, purchanges eliminatese or materially impair a partys ability to own or transfer digital accept delivery of SOL at a price above its then-currency used as collateral, the Companyt market value, or may be required toke a cash settle in Dollars ament prices determined underayment the Loan Agreement, and the agreement would terminate. Such changes could impair the collaterals value at materially exceeds the premium we received for restrictwriting the Companys ability to hold or transact in contract. SOL.

Because debt-funded share repurchases do not generate revenue or cash flow to service indebtedness, leverage amplhas historically experienced signifies these risks. The loan faccant price volatility also contains termination triggers unre, and this volated to payment defaultsincluding equiility declines exceeding specified thresholds or changes in key managementtincreases both the likelihood that could allow acceleraour option of all outstanding obligations. Incontracts will be exercised against us an extreme scenario, declining SOL values combined with margin call failures or a default could d the potential magnitude of any result ining loss of all or substantially all .

Our SOL holdings, acceleration of indebtedness, and potential insolvency.

A default under the Companys Loan Agreement -referenced derivatives are transacted over-the-could rendnter the Company ineligible to use Registration Statement on Form S-3 for securities offerings, which would mawith a limited number of counterially impair the Companys abilityparties willing to raise capital in the public markets.

The Company currently relies on the availability of Form S-3 registration statementtrade instruments referencing SOL, which exposes under the Securities Act of 1933 (s to the Securities Act), to conduct primary and secondary offerings ofrisk that a counterparty fails to perform its securities and to facilitate its share repurchase program. Eligibility to use Form S-3 is conditioned upon, among other things, the Companysobligations to us, particularly during periods of market stress when compliance with the timely filing requirementsunterparty credit quality and other registrant eligibiliur own liquidity conditions set forth in General Inmay be under the greatest struction I.B ain. As of Form S-3, including that the Company has not failed to pay any dividend or sinking fund installment on preferred stock, or defaulted on any installment on indebtedness for borrowed money, or on any material lease, since the end of the last fiscal year.

If tJune 30, 2026, a significant portion of our open derivative positions were with Galaxy Trading Mercury LLC, a related party. The Company were to default on its obligations under the Loan Agreement -including any failure to make requirmarket for SOL derivatives may also lack the depth and liquidity of markets for more established interest or principal paymentasset classes, satisfy margin calls, or comply with other covenants - such default could cauwhich could limit our ability to close the Company to fail to satisfy the registrant eligibility requirements of Form S-3. In such event, the Company would be required to conduct any future public offerings of its securities on Form S-1, which is subject to more extensout, unwind, or roll existing positions on favorable terms, or at all, when we determine it is in our interest to do so. Additionally, our derivative disclosurecontracts requirements, longer SEC review periods, and grea us to post collater time and expense to prepare. The loss of Form S-3 eligibility would significantly impairal, including pledging our digital assets, which reduces the Companys flexibilliquidity to access the capital markof those assets on a timely aand cost-effective basis, which could adversely affect the Companys ability to fund operaresult in margin calls requiring additions, pursue stral collategic opportunities, or respond toral during periods of adverse business conditionprice movements.