Nukkleus Inc.
For the period ended Sep 30, 2025. Filed Nov 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 14, 2025
DFNS$2.01-12.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-14.
0001213900-25-076794
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-14.
0001213900-25-111026
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 86 previous paragraphs and 96 current paragraphs.
60 unchanged; 22 reworded; 14 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Currently, Nukkleus Inc., through its US-based subsidiary, is engaged in the distribution of drones’ payloads in the defense and homeland security markets within the US. In addition, through its Israeli subsidiary, we are engaged in providing services to support civil and defense aviation needs, including maintenance and repair (MRO) services, aircraft modernization, resale, and leasing, which includes the deployment of the de-icing technology for commercial aircrafts.
Current report
On September 15, 2025, Nukkleus Inc. (the “Company”) entered into an Amended and Restated Securities Purchase Agreement and Call Option (the “Star Agreement”) which amended and restated in its entirety the Securities Purchase Agreement and Call Option dated December 15, 2024 (“Purchase Agreement”) between the Company, Star 26 Capital Inc., a Nevada corporation (“Star”), the shareholders of Star (the “Star Equity Holders”) and Menachem Shalom, the representative of such shareholders, as amended by Amendment No. 1, dated as of February 11, 2025, Amendment No. 2 dated May 13, 2025, Amendment No. 3, dated as of June 15, 2025 and Amendment No. 4 dated June 21, 2025. Pursuant to the Star Agreement, the Company is to acquire a controlling 100% interest in Star, a defense acquisition company (the “Transaction”). Star currently holds (1) 100% of B. Rimon Agencies Ltd. (“Rimon”), an Israeli corporation engaged as distributor of military-grade generators, masts and lighting systems and that is, among other clients, a supplier of generators for “Iron Dome” launchers, (2) 67% of Water.IO Ltd., an Israeli corporation engaged in smart hydration technology, and (3) a convertible loan issued by I.T.S. Industrial Techno-logic Solutions Ltd., an Israeli corporation which designs, develops and manufactures fully integrated electro-mechanical machines, assembly lines and custom motion systems. Pursuant to the Star Agreement, at closing the Company will acquire 100% of the issued and outstanding capital of Star in consideration of (i) $21,000,000, to be paid by a 12-month $16,000,000 promissory note and the balance in $5,000,000 cash, less any amounts lent to Star from the Company since the Purchase Agreement signed among the parties, (ii) 4,770,340 shares of common stock of the Company, (iii) a five-year warrant to purchase an aggregate of 12,017,648 shares of the Company’s common stock for an exercise price of $1.50 per share, (iv) $3,000,000 in cash and (v) a 6-month promissory note in the principal amount of $3,000,000, which shall accrue interest at the rate of 8%.The shares, warrants, cash and the 6-month note will be assigned by Star to the Star Equity Holders pro ratably.
Current report
Blade Ranger Distribution Agreement
Current report
On August 20, 2025, the Company obtained exclusive distribution rights for BladeRanger Ltd.’s drone payload systems within the U.S. defense and homeland security markets. BladeRanger, founded in 1968 and reporting 237% revenue growth in 2024, develops advanced hardware and software drone payloads with patent-pending autonomous drone navigation technology. The agreement requires minimum purchase commitments of 5 payloads in Year 1, 10 in Year 2, and 15 in Year 3, with automatic five-year extension upon meeting commitments. As of the date of this report, the Company has not purchased any payloads.
Current report
Mandragola Joint Venture
Current report
On August 28, 2025, the Company, Nukk Picolo and Mandragola Ltd., an Israeli company (“Mandragola”) entered into a Joint Venture Agreement (the “JV Agreement”). Pursuant to the terms of the JV Agreement, the parties will establish a joint venture company in Israel (the “JV Company”) which is intended to establish advanced manufacturing zones in both the Baltics and Israel, designed to support civil and defense aviation needs. Plans also include the development of a NATO-compliant logistics hub in Riga in cooperation with additional regional partners, as well as facilities dedicated to licensed MRO services, aircraft modernization, resale, and leasing, including the deployment of the de-icing technology for commercial aircrafts which Nukkleus recently licensed (on an exclusive basis) from Blade Ranger Ltd. Pursuant to the JV Agreement, Nukk Picolo will hold 51% equity interest in the JV Company. The JV Agreement provides that, under certain specified conditions, Nukkleus can require Mandragola sell to Nukkleus its participating interest in the JV Company in consideration for the issuance of Nukkleus’ common stock based on the then specified valuation of JV Company as set forth in the JV Agreement. Under the JV Agreement, Mandragola has undertaken to provide to the JV Company a 24 month committed credit line of up to $1.5 million on an as needed basis. Nukk Picolo has the right to designate three of the five member board of the JV Company with Mandragola designating the remaining two directors. Under the JV Agreement, Nukkleus will issue to Mandragola 310,000 restricted shares of Nukkleus common stock. In addition, Nukkleus will issue to Mandragola (i) five year warrants to purchase 250,000 shares of Nukkleus’ common stock at a per share exercise price of $4.00 (the “Warrants”) and (ii) five year warrants for an additional 350,000 shares at a per share exercise price of $6.50 (the “Performance Warrants”). The Performance Warrants only vest upon the JV Company achieving $25 million cumulative revenue. If the revenues targets are not achieved by the JV Company within the five-year period, the Performance Warrants expire.
Current report
Tiltan Acquisition
Current report
On September 1, 2025, the Company and Nukk Picolo Ltd., a wholly-owned Israeli subsidiary of the Company (“Nukk Picolo”) entered into a Stock Purchase Agreement (the “Agreement”) with Tiltan Software Engineering Ltd. (“Tiltan”), an Israeli corporation specializing in AI software solutions for the defense and aerospace industry, and Arie Shafir, the sole shareholder of Tiltan (the “Shareholder”). Tiltan is an Israeli company established in 2015 that specializes in AI solutions used for Geographic Information Systems (GIS), mapping, modeling, and simulation technologies for defense and commercial applications. Pursuant to the Agreement, Nukk Picolo will acquire 100% of the issued and outstanding share capital of Tiltan for a total purchase price of NIS 47,600,000 (approximately $14 million at current exchange rates) (the “Purchase Price”). The Purchase Price will be paid through a combination of cash and equity consideration as follows:
Current report
Cash Component: NIS 35,700,000 (approximately $10.5 million), representing 75% of the Purchase Price, will be paid in six equal installments of NIS 5,950,000 (approximately $1.75 million) each. The first installment is payable at closing, with subsequent payments due every 36 days thereafter over a 180-day period. In connection with the cash component, upon execution and delivery of the Agreement the Company issued a secured promissory note (the “Note”) to the Shareholder in the principal amount of NIS 29,750,000 (approximately $8.75 million), representing five-sixths of the cash component. The Note is non-interest bearing unless an event of default occurs, in which case interest accrues at 10% per annum. The Note is payable in five equal installments of NIS 5,950,000 each, payable over the 180-day payment period. The Company may prepay the Note at any time without penalty. Additionally, NIS 666,667 from each of the first three cash payments (totaling NIS 2,000,000) will be retained by Tiltan as working capital rather than distributed to the Shareholder. The Note is secured by a first-priority lien on the Tiltan shares to be transferred to the Company.
Current report
Equity Component: At closing, the Company will deposit into escrow shares of Nukkleus common stock to secure the payment due on the 180th day after closing (the “Settlement Date”). On the Settlement Date, the Shareholder will receive from escrow the number of shares equal to 25% of the Purchase Price, with the number of shares to be based on the market price on the Settlement Date. If the value of the shares in escrow are more than 25% of the Purchase Price, the Shareholder shall receive only that number of shares to which he is entitled to and the excess shares shall be returned to the Company. If the value of the escrowed shares are less than 25% of the Purchase Price, or NIS 11,900,000 (approximately $3.5 million), the Company will issue additional shares to the Shareholder or pay the differential in cash.
Current report
The transaction is subject to customary closing conditions, including, the receipt of regulatory approvals, including the Israel Ministry of Defense and the delivery of PCAOB-compliant audited financial statements of Tiltan for fiscal years 2023 and 2024 and quarterly statements. The Company has provided information requested by the Israel Ministry of Defense and hopes to close the transaction before the end of 2025.
Current report
In connection with the transaction, the parties have agreed to establish an employee retention and incentive program consisting of (i) NIS 500,000 to be allocated by the Shareholder from the Purchase Price, (ii) NIS 1,000,000 in cash to be contributed by Nukkleus, and (iii) NIS 1,000,000 in Nukkleus stock options to be granted to Tiltan employees. Tiltan’s CEO will determine individual allocations under this program.
Current report
Impairment loss consists of impairment losses recognized on long-lived assets where there was a triggering event that indicated a long-lived assets carrying amount may not be recoverable. The impairment loss represents the amount the carrying value exceeds the fair value. Because these components fluctuate with market conditions, impairment loss can vary widely between periods.
Current report
In September 2025, we entered into a common stock purchase agreement with an investor in the form of an Equity Line of Credit (“ELOC”). Pursuant to the ELOC, we may sell to the investor up to $250 million of our common stock. The proceeds received in connection with the ELOC will be used to finance the Company’s ongoing operations, working capital, and expected acquisitions.
Removed paragraphs (4)
Previous report
In December 2024, we entered into a Securities Purchase Agreement and Call Option (the “Star Agreement”) with Star 26 Capital Inc. (“Star”), the shareholders of Star (“Star Equity Holders”) and an officer of Nukkleus, acting in his capacity as the representative of the Star Equity Holders, to acquire a controlling 51% interest in Star, an Israeli corporation engaged as a supplier of generators for “iron dome” launchers and other defense products. On February 11, 2025, the Company, Star and the Star Equity Holders, entered into an Amendment No. 1 to the Star Agreement (the “Amendment”) providing that the consideration to be invested by the Company into Star shall be increased. Mr. Shalom, who is the Chief Executive Officer and a director of the Company, is a controlling shareholder, Chief Executive Officer and a director of Star. Pursuant to the Star Agreement, the Company at closing will acquire 51% of the issued and outstanding capital of Star in consideration of (i) $15,000,000 in a combination of cash in the minimum amount of $5,000,000 and a promissory note for the remaining balance maturing in 12 months following the closing (the “Investment Note”), (ii) the Company issuing the Seller 2,385,170 shares of common stock of the Company and (iii) the Company issuing Star a five-year warrant to purchase an aggregate of 6,907,859 shares of the Company’s common stock for an exercise price of $1.50 per share. The Star Equity Holders granted the Company an option (the “Option”) to purchase the balance of their equity in Star (49%) for an aggregate of $16,084,250 (the “Option Exercise Price”) in consideration for the issuance to the Star Equity Holders five-year warrants to purchase an aggregate of 720,000 shares of the Company’s common stock for an exercise price of $1.50 per share. The Option Exercise Price to be paid by the Company to the Star Equity Holders will consist of $3,000,000 in cash, a promissory note in the principal amount of $3,000,000, which shall accrue interest at the rate of 8% and be due and payable six (6) months after the issuance thereof, 2,385,170 shares of common stock of the Company and a five-year warrant to purchase 5,109,789 shares of the Company’s common stock for an exercise price of $1.50 per share. On May 13, 2025, the parties entered into Amendment No. 2 increasing the amount that the Company will lend to Star prior to the closing date from $1,800,000 to $3,000,000 and removing the closing condition that a fairness opinion be delivered at closing. Star also executed a promissory note memorializing the previous $2,000,000 funded by the Company as well as future advances to be provided to Star up to a total of $3,000,000.
Previous report
Amendments to Star Agreement
Previous report
On June 15, 2025, the parties entered into Amendment No. 3 to the Star Agreement whereby they clarified that if the Company fails to make all payments by the agreed time or if the Star Agreement is terminated as a result of the Company failing to perform or observe the covenants or agreements of the Company or if Company fails to maintain its listing on Nasdaq, Star shall be entitled to a payment from the Company in the amount of $3,000,000.
Previous report
On July 25, 2025, the Company entered into Amendment No. 4 to the Star Agreement. Pursuant to the terms of Amendment No. 4, Menachem Shalom, the holder of all Class B common stock of Star, agreed that all said shares shall be converted to Class A common stock of Star. The objective of such cancellation and conversion is to eliminate the disparity between the voting rights and the economic rights of the common stock of Star.
Reworded paragraphs (22)
Previous wording
We are a financial technology company that was historically focused on providing software, technology solutions, customer sales and marketing, and risk management technology hardware and software solutions packages for the worldwide retail foreign exchange (“FX”) trading industry and payment services from one fiat currency to another or to digital assets.
Current wording
Previously we were a financial technology company that was focused on providing software, technology solutions, customer sales and marketing, and risk management technology hardware and software solutions packages for the worldwide retail foreign exchange (“FX”) trading industry and payment services from one fiat currency to another or to digital assets.
Previous wording
If, for a period of 12 months after the closing, the Company’s shares of common stock are delisted from Nasdaq, Star shall have the right, at its own discretion, to require the Company to exchange the Investment Note for all the shares of Star then held by the Company, provided, however, the Option shall be automatically cancelled and Star shall retain any cash payments made by the Company to Star and the Company shall retain an equity interest in Star equivalent to all cash payments.
Current wording
If, for a period of 12 months after the closing, the Company’s shares of common stock are delisted from Nasdaq, Star shall have the right, at its own discretion, to require the Company to exchange the Investment Note for all the shares of Star then held by the Company, provided, however, Star shall retain any cash payments made by the Company to Star and the Company shall retain an equity interest in Star equivalent to all cash payments.
Previous wording
On July 30, 2025 the Company entered into a warrant agreement with Synthetic Darwin LLC (“Darwin”), enabling the Company to acquire up to 200 million Darwin tokens, a new class of self-evolving AI network tokens developed by Darwin. Darwin is a self-training and evolving AI that can be used to test and simulate multiple scenarios in finance, healthcare and defense. This software aims to allow companies to run scenarios and find the best configuration for financial services, drugs, defense-related software and more. The Company has identified the potential in such AI software and decided to enter into this warrant agreement for Darwin tokens, which will allow the Company and the Company’s future subsidiaries to use this platform.
Current wording
On July 30, 2025 the Company entered into a warrant agreement with Synthetic Darwin LLC (“Darwin”), enabling the Company to acquire up to 200 million Darwin tokens, a new class of self-evolving AI network tokens developed by Darwin. Darwin is a self-training and evolving AI that can be used to test and simulate multiple scenarios in finance, healthcare and defense. This software aims to allow companies to run scenarios and find the best configuration for financial services, drugs, defense-related software and more. The Company has identified the potential in such AI software and decided to enter into this warrant agreement for Darwin tokens, which will allow the Company and the Company’s future subsidiaries to use this platform. The Company currently owns 100 million Darwin tokens.
Previous wording
Other (expense) income, net consists of interest expense, gain (loss) on extinguishment of liabilities, day one loss on issuance of liability-classified stock purchase warrants and embedded derivatives within convertible notes, change in fair value of liability-classified stock purchase warrants and derivative liabilities.
Current wording
Other (expense) income, net consists of interest expense, gain (loss) on extinguishment of liabilities, day one loss on issuance of liability-classified stock purchase warrants and embedded derivatives within convertible notes, change in fair value of liability-classified stock purchase warrants and derivative assets and liabilities, and gain on deconsolidation.
Previous wording
Comparison For the Three and Six Months Ended June 30, 2025 Versus the Three and Six Months Ended June 30, 2024
Current wording
Comparison For the Three and Nine Months Ended September 30, 2025 Versus the Three and Nine Months Ended September 30, 2024
Previous wording
We had no revenue from continuing operations during the three and six months ended June 30, 2025 and 2024, due to the discontinuation of subsidiary DRFQ’s operations since DRFQ has been classified as held-for-sale. We expect to report revenue upon the closing of the Star acquisition, which we expect to be complete by and near the end of the third quarter of this year. At this time, the Company does not expect to generate revenue from other sources prior to the closing of the Star acquisition.
Current wording
We had no revenue from continuing operations during the three and nine months ended September 30, 2025 and 2024, due to the discontinuation of subsidiary DRFQ’s operations and the subsequent sale and deconsolidation of DRFQ in July 2025. We expect to report revenue upon the closing of the Star and Tiltan acquisitions, which we expect to be complete by and near the end of the fourth quarter of this year. At this time, the Company does not expect to generate revenue from other sources prior to the closing of these acquisitions.
Previous wording
For the three months ended June 30, 2025, professional fees decreased by approximately $144,000, or 16.3%, as compared to the three months ended June 30, 2024. For the six months ended June 30, 2025, professional fees decreased by approximately $1,022,000, or 37.6%. This decrease was primarily attributable to a decrease in advisory service fees of $965,500 and consulting fees of approximately $310,000, offset by an increase in legal fees of approximately $123,000 and audit fees of approximately $131,000. This net decrease in professional fees is mainly attributable to the one-time costs incurred in early 2024 in relation to the business combination. We expect that our professional fees will remain consistent in the near future with a possible marginal increase between now and the closing of the Star acquisition. Subsequent to the closing of the Star acquisition, we expect professional fees to decrease slightly as we anticipate the frequency of one-time costs of professional fees to come down.
Current wording
For the three months ended September 30, 2025, professional fees increased by approximately $3,807,000, or 688.6%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, professional fees increased by approximately $2,785,000, or 85.3%. This increase was primarily attributable to increases in consulting fees of approximately $3,758,000, and audit fees of approximately $196,000, offset by decreases in advisory fees of approximately $1,055,000 and legal fees of approximately $114,000. This net increase in professional fees is mainly attributable to the consulting fees expense recognized from the fair value of the shares of common stock and the August 2025 Warrant both issued to Mandragola in connection with the new joint venture agreement entered into in August 2025. We expect that our professional fees will decrease in the near future as this report is reflecting inflated costs due to the aforementioned issuance of shares and warrants. Also, subsequent to the closing of the Star acquisition, we expect professional fees to decrease as we anticipate the frequency of one-time costs of professional fees to decrease.
Previous wording
For the three months ended June 30, 2025, our compensation and related benefits increased by approximately $46,000, or 186.0%, as compared to the three months ended June 30, 2024. For the six months ended June 30, 2025, our compensation and related benefits increased by approximately $80,000, or 145.5%, as compared to the six months ended June 30, 2024. We expect that our compensation and related benefits will increase in the near future if the pending acquisition of Star completes during fiscal year 2025, as the Company expects to employ several individuals immediately following the closing of the acquisition. Our compensation and related benefits have been significantly lower than our professional fees due to the engagement of several professionals working for the Company on a consulting basis.
Current wording
For the three months ended September 30, 2025, our compensation and related benefits increased by approximately $178,000, or 333.1%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, our compensation and related benefits increased by approximately $258,000, or 237.8%, as compared to the nine months ended September 30, 2024. We expect that our compensation and related benefits will increase in the near future if the pending acquisition of Star completes during fiscal year 2025, as the Company expects to employ several individuals immediately following the closing of the acquisition. Our compensation and related benefits have been significantly lower than our professional fees due to the engagement of several professionals working for the Company on a consulting basis.
Previous wording
For the three months ended June 30, 2025, total other general and administrative expenses increased by approximately $116,000, or 95.1%, as compared to the three months ended June 30, 2024. For the six months ended June 30, 2025, total other general and administrative expenses increased by approximately $382,000, or 110.6%, as compared to the six months ended June 30, 2024. The increase was mainly attributable to additional costs associated with operating as a public company, including an increase in D&O insurance of approximately $168,000, marketing fees of approximately $110,000, rent expenses of approximately $73,000 attributable to new offices established in Israel and New York, entertainment and travel of approximately $89,000 attributable to the travel by our CEO and other business expenses of approximately $93,000, offset by a decrease in filing fees of approximately $150,000. We expect that other general and administrative expenses will continue to increase in the near future if the pending acquisition of Star completes during fiscal year 2025, as the Company expects to incur higher costs such as insurance, rent, advertising, and travel expenses.
Current wording
For the three months ended September 30, 2025, total other general and administrative expenses decreased by approximately $10,000, or 5.4%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, total other general and administrative expenses increased by approximately $372,000, or 69.3%, as compared to the nine months ended September 30, 2024. The increase was mainly attributable to additional costs associated with operating as a public company, including an increase in D&O insurance of approximately $138,000, marketing fees of approximately $113,000, rent expenses of approximately $101,000 attributable to new offices established in Israel and New York, entertainment and travel of approximately $121,000 attributable to the travel by our CEO and other business expenses of approximately $95,000, offset by a decrease in filing fees of approximately $198,000. We expect that other general and administrative expenses will continue to increase in the near future if the pending acquisition of Star completes during fiscal year 2025, as the Company expects to incur higher costs such as insurance, rent, advertising, and travel expenses.
Previous wording
For the three months ended June 30, 2025, other income (expense), net, increased approximately $4,514,000, or 1,972.6%, as compared to the three months ended June 30, 2024. For the six months ended June 30, 2025, other income (expense), net, increased approximately $109,172,000, or 45,707.6%, as compared to the six months ended June 30, 2024. The increase was attributable to, an increase in gain from change in fair value – stock purchase warrant liabilities of approximately $109,406,000, a gain from change in fair value – convertible note embedded derivative of approximately $588,000, realized and unrealized gains of approximately $146,000, and a decrease in loss on debt settlement of approximately $176,000, offset by an increase in penalties – late registration, payable to the investor in connection with the December 2024 Private Placement, of $800,000, interest expense due to amortization of debt discounts of approximately $279,000, and interest expense on debt of approximately $81,000. The significant changes in fair value recognized on the Company’s stock purchase warrant liabilities are directly related to several warrants granted during fiscal year 2024. For the duration of the life of these warrants, the Company expects to continue to recognize significant gains or losses heavily driven by any changes in the Company’s stock price at each quarterly and annual report date.
Current wording
For the three months ended September 30, 2025, other income (expense), net, decreased approximately $11,505,000, or 40,634.8%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, other income (expense), net, increased approximately $97,666,000, or 36,558.9%, as compared to the nine months ended September 30, 2024. The increase was attributable to, an increase in gain from change in fair value – stock purchase warrant liabilities of approximately $123,370,000 (see Note 11), a gain on deconsolidation of approximately $2,491,000 (see Note 4), a gain from change in fair value – convertible note embedded derivative of approximately $588,000, realized and unrealized gains of approximately $280,000, and a decrease in loss on debt settlement of approximately $289,000, offset by a decrease in gains on settlement of vendor obligations and due to affiliates of approximately $403,000, and increases in day one loss on private placement of approximately $19,606,000 (see Note 13), loss on debt extinguishment of approximately $7,484,000, a loss from change in fair value – digital assets of approximately $968,000, penalties – late registration, payable to the investor in connection with the December 2024 Private Placement, of $800,000, interest expense due to amortization of debt discounts of approximately $65,000, and interest expense on debt of approximately $26,000. The significant changes in fair value recognized on the Company’s stock purchase warrant liabilities are directly related to several warrants granted during fiscal year 2024. For the duration of the life of these warrants, the Company expects to continue to recognize significant gains or losses heavily driven by any changes in the Company’s stock price at each quarterly and annual report date.
Previous wording
Net loss from discontinued operations was estimated to be $217,952 for the three months ended June 30, 2025 compared to $358,045 for the three months ended June 30, 2024. Net loss from discontinued operations was estimated to be $400,707 for the six months ended June 30, 2025 compared to $692,261 for the six months ended June 30, 2024. These decreases were due to a decrease in net loss from the operations of the Company’s wholly owed subsidiary DRFQ, which is the sole driver of the Company’s former financial services segment. The Company expects to recognize a deconsolidation of DRFQ in the third quarter due to the sale of this subsidiary, which will cease discontinued operations of the Company.
Current wording
Net loss from discontinued operations was estimated to be $60,264 for the three months ended September 30, 2025 compared to net income of $5,672,219 for the three months ended September 30, 2024. Net loss from discontinued operations was estimated to be $460,971 for the nine months ended September 30, 2025 compared to net income of $4,979,958 for the nine months ended September 30, 2024. These decreases were due to a decrease in net loss from the operations of the Company’s wholly owned subsidiary DRFQ, which was the sole driver of the Company’s former financial services segment. The Company deconsolidated DRFQ as of July 29, 2025, and reported a net gain on deconsolidation of $2,491,485 during the three months ended September 30, 2025 (see Note 4).
Previous wording
We generated a pre-tax net income from continuing operations of $106,377,435 for the six months ended June 30, 2025 and incurred a pre-tax net loss from continuing operations of $3,353,397 for the six months ended June 30, 2024, and have an accumulated deficit of $95,099,015 as of June 30, 2025 and $201,075,743 at December 31, 2024. As of June 30, 2025, we had a working capital deficit of $53,463,528, including $1,519,647 of cash. The pre-tax net income from continuing operations of approximately $106,000,000 for the six months ended June 30, 2025 is primarily due to the applicable accounting treatment used to recognize gains from changes in fair value of liability-classified warrants which does not impact our cash position. During the six months ended June 30, 2025 the most significant use of the Company’s cash was for the purpose of advance cash payments to Star of $1,500,000 pursuant to the amended terms of the Star transaction. The Company intends to make an additional final advance payment of $500,000 subsequent to June 30, 2025.
Current wording
We generated a pre-tax net income from continuing operations of $90,072,207 for the nine months ended September 30, 2025 and incurred a pre-tax net loss from continuing operations of $4,570,383 for the nine months ended September 30, 2024, and have an accumulated deficit of $111,464,507 as of September 30, 2025 and $201,075,743 at December 31, 2024. As of September 30, 2025, we had a working capital deficit of $30,512,429, including $7,611,465 of cash and cash equivalents. The pre-tax net income from continuing operations of approximately $90,000,000 for the nine months ended September 30, 2025 is primarily due to the applicable accounting treatment used to recognize gains from changes in fair value of liability-classified warrants which does not impact our cash position. During the nine months ended September 30, 2025 the most significant use of the Company’s cash was for the purpose of advance cash payments to Star of $3,500,000 pursuant to the amended terms of the Star transaction. The Company intends to make an additional final advance payment of $500,000 subsequent to September 30, 2025.
Previous wording
We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. However, we expect to generate revenue beginning immediately after the closing of the Star acquisition, which we expect to be completed near the end of the third quarter of 2025. Since our inception, we have raised capital through private sales of common stock and debt securities. Our future success is dependent upon our ability to achieve profitable operations and generate cash from operating activities. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support our operations.
Current wording
We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. However, we expect to generate revenue beginning immediately after the closing of the Star acquisition, which we expect to be completed near the end of the fourth quarter of 2025. Since our inception, we have raised capital through private sales of common stock and debt securities. Most recently, we raised $10,000,000 in gross proceeds from a private placement entered into on September 4, 2025. Our future success is dependent upon our ability to achieve profitable operations and generate cash from operating activities. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support our operations.
Previous wording
The following summarizes the key components of our cash flows for the six months ended June 30, 2025 and 2024:
Current wording
The following summarizes the key components of our cash flows for the nine months ended September 30, 2025 and 2024:
Previous wording
Net cash flow used in operating activities for the six months ended June 30, 2025 was approximately $2,694,000, which primarily reflected our consolidated net income of approximately $105,977,000, adjusted for changes in working capital accounts and certain non-cash income (expenses) of approximately $109,492,000 (including the change in fair value of our liability-classified stock purchase warrants and derivative liabilities of approximately $109,994,000, offset by amortization of debt discount of approximately $322,000, stock-based compensation of approximately $178,000, and depreciation expense of approximately $1,500).
Current wording
Net cash flow used in operating activities for the nine months ended September 30, 2025 was approximately $5,199,000, which primarily reflected our consolidated net income of approximately $89,611,000, adjusted for changes in working capital accounts and certain non-cash income (expenses) of approximately $97,888,000 (including the change in fair value of our liability-classified stock purchase warrants and derivative liabilities of approximately $123,957,000, and gain on deconsolidation of approximately $2,491,000, offset by day one loss on private placement of approximately $19,606,000, loss on debt extinguishment of approximately $7,484,000, change in fair value of digital assets of approximately $968,000, amortization of debt discount of approximately $322,000, stock-based compensation of approximately $178,000, and depreciation expense of approximately $2,800).
Previous wording
Net cash flow used in operating activities for the six months ended June 30, 2024 was $1,821,000, which primarily reflected our consolidated net loss of approximately $4,046,000, adjusted for changes in working capital accounts and certain non-cash expense of approximately $362,000 (including loss on settlement of vendor obligations of approximately $176,000, stock-based compensation of approximately $149,000, and amortization of debt discount of approximately $36,000).
Current wording
Net cash flow used in operating activities for the nine months ended September 30, 2024 was $3,212,000, which primarily reflected our consolidated net income of approximately $407,000, adjusted for changes in working capital accounts and certain non-cash expense of approximately $748,000 (including loss on settlement of vendor obligations of approximately $289,000, stock-based compensation of approximately $155,000, and amortization of debt discount of approximately $316,000, offset by a gain on settlement of due to affiliates of approximately $192,000, and a gain on settlement of vendor obligations of approximately $211,000).
Previous wording
Net cash flow used in investing activities was approximately $1,515,000 for the six months ended June 30, 2025, which consisted of an additional advance payment to Star of $1,500,000 in connection with the plan acquisition of Star, and a purchase of computer equipment of approximately $15,000.
Current wording
Net cash flow used in investing activities was approximately $3,519,000 for the nine months ended September 30, 2025, which consisted of additional advance payments to Star of $3,500,000 in connection with the planned acquisition of Star, and a purchase of computer equipment of approximately $19,000.
Previous wording
There were no cash flows provided by investing activities for the six months ended June 30, 2024.
Current wording
There were no cash flows provided by investing activities for the nine months ended September 30, 2024.
Previous wording
Net cash flow used in financing activities was approximately $878,000 for the six months ended June 30, 2025, which consisted of a repayment of note payable of $78,000 and payments of penalty – late registration of $800,000.
Current wording
Net cash flow provided by in financing activities was approximately $8,347,000 for the nine months ended September 30, 2025, which consisted of net proceeds from issuance of private placement of approximately $9,225,000, offset by a repayment of note payable of $78,000 and payments of penalty – late registration of $800,000.
Previous wording
Net cash flow provided by financing activities was approximately $1,505,000 for the six months ended June 30, 2024, which consisted of proceeds from loan payable – related parties of approximately $545,000, proceeds from issuance of convertible debt, net of issuance costs of approximately $300,000, proceeds from issuance of note payable of approximately $78,000, and cash provided by financing activities from discontinued operations of approximately $583,000.
Current wording
Net cash flow provided by financing activities was approximately $2,387,000 for the nine months ended September 30, 2024, which consisted of proceeds from loan payable – related parties of approximately $731,000, proceeds from issuance of convertible debt, net of issuance costs of approximately $996,000, proceeds from issuance of note payable of approximately $78,000, and cash provided by financing activities from discontinued operations of approximately $582,000.
Previous wording
As discussed in Note 4 to the unaudited financial statements in this Quarterly Report on Form 10-Q, the Company was unable to obtain complete financial information from a subsidiary for the three months ended June 30, 2025. Consequently, management relied on historical trends and partial records to estimate the operating results of the discontinued operations for the three months ended June 30, 2025.
Current wording
As discussed in Note 4 to the unaudited financial statements in this Quarterly Report on Form 10-Q, the Company was unable to obtain complete financial information from a subsidiary for the period beginning April 1, 2025 and ending July 29, 2025. Consequently, management relied on historical trends and partial records to estimate the operating results of the discontinued operations for this period.
Previous wording
Fluctuations in functional currencies from our net investment in international subsidiaries expose us to foreign currency translation risk, where changes in foreign currency exchange rates may adversely affect our results of operations upon translation into U.S. dollars. See the consolidated statements of comprehensive income (loss) in Part II, Item 8 of this Quarterly Report on Form 10-Q for translation adjustments for the three and six months ended June 30, 2025 and 2024, a 10% increase or decrease in foreign currency exchange rates used in translating the financial statements of subsidiaries with functional currencies other than our reporting currency would not have a material impact on our financial results.
Current wording
Fluctuations in functional currencies from our net investment in international subsidiaries expose us to foreign currency translation risk, where changes in foreign currency exchange rates may adversely affect our results of operations upon translation into U.S. dollars. See the consolidated statements of comprehensive income (loss) in Part I, Item 1 of this Quarterly Report on Form 10-Q for translation adjustments for the three and nine months ended September 30, 2025 and 2024, a 10% increase or decrease in foreign currency exchange rates used in translating the financial statements of subsidiaries with functional currencies other than our reporting currency would not have a material impact on our financial results.