T3 Defense Inc.

NOTE 1 – GENERAL

The Business Combination was completed on December 22, 2023. On the Closing Date, and in connection with the closing of the Business Combination, Brilliant changed its name to Nukkleus Inc. and the Company’s common stock began trading on the NASDAQ under the ticker symbol NUKK.

Effective February 9, 2026, the Company changed its name to “T3 Defense Inc.” As a result of the name change, the new ticker symbol for the Company’s common stock is “DFNS” and trading commenced under the new ticker symbol on The Nasdaq Stock Market LLC on February 9, 2026.

Old Nukk was determined to be the accounting acquirer in the Business Combination under Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). This determination was primarily based on Old Nukk’s shareholders holding a majority of the voting interests in the combined entity, Old Nukk’s ability to appoint and maintain control over the majority of the board of directors of the combined entity, and the continuity of senior management and operations. Accordingly, the Business Combination was accounted for as a reverse recapitalization, with Old Nukk deemed to have issued equity for the net assets of Brilliant. The net assets of Brilliant were recorded at historical cost, and no goodwill or intangible assets were recognized.

While Brilliant was the legal acquirer, Old Nukk was the accounting acquirer; therefore, the historical financial statements of Old Nukk became those of the Company. Accordingly, the consolidated financial statements reflect: (i) Old Nukk’s historical results prior to the Business Combination; (ii) the combined results thereafter; (iii) Old Nukk’s assets and liabilities at their historical cost; and (iv) the Company’s equity structure for all periods presented.

Following the Business Combination, until the change in management in September 2024, the Company operated in the technology business as a full-service transactions technology and advisory business providing end-to-end transactions technology solutions. The Company offered an advanced transactions platform for dealing and risk management with global liquidity and customizable leverage, where users have control over quote and liquidity strategies.

Historically, the Company, through its wholly owned subsidiary, provided software and technology solutions for the worldwide retail foreign exchange trading industry. The Company’s primary customer was Triton Capital Markets Ltd. (“TCM”) (formerly known as FXDD Malta Limited). Substantially all of the Company’s revenues prior to January 1, 2024 were generated pursuant to a General Services Agreement (“GSA”) entered into in May 2016 between Nukkleus Limited and TCM. The GSA provided for minimum monthly payments of $1,600.

Due to non-payment by TCM under the GSA, the Company notified TCM of termination of the agreement. On September 30, 2024, the Company entered into a Release Agreement with TCM and FXDirectDealer LLC confirming that the GSA (and a related services agreement with FXDirectDealer LLC) had been terminated effective January 1, 2024, and that no obligations or liabilities remained outstanding between the parties as of the agreement date. The parties mutually released one another from all claims arising under the agreements.

The Company historically operated its blockchain payment solutions through Digital RFQ Limited (“DRFQ”), an indirect wholly owned subsidiary of the Company. In January 2024, the Company ceased its general support service operations, terminating the existing customer and supplier contracts with a related party, and shifted its focus to the payment services operations. On December 27, 2024, the Company entered into a Share Purchase Agreement to sell DRFQ for nominal consideration of £1,000, subject to shareholder approval. As of August 2025, the Company determined that it no longer had a controlling financial interest in Digital RFQ. Accordingly, the Company deconsolidated DRFQ during the third quarter of fiscal year 2025. See note 3 below for additional information.

On December 15, 2024, the Company entered into a Securities Purchase Agreement and Call Option, as amended by Amendment No. 1 dated February 11, 2025, Amendment No. 2 dated May 13, 2025, and Amendment No. 3 dated June 15, 2025 with Star 26 Capital Inc. (“Star”), the shareholders of Star (“Star Equity Holders”)and Menachem Shalom, 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 September 15, 2025, the Company entered into an Amended and Restated Securities Purchase Agreement(the “Star Agreement”) with Star, Star Equity Holders, and Menachem Shalom, pursuant to which the Company agreed to acquire 100% of the issued and outstanding equity of Star. Mr. Shalom, the Company’s Chief Executive Officer and director, is also a controlling shareholder and director of Star.

Pursuant to the Star Agreement, T3 is to acquire a controlling 100% interest in Star in consideration of $21,000, to be paid by a 12-month $16,000 promissory note and the balance in $5,000 cash, less any amounts lent to Star from T3 since the Purchase Agreement signed among the parties. At the time of closing, the amounts lent are $4,500.

In addition, Star would receive:

The shares, warrants, cash and the 6-month note will be assigned by Star to the Star Equity Holders pro-ratably.

The transaction was approved by the Company’s shareholders on December 16, 2025 and was completed on January 12, 2026, at which time Star became a wholly owned subsidiary of the Company.

Because the acquisition closed subsequent to December 31, 2025, the transaction has not been reflected in the accompanying consolidated financial statements. The Company will account for the acquisition under ASC 805, Business Combinations. The preliminary allocation of purchase consideration to the assets acquired and liabilities assumed has not yet been completed as of the date of issuance of these financial statements.

On December 30, 2025, the Company consummated the acquisition of all of the issued and outstanding shares of Tiltan Software Engineering Ltd. (“Tiltan”) pursuant to a Stock Purchase Agreement, as amended, among the Company, its wholly owned subsidiary Nukk Picolo Ltd. (“Nukk Picolo”), Tiltan and Arie Shafir (the “Tiltan Seller”), in consideration of NIS 47,600 (approximately $14,000). As a result of the acquisition, Tiltan became an indirect wholly owned subsidiary of the Company. (see note 4 for additional information).

On October 16, 2025, a registration statement was filed with the Securities and Exchange Commission (the “SEC”) regarding a proposed initial public offering (“IPO”) of units of SC II Acquisition Corp. (“SC II”), a newly formed special purpose acquisition company and indirect subsidiary of the Company.

On November 28, 2025, SC II consummated its IPO of 17,250,000 units (the “Units”), including the full exercise by the underwriters of their over-allotment option to purchase an additional 2,250,000 Units. The Units were sold at a public offering price of $10.00 per Unit, generating gross proceeds of approximately $172.5 million. Each Unit consists ofone Class A ordinary share, par value $0.0001 per share, and one right to receive one-fifth (1/5) of one Class A ordinary share upon the consummation of SC II’s initial business combination (each, a “Share Right”).

Simultaneously with the closing of the Initial Public Offering (“IPO”), SC Capital II Sponsor LLC (the “Sponsor”), a Delaware limited liability company and indirect subsidiary of the Company in which the Company holds a majority interest, purchased 255,000 private placement units (the “Sponsor Units”) at $10.00 per unit, pursuant to a Sponsor Private Placement Units Purchase Agreement dated November 25, 2025. The issuance of the Sponsor Units was made pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

The proceeds of the IPO were placed in a trust account to be used for the purpose of completing a business combination in accordance with SC II’s amended and restated memorandum and articles of association.

The Company evaluated SC II under ASC 810, Consolidation, including the variable interest entity (“VIE”) model. SC II was determined to be a VIE because, among other factors, the holders of the Class A ordinary shares lack substantive decision-making rights over the activities that most significantly impact SC II’s economic performance and the Sponsor, through its governance rights and economic interests, has the ability to direct such activities.

The Company concluded that it is the primary beneficiary of SC II as it (i) has the power, through its majority ownership and control of the Sponsor, to direct the activities that most significantly impact SC II’s economic performance, including identifying and negotiating a potential business combination, and (ii) has the obligation to absorb losses and the right to receive benefits that could potentially be significant to SC II.

Accordingly, SC II has been consolidated in the Company’s consolidated financial statements as of December 31, 2025.

The assets held in the trust account are heldin money market funds which invest in U.S. Treasury securities. The Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, or if there is a shareholder vote or tender offer in connection with the Company’s initial Business Combination. In accordance with ASC 480-10-S99, the Company classifies Public Shares subject to redemption outside of permanent equity as the redemption provisions are not solely within the control of the Company. The Company recognizes changes in redemption value immediately as they occur and will adjust the carrying value of redeemable shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption value. The change in the carrying value of redeemable shares will result in charges against additional paid-in capital (to the extent available) and accumulated deficit. Accordingly, as of December 31, 2025, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet. As of December 31, 2025, the Class A ordinary shares subject to possible redemption reflected in the balance sheet are reconciled in the following table:

On August 28, 2025, the Company, Nukk Picolo and Mandragola Ltd., an Israeli corporation (“Mandragola”), entered into a Joint Venture Agreement (the “JV Agreement”).

Pursuant to the JV Agreement, the parties agreed to establish a joint venture company in Israel (the “JV Company”). The JV Company is intended to develop advanced manufacturing zones in the Baltics and Israel designed to support civil and defense aviation activities, including the establishment of a NATO-compliant logistics hub in Riga and facilities dedicated to licensed maintenance and repair (MRO) services, aircraft modernization, resale and leasing activities. Under the JV Agreement, Nukk Picolo will hold a 51% equity interest in the JV Company and has the right to designate three of the five members of the board of directors, with Mandragola designating the remaining two directors.

The JV Agreement further provides that, under certain specified conditions, the Company may require Mandragola to sell its participating interest in the JV Company to the Company in exchange for shares of the Company’s common stock based on a pre-determined valuation formula set forth in the JV Agreement.

Mandragola has committed to provide the JV Company with a 24-month credit line of up to $2 million, to be drawn as needed.

In connection with the JV Agreement, the Company issued to Mandragola:

Effective October 24, 2024, the Company amended its amended and restated certificate of incorporation to implement a one-for-eight reverse stock split of its common stock (the “2024 Reverse Stock Split”) and increased the number of authorized shares of the Company’s common stock from 40,000,000 to 150,000,000.

As a result of the Reverse Stock Split, every seven shares of the Company’s outstanding Common Stock prior to the effect of that amendment were combined and reclassified into one share of the Company’s Common Stock. No fractional shares were issued in connection with or following the reverse split and the shares were rounded to the nearest whole number.

All shares, stock option and per share information in these consolidated financial statements have been restated to reflect the Reverse Stock Split on a retroactive basis.

On February 14, 2025, the Board of Directors of the Company approved a change in the Company’s fiscal year end from September 30 to December 31, effective for the fiscal year beginning January 1, 2024. This change results in a transition period from October 1, 2024, to December 31, 2024.

The decision to change the fiscal year end was made to align the Company’s financial reporting with the calendar year, which is expected to enhance operational efficiency, improve comparability with industry peers, and better serve the needs of shareholders. Further, the Company intends to align its fiscal year with Star.

The periods presented are the year ended December 31, 2025, the three months ended December 31, 2024 (the “Transition Period”), and the year ended September 30, 2024 (“Fiscal 2024”). Each of the Company’s fiscal quarters ends on the last day of the calendar month.

On August 28, 2025, the Company received a notification letter from Nasdaq indicating that the Company was not in compliance with the Market Value Rule because the Company had failed to maintain a minimum market value of listed securities of $50,000 over the previous 10 consecutive business days as required by The Nasdaq Global Market. The Company had been provided a compliance period of 180 calendar days, or until February 24, 2026, to regain compliance.

On September 26, 2025, the Company received written confirmation from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that it regained compliance with the minimum market value of listed securities requirement under Nasdaq Listing Rule 5450(b)(2)(A) (the “Market Value Rule”). Nasdaq’s September 26, 2025 letter confirmed that, for the last 10 consecutive business days from September 15, 2025 to September 26, 2025, the Company’s market value of listed securities had been $50,000 or greater. As a result, the Company has demonstrated compliance with the Market Value Rule, and Nasdaq has determined that the Company has regained compliance.

Consequently, the Company is now in compliance with the Market Value Rule and this matter has been closed.

In October 2023, a large-scale terrorist attack in southern Israel led to the outbreak of armed conflict between Israel and Hamas. The conflict subsequently expanded to additional regional fronts and contributed to a period of heightened geopolitical and security instability in the region.

During 2024 and 2025, hostilities included military operations in Lebanon and direct confrontations involving Iran. These developments increased regional uncertainty and, at times, resulted in temporary disruptions to the Company’s operations in Israel, including limited interruptions to routine business activities.

In September 2025, a ceasefire agreement was reached between Israel and Hamas, and all remaining living Israeli hostages were released and returned to Israel. While the ceasefire has generally held as of the date of these financial statements, the security situation remains sensitive, and the potential for renewed hostilities or broader regional escalation cannot be ruled out. More recently, on February 28, 2026, hostilities between Israel and Iran escalated again. Israel, together with the United States, conducted a major joint military campaign of air and missile strikes against targets in Iran, which triggered a broad Iranian response and contributed to significant regional instability. The situation remains highly fluid, and management is unable to predict when, or on what terms, this escalation will be resolved. Accordingly, the extent of the continued impact on the Company’s operations and financial results, if any, cannot be reasonably estimated at this time.

Given that the majority of the Company’s operations are conducted in Israel, and that all members of the Company’s board of directors and management, as well as most employees, consultants, and service providers, are located in Israel, the Company is directly affected by the economic, political, geopolitical, and military conditions impacting the region. As of December 31, 2025, while ceasefire arrangements with Hamas, Lebanon and Iran were generally in effect and large-scale military operations had subsided, the overall security environment in Israel and the surrounding region remained unstable and unpredictable. Any further escalation or expansion of the conflict could negatively affect both regional and global conditions, and may adversely impact the Company’s business, financial condition, and results of operations.

These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern.

At December 31, 2025, the Company had negative working capital of approximately $30 million (of which $24.5 million stock purchase warrant liabilities that do not require cash settlement) and stockholders’ deficit of $15.6 million as of December 31, 2025; For the year ended December 31, 2025, the Company reported a net operating loss of $32.6 million and net cash used in operations of $6.2 million. Absent any other action, the Company will require additional liquidity to continue its operations for the next 12 months.

After evaluating these conditions, management concluded that its plans, when considered in aggregate, alleviate substantial doubt about the Company’s ability to continue as a going concern. Those plans include: (i) cancellation of a previously contemplated $16 million intercompany note obligation arising from the Star acquisition, which has been mutually agreed to be of no force or effect (see Note 20) ; (ii) the Company's existing unrestricted cash balance of approximately $7.0 million, sufficient to fund projected operating expenses through the look-forward period; (iii) an active Equity Line of Credit ("ELOC") with Esousa Holdings, LLC — legally binding, SEC-registered, and shareholder-approved — providing drawdown capacity, which exceeds the Company's projected annual operating cash needs; (iv) the Company's majority-owned subsidiaries, including Rimon Ltd. and Nimbus Robotics, which are cash-positive and require no capital support from the Company; (v) management's ongoing efforts to assist subsidiaries in securing or expanding bank credit facilities; and (vi) the option to satisfy certain obligations through issuance of equity in lieu of cash. See also Note 20, which describes a private placement agreed upon subsequent to the balance sheet date, pursuant to which the Company received $10 million in February 2026.

Management has determined that its plans are probable of being effectively implemented and probable of mitigating the conditions described above, enabling continuation of the Company’s operations for the foreseeable future.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.

As applicable to these financial statements, the most significant estimates and judgments involve valuation of stock-based compensation, valuation of equity-classified stock purchase warrants, valuation of liability-classified stock purchase warrants, valuation of derivative liability, the useful lives of long-lived assets and assumptions used in assessing impairment of long-lived assets.

A majority of the revenues of the Company and its subsidiaries are generated in U.S. dollars. In addition, most of the Company’s and its subsidiaries’ costs and expenses are denominated and determined in U.S. dollars. Management believes that the U.S. dollar is the currency of the primary economic environment in which the Company and its subsidiaries operate. Thus, the functional and reporting currency of the Company and its subsidiaries is the U.S. dollar.

Transactions and monetary balances in other currencies are translated into the functional currency using the current exchange rate. Accordingly, monetary accounts maintained in currencies other than the dollar are remeasured into U.S. dollars in accordance with Accounting Standards Codification (“ASC”) 830, “Foreign Currency Matters”. All transaction gains and losses of the remeasured monetary balance sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation.

In the fourth quarter of Fiscal 2025, the Company changed our presentation in tables from United States Dollars to thousands, unless otherwise designated. As a result, certain rounding adjustments have been made to prior period disclosed amounts in order to conform to the current year presentation. In addition, certain prior period amounts may not recalculate due to rounding. These changes were not significant, and no other updates were made to previously reported financial information.

Cash equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired.

Restricted cash as of December 31, 2025 and 2024 include $50 and$0, respectively, collateral account for the Company’s corporate credit cards and for lease liability and is classified in current assets.

Restricted cash also includes Cash held in trust account in the amount of $172,779 (see note 1D)

The Company accounts for marketable equity securities in accordance with ASC Topic 321, “Investments – Equity Securities”. Investments in marketable equity securities are recorded at fair value based on quoted market prices, with unrealized gains and losses, reported as financial income or expenses, as appropriate. These securities are a Level 1 fair value measurement.

The Company holds blockchain-based digital tokens. The Company evaluates each class of tokens to determine appropriate accounting treatment. Fair value is determined under ASC 820 using quoted prices in active markets (Level 1).

Crypto assets that meet the scope of ASC 350-60 are measured at fair value, with changes in fair value recognized in earnings as a component of other income (expense). Fair value is determined in accordance with ASC 820 using quoted prices in active markets (Level 1).

Digital tokens that provide enforceable contractual rights to receive future goods or services from the issuer are accounted for based on their economic substance and are excluded from ASC 350-60. Such tokens are recognized as intangible assets and are initially measured at the fair value of consideration transferred, including, when applicable, the grant-date fair value of equity instruments issued.

These intangible service assets are classified as non-current until the related services become available for use and are amortized to operating expense over the expected period of service consumption. The Company evaluates these assets for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.

The Company manages credit risk associated with accounts receivables at the customer level. Pursuant to Topic 326 for our accounts receivables, the Company maintain an allowance for doubtful accounts that reflects our estimate of our expected credit losses. Our allowance is estimated using a loss-rate model based on delinquency. The estimated loss rate is based on our historical experience with specific customers, our understanding of our current economic circumstances, reasonable and supportable forecasts, and our own judgment as to the likelihood of ultimate payment based upon available data. The actual rate of future credit losses, however, may not be similar to past experience. Our estimate of doubtful accounts could change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, the Company may be required to increase or decrease our allowance for doubtful accounts.

Fair value of certain of the Company’s financial instruments including cash, accounts payable, accrued expenses, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.

Fair value, as defined by ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise.

Valuation techniques are generally classified into three categories: (i) the market approach; (ii) the income approach; and (iii) the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

Fair value measurements are required to be disclosed by the level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), (ii) segregating those gains or losses included in earnings, and (iii) a description of where those gains or losses included in earning are reported in the statement of operations.

The Company’s financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:

The Company’s financial liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:

The following table presents the changes in fair value of the level 3 fair value measurements of the Company’s liabilities for the period from December 31, 2024 through December 31, 2025.

Changes in fair value are recognized in the consolidated statement of operations within finance expenses. The fair value of the Level 3 liabilities was determined using valuation models. Significant unobservable inputs include expected volatility, expected term, risk-free interest rate and discount rates.

The Company accounts for variable interest entities in accordance with ASC Topic 810, Consolidation (“ASC 810”). Under ASC 810, a variable interest entity (“VIE”) is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. The primary beneficiary of a VIE is the party with both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact its economic performance, the Company considers all the facts and circumstances including its ongoing rights and responsibilities.

This assessment includes identifying the activities that most

significantly impact the VIE’s economic performance and identifying which party, if any, has power over those activities. In general, the party that makes the most significant decisions affecting the VIE is determined to have the power to direct the activities of the VIE. To assess whether the Company has the obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE, the Company considers all of its economic interests, including debt and equity interests, and any other variable interests in the VIE. If the Company determines that it is the party with the power to make the most significant decisions affecting the VIE, and the Company has an obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE, then the Company consolidates the VIE.

The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions, tax-related valuation allowances and pre-acquisition contingencies are initially recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluates these estimates and assumptions quarterly and records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations.

Intangible assets that are not considered to have an indefinite useful life are amortized using the straight-line basis over their estimated useful lives, as noted below. Recoverability of these assets is measured by a comparison of the carrying amount of the asset to the undiscounted future cash flows expected to be generated by the assets. If the assets are considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets.

Intangible assets and their useful lives are as follows:

Acquisition-related intangible assets:

The Company accounts for ASC 350-20 “Goodwill and Other Intangible Assets” (“ASC 350-20”). ASC 805-10 specifies the accounting for business combinations and the criteria for recognizing and reporting intangible assets apart from goodwill.

Acquisition-related intangible assets result from the Company’s acquisitions of businesses accounted for under the purchase method and consist of the value of identifiable intangible assets. Acquisition-related definite lived intangible assets are reported at cost, net of accumulated amortization.

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in business combinations accounted for in accordance with the “purchase method” and is allocated to reporting units at acquisition. Goodwill is not amortized but rather tested for impairment at least annually in accordance with the provisions of ASC Topic 350, “Intangibles - Goodwill and Other”. The Company performs its goodwill annual impairment test for the reporting units at December 31 of each year, or more often if indicators of impairment are present.

Intangible assets with finite lives are amortized using the straight-line basis over their useful lives, to reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up.

The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging (“ASC 815”). Changes in the fair value of derivative instruments are recognized in the consolidated statement of operations... The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risk.

The Company evaluates all of its financial instruments, including notes payable, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company applies significant judgment to identify and evaluate complex terms and conditions in its contracts and agreements to determine whether embedded derivatives exist. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statement of operations each period. Bifurcated embedded derivatives are classified with the related host contract on the Company’s balance sheet. The Company identified embedded derivatives primarily related to conversion features included in certain financial instruments. These features were evaluated in accordance with ASC 815 and, where required, were bifurcated from the host contract and accounted for as derivative liabilities at fair value.

An evaluation of specifically identified conditions is made to determine whether the fair value of the derivative issued is required to be classified as equity or as a derivative liability. Changes in the estimated fair value of the liability-classified derivative financial instruments are recognized as a non-cash gain or loss on the accompanying consolidated statements of operations and comprehensive loss.

The Company accounts for stock purchase warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing liabilities from equity (“ASC 480”), and ASC 815. The assessment considers whether the stock purchase warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the stock purchase warrants meet all of the requirements for equity classification under ASC 815, including whether the stock purchase warrants are indexed to the Company’s own common shares and whether the holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance, modification, and as of each subsequent quarterly period end date while the stock purchase warrants are outstanding.

For issued or modified stock purchase warrants that meet all of the criteria for equity classification, the stock purchase warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.

For issued or modified stock purchase warrants that do not meet all the criteria for equity classification, the stock purchase warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the liability classified stock purchase warrants are recognized as a non-cash gain or loss on the accompanying consolidated statements of operations and comprehensive loss.

The Company assesses the classification of its common stock purchase warrants at each reporting date to determine whether a change in classification between equity and liability is required. For modified stock purchase warrants that result in a change of classification from equity to liability, a liability is recognized equal to the fair value on the date of modification, additional paid-in capital is adjusted by the fair value of the warrant on the date of issuance.

The Company records assets held for sale in accordance with ASC 360 at the lower of carrying value or fair value less costs to sell. Fair value is the amount obtainable from the sale of the asset in an arm’s length transaction. The reclassification takes place when the assets are available for immediate sale and the sale is highly probable. These conditions are usually met from the date on which a letter of intent or agreement to sell is ready for signing.

A component of an entity is identified as operations and cash flows that can be clearly distinguished, operationally and financially, from the rest of the entity. Under ASC 205-20, “Presentation of Financial Statements - Discontinued Operations” (“ASC 205-20”), a discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale and represents a strategic shift that has or will have a major effect on the entity’s operations and financial results, or a newly acquired business or nonprofit activity that upon acquisition is classified as held for sale. Discontinued operations are presented separately from continuing operations in the consolidated statements of Operations and the consolidated statements of cash flows (see Note 9). For long-lived assets or disposals that are classified as held for sale but do not meet the criteria for discontinued operations, the assets and liabilities are presented separately on the balance sheet of the initial period in which it is classified as held for sale.

The Company’s long-lived assets are reviewed for impairment in accordance with ASC Topic 360, “Property, Plant and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. No impairment expenses were recorded during the years ended December 31, 2025 or 2024.

All the Company’s employees have been signed on Section 14 of Israel’s Severance Compensation Law, 1963 (“Section 14”). Pursuant to Section 14, the Company’s employees, covered by this section, are entitled only to monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf by the Company. Payments in accordance with Section 14 release the Company from any future severance liabilities in respect of those employees. Neither severance pay liability nor severance pay fund under Section 14 are recorded in the Company’s balance sheets.

Severance expenses for the years ended December 31, 2024 and 2023 amounted to $87 and $75 respectively.

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes”. Accordingly, deferred taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial statement carrying amount and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the enacted tax rates expected to be in effect when these differences reverse. Valuation allowances in respect of deferred tax assets are provided for, if necessary, to reduce deferred tax assets to amounts more likely than not to be realized.

The Company accounts for unrecognized tax benefits in accordance with ASC Topic 740, which prescribes detailed guidance for the financial statement recognition, measurement and disclosure of unrecognized tax benefits recorded in a Company’s financial statements. According to ASC Topic 740, tax positions must meet a more-likely-than-not recognition threshold to be recognized. Recognized tax positions are measured as the largest amount that is greater than 50 percent likely of being realized. The Company’s accounting policy is to present interest and penalties relating to income taxes within income taxes; however, the Company did not recognize such items in its fiscal years 2025 and 2024 financial statements and did not recognize any amount with respect to an unrecognized tax benefit in its balance sheets.

Basic loss per Common Stock is computed by dividing the loss for the period attributable to common stockholders, after allocation of earnings or losses to non-controlling interests or other classes of equity, by the weighted average number of shares of Common Stock outstanding during the period. In computing diluted loss per share, basic loss per share is adjusted to reflect the potential dilution that could occur upon the exercise of potential shares.

The Company measures and recognizes the compensation expense for all equity-based payments to employees and nonemployees based on their estimated fair values in accordance with ASC 718, “Compensation- Stock Compensation”. Share-based payments including grants of stock options are recognized in the statement of comprehensive loss as a compensation expense based on the fair value of the award at the date of grant. The fair value of stock options granted is estimated using the Black-Scholes option-pricing model. The Company has expensed compensation costs, net of forfeitures as they occur, applying the accelerated vesting method, over the requisite service period or over the implicit service period when a performance condition affects the vesting, and it is considered probable that the performance condition will be achieved.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, loan granted as well as certain other current assets that do not amount to a significant amount. Cash and cash equivalents, which are primarily held in Dollars and New Israeli Shekels, are deposited with major banks in Israel and United States. The Company considers that its cash and cash equivalents have low credit risk based on the credit ratings of the counterparties.

The Company may also be exposed to credit risk with respect to loans granted to third parties. Prior to granting such loans, the Company evaluates the creditworthiness of the borrowers and may obtain collateral or other security when deemed appropriate. The Company monitors the collectability of such loans on an ongoing basis and assesses, at each reporting date, whether there is a need to recognize an allowance for credit losses based on the borrower’s financial condition and other relevant factors.

The Company does not have any significant off-balance-sheet concentration of credit risk, such as foreign exchange contracts, option contracts or other foreign hedging arrangements.

The Company records accruals for loss contingencies arising from claims, litigation and other sources when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Legal costs incurred in connection with loss contingencies are expensed as incurred.

The Company accounts for the extinguishment of debt in accordance with ASC 470, Debt. An extinguishment of debt occurs when the Company is legally released from being the primary obligor under the liability, including through repayment, settlement, or a modification of terms that is considered substantial.

Upon extinguishment, the Company derecognizes the carrying amount of the debt and recognizes a gain or loss in the consolidated statement of operations for the difference between the reacquisition price and the net carrying amount of the extinguished debt.

The Company evaluates modifications of debt instruments to determine whether such modifications should be accounted for as a modification or an extinguishment. If the terms of the modified debt are substantially different from the original terms, including based on a quantitative assessment, the transaction is accounted for as an extinguishment of the original debt and the issuance of new debt.

In transactions where debt is settled through the issuance of equity instruments, warrants, or other derivative instruments, the Company evaluates whether such transactions represent an extinguishment of debt. The fair value of the instruments issued is used to determine the reacquisition price, and any resulting gain or loss is recognized in the consolidated statement of operations.

The Company determines if an arrangement is or contains a lease at contract inception.

The Company is a lessee in certain operating leases primarily for office space and vehicles. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets.

ROU assets represent Company’s right to use an underlying asset for the lease term and lease liabilities represent Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, the Company generally uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in statement of comprehensive loss.

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups (“JOBS”) Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as to those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Adopted Accounting Standards

The Company adopted ASU 2023-08 on January 1, 2025 using a modified retrospective approach. The adoption affected the accounting for certain crypto assets within the scope of ASC 350-60, which are now measured at fair value with changes in fair value recognized in earnings. Digital tokens that provide enforceable contractual rights to receive future goods or services from the issuer are excluded from the scope of ASC 350-60 and continue to be accounted for based on their economic substance. The impact of adoption was not material to the Company’s consolidated financial statements.

Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU add specific requirements for income tax disclosures to improve transparency and decision usefulness. The guidance in ASU 2023-09 requires that public business entities disclose specific categories in the income tax rate reconciliation and provide additional qualitative information for reconciling items that meet a quantitative threshold. In addition, the amendments in ASU 2023-09 require that all entities disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions. The ASU also includes other disclosure amendments related to the disaggregation of income tax expense between federal, state and foreign taxes. The ASU is effective for fiscal years beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis and retrospective application is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.

In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805): Identifying the Acquirer in a Business Combination Involving a Variable Interest Entity. This ASU modifies the guidance for identifying the accounting acquirer in transactions involving VIEs. The ASU is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years, and early adoption is permitted. The amendments are applied prospectively to business combinations occurring after the adoption date. The Company consolidates certain entity that is considered VIEs and is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements and related disclosures.

The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements; however, the impact will depend on the nature of future transactions.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments introduce a practical expedient for estimating expected credit losses on current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the timing of adoption and the impact of this guidance on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-07, Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted. The Company does not currently have contracts that include share-based noncash consideration; however, management is evaluating the potential impact of this ASU on future transactions.

In September 2025, the FASB also issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software, which modifies the recognition threshold for capitalization of internal-use software costs. The ASU is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual periods. Early adoption is permitted. The Company is evaluating the impact of this ASU on its internal-use software capitalization policy and does not expect a material impact upon adoption.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2028, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.

NOTE 3 – DISCONTINUED OPERATIONS AND DECONSOLIDATION

On November 8, 2024, the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”) with Mr. Khurshid, the Company’s former chief executive officer and director and Match Financial Ltd (“Match”), a subsidiary of the Company, pursuant to which the Company agreed, subject to shareholder approval, to sell Digital RFQ Limited (“DRFQ”), a wholly owned subsidiary of the Match to Mr. Khurshid or his nominee. In connection therewith, on December 23, 2024, the parties entered into a Share Purchase Agreement providing for the sale of the subsidiary for consideration of GBP 1, subject to shareholder approval.

As a result of the execution of the Settlement Agreement and management’s commitment to a plan to dispose of the subsidiary, the financial services operating activities met the criteria to be classified as held for sale under ASC 205-20 as of November 8, 2024. Accordingly, the assets and liabilities of the subsidiary were classified as held for sale beginning on that date, and the results of operations of the financial services operating segment have been presented as discontinued operations for all periods subsequent to such classification.

On August 5, 2025, the Company was notified that on July 29, 2025, Match had been placed into administration in the United Kingdom pursuant to the Insolvency Act 1986, and administrators were appointed. On July 29, 2025, the administrators completed a pre-packaged sale of Match’s entire shareholding of the subsidiary to an entity owned by Mr. Khurshid. As a result, the Company lost control of the subsidiary and deconsolidated the subsidiary as of July 29, 2025 in accordance with ASC 810-10-40.

During the preparation of the consolidated financial statements for the quarter ended June 30, 2025, management was unable to obtain complete financial information from the subsidiary due to the loss of direct access to systems and limited cooperation from subsidiary personnel. Accordingly, the results of discontinued operations for the period from April 1, 2025 through July 29, 2025 are based on management’s best estimates derived from historical trends and available information.

Upon deconsolidation, the Company derecognized the subsidiary’s assets and liabilities and recognized a net gain on deconsolidation of approximately $2,491, which is included within other income (expense) in the consolidated statements of operations and comprehensive loss

Summary Reconciliation of Discontinued Operations

The following tables present the balance sheets and the results of operations of the Company classified as discontinued operations for the periods presented:

NOTE 3 – DISCONTINUED OPERATIONS AND DECONSOLIDATION (continued)

NOTE 4 – ACQUISITION OF TILTAN

On December 30, 2025, the Company completed the acquisition of 100% of the issued and outstanding shares of Tiltan Software Engineering Ltd. (“Tiltan”), an Israeli provider of AI-based software solutions for defense and aerospace applications, pursuant to a Stock Purchase Agreement (the “Tiltan Purchase Agreement”). The acquisition was undertaken to expand the Company’s capabilities in AI-based software solutions and to leverage expected synergies and growth opportunities in the defense and aerospace sectors. As a result of the acquisition, Tiltan became an indirect wholly owned subsidiary of the Company.

The contractual purchase price was NIS 47.6 million (approximately $14.0 million based on the exchange rate at the acquisition date), payable 75% in cash and 25% in shares of the Company’s common stock.

The cash portion of NIS 35,700 is payable in installments through June 29, 2026 and is primarily evidenced by a secured promissory note in the principal amount of NIS 29,750. The note does not bear interest unless an event of default occurs and is secured by a first-priority pledge over the shares of Tiltan. Deferred cash payments were measured at fair value as of the acquisition date by discounting contractual amounts using a market-based discount rate.

The equity portion, equal to NIS 11,900, represents a fixed monetary amount to be settled in a variable number of shares. At closing, shares were deposited into escrow, with the final number of shares to be determined based on the market price on June 29, 2026. If the value of escrowed shares is less than the required amount, the Company is obligated to issue additional shares or pay the shortfall in cash. The equity consideration was measured at fair value based on the closing market price of the Company’s common stock on the acquisition date.

The acquisition has been accounted for as a business combination under ASC 805, Business Combinations. The Company determined that Tiltan constitutes a business as defined under ASC 805 as the acquired set includes inputs, processes, and the ability to generate outputs.

As of December 31, 2025, the Company, with the assistance of a third-party valuation specialist, completed the allocation of the purchase price to the identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The aggregate fair value of consideration transferred was approximately $14.3 million.

NOTE 4 – ACQUISITION OF TILTAN (continued)

The acquisition was completed on December 30, 2025 and therefore did not contribute to the Company’s revenues or earnings for the year ended December 31, 2025. Pro forma results of operations have not been presented as the impact of the acquisition is not material. Acquisition-related costs were expensed as incurred and are included in general and administrative expenses.

The allocation of the purchase price was as follows (in thousands):

Customer relationships were valued using the multi-period excess earnings method. Developed technology was valued using the relief-from-royalty method. The identified intangible assets are being amortized on a straight-line basis over their estimated useful lives.

Deferred tax liabilities were recognized primarily in respect of the fair value adjustments to identifiable intangible assets.

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired and is primarily attributable to expected synergies, future growth opportunities, assembled workforce and other intangible benefits that do not qualify for separate recognition. The goodwill recognized is not expected to be deductible for income tax purposes.

NOTE 5 – OTHER CURRENT ASSETS

NOTE 6 – LOAN GRANTED

On November 1, 2025, the Company entered into an unsecured promissory note agreement with a third party, pursuant to which the Company advanced an aggregate principal amount of $2,351, bearing simple interest at a rate of 12% per annum. The outstanding principal and accrued interest are due on October 30, 2026. The note represents a senior unsecured obligation of the borrower and ranks pari passu with its other unsubordinated unsecured indebtedness.

NOTE 7 – DIGITAL ASSETS

On July 30, 2025, the Company entered into a Warrant to Purchase Tokens agreement with Synthetic Darwin LLC (the “Darwin”), pursuant to which the Company paid a purchase price of $0.5 in exchange for the right to purchase up to 200,000,000 tokens (the “Warrant Tokens”) at escalating exercise prices ranging from $0.02 to $0.50 per token. The warrant is exercisable in four tranches of 50,000,000 tokens each over a twelve-month period and expiresone year from the issue date. The warrant may be exercised for cash, by issuance of the Company’s common stock, by net exercise, or through other agreed forms of payment.

Tokens issued upon exercise are subject to a six-month transfer restriction, subject to certain parity protections. The agreement also provides anti-dilution style protections, including entitlement to a pro rata portion of future token issuances, forks, or increases in total token supply.

At the time of initial acquisition in July 2025, the Company exercised a warrant to acquire 50 million tokens in exchange for the issuance of 147,710 shares of common stock of the Company at a total exercise price of $1,000 thousands. In addition, on October 8, 2025, the Company exercised the second tranche and issued 375,000 shares of common stock of the Company to acquire another 50 million tokens at a total exercise price of $3,360 thousands.

Darwin is a blockchain-based digital token issued and recorded on a distributed ledger. The token may be transferable and trade at market-determined prices on digital asset platforms. The token does not represent an equity interest or contractual claim to assets or cash flows of the Darwin.

The Company accounts for the warrant and the underlying tokens based on their economic substance. The tokens acquired upon exercise represent rights to receive services within a blockchain-based ecosystem but do not represent a contractual claim to cash flows or equity interests. Accordingly, the Company has concluded that the tokens are not within the scope of ASC 350-60 since they do not represent crypto assets within the scope of that guidance, but rather rights to future services, and are recognized upon acquisition as indefinite-lived intangible assets. The tokens are initially measured at the fair value of the consideration transferred, including the fair value of equity instruments issued in accordance with the contractual pricing mechanism. Because the related services are not yet available, the tokens are not amortized and are instead evaluated for impairment in accordance with the accounting policy described above. During the year ended December 31, 2025 the Company recorded an impairment loss of $4,344.

NOTE 8 – LEASES

NOTE 8 – LEASES (continued)

On December 15, 2025, the Company entered into a new lease agreement for office space in Netanya, Israel for a period of 1 year with monthly payments of $1 and an option to extend the agreement for an additional 1 year with at a 5% increase in the monthly payments. A lease right-of-use asset and a related liability in the amount of $16 have been recognized in the balance sheet in respect of this lease.

In December 2025 the Subsidiary exercised its extension option of a lease agreement for the office space in 2 Granit, Petach-Tikva, Israel for a term ofone year. The quarterly lease payments under the lease agreement are approximately NIS 106 (approximately $33).

NOTE 9 – CONVERTIBLE NOTES PAYABLE, NET

The Company’s convertible notes payable consisted of the following:

August 2024 Note:

In August 2024, the Company issued a senior unsecured promissory note (the “August 2024 Note”) in the principal amount of $515 to a new lender in consideration of cash proceeds in the amount of $412. The August 2024 Note bears interest of 12.0% per annum and is due and payable six months after issuance. The lender shall have the right to convert the principal and interest payable under the August 2024 Note into shares of common stock of the Company. In addition, the Company issued the lender a stock purchase warrant (the “August 2024 Warrant”) to acquire 175,000 shares of common stock at a per share price of $2.00 for a term offive years that may be exercised for cash. The number of shares and exercise prices for the August 2024 Note and August 2024 Warrant reflect the October 2024 reverse stock split.

The August 2024 Warrant was determined to be an equity classified warrant and fair value was calculated as $447 using the Black-Scholes option-pricing model with the following assumptions: volatility of 183.31%, risk-free rate of 3.84%, annual dividend yield of 0.0% and expected life offive years. The Company recorded a total debt discount of $342,314 related to the original issue discount and August 2024 Warrant, which will be amortized over the term of the August 2024 Note. The principal amount of the August 2024 Note was allocated to the August 2024 Note and the August 2024 Warrant in the amount of $276 and $239, respectively. The amount allocated to the original issue discount and the August 2024 Warrant were recorded as a discount on the August 2024 Note, which will be amortized to interest expense using the effective interest rate method over the term of the August 2024 Note.

In June 2025, the lender sold August 2024 Note and the August 2024 Warrant to an unaffiliated third party. In August 2025, the Company entered into a settlement agreement with the new holder (the “Holder”) of the August 2024 Note and August 2024 Warrant. Pursuant to the terms of the settlement agreement, the Holder agreed to waive all events of default in relation to the August 2024 Note. Additionally, the Holder agreed to convert the August 2024 Note into 243,155 shares of common stock based on the post-reverse stock split conversion price of $2.50 per share. In consideration of such waiver and conversion, the Company agreed to issue to the Holder a pre-funded warrant to purchase 1,702,088 shares of the Company’s common stock. The Company determined the fair value of the pre-funded warrants a $7,080 based on the share price at the date of the agreement. Such warrants were exercised into 1,702,088 common stock in October 2025.

Furthermore, on August 11, 2025, the Company agreed to exchange the August 2024 Warrant for a new warrant (the “Exchange Warrant”) in form and substance similar to the August 2024 Warrant, provided that such Exchange Warrant permitted the Holder to exercise such Exchange Warrant on a cashless basis. The Holder then exercised the Exchange Warrant on a cashless basis, resulting in an issuance of 123,860 shares of the Company’s common stock.

NOTE 9 – CONVERTIBLE NOTES PAYABLE, NET (continued)

December 2024 Note:

On December 3, 2024, the Company issued a convertible promissory note (the “December 2024 Note”) in the principal amount of $500 to a lender, in consideration of cash proceeds in the amount of $450 after an original issue discount of $25 and issuance costs of $25 in connection with the standby equity purchase agreement executed with the lender (the “SEPA”). The December 2024 Note matures on December 3, 2025. The SEPA was subsequently terminated in December 2024. The December 2024 Note has the following features:

The note bears interest at 10% per annum (18% upon an event of default) and matured on December 3, 2025. The note was issued in connection with a standby equity purchase agreement, which was terminated in December 2024.

The note was convertible at the option of the holder into shares of the Company’s common stock at a conversion price equal to the lower of (i) $2.00 per share or (ii)90% of the lowest daily VWAP during theten consecutive trading days preceding conversion, subject to a floor price of $0.33. Conversions were subject to a 4.99% beneficial ownership limitation (the “Exchange Cap”), unless stockholder approval was obtained.

Upon the occurrence of specified events, including certain price-based triggers, exchange cap limitations, or registration-related events (each, an “Amortization Event”), the Company was required to make monthly payments of $150,000 plus a 10% premium and accrued interest. The note was also subject to optional redemption by the Company at a premium.

Certain embedded features, including redemption and default provisions, were required to be bifurcated and presented as derivative liabilities at fair value according to ASC 815. The embedded derivatives were initially recorded at fair value of $223 and are remeasured at fair value at each reporting date, with changes recognized in earnings. As of December 31,2024, the fair value of the embedded derivatives was $848.

During May and June 2025, the holder converted the entire balance of the note into 260,300 shares of common stock. Upon conversion, the embedded derivative liabilities were remeasured to fair value, which was $260. As a result, the Company recorded $588 as Change in fair value - convertible note embedded derivative.

NOTE 10 – OTHER CURENT LIABILITIES

NOTE 11 – LOANS PAYABLE – FORMER RELATED PARTIES

Between October 2023 through September 2024, the Company issued promissory notes in the aggregate principal of $1,106 thousands and $248 thousands to a shareholder and to an entity managed by that shareholder, respectively, (collectively, the “2024 Shareholder Loans”), in consideration of cash proceeds.

The 2024 Shareholder Loans bear interest of 5.0% per annum and each individual loan will be due and payable three years from the date of issuance. As of December 31, 2025, the outstanding principal balance and accrued and unpaid interest of the 2024 Shareholder Loans was $1,354 and $125, respectively.

In July 2024, a shareholder of the Company made payments on the Company’s behalf to settle an obligation with an affiliate in which the shareholder has a controlling interest. The shareholder entered into an assignment of debt agreement with the affiliate whereby the affiliate assigned its right, title obligation and interest in the obligation by the Company to the shareholder (the “July 2024 Loan”). The July 2024 Loan is noninterest bearing and was due and payable at issuance.

Consisting of the above-mentioned loans, the Company’s loans payable – related parties is summarized as follows:

In June 2024, as part of the terms of a note payable entered into,30.0% of the loans payable with the shareholder of the Shareholder 2024 Loans and July 2024 Loan was due and payable on demand.

NOTE 12 – STOCKHOLDERS’ EQUITY (DEFICIT)

Description of the rights attached to the Shares in the Company:

Common Stock:

Holders of common stock are entitled to receive dividends and other distributions, as and if declared by the Board out of assets or funds of the Company legally available and shall share equally on a per share basis. The common stock possesses all voting power of the Company. Each share of common stock is entitled toone vote. In the event of any liquidation, dissolution or winding up of the Company, after payment or provision of payment of the debts and other liabilities of the Company, the holders of common stock are entitled to receive the remaining assets of the Company available for distribution ratably in proportion to the number of shares of common stock held by them.

Reverse stock split:

Effective October 24, 2024, the Company amended its amended and restated certificate of incorporation to implement a one-for-eight reverse stock split of its common stock (the “2024 Reverse Stock Split”) and increased the number of authorized shares of the Company’s common stock from 40,000,000 to 150,000,000 (see Note 1 above).

Preferred Stock:

The Company is authorized to issue 15,000,000 shares of preferred stock with a par value of $0.0001 per share. The Company’s board of directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, option or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series.

Transactions:

On December 19, 2024,230,000 shares of common stock were issued in connection with the Private Placement.

Pursuant to the terms of the Private Placement, the Company was obligated to file a resale registration statement related to the securities purchased in the Private Placement and to ensure that such resale registration statement was declared effective within 75 days from the closing date of the Private Placement. The Company did not meet this obligation and as a result, the investor was entitled to penalties payable in cash until the registration statement becomes effective. During April through June 2025, the Company made cash payments to the investor totaling $800 to satisfy these penalties. On September 15, 2025, the Company requested a withdrawal of the registration statement.

The Pre-funded Warrant and the Private Placement Warrant permit the investor to acquire a fixed amount of shares of the Company’s common stock at a per share price of $0.0001 and $6.00, respectively, that may be exercised on a cash or cashless basis. The Pre-Funded Warrant is immediately exercisable, at a nominal exercise price of $0.0001 per share, and may be exercised at any time until the Pre-Funded Warrant is fully exercised. The Private Placement Warrant has an exercise price of $6.00 per share, is immediately exercisable on a cash or cashless basis and will expire five years from the date of issuance. The Pre-funded Warrant and the Private Placement Warrant were determined to be liability-classified at the time of issuance.

The Company analyzed the 2024 Private Placement in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. The Company determined that the Pre-funded Warrant and the Private Placement Warrant do not meet the criteria for equity classification. Accordingly, the Pre-funded Warrant and the Private Placement Warrant were accounted for as a single liability-classified instrument. The Pre-funded Warrant and the Private Placement Warrant were initially recorded at fair value and are remeasured at fair value at each reporting date, with changes in fair value recognized in the consolidated statements of operations until settlement or expiration.

The Company using a third-party specialist allocated the total proceeds to the Warrant Shares liability and to the Series A Preferred Stock.

Pre-funded Warrant and the Private Placement Warrant Shares liability

The fair value of the Pre-funded Warrant was calculated using the Black-Scholes option pricing Model. The assumptions used to perform the calculations are detailed below:

The fair value of the Private Placement Warrant was calculated using the Monte Carlo Simulation Model. The assumptions used to perform the calculations are detailed below:

Based on the above the entire 2024 Private Placement proceeds were allocated to the warrants.

As of December 31, 2025 the Pre-funded Warrant and the Private Placement Warrant were fully exercised

The Series A Preferred Stock is convertible at the option of the holder at any time and will be automatically converted into Common Stock or Pre-Funded Warrants in lieu thereof on the effective date of the Initial Registration Statement whether or not Stockholder Approval has been obtained. If at any time after the one-year anniversary of the closing of the 2025 Private Placement, the Series A Preferred Stock is then outstanding and the Company has not received Stockholder Approval, the Series A Preferred Stock is redeemable at the option of the holder at a price per Share equal to 105% of the Stated Value. The conversion of the Series A Preferred Stock is subject to a 9.9% beneficial ownership limitation blocker.

Pursuant to the Securities Purchase Agreement, the Company was required to seek stockholder approval (the “Stockholder Approval”) related to certain provisions contained in the Certificate and to file a preliminary proxy statement for a special or annual meeting of the Company’s stockholders within six months of the closing of the 2025 Private Placement and hold a meeting as soon as practicable thereafter to seek Stockholder Approval. The Company also granted the Purchasers a right of participation in subsequent financings of the Company for a period of time following closing, subject to certain exempt issuances, and the Company has agreed not to issue securities for a period of time following the closing of the 2025 Private Placement, subject to certain exempt issuances, including issuances pursuant to strategic transactions.

Pursuant to the terms of the 2025 Private Placement, the Company was obligated to file a resale registration statement related to the securities purchased in the Private Placement and to ensure that such resale registration statement was declared effective within 75 days from the closing date of the 2025 Private Placement. If the registration statement is not declared effective by the Effectiveness Deadline, the Company will be required to pay to the Purchasers an amount in shares of common stock or cash, at the Company’s discretion, as partial liquidated damages and not as a penalty, equal to the product of 1.5% multiplied by the aggregate purchase price paid by such Purchasers. The Company filed a registration statement which was declared effective at December 23, 2025.

The Company analyzed the 2025 Private Placement in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. The Company determined that the Warrant Shares do not meet the criteria for equity classification. Accordingly, the Warrant Shares were accounted for as a single liability-classified instrument. The Warrants are initially recorded at fair value and are remeasured at fair value at each reporting date, with changes in fair value recognized in the consolidated statements of operations until settlement or expiration.

The Company using a third-party specialist allocated the total proceeds to the Warrant Shares liability and to the Series A Preferred Stock.

Warrant Shares liability

The fair value of the Warrant Shares was calculated using the Monte Carlo Simulation Model. The assumptions used to perform the calculations are detailed below:

Based on the above the entire 2025 Private Placement proceeds were allocated to the warrants.

After the balance sheet date, on January 2, 2026, the Company issued 2,439,000 shares of common stock in connection with the conversion of the Series A convertible preferred stock.

In addition, on January 2, 2026, the Company issued 73,170 shares of common stock to satisfy the penalty incurred from late effectiveness of the registration statement for the securities from the September 2025 Private Placement. The fair value of the penalty shares was estimated at $300 and was included asother expenses in the financial statements for the year ended December 31, 2025.

Additionally, on September 19, 2025, the Company and the Investor entered into a registration rights agreement (the “ELOC RRA”), pursuant to which the Company agreed to file a registration statement with the United States Securities and Exchange Commission (“SEC”) covering the resale of Common Shares that are issued to the Investor under the ELOC Purchase Agreement, including the Commitment Shares.

After the balance sheet date, on January 2, 2026, the Company issued 304,878 shares of common stock in connection with the Commitment Shares. The fair value of the Commitment shares was estimated at $1,250 and was included asother expenses in the financial statements for the year ended December 31, 2025.

NOTE 13 – WARRANTS

The Company and X Group also entered into a Restructuring Agreement providing that, among other items, X Group, in its sole discretion, will have the right for a period for six months from the Effective Date (the “Investment Period”), to lend the Company an additional $500,000 in consideration of a convertible promissory note that will have a term oftwo years, bear interest at 12% and will convert into shares of common stock at a per share price of $2.00. During the Investment Period, the Company may not incur additional debt or enter into any equity financing arrangement without the written consent of the X Group.

In order to induce X Group to provide the loan contemplated pursuant to the Note, Emil Assentato, a former director and executive officer of the Company, entered into a Voting Agreement with the Company and X Group agreeing to vote his shares in support of any transaction provided by X Group. The Company and X Group have agreed that 100% of all loan balances including loans payable to Emil Assentato by the Company will be recorded on the books of the Company as a bona fide debt of the Company, of which 30% of such debt will be paid within nine (9) months of the Effective Date and the balance to be repaid within twenty-four (24) months of the Effective Date.

On September 10, 2024, the Company issued an additional Senior Unsecured Promissory Note (the “X Group Note 2”) in the principal amount of $125 to X Group in consideration of cash proceeds in the amount of $100, which was funded on September 4, 2024.

On November 8, 2024, the Company entered into a Conversion Agreement (the “Conversion Agreement”) with X Group to convert outstanding principal and interest totaling of $771,085 payable under the X Group Note 1 and the X Group Note 2 (the “X Group Debt”) into shares of common stock of the Company. Pursuant to the Conversion Agreement, the Company issued 385,542 shares of its common stock and an additional warrant to purchase 351,424 shares of common stock exercisable for a period offive years at an exercise price of $2.00 per share (“X Group Warrant 2”) in exchange for the cancellation of the X Group Debt. Further, the Company and X Group entered into a letter agreement providing that X Group may not exercise the X Group Warrant 1 in the event such exercise would result in X Group holding in excess of 19.9% of the Company’s outstanding shares of common stock as of November 8, 2024. On November 14, 2024, the Company and X Group entered into a letter agreement pursuant to which it amended the terms of the Conversion Agreement and the X Group Warrant 2 issued in connection with the Conversion Agreement. Pursuant to the letter agreement, the shares of common stock to be issued under the Conversion Agreement were amended to be 319,952 shares of common stock of the Company and the exercise price of the X Group Warrant 2 was amended to be $2.41.

The assumptions used for the Black-Scholes option pricing model for liability-classified stock purchase warrants are as follows:

NOTE 13 – WARRANTS (continued)

The Company accounted for the JV Warrants as share-based payment award. Accordingly, the JV Warrants were measured at grant-date fair value and with no subsequent update

The fair value of the JV Warrants was calculated as of grant date using a Monte Carlo simulation model. The key assumptions used in the valuation were as follows:

The Performance Warrants vest only upon the JV Company achieving cumulative revenues of $25 million within five years from the issuance date. If the revenue target is not achieved within such period, the Performance Warrants expire unvested.

As of December 31, 2025, management concluded that the revenue target had not been met and that the performance condition was not yet considered probable. Accordingly, no amount was recognized with respect to the Performance Warrants as of that date.

NOTE 13 – WARRANTS (continued)

The following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding of December 31, 2025:

The following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at December 31, 2024:

Warrant activities for the year ended December 31, 2025 were as follows:

NOTE 14 – STOCK BASED COMPENSATION

Old Nukk Equity Incentive Plan

For periods prior to the reverse recapitalization, the Old Nukk Equity Incentive Plan (the “Old Nukk Plan”) permitted the granting of various awards including stock options (including both nonqualified options and incentive options), stock appreciate rights (“SARs”), stock awards, phantom stock units, performance awards and other share-based awards to employees, outside directors and consultants, and advisors to the Company. Only stock options have been awarded to consultants and advisors under the Old Nukk Plan.

Assumed Options converted into an option to purchase a number of shares of the Company’s common stock equal to the product of the number of shares of Old Nukk common stock and the Exchange Ratio at an exercise price per share equal to the exercise price of the Assumed Options divided by the Exchange Ratio. Each Assumed Option is governed by the same terms and conditions applicable to the Assumed Options prior to the Business Combination. No further grants can be made under the Old Nukk Plan.

2024 Equity Incentive Plan

On October 11, 2024, the Company’s shareholders approved a new long-term incentive award plan (the “2024 Plan”). The 2024 Plan is administered by the Board. The selection of participants, allotment of shares, determination of price and other conditions are approved by the Board at its sole discretion to attract and retain personnel instrumental to the success of the Company.

On November 13, 2024, the Company issued 100,000 stock options to a consultant of the Company at an exercise price of $2.39 per share. In May 2025, the consultant exercised these options via a cashless exercise, resulting in an issuance of 85,710 shares of common stock.

2025 Equity Incentive Plan

In February 2025, the Company established the Nukkleus Inc 2025 Equity Incentive Plan (the “2025 Plan”) to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company by providing them the opportunity to acquire a proprietary interest in the Company and to align their interest and efforts to the long-term interest of the Company’s stockholders.

On November 13, 2025, the board of directors of the Company approved the issuance of an equity grant to executive officers and consultants under its 2025 Equity Incentive Plan amounting to a total of 3,950,000 shares of common stock, par value $0.0001. On November 13, 2025, and December 22, 2025, the Company issued 3,370,000 shares of common stock to employees, Directors and consultants and in January 2026 the Company issued 475,000 shares of common stock to employees, Directors and consultants. The Company estimated the value of the shares issued at $18,648 based on the share price of the date of the board resolution. In addition, the Company issued an aggregate of 105,000 restricted shares of common stock as debt settlement of debt to related parties. The shares were estimated at $509 based on the share price of the common stock on issuance date.

NOTE 14 – STOCK BASED COMPENSATION (continued)

Stock options generally vest over one to three years, with a maximum term of ten years from the date of grant. These awards become available to the recipient upon the satisfaction a vesting condition based on a period of service. Total stock options activity for the year ended December 31, 2025 is summarized as follows:

Stock-based compensation expense for year ended December 31, 2025, for three months ended December 31, 2024 and for year ended September 30, 2024 was $18,825, $6 and $230, respectively. Stock-based compensation expense were recorded as professional fees on the accompanying consolidated statements of operations and comprehensive loss. There was no unrecognized Stock-based compensation at December 31, 2025.

NOTE 15 – GENERAL AND ADMINISTRATIVE EXPENSES

NOTE 16 –INCOME TAX

NOTE 16 –INCOME TAX (continued)

U.S. resident companies are taxed on their worldwide income for corporate income tax purposes at a statutory rate of 21%. If certain conditions are met, income derived from foreign subsidiaries is tax exempt in the US under applicable tax treaties to avoid double taxation. Income of Israeli subsidiaries are taxable from 2018 onwards, at corporate tax rate between 12% -23%. SC II considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period presented.

As of December 31, 2025, the Company and subsidiaries have operating loss carry forwards of approximately $56,194, of which $258 can be offset against taxable income generated until 2038, $55,081 can be offset against future taxable income, if any, indefinitely limited to 80% of the annual taxable income and $855 can be offset against future taxable income, if any, indefinitely. However, due to changes in stock ownership, the use of the U.S. federal net operating loss carry-forwards is limited under Section 382 of the Internal Revenue Code. The Company has not performed a study to determine if the loss carryforwards are subject to these Section 382 limitations. $258 of the net operating loss carry-forwards will expire in fiscal years 2033 through 2038. The remaining net operating loss carry-forwards do not expire.

The Company has a December 31 tax year-end. The federal, state and foreign income tax returns of the Company are subject to examination by various tax authorities.

NOTE 17 –EARNINGS (LOSS) PER SHARE

Basic loss per share is computed by dividing net loss by the weighted average number of shares outstanding during the year. The weighted average number of shares of Common Stock used in computing basic and diluted loss per Common Stock for the years ended December 31, 2025 and 2024, are as follows:

NOTE 18 –RELATED PARTIES

NOTE 18 – RELATED PARTIES (continued)

Menachem Shalom was appointed as a director on July 24, 2024. On December 16, 2024, the Company entered into a Consultancy Agreement with Menachem Shalom, the Company’s CEO, effective September 1, 2024. Pursuant to the agreement, Mr. Shalom is employed as Chief Executive Officer of the Company unless terminated pursuant to the terms of the agreement. During the initial term of the agreement (September 2024 through February 2025), Mr. Shalom is entitled to receive $20 monthly, with subsequent semi-annual $5monthly increases effective March 2025 & September 2025.

On December 8, 2025, the Board of Directors of the Company, appointed Morel Levi as the Chief Financial Officer of the Company, effective as of December 8, 2025. Mr. Levi will also serve as the Chief Financial Officer of Nukk Picolo Ltd., a wholly owned subsidiary of the Company (the “Subsidiary”), and has entered into an employment agreement with the Subsidiary.

In connection with his appointment as Chief Financial Officer of the Company and Subsidiary, Mr. Levi will receive a salary of $7,500 per month.

In December 2024, the Company advanced $1,000 to Star pursuant to the Star Agreement. From February through September 2025, the Company advanced an additional $3,500 pursuant to the first and second amendments to the Star Agreement, resulting in aggregate advances of $4,500 outstanding as of December 31, 2025. The advance is evidenced by a promissory note that does not bear interest. (see Notes 1B)

NOTE 19 – SEGMENT REPORTING

During 2025, the Company sold its previously existing operations, which are now presented as discontinued operations (see Note 3). On December 30, 2025, the Company acquired a subsidiary operating in the Defense Software sector (see Note 4).

As of December 31, 2025, the Company identifiesone reportable segment.

The Company’s chief operating decision maker is itschief executive officer.

The chief operating decision maker assesses performance and decides how to allocate resources based on net income (loss) that is also reported on the income statement as net income (loss).

The measurement of segment assets is reported on the balance sheet as total consolidated assets.

The chief operating decision maker uses net income (loss) to evaluate income generated from the segment assets (return on assets) in deciding whether to reinvest profits into the segment or into other parts of the entity.

All of Company's long-lived assets are located in Israel.

NOTE 19 – SEGMENT REPORTING (continued)

Since the acquisition of the Defense Software subsidiary was completed on December 30, 2025, the results of operations for this segment for the year ended December 31, 2025, were immaterial.

Net income (loss), financial expenses (as appear in the statement of comprehensive loss) and information on expenses included in note 15 are used to monitor budget versus actual results. The chief operating decision maker also uses net income (loss) in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis along with monitoring of budget versus actual results are used in assessing performance of the segment and in establishing management’s compensation.

NOTE 20 –SUBSEQUENT EVENTS

Proposed Business Combination

On March 31, 2026, SC II Acquisition Corp., a Cayman Islands exempted company (the “SPAC”), entered into a non-binding letter of intent (the “LOI”) with a payments technology company (the “Target”), which outlines the general terms and conditions of a potential business combination (the “Proposed Transaction”) pursuant to which the SPAC would acquire 100% of the outstanding equity and equity equivalents of the Target. The SPAC’s sponsor, SC Capital II Sponsor LLC, , is controlled and majority owned by Nukkleus Defense Technologies Inc., a wholly-owned subsidiary of T3.

The LOI is a preliminary, non-binding expression of mutual interest and does not constitute a binding commitment, obligation or agreement of the SPAC or the Target to consummate the Proposed Transaction or any other transaction. Except for certain limited binding provisions, including, among other things, exclusivity, confidentiality, the waiver of claims against the SPAC’s trust account, and governing law, neither the SPAC nor the Target has any legal obligation to the other party with respect to the Proposed Transaction by virtue of the LOI.

Cancellation of $16,000,000 Indebtedness

On January 12, 2026, the Company completed the Star purchase transaction – see note 1B above. On March 31, 2026, the Company agreed on the termination of its obligation to pay $16,000,000 to its wholly-owned subsidiary, Star. Pursuant to the Cancellation Agreement, (the “Cancellation Agreement”), while all terms and provisions of the Amended and Restated Securities Purchase Agreement, dated September 15, 2025 (the “Acquisition Agreement”) remain in full force and effect, and the Company's ownership of Star, including all assets, operations, and subsidiaries, is unaffected, the Company eliminated $16,000,000 of indebtedness, effective immediately, at no cost, no dilution, and with no offsetting obligation to the Company or its shareholders.

Pursuant to the terms of the Cancellation Agreement, the entire $16,000,000 obligation to Star, including principal, accrued interest and any other amounts owing with respect thereto, were cancelled, terminated and rendered of no further force or effect, effective immediately, at no cost, no dilution, and with no offsetting obligation to the Company or its shareholders and while maintaining full ownership of Star and all of its assets.

Litigation

On March 3, 2026, the Company, obtained a copy of a summons and complaint filed in the Supreme Court of the State of New York dated February 24, 2026 by Kingswood Capital Partners, LLC against Star, Nukkleus, Inc. and the Company. The complaint alleges that a success fee is due for an earned investment banking success fee arising from a transaction. The Company denies all the allegations and intends to vigorously defend such action, which it believes is without merit.

Private Placement

On February 26, 2026, T3 closed a private placement pursuant to the terms of a Securities Purchase Agreement with an accredited investor (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) pursuant to which the investor (the “Purchaser”) agreed to purchase from the Company 400 units for an aggregate purchase price of $20,000,000, or a per unit price of $50,000. Each unit consists of (i)one share (each a “Share” and collectively, the “Shares”) of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), and (ii) one and a half common stock purchase warrants to initially purchase up to one and a half shares of common stock, par value $0.0001 per share (the “Common Stock”), of the Company, subject to adjustment as described herein (the “Common Warrants” and the shares of Common Stock issuable upon exercise or exchange of the Common Warrants, the “Warrant Shares”). The Private Placement is structured as a two stage investment. At the initial closing, which occurred on February 26, 2026, the Company sold 200 units for gross proceeds of $10 million. The Purchaser agreed to purchase an additional 200 units for an additional investment of $10 million following (i) the effectiveness of the registration statement described below, (ii) stockholder approval of the issuance of the transactions contemplated by the Securities Purchase Agreement as required pursuant to Nasdaq rules, (iii) the stock price is at least $1.00 and (iv) subject to the condition that the value of the trading in the Company’s stock on Nasdaq for the 10 consecutive days preceding the second closing is at or above $900,000 (the “Second Closing Market Trading Value”), provided that if the Second Closing Market Trading Value is less than $900,000, then there will be a proportionate reduction in the number of units to be sold at the second closing.

Pursuant to the Securities Purchase Agreement, the Company is required to seek stockholder approval (the “Stockholder Approval”) related to the issuance of the units to be issued in the Private Placement. The Company is required to file a preliminary proxy statement for a special meeting of the Company’s stockholders within 75 days of the initial closing of the Private Placement. The Company’s directors and officers have agreed to execute voting agreements to vote in favor of the applicable proposals. If the Company does not obtain Stockholder Approval at the first such meeting, the Company is required to call a meeting every 4 months thereafter to seek Stockholder Approval until the earlier of the date on which Stockholder Approval is obtained or the securities are no longer outstanding.

The Company also granted the Purchaser a right of participation in subsequent financings of the Company for a period of time following closing, subject to certain exempt issuances, and has agreed not to issue securities for a period of time following the closing of the Private Placement, subject to certain exempt issuances, including issuances pursuant to strategic transactions.

Under the terms of the Securities Purchase Agreement, the Company agreed not deliver any purchase notices under Company’s equity line of credit with the Purchaser until after the later of the date on which (i) the registration statement is declared effective and (ii) the Company obtains Stockholder Approval and even after such date, certain market conditions must be satisfied.

Series B Preferred Stock

Pursuant to the Certificate of Designations of Rights, Preferences and Limitations which was filed with the Secretary of State of the State of Delaware prior to closing of the Private Placement, each share of Series B Preferred Stock has a stated value of $50,000 (the “Stated Value”) and will initially be convertible into 23,474 shares of Common Stock (the “Conversion Shares”) (or pre-funded warrants in lieu thereof (the “Pre-Funded Warrants”)), calculated by dividing the Stated Value by the initial conversion price equal to $2.13 per Share (the “Initial Conversion Price”). The Initial Conversion Price is subject to adjustment upon stock splits, distributions, reorganizations, reclassifications, change of control and the like, and is also subject to price-based anti-dilution adjustments for subsequent offerings made by the Company while the Series B Preferred Stock remains outstanding (subject to certain exempt issuances). The Initial Conversion Price will also be adjusted upon receipt of Stockholder Approval (as hereinafter defined), if obtained, to the lower of (i) the then applicable conversion price and (ii) the price per share of the Common Stock on its trading market upon the earlier of (A) effectiveness of the registration statement required to be filed pursuant to the Registration Rights Agreement (as defined herein) or (B) upon applicability of Rule 144 as it relates to the sale of the Conversion Shares.

The Series B Preferred Stock is convertible at the option of the holder at any time and will be automatically converted into Common Stock or Pre-Funded Warrants in lieu thereof on the effective date of the registration statement, whether or not the Stockholder Approval has been obtained. If at any time after the one-year anniversary of the closing of the Private Placement, the Series B Preferred Stock is then outstanding and the Company has not received Stockholder Approval, the Series B Preferred Stock is redeemable at the option of the holder at a price per Share equal to 105% of the Stated Value. The conversion of the Series B Preferred Stock is subject to a 9.9% beneficial ownership limitation blocker. The Series B Preferred Stock are not entitled to receive dividends, other than on an as-converted basis if dividends are paid to holders of Common Stock.

The holders of Series B Preferred Stock are entitled to 10,000 votes per each share of Series B Preferred Stock. The holders of Series BPreferred Stock have voting rights with respect to certain corporate actions that affect the rights of the Series B Preferred Stockholders and also have certain consent rights in connection with certain proposed Fundamental Transactions (as defined in the Certificate of Designations). The Series B Preferred Stock is (i) senior to the Common Stock of the Company and any other equity securities that the Company may issue in the future, the terms of which specifically provide that such equity securities rank junior to the Series B Preferred Stock, (ii) equal with any class or series of capital stock established after the closing date of the Private Placement, the terms of which specifically provide that such equity securities rank on par with such Series B Preferred Stock, in each case with respect to payment of amounts upon liquidation, dissolution or winding up and (iii) junior to all of the Company’s existing and future indebtedness. The Company has agreed not to issue any parity stock or senior securities without the written consent of a majority in interest of the Series B Preferred Stock. Upon a change of control, liquidation or winding up of the Company the holders of the Series B Preferred Stock are entitled to a liquidation preference of $50,000 per Share.

Common Warrants

The Common Warrants are exercisable on a cash or cashless basis at the earlier of (i) 180 days following their issuance and (ii) the date the stockholder approval is obtained, and expire 5 years from the date of issuance. Each Common Warrant will be initially exercisable forone share of Common Stock at an initial exercise price of $0.0125 per share, subject to adjustment for stock splits, distributions and the like (the “Initial Exercise Price”). The Initial Exercise Price is also subject to price-based anti-dilution adjustments for subsequent offerings made by the Company while the Common Warrants remain outstanding (subject to certain exempt issuances). At any time after the closing of the Private Placement, the holder of the Common Warrants may exchange the Common Warrants on a cashless basis for a number of shares of Common Stock determined by multiplying the total number of Warrant Shares with respect to which the Common Warrant is then being exercised by the Black Scholes Value (as defined in the Common Warrant) divided by the lower of the two closing bid prices of the Common Stock in the two days prior the time of such exercise, but in any event not less than $0.01 (as may be adjusted for stock dividends, subdivisions, or combinations and the like). The exercise of the Common Warrants is subject to a 9.9% beneficial ownership limitation blocker.

In the event of a Fundamental Transaction (as defined in the Common Warrants), the holders of the Common Warrants will be entitled to receive upon exercise of the Common Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Common Warrants immediately prior to such Fundamental Transaction. Additionally, as more fully described in the Common Warrants, the holders of the Common Warrants will be entitled to receive consideration in an amount equal to the Black Scholes value of the Common Warrant in connection with a Fundamental Transaction.

If the Company fails to timely deliver the Warrant Shares issuable upon exercise of the Common Warrants, the Company will be subject to liquidated damages, payable in the Company’s discretion in cash or shares on the Registration Date (as defined therein) or buy-in. If the Company elects to pay in shares, the number of shares due will be based on the LD Share Formula (as defined below).

Registration Rights Agreement

In connection with the Private Placement, on February 24, 2026, the Company and the Purchaser entered into a Registration Rights Agreement (the “Registration Rights Agreement”). Pursuant to the terms of the Registration Rights Agreement, the Company is required to register the resale of the Conversion Shares (and any shares underlying the Pre-Funded Warrants, if any) and the Warrant Shares. The Company is required to prepare and file an initial registration statement (the “Initial Registration Statement”) with the Securities and Exchange Commission within 45 days of the date of the Securities Purchase Agreement (the “Filing Deadline”) and to use commercially reasonable efforts to have the Initial Registration Statement declared effective within 75 days of the date of the Securities Purchase Agreement (the “Effectiveness Deadline”). In certain circumstances including, but not limited to, if the Company misses the Filing Deadline or the Effectiveness Deadline, then the Company will be required to pay to the Purchasers an amount in shares or cash, at the Company’s discretion, as partial liquidated damages and not as a penalty, equal to the product of 1.5% multiplied by the aggregate purchase price paid by such Purchaser. Liquidated damages, if any, will accrue and be paid on the earlier of the effective date of a resale registration statement registering the sale of the shares that may be issued in lieu of cash or the date on which such shares can be sold pursuant to Rule 144 (the “Registration Date”). If the Company elects to pay liquidated damages in shares of Common Stock, the number of shares of Common Stock issuable to the Purchaser will be determined by dividing the aggregate amount of accrued liquidated damages by the closing price of the Company’s Common Stock on the trading market of the Common Stock on the day immediately prior to the Registration Date (the “LD Share Formula”).

In connection with the Private Placement, the Company entered into a Placement Agency Agreement, dated February 24, 2026, with Dawson James Securities Inc. (the “Placement Agent”), pursuant to which the Placement Agent acted as the sole placement agent for the Private Placement. In consideration for the foregoing, the Company has agreed to pay customary placement fees to the Placement Agent, including a cash fee equal to 3.5% of the gross proceeds raised in the Private Placement and issue warrants equal to 7.5% of the securities placed in the Offering. Pursuant to the Placement Agency Agreement, the Company has also agreed to reimburse certain expenses of the Placement Agent incurred in connection with the Private Placement.

Consulting Agreement

On February 17, 2026, the Board of Directors, based on the recommendations and approval of the Compensation Committee, approved the terms of the terms and provisions of a Consulting Agreement between the Company and Billio Ltd., a company in Israel, to provide the services of Menachem Shalom as the principal executive officer of the Company. The consulting agreement terminates and supersedes the (i) Consulting Agreement dated December 16, 2024 between the Company and Billio Ltd., pursuant to which the Company obtained consulting services from the Consultant through Menachem Shalom; (ii) Management Services Agreement dated June 28, 2024, as amended by Amendment No. 1 dated August 8, 2024, between Star 26 Capital, Inc. (“Star Capital”) and Zero One Capital LLC, a Nevada limited liability company (“Zero One”) in which Mr. Shalom is the chief executive officer and controlling member and shareholder of Zero One; and (iii) Offsetting Management Services Agreement dated August 12, 2024 between Zero One and B. Rimon Agencies Ltd., an Israeli company which is currently wholly-owned by Star Capital.

Given the performance of the Company within the last 15 months, the Compensation Committee and the Board of Directors determined that it was in the best interest of the Company to provide Mr. Shalom with the amended consulting agreement and increased compensation. The Committee and the Board also authorized a cash bonus to Mr. Shalom in the amount of $250,000 for his past services to the Company. The Company, under the supervision and guidance of Mr. Shalom, has completed several acquisitions within the last 15 months, including without limitation, Star 26, Tiltan Software Engineering, Nimbus Drones and ITS.

Pursuant to the terms of the Consulting Agreement, which is effective as of January 1, 2026, Mr. Shalom will continue to act as the chief executive officer of the Company while maintaining other executive roles in non-completing companies. For his services, Mr. Shalom will receive a base salary of $60,000 per month and target cash bonuses equal to 50% of base salary, subject to achievement of performance goals to be set by the Compensation Committee. He could also be entitled to additional milestone-based bonuses as determined by the Board. Mr. Shalom will receive 250,000 shares of common stock quarterly, subject to availability under approved incentive plans; if there is no plan or no availability, the quarterly amount of shares shall accrue until there is availability under an approved incentive plan. Such plan will also require shareholder approval pursuant to applicable Nasdaq rules. He will also be entitled to a relocation grant of $175,000 if Mr. Shalom relocates to the United States with his family. Mr. Shalom will also be entitled to all executive benefit plans including health and 401(k) plans and 30 business days per year vacation.

In the event Mr. Shalom is terminated for cause or is no longer employed by the Company for reason of death or disability, he shall only be entitled to his compensation at such time. If he is terminated by the Company without cause, he shall be entitled to 6 months of his base compensation, and if Mr. Shalom resigns, he shall be entitled to compensation for 12 months. If he is terminated for cause, Mr. Shalom shall not be entitled to any compensation.

The Consulting Agreement contains customary non-competition, non-solicitation and confidentiality provisions.

Director Resignation

On February 23, 2026, the Company received a letter of resignation from Ms. Aviya Volodarsky pursuant to which Ms. Volodarsky resigned from her position as a member of the board of directors of the Company and from all the committees on which she served for personal reasons. The resignation was effective immediately.

Name Change

Effective February 9, 2026, the Company changed its name by the filing of a certificate of correction to the Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to change the name of the Company to “T3 Defense Inc.”. The change in the name of the Company was effectuated pursuant to Section 242(d)(1) of the Delaware General Corporation Law. As a result of the name change, the new ticker of the Company became “DFNS”.

Nimbus Acquisition

On January 15, 2026, the Company consummated its acquisition (the “Nimbus Acquisition”) of 100% of Nimbus Drones Technologies and Marketing Ltd., an Israeli private company (“Nimbus”) specializing in unmanned aerial systems and services, pursuant to the terms of that certain Stock Purchase Agreement, dated January 15, 2026 (the “Nimbus Purchase Agreement”), by and among the Company, Nimbus and Elad Defense LLC (“Elad”). In connection with the closing of the Nimbus Acquisition, the Company issued to Elad as consideration (i)1,850,000 shares of Common Stock and (ii) a $3,250,000 convertible 24-month note (the “Nimbus Note”) bearing 6% interest, which is convertible at the option of the holder at a fixed price of $2.00 per share. The Nimbus Note also prohibits the Company from issuing the holder shares that would result in the holder beneficially owning more than 4.99% of the outstanding shares of Common Stock. As of February 17, 2026, the Nimbus Note was converted to an aggregate of 1,625,000 shares of Common Stock.