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YoY shift: Unscored
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Risk Factors (Item 1A)
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ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors before deciding whether to purchase or sell stock in the Company. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also our business operations or our financial condition. If any of the events discussed below occur, our business, consolidated financial condition, results of operations or prospects could be materially and affected. In such case, the value and marketability of the common stock could .
impair
adversely
decline
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that you should consider before investing in our common stock. Set forth below is a summary of the principal risks we face:
We adopted a new business strategy dedicated to SOL which exposes us to significant risk as there is no assurance that we will be able to successfully execute this strategy and business plan;
The SEC has taken, and may in the future take, the view that some of the digital assets held by the Company are securities, which has adversely affected, and could adversely affect the value of such digital assets and the financial condition of the Company and result in potentially substantial expense to the Company;
A particular crypto asset’s status as a security in any relevant jurisdiction is subject to a high degree of uncertainty, and if we are unable to correctly classify a crypto asset, we may be subject to regulatory scrutiny, investigations, additional reporting requirements and other adverse consequences, including potentially becoming subject to the Investment Company Act of 1940 which would impose significant financial and regulatory burdens and compliance costs;
The high volatility of trading prices that many digital assets, including SOL, have experienced and may continue to experience could have a material adverse effect on the value of the Company’s digital assets, which could lose all or substantially all of their value, and on the overall financial position of the Company;
Crypto assets and our related activities are characterized by numerous other risks and uncertainties, including the possibility of code malfunction, theft, fraud, hacking, cyberattacks, malicious activities or manipulation, in addition to price volatility, regulatory actions, bans or restrictions, declines in the price of crypto assets, demand for or public perception of crypto assets and other external forces beyond our control;
There is a significant increase in competition in the digital asset industry and thus, the Company’s financial condition and operations may be adversely affected if the Company fails to compete effectively;
Technological innovations and new entrants into the digital asset ecosystem may render Solana obsolete which would materially affect the price of the Company’s stock price and overall financial position;
The Company’s financial position and operations may be dependent on the acceptance of digital assets, which represent a new and rapidly evolving industry;
The largely unregulated nature of the digital asset ecosystem may adversely affect the value of digital assets and, consequently, the Company’s financial position;
We are highly dependent on our new Chairman of the Board of Directors, members of our executive team, and our Asset Manager, and the loss of any of their services could materially harm our business.
Risks Related to the Company’s Digital Assets Strategy and Holdings
We purchase digital assets, including SOL, the price of which has been, and will likely continue to be, highly volatile. Our operating results and share price may significantly fluctuate, including due to the highly volatile nature of the price of such digital assets and erratic market movements.
We purchase or otherwise acquire SOL for the establishment of our digital asset treasury operations. Digital assets, such as SOL, are highly volatile assets, as a result of many factors including shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions and regulatory announcements. In addition, digital assets do not pay interest or other returns, unless utilized in staking or financial applications, and so the ability to generate a return on investment from the net proceeds of any capital raisings will principally depend on whether there is appreciation in the value of digital assets following our purchases of digital assets with the net proceeds from such capital raisings. Future fluctuations in digital asset trading prices may result in our converting digital assets into cash with a value substantially below what we paid for such digital assets.
We adopted a digital asset treasury strategy with a focus on SOL, and we may be unable to successfully implement this new strategy.
We adopted a digital asset treasury primarily dedicated to SOL, including SOL acquisitions, staking and other decentralized finance activities. There is no assurance that we will be able to successfully implement this new strategy or operate Solana-related activities at the scale or profitability currently anticipated. Solana operates with a proof-of-stake combined with proof-of-history consensus mechanism, which differs significantly from bitcoin’s proof-of-work mining mechanism. This strategic shift requires specialized employee skillsets and operational, technical and compliance infrastructure to support SOL and related staking activities. This also requires that we implement different security protocols and treasury management practices. Further, there is ongoing scrutiny and limited formal guidance from regulatory agencies, including Nasdaq and the SEC, with respect to the treatment of public company cryptocurrency strategies. There is no assurance that we will be able to execute this strategy by building out the needed infrastructure within the timeframe that we currently anticipate. Errors by key management could result in significant loss of funds and reduced rewards. As a result, our shift towards SOL could have a material adverse effect on our business and financial condition.
Our management relies upon the advice of the Asset Manager through the Asset Management Agreement to assist in building our new Treasury Policy and the execution of the Company’s Treasury Policy and may not yield the desired return.
We have engaged the Asset Manager to manage our digital assets holdings and provide discretionary investment management services with respect to all of the Company’s cash, cash equivalents, stablecoins, cryptocurrency and certain other investible assets (the “Treasury Assets”) including all digital assets, the proceeds of any bona fide capital raise or other financing transaction conducted by or on behalf of the Company or any of our subsidiaries and any investments of the Treasury Assets. Such Asset Manager (i) will have broad discretion in the application of our Treasury Policy and management of our Treasury Assets, (ii) will have sole responsibility and authority with respect to the discretionary investment management of the Treasury Assets and, (iii) from time to time direct the investment and reinvestment of our Treasury Assets. The Asset Manager’s investments decisions and use of the Treasury Assets could not improve our results of operations or enhance the value of our common stock. The failure to apply and manage these Treasury Assets effectively could result in financial losses that could cause the price of our common stock to decline.
Our shift towards a Solana-focused strategy requires substantial changes in our day-to-day operations and exposes us to significant operational risks.
Our shift towards a SOL treasury-focused strategy, including staking, liquid staking, and other decentralized finance activities, exposes us to significant operational risks. To participate in Solana’s Proof-of-Stake consensus mechanism, we must either operate or delegate to validator nodes, and such validator nodes must keep software updated, maintain validator uptime and employ secure key management. In addition, the Solana ecosystem rapidly evolves, with frequent upgrades and protocol changes that may require significant adjustments to our operational setup if we are operating a validator node. The upgrades and protocol changes may require that we incur unanticipated costs and could cause temporary service disruptions to the Solana network. We may also need to employ third-party service providers in our operations, which may introduce risks outside of our control, including significant cybersecurity risks. Any of these operational risks could materially and adversely affect our ability to execute our SOL treasury strategy and may prevent us from realizing positive returns and could severelyhurt our financial condition.
The concentration of our SOL holdings enhances the risks inherent in our Solana-focused strategy.
We have and intend to purchase SOL and increase our overall holdings of SOL in the future. The intended concentration of our SOL holdings limits the risk mitigation that we could achieve if we were to purchase a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent in our Solana-focused strategy. The price of SOL experienced a significant decline in 2022, and any similar future significant declines in the price of SOL could have a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets. Our initial purchases of SOL were valued at approximately $232 per SOL, or $1.58 billion in the aggregate, in early September. At September 30, 2025, the fair value of our SOL holdings was approximately $209 per SOL, or $1.43 billion in the aggregate, and at November 30, 2025, the fair value of our SOL holdings was approximately $133 per SOL, or $920.5 million in the aggregate.
Solana is created and transmitted through the operations of the peer-to-peer Solana network, a decentralized network of computers running software following the Solana protocol. If the Solana network is disrupted or encounters any unanticipateddifficulties, the value of SOL could be negatively impacted.
If the Solana network is disrupted or encounters any unanticipateddifficulties, then the processing of transactions on the Solana network may be disrupted, which in turn may prevent us from depositing or withdrawing SOL from our accounts with our custodian or otherwise affecting SOL transactions. Such disruptions could include, for example: the insolvency, business failure, interruption, default, failure to perform, security breach, or other problems of participants, custodians, or others; the closing of SOL trading platforms due to fraud, failures, security breaches or otherwise; or network outages or congestion, power outages, or other problems or disruptions affecting the Solana network. In 2021 and 2022, the Solana network experienced performance degradation including liveness disruptions due to network congestion; although the Solana network has been upgraded to address those congestion issues, there is no assurance that future issues may not arise. The implementation of material network upgrades, such as the proposed Alpenglow consensus upgrade or the continued integration of the Firedancer validator client, two initiatives taking place on the Solana blockchain, could result in future degradation of performance. Any disruption of the Solana network could materially impact the operation of decentralized finance on the network, resulting in the inability of the Company to transfer or sell SOL, and the price of SOL.
SOL and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty, which could materially adversely affect the Company’s financial position, operations and prospects.
SOL and other digital assets, as well as applications on blockchain networks such as Solana, are relatively novel and are subject to significant uncertainty, which could adversely impact their price. The application of state and federal securities laws and other laws and regulations to digital assets and blockchain-based applications is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of SOL or other digital assets, or the ability of blockchain-based applications to operate.
The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of SOL or the ability of individuals or institutions such as us to own or transfer SOL and utilize blockchain-based applications on networks such as Solana. For example, the U.S. executive branch, the SEC, the European Union’s Markets in Crypto Assets Regulation, among others, have been active in recent years, and in the United Kingdom, the Financial Services and Markets Act 2023 became law. It is not possible to predict whether, or when, any of these developments will lead to Congress granting additional authorities to the SEC, Commodity Futures Trading Commission (“CFTC”), or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally and SOL specifically. The consequences of increased regulation of digital assets and digital asset activities could adversely affect the market price of SOL and in turn adversely affect the market price of our common stock.
Moreover, the risks of engaging in a digital asset treasury strategy are relatively novel and have created, and could continue to create complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
The growth of the digital assets industry in general, and the use and acceptance of SOL in particular, may also impact the price of SOL and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of the Solana network and SOL may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to SOL, institutional demand for SOL as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for SOL as a means of payment, and the availability and popularity of alternatives to SOL. Even if growth in SOL adoption occurs in the near or medium term, there is no assurance that SOL and Solana network usage will continue to grow over the long term.
Because SOL have no physical existence beyond the record of transactions on the Solana blockchain, a variety of technical factors related to the Solana blockchain could also impact the price of SOL. For example, malicious attacks by validators, inadequate validation and staking rewards to incentivize validating of Solana transactions, hard “forks” of the Solana blockchain into multiple blockchains, difficulties with upgrades to the Solana network (such as the proposed Alpenglow consensus upgrade or integration of the Firedancer validator client) and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the Solana blockchain and negatively affect the price of SOL. The liquidity of SOL may also be reduced and damage to the public perception of Solana may occur, if financial institutions were to deny or limit banking services to businesses that hold SOL, provide Solana-related services or accept SOL as payment, which could also decrease the price of SOL. Similarly, the open-source nature of the Solana blockchain means the contributors and developers of the Solana blockchain are generally not directly compensated for their contributions in maintaining and developing the blockchain, and any failure to properly monitor and upgrade the Solana blockchain could adversely affect the Solana blockchain and negatively affect the price of SOL.
The liquidity of SOL may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for SOL and other digital assets.
In connection with our SOL treasury strategy, we expect to interact with various smart contracts deployed on the Solana network, which may expose us to risks and technical vulnerabilities.
In connection with our SOL treasury strategy, including staking, liquid staking, and other decentralized finance activities, we expect to interact with various smart contracts deployed on the Solana network in order to optimize our strategy and generate income. Smart contracts are self-executing code that operate without human intervention once deployed. Although smart contracts are integral to the functionality of staking deposit contracts, liquid staking protocols, and decentralized finance applications, they are subject to many known risks such as technical vulnerabilities, coding errors, security flaws, and exploits. Any vulnerability in a smart contract we interact with could result in the loss or theft of SOL or other digital assets, which could have a materially adverse impact on our business. In addition, certain smart contracts are upgradable or subject to certain governance controls which could result in unforeseen code errors, asset or account freezing, or the loss of digital assets. A vulnerability in a smart contract could create an unintended and unforeseeable consequence that has adverse financial consequences, such as the loss of or inability to access funds. There is no assurance that the smart contracts we integrate with or rely upon will function as intended or remain secure. Exploitation of such vulnerabilities could have a material adverse effect on our business and financial condition.
Part of our future business strategy may include acquisitions and investments in companies with Solana-focused or blockchain strategies, and there are risks associated with the integration of any assets or operations acquired and our ability to manage those risks. In addition, we may be unable to make attractive acquisitions or successfully integrate acquired businesses, assets or properties, and any inability to do so may disrupt our business and hinder our ability to grow.
We intend to pursue a strategy focused on both SOL accumulation and future acquisitions. Accordingly, in the future we may make acquisitions of businesses or assets that we expect to complement or expand our current assets. However, we may not be able to identify attractive acquisition opportunities in the future. Even if we do identify attractive acquisition opportunities, we may not be able to complete the acquisition or do so on commercially acceptable terms. No assurance can be given that we will be able to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquire identified targets.
The success of any acquisition will depend on our ability to integrate effectively the acquired business or asset into our existing operations. The process of integrating acquired businesses and assets may involve unforeseendifficulties and may require a disproportionate amount of our managerial and financial resources. The integration of acquisitions is a complex, costly and time-consuming process, and our management may face significant challenges in such process. Some of the factors affecting integration will be outside of our control, and any one of them could result in increased costs and diversion of management’s time and energy, as well as decreases in the amount of expected revenue.
Our failure to achieve consolidation savings, to incorporate the acquired businesses and assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material and adverse effect on our financial condition and results of operations.
Additional ability to achieve the objectives of our business strategy depends in significant part on our ability to obtain equity and debt financing. If we are unable to obtain equity or debt financing on favorable terms or at all, we may not be able to successfully execute on our business strategy.
Certain of the Sponsors and their affiliates have been, and may continue to be, the subjects of legal and regulatory proceedings and investigations.
Certain of the Sponsors and their affiliates have been, and may continue to be, the subjects of legal and regulatory proceedings and investigations. For example, Galaxy Digital Inc. agreed to pay $200 million as part of an agreement with the New York Attorney General to resolve civil claims related to certain investments, trading, and public statements made in connection with the LUNA digital asset from late 2020 to 2022. Separately, Multicoin Capital Management, LLC and its managing partner Kyle Samani have been named as co-defendants along with Solana Labs in a putative class-action litigation related to the promotion and sale of SOL for which a motion to dismiss is pending. Certain of these matters have involved, among other things, allegations of improper marketing practices and misrepresentations, as well as unregistered securities offerings with respect to SOL and other digital assets. Any adverse outcome in these proceedings or other future litigation or regulatory inquiries could negatively affect public perception of the Sponsors, the Company, and Solana itself, which could constrain trading activity and suppress the price and liquidity of SOL. Any such development could materially and adversely affect the value of our digital asset treasury, the market price of our stock and our ability to execute on our digital asset treasury strategy.
Changes in regulatory interpretations could require us to register as a money services business or money transmitter, leading to increased compliance costs or operational shutdowns.
The regulatory regime for digital assets in the U.S. and elsewhere is uncertain. The Company may be unable to effectively react to proposed legislation and regulation of digital assets, which could adversely affect its business.
If regulatory changes or interpretations require us to register as a money services business with The Financial Crimes Enforcement Network (FinCEN) under the U.S. Bank Secrecy Act, or as a money transmitter under state laws, we may be subject to extensive regulatory requirements, resulting in significant compliance costs and operational burdens. In such a case, we may incur extraordinary expenses to meet these requirements or, alternatively, may determine that continued operations are not viable. If we decide to cease certain operations in response to new regulatory obligations, such actions could occur at a time that is unfavorable to investors.
Multiple states have implemented or proposed regulatory frameworks for digital asset businesses. Compliance with such state-specific regulations may increase costs or impact our business operations. Further, if we or our service providers are unable to comply with evolving federal or state regulations, we may be forced to dissolve or liquidate certain operations, which could materially impact our investors.
If any of the digital assets that we hold are classified as a security, we may be subject to extensive regulation, which could result in significant costs or force us to cease operations.
Regulatory changes or interpretations that classify digital assets that we hold as a security under the Securities Act of 1933 or the Investment Company Act, could require us to register as an investment company and comply with additional regulations. Compliance with these requirements could impose extraordinary, non-recurring expenses on our business. If the costs and regulatory burdens become too great, we may be forced to modify or cease certain operations, which could be detrimental to our investors.
The SEC has previously indicated that certain digital assets may be considered securities depending on their structure and use. Future developments could change the legal status of digital assets that we may hold, requiring us to comply with securities laws. If we fail to do so, we may be forced to discontinue some or all of our business activities, negatively impacting investments in our securities.
If the SEC or other regulators determine that digital assets that we may hold qualify as securities, we may be required to change our operations, wind down our operations, or register as an investment company under the Investment Company Act. This classification would subject us to additional periodic reporting, disclosure requirements, and regulatory compliance obligations, significantly increasing our operational costs. Compliance with the requirements of the Investment Company Act applicable to registered investment companies may make it difficult for us to continue our current operations, and this would materially and adversely affect our business, financial condition and results of operations. In addition, if SOL or another digital asset we hold were determined to constitute a security for purposes of the federal securities laws, we would likely take steps to reduce the percentage of SOL or such other digital assets that constitute investment assets under the Investment Company Act. These steps may include, among others, selling SOL that we might otherwise hold for the long term and deploying our cash in non-investment assets, and we may be forced to sell our SOL or other digital assets at unattractive prices, or cease our operations.
Although we do not currently engage in investing, reinvesting, or trading securities, and we do not hold ourselves out as an investment company, we could inadvertently be deemed one under the Investment Company Act. If we are unable to rely on an exclusion, we would be required to register with the SEC, which could impose additional financial and regulatory burdens.
Further, state regulators may conclude that the digital assets we hold are securities under state laws, requiring us to comply with state-specific securities regulations. States like California have stricter definitions of “investment contracts” than the SEC, increasing the risk of additional regulatory scrutiny.
The classification of digital assets that we hold as a commodity could subject us to additional CFTC regulation, resulting in significant compliance costs or the cessation of certain operations.
Under current interpretations, SOL are classified as a commodity under the Commodity Exchange Act and are subject to regulation by the CFTC. If our activities require CFTC registration, we may be required to comply with extensive regulatory obligations, which could result in significant costs and operational disruptions. Additionally, current and future legislative or regulatory developments, including new CFTC interpretations, could further impact how SOL and SOL derivatives are classified and traded.
If SOL are further regulated as a commodity, we may be required to register as a commodity pool operator and register the Company as a commodity pool with the CFTC through the National Futures Association. Compliance with these additional regulatory requirements could result in substantial, non-recurring expenses, adversely affecting an investment in our securities. If we determine not to comply with such regulations, we may be forced to cease certain operations, which could negatively impact our investors.
We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.
Mutual funds, exchange-traded funds (ETFs) and their management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of our changes to our digital asset strategy, our use of leverage, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers.
Due to the unregulated nature and lack of transparency surrounding the operations of many digital asset trading venues, digital asset trading venues experience greater risk of fraud, market manipulation and other deceptive marketing practices, as well as security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in digital asset trading venues and adversely affect the value of digital assets, and the Company’s financial position, operations and prospects.
Digital asset trading venues are relatively new and, in many cases, unregulated. Furthermore, there are many digital asset trading venues that do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in digital asset trading venues, including prominent exchanges that handle a significant volume of such trading and/or are subject to regulatory oversight, in the event one or more digital asset trading venues cease or pause for a prolonged period the trading of digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.
Negative perception, a lack of stability in the broader digital asset markets and the closure, temporary shutdown or operational disruption of digital asset trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the digital asset ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in digital assets and the broader digital asset ecosystem and greatervolatility in the price of digital assets. The price of our listed securities may be affected by the value of our future digital asset holdings, and the failure of a major participant in the ecosystem could have a material adverse effect on the market price of our listed securities.
Digital Assets, including SOL, historically are highly volatile assets, and fluctuations in the price of SOL are likely to influence our financial results and the market price of our common stock. Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our holdings of digital assets. Accordingly, it may be difficult to evaluate the Company’s business and future prospects, and the Company may not be able to achieve or maintain profitability in any given period.
We purchase digital assets, including SOL, the price of which has been, 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 decreased 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.
In addition, 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 will need to perform an analysis each quarter to identify whether events or changes in circumstances indicate that our digital assets are impaired.
Digital asset holdings are less liquid than cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the digital asset market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, concerns regarding pseudonymity of digital asset addresses, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our digital assets at favorable prices or at all. As a result, digital asset holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Further, digital assets we hold with our custodians and transact with our trade execution partners do not enjoy the same protections or insurance as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered digital assets or otherwise generate funds using our digital asset holdings, including in particular during times of market instability or when the price of digital assets has declined significantly. If we are unable to sell our digital assets, enter into additional capital raising transactions, including capital raising transactions using SOL as collateral, or otherwise generate funds using our SOL holdings, or if we are forced to sell our digital assets at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
The availability of spot ETPs for SOL and other digital assets may adversely affect the market price of our listed securities.
Although bitcoin, SOL and other digital assets have experienced a surge of investor attention since bitcoin was developed in 2008, until recently investors in the United States had limited means to gain direct exposure to SOL through traditional investment channels, and instead generally were only able to hold SOL through “hosted” wallets provided by digital asset service providers or through “unhosted” wallets that expose the investor to risks associated with loss or hacking of their private keys. Given the relative novelty of digital assets, general lack of familiarity with the processes needed to hold SOL directly, as well as the potential reluctance of financial planners and advisers to recommend direct SOL holdings to their retail customers, some investors have sought exposure to bitcoin, SOL and other digital assets through investment vehicles that hold bitcoin, SOL and other digital assets and issue shares representing fractional undivided interests in their underlying digital asset holdings. These vehicles, which were previously offered only to “accredited investors” on a private placement basis.
In October of 2025, the SEC approved the listing and trading of spot SOL exchange-traded products (“ETPs”), the shares of which can be sold in public offerings and are traded on U.S. national securities exchanges. The first approved SOL ETP commenced trading directly to the public on October 28, 2025, with a trading volume of approximately $55 million on the first trading day and had the highest launch day inflows of any ETP launched in 2025. The value of our common stock may decline due to investors having a greater range of options to gain exposure to SOL now that SOL ETPs are approved and investors may prefer to gain such exposure through ETPs rather than our common stock. The listing and trading of spot ETPs for SOL or other digital assets offers investors another alternative to gain exposure to digital assets, which could result in a decline in the trading price of SOL as well as a decline in the value of our common stock relative to the value of our SOL.
As a result of the foregoing factors, the availability of spot ETPs for SOL and other digital assets could have a material adverse effect on the market price of our listed securities.
Digital asset lending arrangements may expose us to risks of borrower default, operational failures and cybersecurity threats .
From time to time, we may generate income through lending digital assets, which carries significant risks. The volatility of such digital assets increases the likelihood that borrowers may default due to market downturns, liquidity crises, fraud or other financial distress. These lending transactions may be unsecured and therefore may be subordinated to the secured debt of the borrower in the event of the borrower’s bankruptcy or insolvency. If a borrower becomes insolvent, we may be unable to recover the loaned SOL, leading to substantial financial losses.
Additionally, digital asset lending platforms are vulnerable to operational and cybersecurity risks. Technical failures, software bugs or system outages could disrupt lending activities, delay transactions or result in inaccurate record-keeping. Cybersecurity threats, including hacking, phishing and other malicious attacks, pose further risks, potentially leading to the loss, theft or misappropriation of our loaned SOL. A successfulcyberattack or security breach could materially and adversely impact our financial position, reputation and ability to conduct future lending activities.
Decentralized finance arrangements may expose us to risks of smart contract risk, operational failures and cybersecurity threats.
From time to time, we may generate income through the use of digital assets including SOL or stablecoins in decentralized protocols including decentralized finance (“DeFi”) applications. DeFi applications include over-collateralized borrow-lend vaults, token-exchange pools, and other financial or commercial arrangements. Although these protocols are largely designed to limit counterparty risk in transactions, they introduce novel risks relating to software code bugs, liquidation risks, and governance risks. These protocols are designed to operate in decentralized environments but can be subject to failures or exploits. In addition: (a) network congestion or downtime can increase the likelihood of asset loss or liquidation; (b) the volatility of digital assets deployed into DeFi applications may increase the likelihood of liquidation due to market downturns, liquidity crises, governance attacks or other exploits, leading to substantial financial losses; (c) the uncertainty in the accounting treatment of certain DeFi applications; (d) DeFi applications generally operate on a user-to-protocol basis where a user of a DeFi application does not know the identity of other parties utilizing the DeFi application; and (e) the use of monitoring and forensics software to mitigate risks of engaging in DeFi applications may not prevent the Company from engaging in DeFi pools that are also used by bad actors or sanctioned persons.
The reliance on open-source code by digital asset networks exposes us to risks related to competitive networks and products built on such code, the failure of individuals to maintain that code, and discovery of security vulnerabilities that could threaten the ability of such networks to operate.
Digital asset networks are open-source projects and, although there may be an influential group of leaders in the network community, generally there is no official developer or group of developers that formally controls the digital asset network. Without guaranteed financial incentives, there may be insufficient resources to address emerging issues, upgrade security or implement necessary improvements to the network in a timely manner. If the digital asset network’s software is not properly maintained or developed, it could become vulnerable to security threats, operational inefficiencies and reduced trust, all of which could negatively impact the digital assets’ long-term viability and our business.
The lack of legal recourse and insurance for digital assets increases the risk of total loss in the event of theft or destruction.
Digital assets that we acquire will not be insured against theft, loss or destruction. If we lose our digital assets, due to cyberattacks, fraud, theft, or other malicious activities, we may not have any viable legal recourse or ability to recover the lost assets. Unlike funds held in insured banking institutions, our digital assets are not protected by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. If our digital assets are lost under circumstances that render another party liable, there is no guarantee that the responsible party will have the financial resources to compensate us. As a result, we and our shareholders could face significant financial losses.
The Company will face risks relating to the custody of its digital assets. 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.
We expect our primary counterparty risk with respect to our SOL will be custodian performance obligations under the custody arrangements we enter into. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, SEC enforcement actions against other providers, and the placement into receivership or civil fraud lawsuit against digital asset industry participants have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading. Legal precedent created in these bankruptcies and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings.
While our custodians will be subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially held SOL will not become part of the custodian’s bankruptcy estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings. The treatment of digital assets in bankruptcy proceedings remains an evolving area of law. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our SOL holdings, we would become subject to additional counterparty risks. We will need to carefully evaluate market conditions, including price volatility as well as service provider terms and market reputations and performance, among others, prior to implementing any such strategy, all of which could affect our ability to successfully implement and execute on any such future strategy. These risks, along with any significant non-performance by counterparties, including in particular the custodian or custodians with which we will custody substantially all of our SOL, could have a material adverse effect on our business, prospects, financial condition, and operating results.
We face risks relating to the use of third-party trading platforms in connection with our Solana-focused strategy.
We use third-party trading platforms, which we believe are reputable, as well as reputable over-the-counter brokers to purchase SOL for our treasury. As part of our process in determining transactions with third-party exchanges, we search for reputable exchanges that have industry standard policies and procedures in place regarding data security and customer diligence related to anti-money laundering (“AML”), Office of Foreign Assets Control (“OFAC”) sanctions compliance, and know-your-customer (“KYC”) rules and regulations. If any of these third-party exchanges no longer meet our standards or if there is a decrease in reputable third-party exchanges, we may need to find additional counterparties and enter into additional agreements that could be on less favorable terms, which could have a material adverse effect on our business, financial condition or the results of our operations.
The irreversibility of digital asset transactions exposes us to risks of theft, loss and human error, which could negatively impact our business.
Digital asset transactions are generally irreversible without the consent and active participation of the recipient of the transaction or, in theory, control of a majority of the processing power (or, in proof-of-stake networks, a majority of the staked tokens) on that digital asset network. Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of digital assets or a theft of digital assets generally will not be reversible, and we may not be capable of seeking compensation for any such transfer or theft.
Although we plan to regularly transfer digital assets to or from vendors, consultants and services providers, it is possible that, through computer or human error, or through theft or criminal action, such assets could be transferred in incorrect amounts or to unauthorized third parties.
To the extent we are unable to seek a corrective transaction to identify the third party which has received our digital assets through error or theft, we will be unable to seek recourse or otherwise recover the impacted digital assets, and any such loss could adversely affect our business, results of operations and financial condition.
We will be subject to significant competition in the growing digital asset industry and the Company’s business, operating results, and financial condition may be adversely affected if the Company is unable to compete effectively.
Following the launch of the Company’s digital asset treasury strategy, the Company will operate in a competitive environment and will compete against other companies and other entities with similar strategies, including companies with significant holdings in SOL and other digital assets, and the Company’s business, operating results, and financial condition may be adversely affected if the Company is unable to compete effectively.
Solana faces unique technical, governance and concentration risks that could materially affect its long-term viability.
Solana is a high-throughput Layer 1 blockchain with architectural features that differ significantly from other blockchains, such as Ethereum. While these features allow for rapid processing of transactions, they introduce risks that could adversely impact the value of SOL and the stability of the Solana network. Historically, Solana has suffered network outages, slow operations and validator coordination failures. If such challenges were to persist, the confidence of the Solana development community and its users would be adversely affected, which could cause a rapid decline in the value of SOL. In addition, Solana’s consensus mechanism (Proof of History combined with Proof of Stake) is novel and relatively untested at a large scale over time. Structural flaws could emerge that require a fork, which may have an adverse impact on the Solana network and our holdings.
Solana validators are relatively small in number, compared to some other leading blockchains, which may lead to coordinated censorship.
Solana has fewer validators than certain other blockchains but has a high Nakamoto coefficient, which refers to the minimum number of validators or node operators that would need to collude to compromise or take control of a blockchain network. In contrast, Ethereum has a higher number of validators. Despite the higher Nakamoto coefficient, a malicious actor might more easily be able to gain control of a network with fewer validators. Such control of the network could allow a malicious actor to censor transactions, reverse transactions (double-spending), or manipulate block validations.
Solana is subject to technological obsolescence, including competition from emerging blockchain and artificial intelligence protocols.
The digital asset ecosystem is characterized by rapid technological innovation, short development cycles, and intense competition among blockchains and related infrastructure providers. Solana faces intense competition among existing protocols, such as Aptos, Hyperliquid, Sei and Sui, the Ethereum Layer 2 blockchains such as Base, and new entrants that are currently being developed. Competitors may offer or develop superior scalability, security, interoperability, decentralization, programmability and adoption, and may attract developers away from the Solana ecosystem. Advancements in AI and blockchain technology are likely to accelerate the development of such protocols, including the development of additional networks that natively integrate AI into consensus mechanisms and other core features. If Solana is unable to evolve to address such increased competition or if market participants believe that Solana’s core technology stack is outdated or less attractive compared with other blockchain networks, Solana may be considered technologically obsolete by the next generation of protocols. The decline in the Solana network would materially impact the market value of SOL and adversely affect the value of our SOL treasury holdings and our stock price.
The Company may be subject to additional tax liability if regulation or policy changes adversely affect the tax treatment of rewards from staking SOL.
The U.S. federal income tax treatment of rewards from staking digital assets such as SOL or utilizing liquid staking tokens remains uncertain and is currently the subject of debate and regulatory attention. Under current guidance by the Internal Revenue Service (“IRS”), staking rewards and transaction fees may be treated as ordinary income upon receipt, although additional guidance is expected pursuant to the President’s Working Group July 2025 report “Strengthening American Leadership in Digital Financial Technology.” If regulation or policy changes, or the interpretation or enforcement thereof, results in adverse tax treatment of rewards from staking SOL, we could be subject to increased audits by the IRS and additional tax liabilities.
The Solana blockchain experiences a high number of “spam” transactions which can cause periods of congestion or outages or make it difficult for users to have their transactions processed.
Solana’s high throughput and lower transaction fees compared to other blockchains have made it an attractive target for large volumes of low-value or “spam” transactions, which are often generated by automated bots or malicious actors seeking to exploit the network’s resources. These spam transactions can congest the network, delay or prevent the processing of legitimate transactions, and in some cases, cause partial or complete network outages or performance degradation. During periods of high congestion, users may experience significant delays, increased transaction fees, or failed transactions, which can erode confidence in the network and reduce its utility for both users and developers. In addition, repeated or prolonged network disruptions may discourage new projects from building on Solana, limit the adoption of decentralized applications, and negatively impact the value of SOL. The Solana development team and community have implemented, and may in the future implement additional, technical upgrades or other measures to address these issues, but there can be no assurance that such efforts will be successful or sufficient to prevent future disruptions.
A high percentage of Solana validators rely on software provided by Jito Labs, a third party unaffiliated with Solana Labs. If Jito Labs were to stop maintaining such software or if such software failed to function properly, it could have an adverse effect on the Solana blockchain and value of SOL.
A significant portion of Solana validators utilize software developed and maintained by Jito Labs, an independent third party that is not affiliated with Solana Labs or the Solana Foundation. This reliance on third-party software introduces additional operational and security risks to the Solana network. If Jito Labs were to discontinue support for its software, experience operational difficulties, or if the software were to contain critical bugs, vulnerabilities, or backdoors, the performance and security of the Solana network could be compromised. For example, a failure or exploit in the Jito Labs software could result in network instability, validator downtime or other adverse outcomes. The software offered by Jito Labs has also reduced the impact of “spam” transactions on the Solana blockchain. If Jito Labs were to stop offering or supporting its software, there could be a far greater impact of “spam” transactions on the Solana network which could congest the network, delay or prevent the processing of legitimate transactions, and in some cases, cause partial or complete outages of the blockchain. Any such events could materially and negatively affect the value of SOL, reduce confidence in the network, and impair the ability of the Company to realize the expected benefits of its investment in SOL.
A cyberattack or other malicious attack on the Solana blockchain could have a material impact on the value of SOL held by the Company.
Solana and other digital assets and the entities that provide services to participants in blockchain ecosystems have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploitedweaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. A successful security breach or cyberattack could result in:
a partial or total loss of our digital assets in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold our digital assets;
harm to our reputation and brand;
improper disclosure of data and violations of applicable data privacy and other laws; or
significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure,
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader Solana ecosystem or in the use of the Solana network to conduct financial transactions, which could negatively impact us.
Attacks upon systems across a variety of industries, including industries related to Solana, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, we expect that unauthorized parties will attempt to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. Threats can come from a variety of sources, including criminal hackers, hacktivists, state intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures. The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing Russia and Israel conflicts, or other future conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the Solana industry, including third-party services on which we rely, could materially and adversely affect our financial condition and results of operations.
The emergence or growth of other digital assets, including those with significant private or public sector backing, including by governments, consortiums or financial institutions, could have a negative impact on the price of SOL and adversely affect the Company’s securities.
Following the launch of the Company’s proposed digital asset treasury strategy, as a result of our Solana strategy, we expect our assets to be concentrated in SOL holdings. Accordingly, the emergence or growth of digital assets other than SOL, including those with significant private or public sector backing, including by governments, consortiums or financial institutions, may have a material adverse effect on our financial condition. As of September 30, 2025, Solana was the fifth largest digital asset by market capitalization, excluding stablecoins. However, there are numerous alternative digital assets and many entities, including consortiums and financial institutions, are researching and investing resources into private or permissioned blockchain platforms. If the mechanisms or network effects on alternative blockchain platforms are perceived as superior to the Solana network, those digital assets could gain market share relative to Solana.
Many of the blockchain applications on large blockchain networks involve the use of “stablecoins,” which are designed to maintain a constant price related to or based on some other asset or traditional currency because of, for instance, their issuers’ promise to hold high-quality liquid assets (such as U.S. dollar deposits and short-term U.S. treasury securities) equal to the total value of stablecoins in circulation. In July 2025, the U.S. President signed into law the “GENIUS Act,” which establishes a federal framework for “payment stablecoins,” treating them as payment systems, not securities, and mandating fiat-backed reserves, monthly disclosures, anti-money laundering safeguards, and similar measures. Stablecoins have grown rapidly as a medium of exchange and store of value, particularly on digital asset trading platforms, and their use as an alternative to digital assets such as bitcoin and SOL could expand further as rules are promulgated under the GENIUS Act. As of September 30, 2025, two of the seven largest digital assets by market capitalization were U.S. dollar-pegged stablecoins. Stablecoins are an important aspect of blockchain networks such as Solana and if other blockchains are deemed more attractive than Solana for the use of stablecoins, that may impact the usefulness of the Solana network and Solana-based blockchain applications, and therefore the value of SOL.
If we lose key personnel, if we fail to recruit additional highly skilled personnel, or if we lose the services of our Asset Manager, our ability to operate and manage our digital asset treasury strategy will be impaired.
Our ability to operate and manage our digital asset treasury strategy depends upon our ability to attract and retain highly qualified personnel, including our newly appointed Chairman, Kyle Samani, members of our executive team, or other key personnel. In addition, we rely heavily on the services of our Asset Manager for the management of our digital asset treasury and for strategic guidance relating to our business, operations, growth initiatives and industry trends in the crypto technology sector. The loss of the services of any of our executive officers, key employees, or the Asset Manager, or our inability to find suitable replacements, could result in significant disruptions to our operations and management of our digital assets.
Risks Relating to Our Design Business
Our design business has experienced recurring losses. We cannot assure you that we will regainprofitability in the future.
Our design business generated a net loss of approximately $5,159,000 in Fiscal 2025. We can provide no assurance that our design business will not experience losses in the future. Our design business will need to generate increased revenues to achieveprofitability in the future. Despite our efforts, our design business may not achieveprofitability in the future or sustain profitability for a prolonged period of time. If our design business cannot generate sufficient revenues to operate profitably, we may be forced to cease, limit or suspend operations, or we may be required to raise additional capital or incur additional debt to maintain or grow our design business. There is no assurance that we will be able to raise such capital and if so on terms that are not onerous and dilutive to the Company and its shareholders.
The loss of any of, or a material reduction in orders from, our largest design customers would materially and adversely affect our design business results of operations and financial condition.
Our design business can at times be concentrated with certain larger customers. In Fiscal 2024, our largest design customer accounted for over 30% of our consolidated net revenues In December 2024, our largest design customer notified the Company of its plan to discontinue their insulin patch program, on which the Company was working. We expect this to continue to cause a material decrease in our revenues relative to Fiscal 2024. We have implemented cost reduction efforts to mitigate this reduction in design revenue.
Although our design customer concentration changes from year to year, and we continue our efforts to diversify our design business, we cannot provide any assurance that we will be successful. The loss of any of these customers would have a material adverse effect on the financial condition, liquidity and results of operations of our design business.
If we are unable to provide our design customers with high-quality products and services or if we are unable to deliver our products and/or services to our customers in a timely manner, the financial condition, and results of operations of our design business may be materially adversely affected.
In order to maintain our existing design business customer base and obtain business from new customers, we must demonstrate our ability to develop, design and produce products and services at the level of quality, responsiveness, timeliness, and cost that our customers require. If our products or services are provided at what customers believe are of a substandard quality, if they are not delivered on time, if we are not responsive to our customers’ demands or cannot meet their needs, our reputation as a reliable supplier of high-quality products and a sophisticated product designer and developer would likely be damaged. If we are unable to meet anticipated product and service standards imposed by contractual arrangements, customer expectations, industry practices, regulatory requirements and competitive forces, we may be unable to obtain new or keep our existing customers, and this would have a material adverse effect on the business, financial condition, and results of operations of our design business.
If our design teams fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, then we may incur a loss on that project.
Our design engagements often involve large-scale, complex projects. The quality of our performance on such projects depends in large part upon our ability to manage the relationship with our clients and our ability to effectively manage the project and deploy appropriate resources, including third-party contractors and our own personnel, in a timely manner. We may commit to a client that we will complete a project by a scheduled date and/or at a fixed fee. We may also commit that a project, when completed, will achieve specified performance standards. If the project is not completed by the scheduled date or fails to meet required performance standards, we may incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the project. If the project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling the project. In addition, performance of projects can be affected by a number of factors beyond our control, including unavoidabledelays from government inaction, inability to obtain financing, weather conditions, unavailability of vendor materials, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards, and labor disruptions. Furthermore, our entrance into fixed price arrangements means that if the costs of supplies, labor and other resources rise due to shortages, heightened demand, inflation or other factors, our margin for a given project will decline. To the extent these events occur, the total costs of the project could exceed our estimates, and we could experience reduced profits or, in some cases, incur a loss on a project, which may reduce or eliminate our overall profitability on that project or in general. Further, any defects or errors, or failures to meet our clients’ expectations, could result in claims for damagesagainst us. Failure to meet performance standards or complete performance on a timely basis could also adversely affect our reputation.
Our design business results of operations could suffer if we are not able to maintain adequate utilization of our workforce.
The cost of providing our design services, including the extent to which we utilize our workforce, affects our profitability. The rate at which we utilize our workforce is affected by a number of factors, including:
our ability to transition employees from completed projects to new assignments and to hire and assimilate new employees;
our ability to forecast demand for our services and thereby maintain an appropriate headcount in each of our operating units;
our ability to engage employees in assignments during natural disasters or pandemics;
our ability to manage attrition;
our need to devote time and resources to training, business development, professional development, and other non-chargeable activities; and
our ability to match the skill sets of our employees to the needs of the marketplace.
If we over-utilize our workforce, our employees may become disengaged, which could impact employee attrition. If we under-utilize our workforce, our profit margin and profitability will suffer.
Future design revenues are difficult to predict and are likely to show significant variability as a consequence of customer concentration.
Because our design revenues can at times be concentrated in a few large customers, and because the volumes of these customers’ order flows to us can fluctuate markedly in a short period of time, our quarterly design revenues, and consequently our design business results of operations, may be highly variable and subject to significant changes over a relatively short period of time. Our large design customers may have their budgets limited from many factors including economic declines (resulting from a pandemic, tariffs or any other reason) causing discretionary budgets to decline or may from-time-to-time choose to do their development work in-house. Further, in our design business, customers may decline to use us for future work after a project is completed, which may be due to lack of continued need for our services after their product has been developed, produced, and marketed or because they are dissatisfied with our pricing or performance. All of these factors tend to lead to a high degree of variability in our quarterly design revenue levels. Significant, rapid shifts in our operating results may occur if and when one or more of these customers increases or decreases the size(s) of, or eliminates, their orders or engagement from us by amounts that are material to our design business.
The gross margins, and therefore the potential profitability, in our design business vary considerably, and if the revenue contribution from one or more customers or projects changes materially, our gross profit percentage may fluctuate.
Our design business gross profit margins can vary widely depending on the project type, customer, and contract size. Because of this variability, we anticipate that gross margins, and accordingly their impact on operating income or loss, may fluctuate significantly depending on the relative revenue contribution from each customer or project. Similarly, because we offer a wide range of services which often vary with each customer and project, we face challenges in maintaining and enhancing operational efficiencies. For example, because of the range of products and services we offer and our general lack of specializations within our fields relative to some of our competitors, we may not enjoy the advantages offered by more focused or streamlined operations, such as economies of scale or improved production capabilities from our labor, facilities, and procedures with the passage of time. If our gross margins decrease, the results of operations in our design business will be adversely affected.
Issues with our products or services may lead to product liability, personal injury or property damageclaims, recalls, withdrawals, replacements of products, or regulatory actions by governmental authorities that could divert resources, affect business operations, decrease sales, increase costs, and put us at a competitive disadvantage, any of which could have a significant adverse effect on our financial condition.
Our design business may experience issues with products that we develop, or with the services we render, that may lead to product liability, personal injury or property damageclaims, recalls, withdrawals, replacements of products, or regulatory actions by governmental authorities. Any of these activities could result in increased governmental scrutiny, harm to our reputation, reduced demand by consumers for our services, decreased willingness by customers to procure our services, absence or increased cost of insurance, or additional safety and testing requirements. Such results could divert development and management resources, adversely affect our business operations, decrease sales, increase legal fees and other costs, and put us at a competitive disadvantage compared to other companies not affected by similar issues, any of which could have a significant adverse effect on our financial condition and results of operations. The Company carries liability insurance and works with its customers to satisfy quality concerns; however, there can be no assurance that customers will not seek damages beyond our insurance coverage limits. While we have not experienced significant claims for damages or losses from the development or design of products to date, any uninsured or underinsured claim, if successful and of significant magnitude, could have a material adverse effect on our business, prospects, results of operations or financial condition. Our insurance coverage is subject to policy limits, deductibles, and exclusions that may not adequately cover all potential liabilities arising from our operations.
The design business is highly competitive and does not pose significant barriers to entry.
There are many competitors in the engineering design business and competition is intense. Since little or no significant proprietary technology is involved in the services we sell, others may enter the business with relative ease and compete against us. Such competition may result in the diminution of our market share or the loss of one or more major customers, thereby adversely affecting the net revenues, results of operations, and financial condition of our design business. Further, while management believes there are a limited number of competitors offering the broad range of design and development services we do, there are numerous design and engineering companies that compete with us in specific industries and/or with specific targeted skills or competitive advantages, and some prospective customers might prefer a competitor that focuses in a specialty area in which they operate or target over an offering such as ours that is not limited to any specific industry or product type.
Many of our competitors are larger and more diversified than we are and may be betterable to withstand a downturn in the general economy or in the product areas in which our design business specializes. Potential customers may prefer the pricing terms offered by competitors. These competitors may also have less sales concentration than we do and be betterable to withstand the loss of a key customer or diminution in its orders. If we are not effectively able to compete, the results of operations in our design business will be adversely affected.
If we experience system interruptions, it may cause us to lose customers and may harm our design business.
Our inability to maintain and improve our information technology systems and infrastructure may result in system interruptions. System interruptions and slow delivery times, unreliable service levels, prolonged or frequent service outages, or insufficient capacity may prevent us from efficiently providing services to our design customers, which could result in our losing customers and revenue.
Certain of our IT infrastructure including power, security, connectivity and other services is housed within our office space in which we lease. We also rely on third-party providers for bandwidth. We do not control these vendors, and it would take significant time and effort to replace them. We have experienced, and may experience in the future, website disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors and capacity constraints.
Our systems are vulnerable to damage or interruption from terrorist attacks, floods, fires, power loss, telecommunications failures, hurricanes, computer viruses, computer denial of service attacks or other attempts to harm our systems. Any such damage or interruption would adversely affect our results of operations.
Because our networks and IT systems may be vulnerable to unauthorized persons hacking our systems, it could disrupt our operations and result in the theft of our proprietary information.
A party who is able to breach the security measures on our networks could misappropriate either our or our design customers’ proprietary information, or cause interruptions or malfunctions in our operations. Hacking of companies’ infrastructure is a growing problem. While we have implemented security measures and maintain an engineering team focused on protecting our systems, no security measures are foolproof, and we cannot provide absolute assurance againstunauthorized access or data breaches. If we grow and obtain more visibility, we may be more vulnerable to hacking. We may be required to expend significant capital and other resources to protect against such threats or to alleviate problems caused by breaches in security, which could have a material adverse effect on our financial performance and operating results.
Our design business uses software that is highly technical, and undetectederrors, if any, could adversely affect our business.
Our design business may use software that is highly technical and complex. Our software has contained, and may now or in the future contain, undetectederrors, bugs, flaws, corrupted data or vulnerabilities. Some errors in our software code may only be discovered after the code has been released. Any errors, bugs, flaws, or corrupted data could result in damage to our reputation, loss of users, or loss of revenue, any of which could adversely affect our business and financial results.
Risks Related to Our Business, Liquidity and Operations
If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.
Our future depends, in part, on our ability to attract and retain key personnel and the continued contribution of our executive officers. Our digital assets strategy requires specialized knowledge in a rapidly evolving industry. Our design and development business is highly labor intensive, therefore, our ability to attract and retain professional and technical staff is an important factor in our future success. The market for qualified engineers is competitive and, from time to time, it may be difficult to attract and retain qualified individuals with the required expertise within the timeframe demanded by our clients. The loss of the services of any of our key personnel and the process to replace any key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.
If a third party asserts that we are infringing on its intellectual property, whether successful or not, it could subject us to costly and time-consuming litigation or require us to obtain expensive licenses, and our business may be adversely affected.
Third party lawsuits alleging our infringement of patents, trade secrets or other intellectual property rights could cause us to do one or more of the following:
stop using technology that contains the allegedlyinfringing intellectual property;
incur significant legal expenses;
cause our management to divert substantial time to our defenses;
pay substantial damages to the party whose intellectual property rights we may be found to be infringing;
indemnify customers; or
attempt to obtain a license to the relevant intellectual property from third parties, which may not be available to us on reasonable terms or at all.
Third party lawsuits alleging our infringement of patents, trade secrets or other intellectual property rights could have a material adverse effect on our business, results of operations and financial condition. Potential adverse developments involving intellectual property described above may occur with respect to design customers’ products incorporating the products or services that we render.
Employee or agent misconduct, or our failure to comply with anti-bribery and other laws or regulations, could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.
Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by one of our employees or agents could have a significant negative impact on our business and reputation. Such misconduct could include the failure to comply with various procurement regulations, regulations regarding the protection of confidential information and personal data, regulations prohibiting bribery and other foreign corrupt practices, regulations regarding the pricing of labor and other costs in contracts, regulations on lobbying or similar activities, regulations pertaining to the internal controls over financial reporting, environmental laws, and any other applicable laws or regulations. For example, the Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these regulations and laws, and we take precautions to prevent and detect misconduct. However, since our internal controls are subject to inherent limitations, including human error, it is possible that these controls could be intentionally circumvented or become inadequate because of changed conditions. As a result, we cannot assure that our controls will protect us from reckless or criminal acts committed by our employees or agents. Our failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines and penalties, including substantial monetary penalties under data privacy laws, and suspension or debarment from contracting, any or all of which could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.
If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results. As a result, current and potential shareholders could lose confidence in our financial reporting, which could harm our business and the trading price of our stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports. If we cannot maintain effective controls and reliable financial reports, our business and operating results could be harmed. We continue to work on improvements to our internal controls over financial reporting. Any failure to implement and maintain internal controls over our financial reporting or difficulties encountered in the implementation of improvements in our controls, could cause us to fail to meet our reporting obligations. Any failure to improve our internal controls over financial reporting or to address identified weaknesses in the future, if they were to occur, could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our stock.
We maintain cash balances in our bank accounts that exceed the FDIC insurance limitation.
We maintain our cash assets at commercial banks in the U.S. in amounts in excess of the Federal Deposit Insurance Corporation insurance limit of $250,000 per depositor, per insured bank, for each account ownership category. In the event of a failure at a commercial bank where we maintain our deposits, money market accounts, or other cash assets, we may incur a loss to the extent such loss exceeds the applicable insurance limitation, which could have a material adverse effect upon our financial condition and results of operations. As of November 30, 2025, the Company maintained approximately $40.4 million in uninsured deposits.
Risks Related to Our Common Stock
Due to factors beyond our control, our stock price may be volatile.
Any of the following factors could affect the market price of our common stock:
Our failure to increase revenue in each succeeding quarter and achieve and thereafter maintain profitability;
Adverse regulatory developments such as the recent actions brought by securities regulators on crypto asset activities;
Volatility in the price of crypto assets, specifically SOL;
Our failure to meet our revenue and earnings guidance or our failure to meet financial analysts’ performance expectations;
Cybersecurity breaches;
The loss of customers or our failure to attract more customers;
Creditworthiness and solvency of counterparties and clients;
Loss of key employees;
The sale of a large amount of common stock by our shareholders;
Our announcement of a pending or completed acquisition or our failure to complete a proposed acquisition;
An adverse court ruling or regulatory action;
Changes in regulatory practices, including tariffs and taxes;
Changes in market valuations of similar companies;
Short selling activities;
Our announcement of any financing or a change in the direction of our business;
Announcements by us, or our competitors, of significant contracts, acquisitions, commercial relationships, joint ventures or capital commitments; or
Other forces outside of our control such as inflation, Federal Reserve interest rate increases and the recessionary environment it could bring, geopolitical turmoil, and other developments that could adversely impact the U.S. and global economies and erode investor sentiment.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.
If we become subject to a regulatory investigation, it could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business.
From time to time, we may receive inquiries from regulators regarding our compliance with laws and other matters. In 2019, we incurred significant expenses responding to an SEC investigation into potential insider trading by certain insiders of the Company. Although that investigation has concluded with no enforcement action taken against the Company, responding to or defendingagainst other such regulatory inquiries or investigations would cause us to incur substantial expenses and divert our management’s attention.
Violation of existing or future regulatory orders or consent decrees could subject us to substantial monetary fines and other penalties that could negatively affect our financial condition and results of operations. In addition, it is possible that future orders issued by, or enforcement actions initiated by, regulatory authorities could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business.
We do not expect to pay dividends in the future, which means that investors may not be able to realize the value of their shares except through a sale.
We do not anticipate that we will declare or pay a cash dividend. We expect to retain future earnings, if any, for our business and do not anticipate paying dividends on common stock at any time in the foreseeable future. Because we do not anticipate paying dividends in the future, the only opportunity for our shareholders to realize the creation of value in our common stock will likely be through a sale of those shares.
Our shares of common stock are available in tokenized form on the Solana blockchain and such tokenized shares are subject to unique risks including lack of liquidity and limited utility.
Our shares of common stock are issued and maintained in two forms:
Book-Entry Shares: Traditional uncertificated shares recorded and maintained by our traditional transfer agent in electronic book-entry form.
Tokenized Shares: Digital representations of our common stock recorded on the Solana blockchain, maintained by our digital transfer agent.
All issued shares, regardless of form, represent identical rights and may have their ownership format updated pursuant to investor discretion and instructions subject to applicable procedures and requirements and processing times.
In September 2025, we entered into a Digital Transfer Agency Agreement with Superstate Services LLC (“Superstate”) as our co-transfer agent, pursuant to which Superstate, at the request of a common shareholder, will tokenize their shares and distribute such tokenized shares to such shareholder’s digital wallet or custodian, as applicable. Superstate will maintain an “Allowlist” of wallet addresses of individuals and entities who have completed onboarding requirements and are permitted to hold, transfer and facilitate transfers of our tokenized common stock. As a result, access to our tokenized common stock will be restricted to holders who have onboarded with Superstate, potentially limiting investor participation and market depth, and resulting in greater price volatility.
There is little precedent for the issuance or trading of tokenized equity securities, and it is therefore difficult to foresee all of the complications that such activity may entail, which could be significant. For example, if the Solana network experiences downtime, congestion, forks, or other technical issues, holders of tokenized common shares may be unable to transfer or validate ownership of their shares. Such events could impair confidence in our securities and adversely affect their value and liquidity.
Holders of tokenized shares of common stock should be aware that, because currently outstanding shares of the Company’s common stock trade on Nasdaq and there are no current trading venues for the tokenized shares of common stock, recipients of tokenized shares of common stock may face potential illiquidity, trading volatility and/or pricing discrepancies when compared to shares of common stock which trade on Nasdaq. These discrepancies may be substantial and could result in significantly lower valuations for tokenized shares of common stock.
Tokenized shares of common stock are expected to trade on a peer-to-peer basis initially on the Solana blockchain, until more sophisticated marketplaces are developed. The trading volumes and market prices for these shares may be significantly lower than comparable metrics of the common stock listed on Nasdaq, and the holder may therefore face substantial challenges in liquidating their tokenized shares both as compared to the Company’s Nasdaq-listed common stock and in general. Although holders may convert their tokenized shares to traditional book-entry shares traded on Nasdaq, such conversion process could take up to multiple weeks. Holders may be unable to sell their tokenized shares of common stock at any price or at all. The Company can provide no assurances regarding the liquidity, trading volume or pricing of tokenized shares of common stock.
A trading venue based on blockchain technology involves substantial technical risks. A tokenized securities trading venue may face difficulties in scaling to handle a large number of users and transactions, as well as ensuring adequate performance and security. The underlying blockchain(s) may experience network outages, congestion, or complete failure. The trading venue may face risks related to the underlying blockchain protocol, such as forks or other network changes that could negatively impact or completely halt the venue’s operations. Such trading venue(s) may face risks related to smart contract security, such as bugs or vulnerabilities in the smart contracts used on the venue, which could result in permanent and irreversibleloss of tokenized shares or funds as well as other security breaches. The Company has no control over the Solana blockchain or any trading venue and makes no assurances regarding the security, functionality, or continued operation of either.
Other potential risks and uncertainties include, without limitation:
The possibility that a viable trading market never develops, is not sustained, or ceases to exist;
Adverse attention or action from regulatory authorities;
The possibility that the technology on which the blockchain depends fails to function properly or ceases to function entirely, which could result in the inability to access, transfer, or sell tokenized shares of common stock;
Uncertainty as to the potential application of laws and regulations including those regarding securities, virtual currencies and money transmission.
Any of the above risks or other uncertainties could adversely impact the rights and interests of holders of the tokenized shares of common stock.
If holders of tokenized shares of common stock elect to move their shares back to the traditional transfer agent, the process can be time-consuming and costly, and during the processing time, trading volatility, stock prices or other factors could adversely impact the shareholder.
If a holder elects to move tokenized shares of common stock from the blockchain to the traditional transfer agent, such process may be time-consuming and costly to the holder. During the time it takes to move the tokenized shares into traditional form, perceived benefits of doing so, such as effecting a sale at a specified price with a willing purchaser, could be lost, and disadvantages such as adverse changes in market conditions, trading volume, or prices could occur during the processing time that render the transaction unfavorable. The Company will not be responsible for any of the foregoing, including the costs and administrative considerations involved in effecting the transfer or deviations in prices.
MD&A (Item 7)
4,068 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report on Form 10-K. The following discussion and analysis compares our results of operations for the year ended September 30, 2025 (“Fiscal 2025”) with those for the year ended September 30, 2024 (“Fiscal 2024”). All dollar amounts and percentages presented herein have been rounded to approximate values. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under “Risk Factors.”
This report includes “forward-looking statements”, as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than historical factual information are forward-looking statements, including, without limitation, statements regarding future performance and management’s plans and strategies for future operations, including the implementation and anticipated benefits of our digital asset treasury strategy, intentions of our staking activities, our liquidity and the management of our liquidity, our beliefs regarding SOL, the SOL blockchain and ecosystem, anticipated sales under the ATM offering or purchases under the share buyback program, anticipated hirings, as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed in this report, and in particular, the risks discussed under the caption “Risk Factors” in Item 1A of this report and those discussed in other documents we file with the SEC. Forward-looking statements herein speak only as of the date of this report. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Business Overview
Forward Industries, Inc. is a design company serving top tier medical and technology customers. The Company provides hardware and software product design and engineering services to customers predominantly located in the U.S. The Company also acquires and holds Solana (“SOL”) and other digital assets and has adopted SOL as its primary treasury reserve asset. On November 17, 2025, the Company changed its ticker symbol on the Nasdaq Capital Market from FORD to FWDI.
New Digital Asset Treasury Strategy
On September 8, 2025, in connection with a private placement with certain accredited investors, we announced the launch of our digital asset treasury strategy, pursuant to which we plan to pursue a number of strategic initiatives to acquire SOL and other digital assets. On September 10, 2025, we entered into the Asset Management Agreement and Services Agreement with Galaxy Digital Capital Management LP (“Galaxy Digital”) to guide us through the implementation of our new digital assets treasury business. On September 15, 2025, we announced our initial liquid SOL purchases of 6,822,000 SOL at an average price of $232 per SOL, or approximately $1.58 billion in the aggregate.
Under our new treasury policy and strategy (the “Treasury Policy”), the principal holding in our treasury reserve on the balance sheet will be allocated to digital assets, primarily SOL. Our strategy involves applying a public-market treasury model to an asset that we believe is earlier in its lifecycle, structurally reflexive, and underexposed as compared to Bitcoin. Our approach involves acquiring SOL directly through market purchases, staking our holdings via our own or third-party operated validators and generating incremental revenue through strategic partnerships and deployments within the Solana ecosystem.
In addition to operating our hardware and software product design and engineering services business, our management will focus its resources on our Treasury Policy, and a significant portion of the balance sheet will be allocated to holding SOL and other digital assets in our digital asset treasury. As of November 30, 2025, we estimated that our digital asset holdings comprised more than 90% of our total assets.
Reverse Stock Split
In June 2024, the Company’s shareholders authorized, and the Company’s Board of Directors approved, a 1-for-10 reverse stock split of our common stock, which became effective on June 18, 2024. Accordingly, all references made to share, per share, or common share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the reverse stock split.
Discontinued Operations
Considering the recurring losses incurred by the retail segment, in July 2023, the Company decided to cease operations of our retail distribution segment, and we are presenting the results of operations for this segment within discontinued operations in the current and prior periods presented herein. The discontinuation of the retail segment represents a strategic shift in the Company’s business. The primary assets of the retail segment are inventory and accounts receivable. The Company sold, liquidated, or otherwise disposed of the remaining retail inventory and collected the remaining retail accounts receivable as of September 30, 2025. As of September 30, 2025, the retail segment was fully discontinued, and we expect to have no further significant involvement in this segment. The inventory of the retail segment was presented as discontinued assets held for sale on the balance sheet at September 30, 2023 and the results of operations for the retail segment have been classified as discontinued operations on the consolidated statements of operations for the years ended September 30, 2025 and 2024. All information and results in this annual report on Form 10-K exclude the retail segment unless otherwise noted. See Note 3 to our consolidated financial statements for additional information on the retail segment.
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 current and prior periods 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 related party owned by the Company’s former CEO (see Note 14).
Unless otherwise noted, amounts related to these discontinued operations are excluded from the disclosures presented herein. See Note 3 for more information on these discontinued operations.
Variability of Revenues and Results of Operations
A significant portion of our design segment revenue is concentrated with several large customers, some of which are the same and some of which change over time. Orders from some of these customers can be highly variable, with short lead times, which can cause our quarterly revenues, and consequently our results of operations, to vary over a relatively short period of time.
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.
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 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.
Goodwill and Intangible Assets
The Company reviews goodwill for impairment at least annually, or more often if triggering events occur. The Company has two reporting units with goodwill (the IPS and Kablooe operating segments) and we perform our annual goodwill impairment test on September 30, the end of the fiscal year, or upon the occurrence of a triggering event. Evaluating goodwill for impairment will often require the estimation of the fair value of the underlying reporting unit, the inputs to which require a significant amount of judgment, such as future cash flows, future growth rates and profitability. Changes in our business strategy or adverse changes in market conditions could impact impairment analyses and require the recognition of an impairment charge. 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, actual results could differ from these estimates.
Intangible assets include trademarks and customer relationships, which were acquired as part of the acquisitions of IPS in Fiscal 2018 and Kablooe in Fiscal 2020 and are amortized over their estimated useful lives, which are periodically evaluated for reasonableness. Our intangible assets are reviewed for impairment whenever events or changes in circumstances indicate their carrying amount may not be recoverable. In assessing the recoverability of our intangible assets, we must make estimates and assumptions regarding future cash flows and other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is recognized and the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
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 general and administrative expenses within our financial statements.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 requires certain crypto assets meeting defined criteria to be measured at fair value each reporting period with changes in fair value recognized in net income, presented separately from other intangible assets and accompanied by enhanced disclosures. This standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company early adopted this standard in the fourth quarter of Fiscal 2025, in conjunction with its new treasury strategy. Since the Company held no digital assets until September 2025, the adoption of this standard had no impact to prior reported financial statements and no cumulative adjustment to retained earnings was required or recorded.
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): 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 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 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 consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures”, requiring enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis and retrospective application is permitted. The Company is currently evaluating the effects of this pronouncement on its consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires expanded segment reporting and disclosure and is effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this standard in Fiscal 2025 with no material impact to its consolidated financial statements.
RESULTS OF OPERATIONS FOR FISCAL 2025 COMPARED TO FISCAL 2024
The table below summarizes our consolidated results from continuing operations for Fiscal 2025 as compared to Fiscal 2024:
Fiscal 2025
Fiscal 2024
Change ($)
Change (%)
Net revenues
Cost of sales
Gross profit
Sales and marketing expenses
General and administrative expenses
Goodwill impairment
Operating loss
Other expense/(income), net
Income tax provision
Loss from continuing operations
n/m - not meaningful
The decline in net revenues from Fiscal 2024 to Fiscal 2025 resulted from a $6,385,000 decline in design segment revenue, primarily attributable to the loss of a major design customer in December 2024 and a net decrease in volume of work and projects with other customers, partially offset by $4,582,000 in staking revenue generated by our digital assets segment.
Our gross profit increased slightly, and gross margin increased from 25.9% in Fiscal 2024 to 28.5% in Fiscal 2025. This increase in both gross profit and margin resulted from the high margin staking revenue generated in our digital assets segment, which generated gross profit of $4,412,000 and gross margin of 96.3%. This was partially offset by lower gross profit and margin in the design segment, a decrease of $4,405,000 in gross profit and a reduction in gross margin from 25.9% in Fiscal 2024 to 5.7% in Fiscal 2025, driven by lower utilization rates, partially mitigated by staff reductions in January and June 2025.
Sales and marketing expenses increased primarily due to increased corporate marketing spend of $500,000 related to corporate market research related activities and was partially offset by a $240,000 reduction in the design segment, driven by cost reduction efforts, including lower personnel costs and lower marketing spend.
Corporate general and administrative expenses increased $4,392,000 due to higher share-based compensation, professional fees related to the sale of the OEM segment and our recent financing transactions, costs associated with additional shareholder meetings and higher investor relations spending. Design segment expenses decreased $769,000 due to lower personnel costs related to staff reductions and other cost-cutting measures in response to the decline in revenues. Digital assets general and administrative expenses of $539,000 are asset management fees to Galaxy Digital. Management continues to monitor the various components of general and administrative expenses and how these costs are affected by inflationary and other factors. We intend to adjust these costs as needed based on the overall needs of the business.
During Fiscal 2025, the Company recorded goodwill impairment charges of $1,167,000 related to the IPS reporting unit and $391,000 related to the Kablooe reporting unit, and intangible asset impairment charges of $271,000 related to the IPS reporting unit and $197,000 related to the Kablooe reporting unit, all of which are included in the design segment. These impairment charges resulted from recurring impairment testing and were driven by historical losses and a reduction in expected future performance of the reporting units.
The change in other expense/(income), net is due to a $160,035,000 reduction in the fair value of our digital assets resulting from a decline in the market value of SOL, a $658,000 increase in the estimated fair value of the warrant liability from July 1, 2025 through August 8, 2025 based on changes in the inputs to the valuation model, and lower interest income, interest expense and foreign currency exchange rate losses.
In Fiscal 2025, we recorded a tax provision of $20,000, incurred a loss from continuing operations before income taxes of $169,069,000 and had an effective tax rate of 0%. In Fiscal 2024, we recorded a tax provision of $23,000, generated a loss from continuing operations before income taxes of $2,143,000 and had an effective tax rate of (1.3%). We maintain significant net operating loss carryforwards and do not recognize a significant income tax provision or benefit as our deferred tax provision is typically offset by a full valuation allowance on our net deferred tax assets.
Consolidated basic and diluted loss per share from continuing operations was $24.90 and $1.97 for Fiscal 2025 and Fiscal 2024, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Prior to our recent financings, our primary source of liquidity has been our operations. The primary demand on our working capital is and has historically been (i) operating losses, (ii) repayment of debt obligations, and (iii) any increases in accounts receivable and inventories arising in the ordinary course of business. Historically, our sources of liquidity have been adequate to satisfy working capital requirements arising in the ordinary course of business and we anticipate that our liquidity and financial resources will remain adequate to manage our operating and financial requirements until at least December 2026. At September 30, 2025, our working capital was approximately $38.5 million. At November 30, 2025, our cash balance was approximately $41.2 million.
Recent Financings
On September 9, 2025, we sold and issued to certain accredited investors in a private placement an aggregate of: (i) 77,144,562 shares of our common stock at an offering price of $18.50 per share, and (ii) pre-funded warrants to purchase 12,031,364 shares of our common stock with $18.49999 of the exercise price pre-funded at closing. Pre-funded warrants to purchase an additional 1,783,519 shares of our common stock with $18.49999 of the exercise price pre-funded were also issued in connection with a related strategic advisor agreement. We received aggregate proceeds of approximately $1.65 billion, before deducting placement agent fees and other offering expenses. Net proceeds to the Company, after deducting placement agent fees and other offering expenses, were approximately $1.58 billion.
From July 1 through August 12, 2025, we sold 246,000 shares of common stock under the $35 million ELOC and received gross proceeds of $2,432,000 in connection with such sales. We have sold all shares registered under the ELOC, which was mutually terminated on September 9, 2025.
On August 11, 2025, we sold, in a registered direct offering, approximately 263,000 shares of our common stock at a price of $8.50 per share to six investors and received gross proceeds of approximately $2,230,000.
From September 17, 2025 through November 30, 2025, we sold 436,000 shares of our common stock under our Controlled Equity Offering Sales Agreement for gross proceeds of approximately $11.7 million.
On September 11, 2025, in connection with a Waiver and Leak-out Agreement, we sold 1,784,000 shares of our common stock to the Series B Investors for gross proceeds of $33 million.
See Note 8 to our consolidated financial statements for more information about each of these financings.
Other Liquidity Factors
In the prior reporting period, we identified certain conditions that raised substantial doubt about our ability to continue as a going concern. These conditions included the loss of a significant customer, the resulting decline in revenues and cash, and recurring operating losses. During the period from May 2025 to September 2025, the Company raised gross proceeds of over $1.65 billion through the multiple equity financing transactions described above. Management has evaluated the Company’s ability to continue as a going concern and has concluded that the Company now has sufficient liquidity to fund anticipated cash requirements for operations and working capital purposes for at least one year from the date of issuance of these financial statements. As a result, substantial doubt about the Company’s ability to continue as a going concern no longer exists.
If we have the opportunity to make a strategic acquisition (as we have in the past with the acquisitions of IPS and Kablooe) or an investment in a product or partnership, we may require additional capital beyond our current cash balance to fund the opportunity.
Cash Flows
During Fiscal 2025 and Fiscal 2024, our sources and uses of cash were as follows:
Operating Activities
During Fiscal 2025, cash used in operating activities of $4,502,000 resulted from the net loss of $166,974,000, non-cash net digital asset revenue of $4,412,000, the $1,406,000 gain on sale of the OEM business, and the net change in other operating assets and liabilities of $120,000, partially offset by non-cash charges of $160,035,000 related to the fair value adjustment to digital assets, non-cash charges of $3,309,000 for depreciation, amortization, share-based compensation and credit loss expense, non-cash charges of $658,000 related to the fair value adjustment to the warrant liability, non-cash charges of $2,026,000 for the impairment of goodwill and intangible assets, a $1,153,000 increase in accounts payable and related party payables, an $833,000 decrease in accounts receivable and contract assets and $396,000 cash provided by discontinued operations.
During Fiscal 2024, cash provided by operating activities of $520,000 resulted from a net decrease in accounts receivable and contract assets of $1,224,000, cash provided by discontinued operations of $1,672,000, non-cash charges for depreciation, amortization, share-based compensation, credit loss expense and goodwill impairment of $653,000 and the net change in other operating assets and liabilities of $53,000, partially offset by the net loss of $1,951,000, a decrease in accrued expenses and other current liabilities $739,000, a decrease in accounts payable $392,000.
Investing Activities
In Fiscal 2025 cash used for investing activities included $900,791,000 used to purchase digital assets, $650,000 in payments related to the sale of the OEM business, and $26,000 used to purchase property and equipment. In Fiscal 2024, cash used for investing activities of $65,000 resulted from purchases of property and equipment.
Financing Activities
In Fiscal 2025, the Company generated $900,104,000 in cash from the sale of shares under our securities purchase agreement and related pre-funded warrants, $33,000,000 from the Series B waiver and leak-out agreement, $3,962,000 from our ATM, $2,361,000 from our Equity Line of Credit, $2,238,000 from our registered direct offering, $971,000 from the issuance of the Series B preferred stock, net of fees, and $61,000 related to the exercise of stock options, which was partially offset by $737,000 of deferred financing costs related to the ATM and $600,000 to pay off the remaining balance of our note payable to Forward China.
In Fiscal 2024, cash used in financing activities of $500,000 consisted of principal payments on the promissory note held by Forward China.
