UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~☒ QUARTERLY REPORT UNDER SECTION 13 OR 15~~ (dMark One) ~~OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~☒ QUARTERLY ~~the~~REPORT ~~quarterly~~PURSUANT ~~period~~TO ~~ended~~SECTION ~~September~~13 ~~30, 2025~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ORFor the Quarterly Period Ended March 31, 2026

~~☐ TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934~~or

~~For~~☐ TRANSITION ~~the~~REPORT ~~transition~~PURSUANT ~~period~~TO ~~from~~SECTION ~~__________~~13 ~~to __________~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Commission~~For the ~~file~~transition ~~number:~~period ~~001-39341~~from __________________________ to __________________________

~~Nukkleus~~Commission file ~~Inc.~~number 001-39341

T3 Defense Inc.

(Exact name of registrant as specified in its charter)

Delaware		38-3912845
(State or other jurisdiction of		(I.R.S. Employer
(State or other jurisdiction		(I.R.S. Employer
incorporation or organization)		Identification No.)
of incorporation or organization)		Identification No.)

575 Fifth Ave, 14th Floor, New York, New York 10017

575 Fifth Avenue, 14^th Floor

New York, New York

10017

(Address of Principal Executive Offices)

(Zip Code)

(~~Address of principal executive offices, including zip code~~212) 791-4663

646-257-4214

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading ~~Symbol~~symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	~~NUKK~~DFNS	The Nasdaq Stock Market LLC
Warrants, each warrant exercisable for one Share of Common Stock for $92.00 per share	NUKKW	The Nasdaq Stock Market LLC
Warrants, each warrant exercisable for one share of common stock for $92.00 per share	DFNSW	The Nasdaq Stock Market LLC

Securities registered ~~under~~pursuant to Section 12(g) of the ~~Exchange~~ Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a ~~smaller~~small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,” “smaller reporting company” ~~and~~ or an “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging ~~growth~~Growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 137(a)(2)(B) of the ~~Exchange~~Securities Act. : ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~State~~As ~~the number~~ of ~~shares~~May ~~outstanding~~20, of2026, ~~each~~there ofwere ~~the issuer’s classes of common equity~~60,270,525 asshares of the ~~latest~~registrant’s common ~~practicable~~stock ~~date~~outstanding.

Class		Outstanding November 14, 2025
Common Stock, $0.0001 par value per share		16,645,766 shares

T3 DEFENSE INC. AND SUBSIDIARIES

~~NUKKLEUS~~FOR THE ~~INC.~~QUARTERLY PERIOD ENDED MARCH 31, 2026

FORM 10-Q

		Page
PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)

	Unaudited Condensed Consolidated Balance Sheet as of March 31, 2026	F-2

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2026 and March 31, 2025	F-4

	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the Three Months Ended March 31, 2026 and March 31, 2025	F-6

	Unaudited Condensed Consolidated Statements of Cash Flow for the Three Months Ended March 31, 2026 and March 31, 2025	F-8

	Notes to Unaudited Condensed Consolidated Financial Statements	F-11

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	6

ITEM 4.	CONTROLS AND PROCEDURES	6

ITEM 5.	OTHER	6

PART II. OTHER INFORMATION		7

ITEM 1.	LEGAL PROCEEDINGS	7

ITEM 1A.	RISK FACTORS	7

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITES AND USE OF PROCEEDS	7

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	7

ITEM 4.	MINE SAFETY DISCLOSURES	7

ITEM 5.	OTHER INFORMATION	8

ITEM 6.	EXHIBITS	9

SIGNATURES		10

September 30, 2025

TABLE OF CONTENTS

		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Interim Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2025 and 2024	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2025 and 2024	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Recent Sales of Unregistered Securities	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

~~FORWARD~~T3 ~~LOOKING~~DEFENSE ~~STATEMENTS~~INC.

~~This~~CONDENSED ~~report~~CONSOLIDATED ~~contains~~INTERIM ~~forward-looking~~FINANCIAL ~~statements~~STATEMENTS ~~that involve a number of risks and uncertainties which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended~~ (~~the “Securities Act”~~UNAUDITED), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although our forward-looking statements reflect the good faith judgment of our management, these statements can be based only on facts and factors of which we are currently aware. Consequently, forward-looking statements are inherently subject to risks and uncertainties. Actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.

~~Forward-looking~~AS ~~statements~~OF ~~can~~MARCH ~~be identified by the use of forward-looking words such as “may~~31,” “will,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. These statements include, but are not limited to, statements under the captions “Risk Factors,” “Management’s Discussion and Analysis or Plan of Operation” and “Description of Business,” as well as other sections in this report. Such forward-looking statements are based on our management’s current plans and expectations and are subject to risks, uncertainties and changes in plans that may cause actual results to differ materially from those anticipated in the forward-looking statements. You should be aware that, as a result of any of these factors materializing, the trading price of our common stock may decline. These factors include, but are not limited to, the following:2026

TABLE OF CONTENTS

	Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Unaudited Condensed Consolidated Interim Balance sheets as of March 31, 2026, and December 31, 2025	F-2
Unaudited Condensed Consolidated Interim Statements of Comprehensive (income) loss for three months ended March 31, 2026 and 2025	F-5
Unaudited Condensed Consolidated Interim Statements of Stockholders’ Equity (Deficit) for the period of three months ended March 31, 2026 and 2025	F-6
Unaudited Condensed Consolidated Interim Statements of Cash Flows for the three months ended March 31, 2026 and 2025	F-8
Notes to Unaudited Condensed Consolidated Interim Financial Statements	F-11 – F-34

_______________________

_______________________________

_______________________

F-1

T3 DEFENSE INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(USD in thousands except share and per share data)

	March 31,		December 31,
	2026		2025
Assets
Current Assets
Cash and cash equivalents		6,431		2,627
Current assets of consolidated variable interest entities
Cash and cash equivalents		931		1,270
Other current assets		159		102
Short term deposits and restricted cash		334		50
Marketable Securities		120		250
Inventories		3,501		-
Note receivable - related party		-		4,500
Due from related parties		-		1,641
Accounts receivable, less allowance for credit losses of $27 as of March 31, 2026		3,639		506
Other current assets		1,877		224
Loan granted		2,455		2,385
Current assets held for sale		3,364		-
Total Current assets		22,811		13,555

Non-Current Assets
Operating right of use assets		4,386		823
Non-Current assets of consolidated variable interest entities
Cash and securities held in trust account		174,568		172,779
Other non-current assets		14		36
Property and equipment, net		559		101
Goodwill		100,150		7,688
Other intangible asset		12,543		7,388
Intangible asset		10		16
Deferred taxes		360		-
Funds in respect of employee rights upon termination		85		-
Total Non-Current assets		292,675		188,831

Total Assets		315,486		202,386

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

F-2

T3 DEFENSE INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(USD in thousands except share and per share data)

	March 31,			December 31,
	2026			2025
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities
Short term loan		4,165			12
Accounts payable		2,485			124
Operating lease liability, current portion		1,531			504
Promissory note – related party		5,691			-
Due to related parties		1,001			255
Other current liabilities		7,729			3,117
Other current liabilities of consolidated variable interest entities		206			104
Loans payable - former related parties, current		1,250			842
Stock purchase warrant liabilities		56,194			24,521
Deferred considerations		9,025			14,067
Derivative liability		110			-
Current liabilities held for sale		2,238			-
Total current liabilities		91,625			43,546

Non-Current liabilities
Non-current operating lease liabilities		2,883			143
Long term loan		3,084			-
Loan payable - former related parties, net of current portion		-			850
Liability in respect of employee rights upon termination		120			-
Deferred tax liability		683			647
Total Non-Current liabilities		6,770			1,640

Total Liabilities		98,395			45,186

Noncontrolling interests Subject to Possible Redemption		174,568			172,779

Stockholders’ Equity (Deficit)
Preferred stock ($0.0001 par value; 15,000,000 shares authorized; 400 and 0 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively)		*			-
Common stock ($0.0001 par value; 150,000,000 shares authorized; 38,215,119 and 19,025,767 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively)		4			2
Additional paid-in capital		185,859			102,737
Accumulated other comprehensive loss		(24	)		-
Accumulated deficit		(149,674	)		(122,527	)
Total Company’s stockholders’ equity (deficit)		36,165			(19,788	)
Non-controlling interest		6,358			4,209
Total stockholders’ equity (deficit)		42,523			(15,579	)
Total liabilities and stockholders’ equity (deficit)		315,486			202,386

(*)	Less than $1 thousand.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

F-3

T3 DEFENSE INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS

(USD in thousands except share and per share data)

	Three months ended
	March 31
	2026			2025

Revenues		3,653			-
Cost of revenues		(3,282	)		-
Gross profit		371			-

Operating expenses
Research and development expenses		(274	)		-
Selling and marketing expenses		(157	)		-
General and administrative expenses		(3,528	)		(1,507	)
General and administrative expenses of consolidated variable interest entities		(223	)		-
Total operating expenses		(4,182	)		(1,507	)

Loss from operations		(3,811	)		(1,507	)

Other income (expenses)
Interest expense		(2,591	)		(197	)
Interest income of consolidated variable interest entities		1,790			-
Interest on related parties promissory note		(354	)		-
Change in fair value - convertible note		5,392			567
Change in fair value - stock purchase warrant liabilities		(26,635	)		104,278
Total other income (expense), net		(22,398	)		104,648

Net income (loss) before income taxes		(26,209	)		103,141
Income taxes		(38	)		-
Net income (loss) from continuing operations		(26,247	)		103,141
Net loss from discontinued operations		(104	)		(183	)
Net income (loss)		(26,351	)		102,958
Net income (loss) attributable to non-controlling interests		796			-
Net income (loss) attributable to the Company’s stockholders		(27,147	)		102,958
Net income (loss)		(26,351	)		102,958

Earnings (loss) per share from continuing operations (basic)		(1.01	)		20.80
Earnings (loss) per share from discontinued operations (basic)		-			(0.04	)
Total loss per share (basic)		(1.01	)		20.76

Weighted average number of shares of Common Stock outstanding - basic		28,158,248			4,959,516
					-
Earnings (loss) per share from continuing operations (diluted)		(1.14	)		18.19
Earnings (loss) per share from discontinued operations (diluted)		-			(0.04	)
Total loss per share (diluted)		(1.14	)		18.15

Weighted average number of shares of Common Stock outstanding – diluted		30,874,436			5,671,702

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

F-4

T3 DEFENSE INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(USD in thousands except share and per share data)

	Three months ended
	March 31
	2026			2025

Comprehensive income (loss):
Net income (loss)		(26,351	)		102,958
Unrealized foreign currency translation (loss) gain		243			(59	)
Comprehensive income (loss)		(26,108	)		102,899

Comprehensive income (loss) attributable to non-controlling interests		924			-
Comprehensive income (loss) attributable to the Company’s stockholders		(27,032	)		102,899
Comprehensive income (loss)		(26,108	)		102,899

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

F-5

T3 DEFENSE INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(USD in thousands, except share and per share data)

	Preferred Stock				Common Stock				Additional						Accumulated Other Comprehensive			Non-			Total stockholders’
	Number of Shares		Amount		Number of Shares		Amount		paid-in capital			Accumulated deficit			Income (Loss)			controlling interest			equity (deficit)

BALANCE AT DECEMBER 31, 2025		-		-		19,025,767		2		102,737			(122,527	)		-			4,209			(15,579	)
Issuance of common stock from exercise of warrants		-		-		3,483,848		*		4,960			-			-			-			4,960
Stock based compensation		-		-		475,000		*		1,907			-			-			-			1,907
Issuance of common stock in relation to private placement		-		-		2,439,000		*		*			-			-			-			*
Issuance of common stock for purchase of subsidiaries		-		-		6,620,340		1		24,902			-			-			-			24,903
Conversion of note into equity						1,625,000		*		3,153												3,153
Equity classified warrants issued at part of purchase of subsidiaries		-		-		-		-		45,646			-			-			-			45,646
Issuance of preferred stock in relation to private placement		200		*		-		-		-			-			-			-			-
Shares issue as penalty		-		-		73,170		*		*			-			-			-			*
Shares issued to settle commitment under ELOC agreement		-		-		304,878		*					-			-			-			*
Issuance of shares from ELOC exercises		-		-		3,968,116		1		3,529			-			-			-			3,530
Issuance of shares for settlement of debt on related party		-		-		200,000		*		300			-			-			-			300
Subsidiary consolidation for the first time		-		-		-		--		-			-			(139	)		1,739			1,600
Accretion of Noncontrolling interests Subject to Possible Redemption		-		-		-		-		(1,275	)		-			-			(514	)		(1,789	)
Foreign currency translation adjustments		-		-		-		-		-			-			115			128			243
Comprehensive loss for the periord		-		-		-		-		-			(27,147	)		-			796			(26,351	)
BALANCE AT MARCH 31, 2026		200		-		38,215,119		4		185,859			(149,674	)		(24	)		6,358			42,523

(*)

Less than $1 thousand.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

F-6

T3 DEFENSE INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(USD in thousands, except share and per share data)

	Preferred Stock				Common Stock				Additional					Accumulated Other Comprehensive					Total stockholders’
	Number of Shares		Amount		Number of Shares		Amount		paid-in capital		Accumulated deficit			Income (Loss)			Non-controlling interest		equity (deficit)

BALANCE AT DECEMBER 31, 2024		-		-		4,930,531		*		37,760		(201,076	)		(34	)		-		(163,350	)
Issuance of common stock from exercise of pre-funded warrants		-		-		83,332		*		3,056		-			-			-		3,056
Stock based compensation		-		-		-		-		178		-			-			-		178
Foreign currency translation adjustments		-		-		-		-		-		-			(59	)		-		(59	)
Net loss for the period		-		-		-		-		-		102,958			-			-		102,958
BALANCE AT MARCH 31, 2025		-		-		5,013,863		*		40,994		(98,118	)		(93	)		-		(57,217	)

(*)

Less than $1 thousand.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

F-7

T3 DEFENSE INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(USD in thousands, except share and per share data)

	Three months ended
	March 31,
	2026			2025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) for the period from continuing		(26,351	)		102,958
Net loss from discontinued operations		(104	)		(183	)
Net income (loss) for the year from continuing operations		(26,247	)		103,141
Adjustments required to reconcile net loss for the year to net cash used in operating activities:
Amortization of debt discount		166			135
Depreciation		22			*
Stock-based compensation		1,907			178
Interest earned on marketable securities held in trust account		(1,789	)		-
Employee termination benefits		(3	)		-
Change in deferred taxes		(42	)		-
Interest on loans		183			-
Gain on marketable securities		91			-
Day one loss on stock purchase warrants issued in connection with private placement		15,429			-
Change in fair value - stock purchase warrant liabilities		6,188			(104,846	)
Change in fair value of liability-classified stock purchase warrants		(124	)		-
Changes in lease assets and lease liabilities		88			-
Changes in operating assets and liabilities:
Trade receivables		(400	)
Other current assets		139			35
Inventory		285
Accounts payable		(1,453	)		(51	)
Due to affiliates		-			2
Interest payable - related parties		-			34
Accrued expenses and other current liabilities		995			(250	)
Net cash used in operating activities – continuing operations		(4,565	)		(1,622	)
Net cash used in operating activities – discontinuing operations		(362	)		280
Net cash used in operating activities		(4,927	)		(1,342	)

F-8

T3 DEFENSE INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(USD in thousands except share and per share data)

	Three months ended
	March 31,
	2026			2025

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in purchase of subsidiaries		(5,042	)		-
Investment in short term securities		239			-
Due to affiliates		(4	)		-
Cash provided by purchase of subsidiary		1,138			-
Payment on property and equipment		(154	)		(10	)
Advance to target of planned acquisition		-			(800	)
Net cash used in investing activities		(3,823	)		(810	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short term bank credit		(575	)		-
Proceeds from issuance of loans payable - related parties		411			-
Dividend payment		(297	)
Proceeds from issuance of private placement		10,000			-
Repayments on loans payable - related parties		(593	)		-
Proceeds from issuance of ELOC shares		3,530			-

Net cash provided by financing activities		12,476			-

Effect of exchange rate changes on cash and cash equivalents– continuing operations		-			(3	)
Effect of exchange rate changes on cash and cash equivalents– discontinuing operations		-			35
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		3,726			(2,120	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD, INCLUDING DISCONTINUED OPERATIONS		3,947			7,858
CASH, CASH EQUIVALENTS, RESTRICTED CASH CASH FROM HELD FOR SALE COMPANY AT END OF PERIOD, INCLUDING DISCONTINUED OPERATIONS		7,673			5,738
LESS CASH FROM DISCONTINUED OPERATIONS		-			1,275
CASH, CASH EQUIVALENTS, RESTRICTED CASH CASH FROM DISCONTINUED OPERATIONS AT END OF PERIOD FROM CONTINUING OPERATIONS		7,673			4,463

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

F-9

T3 DEFENSE INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(USD in thousands except share and per share data)

Supplemental disclosure of cash flow information:
Non cash transactions:
Purchase of subsidiaries against issuance of common stock and warrants	70,549		-
Issuance of common stock to settle loans payable – related parties		300		-
Fair value of pre-funded warrants exercised		-		3,056
Initial recognition of operating lease liability and a corresponding right-of- use asset		38		-
Fair value of warrants exercised		4,960
Fair value of common stock issued in connection with conversion of convertible note		3,153		-

Cash provided by purchase of subsidiaries consolidated for the first time:
Working capital (excluding cash and cash equivalents)	(16,026	)
Long terms assets	7,723
Intangible assets	5,182
Goodwill	92,460
Intangible assets held for sale	905
Long terms liabilities	(19,233	)
Other comprehensive income	139
Non-controlling interest	(1,739	)
Issuance of common stock and warrants	(70,549	)
Net cash provided by from the purchase of subsidiary consolidated for the first time	(1,138	)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

F-10

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 1 – GENERAL

T3 Defense Inc. (formerly known as Nukkleus Inc.) (the “Company” or “T3”) was formed on May 24, 2019 under the name Brilliant Acquisition Corporation. On June 23, 2023, Brilliant Acquisition Corporation, a British Virgin Islands company, entered into an Amended and Restated Agreement and Plan of Merger (as amended by the First Amendment to the Amended and Restated Agreement and Plan of Merger on November 1, 2023, (the “Merger Agreement”), by and among Brilliant BRIL Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Brilliant (“Merger Sub”), and Nukkleus Inc., a Delaware corporation (“Old Nukk”). Old Nukk (f/k/a Compliance & Risk Management Solutions Inc.) was formed on July 29, 2013 in the State of Delaware. The Merger Agreement provided that, at the closing, among other things (the “Closing”) of the transactions contemplated by the Merger Agreement, Merger Sub merged with and into Old Nukk (the “Merger”), with Old Nukk surviving as a wholly-owned subsidiary of Brilliant.

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 continued under the new ticker symbol on The Nasdaq Global Market.

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.

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.

F-11

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 1 – GENERAL (continued)

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.

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”).

SC II Acquisition Corp.

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” or the “SPAC”), a newly formed special purpose acquisition company and indirect subsidiary of the Company. The SPAC’s sponsor, SC Capital II Sponsor LLC (the “Sponsor”), a Delaware limited liability company, is controlled and majority owned by Nukkleus Defense Technologies Inc., a wholly-owned subsidiary of the Company.

On November 28, 2025, SC II consummated its initial public offering (“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 of one 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 IPO, the Sponsor 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.

As of March 31, 2026, the Class A ordinary shares subject to possible redemption reflected in the balance sheet are reconciled in the following table:

Class A ordinary shares subject to redemption as of December 31, 2025			172,779
Plus:
Remeasurement of carrying value to redemption value			1,789
Class A ordinary shares subject to redemption as of March 31, 2026			174,568

On March 31, 2026, 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 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.

F-12

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 1 – GENERAL (continued)

Star 26 Capital Inc. Acquisition

On January 12, 2026, the Company consummated the acquisition of 100% of the issued and outstanding equity of Star 26 Capital Inc. (“Star”) pursuant to the terms of the Amended and Restated Securities Purchase Agreement and Call Option, dated September 15, 2025 (the “Star Agreement”), with Star, the equity holders of Star, and Menachem Shalom, as the representative of said equity holders. Mr. Shalom, the Company’s Chief Executive Officer and a director, is also a controlling shareholder and director of Star. Pursuant to the Star Agreement, T3 acquired a 100% interest in Star. See note 3.

Nimbus Drones Technologies and Marketing Ltd Acquisition

I.T.S. Industrial Techno-Logic Solutions Ltd. Acquisition

On February 16, 2026, the Company consummated its acquisition (the “ITS Acquisition”) of 51% of I.T.S. Industrial Techno-Logic Solutions Ltd., an Israeli private company (“ITS”). ITS is engaged in the design, development, and serial production of fully integrated electro-mechanical systems and sophisticated assembly lines.

ITS’s operations are conducted by ITS and its wholly-owned subsidiary, Positech Ltd., which specializes in the design and manufacture of high-performance motion control systems for both defense and commercial applications. See Note 5.

Israel –war

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 March 31, 2026, 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.

In April 2026, a ceasefire agreement was reached; however, the ceasefire remains fragile and the overall security situation in Israel and the region continues to be uncertain.

F-13

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 1 – GENERAL (continued)

Going concern

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 March 31, 2026, the Company had negative working capital of approximately $69 million (of which $56 million consists of stock purchase warrant liabilities that do not require cash settlement) and stockholders’ equity of $42.5 million; For the three month ended March 31, 2026, the Company reported a net operating loss of $3.8 million and net cash used in operations of $4.9 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) the Company’s existing unrestricted cash balance of approximately $7.4 million, sufficient to fund projected operating expenses through the look-forward period; (ii) 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; (iii) the Company’s majority-owned subsidiaries, including Rimon Ltd. and Nimbus Drones , which are cash-positive and require no capital support from the Company; (iv) management’s ongoing efforts to assist subsidiaries in securing or expanding bank credit facilities; and (v) the option to satisfy certain obligations through issuance of equity in lieu of cash.

In addition, management believes that the completion of the sale by Water IO Ltd., a majority-owned indirect subsidiary of the Company, of Zorro Net Ltd. to BiomX Inc., pursuant to which Water IO received 1,300,000 shares of BiomX common stock and a $1.25 million promissory note due within three months (see note 12 below), may provide additional liquidity and financial flexibility to the Company and its subsidiaries. The sale occurred on April 10, 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 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of presentation

The condensed interim consolidated financial statements included in this Quarterly Report are unaudited. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for a fair statement of the Company’s financial position as of March 31, 2026, and its results of operations changes in stockholders’ equity, and cash flows for the three months ended March 31, 2026 and 2025. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the year ending December 31, 2026 or for any other future annual or interim period. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on March 31, 2026. The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2025 included in such Form 10-K except as mentioned below.

Use of Estimates

The preparation of unaudited condensed consolidated interim 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 assumptions relate to calculation of fair value of the financial instruments.

F-14

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

Revenue recognition:

Significant management judgments and estimates must be made and used in connection with the recognition of revenue in any accounting period. Material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management’s estimates change on the basis of development of business or market conditions.

The Company follows the provisions of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The guidance provides a unified model to determine how revenue is recognized.

Revenues are recognized when control of the promised goods or services are transferred to the customers in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.

The Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, the Company satisfies a performance obligation.

The Company has two main types of revenues –

Revenues from selling goods imported by the Company – like generators, masts and lightning

Revenues from integration projects where the Company designs, engineers, sources raw materials, assembles and completes tactical vehicles and trailers.

The Company provides services to customers and has related performance obligations and recognizes revenue in accordance with ASC 606. Revenues are recognized when the Company satisfies performance obligations under the terms of its contracts, and control of its services or products is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products. Control is transferred upon delivery of its services or products.

A typical contract with a customer specifies that the Company would receive an advance payment once the contract is signed, an additional payment would be made to the Company once the ordered product is manufactured and ready to be shipped to the customer and the remainder of the contract’s consideration would be made once the system is installed in the customer’s factory and its accepted by the customer.

According to ASC-606-10-50, and given the mentioned-above, once signed, the Company’s contracts are considered Contract Liability – as the Company has received the amount prior to delivering the goods to the customer. Those amounts would not be considered as revenues. Once the goods are shipped to the customer – the contract becomes Contract Asset – as the Company transferred the goods to the client prior to receiving the full consideration for it. At the time the receipt of the consideration is conditional upon a successful installation of the product by the Company at the customer’s location and the full acceptance of the product by the customer. Only after such installation and acceptance the consideration owed to the Company is categorized as receivable. In all cases the time interval between the delivery of the product and its installation and acceptance by the customer happens within days.

F-15

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

This process involves identifying the customer contract, determining the performance obligations in the contract, determining the transaction price, allocating the transaction price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it (a) provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and (b) is separately identified in the contract. The Company considers a performance obligation satisfied once it has transferred control of a good or product to a customer, meaning the customer has the ability to direct the use and obtain the benefit of the product.

Assets held for sale

The Company accounts for 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 occurs 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. Assets and liabilities of a component classified as held for sale are presented separately in the consolidated balance sheets as “Assets held for sale” and “Liabilities held for sale”. If such component also qualifies as a discontinued operation under ASC 205-20, its results of operations are presented separately from continuing operations in the consolidated statements of operations.

Cost of Goods Sold:

The Cost of Goods Revenues represents the costs incurred in the production of goods sold by the Company. These costs include, but are not limited to:

Raw Materials– Costs related to the procurement of raw materials and other direct inputs used in the production process.

Direct Labor – Wages and related expenses for employees directly involved in the manufacturing or production process.

Manufacturing Overhead – Indirect production costs, including factory utilities, depreciation of production equipment, and maintenance expenses.

Other Direct Costs – Any additional costs directly attributable to the production of goods, including packaging and quality control.

Research and Development Costs

Research and development (“R&D”) costs are accounted for in accordance with ASC 730, Research and Development. R&D costs are expensed as incurred and include, among other things, payroll and related costs for employees engaged in research and development activities, external consulting services, materials, prototype development, testing activities, and other directly attributable costs.

Software development costs incurred prior to the establishment of technological feasibility of a software, as well as costs incurred after general release of software products (including routine maintenance, bug fixes, and minor enhancements), are expensed as incurred.

F-16

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

Technological feasibility is generally determined based on the completion and approval of detail program design documentation together with the successful validation of an internal working model demonstrating that the software product can be produced to meet its design specifications. Accordingly, technological feasibility is generally achieved prior to a working model ready for customer testing.

In accordance with ASC 985-20-25-1 through 25-6, all software development costs incurred prior to the establishment of technological feasibility are expensed as research and development costs.

Severance pay:

All the Company’s employees, besides one, 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.

As to the employee that has not signed the Section 14 clause, the Company contributes the on-going contributions on monthly basis

F-17

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

Fair value

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.

F-18

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

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:

	As of March 31, 2026
	Level 1		Level 2		Level 3		Total
	US$

Assets:
Marketable Securities		120		-		-		120
Total assets		120		-		-		120

	As of December 31, 2025
	Level 1		Level 2		Level 3		Total
	US$

Assets:
Marketable Securities		250		-		-		250
Total assets		250		-		-		250

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:

	As of March 31, 2026
	Level 1		Level 2		Level 3		Total
	US$

Liabilities:
Derivative liability	-		-		110		110
September 2025 Private Placement Warrant						12,691		12,691
February 2026 Warrants		-		-		43,503		43,503
Total liabilities		-		-		56,304		56,304

	As of December 31, 2025
	Level 1		Level 2		Level 3		Total
	US$

Liabilities:
September 2025 Private Placement Warrant		-		-		24,521		24,521
Total liabilities		-		-		24,521		24,521

F-19

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

The following table presents the changes in fair value of the level 3 liabilities for the period from December 31, 2025 through March 31, 2026.

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.

	Private Placement Warrant			February 2026 Warrants		Derivative liabilities			Total
Liabilities:
Outstanding at December 31, 2025		24,521			-					24,521
Additions		-			25,429		-			25,429
Liabilities assumed in part of subsidiary consolidated for the first time		-			-		8,779			8,779
Exercised		(4,960	)		-		(3,153	)		(8,113	)
Changes in fair value		(6,870	)		18,074		(5,516	)		5,688
Outstanding at March 31, 2026		12,691			43,503		110			56,304

Goodwill:

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.

As of March 31, 2026 the Company did not identify any triggers requiring impairment test of its reporting units. Due to the equity of the Company being above the market capitalization of the Company as of March 31, 2026, a further sustained decline in the Company’s share price and market capitalization may require further testing, which may result in an impairment.

NOTE 3 – ACQUISITION OF STAR 26

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 a director, is also a controlling shareholder and director of Star.

F-20

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 3 – ACQUISITION OF STAR 26 (continued)

On January 12, 2026, T3 acquired 100% interest in Star pursuant to the terms of the Star Agreement. The consideration consisted of $21,000,000, to be paid by a 12-month $16,000,000 promissory note and the balance in $5,000,000 cash, less $4,000,000 representing all amounts lent to Star from T3 since December 15, 2024, the date the original Star Agreement was signed.

In addition, Star received:

●

4,770,340 shares of common stock of T3,

●

a five-year warrant to purchase an aggregate of 12,017,648 shares of T3’s common stock for an exercise price of $1.50 per share,

●

A promissory note in the principal amount of $3,000,000 (the “Six-Month Note”), which note accrues interest at the rate of 8% per annum and matures July 12, 2026; and

●

A promissory note in the principal amount of $3,000,000 (the “Three-Month Note”), which note matures April 12, 2026.

The shares, warrants, the Six-Month Note and the Three-Month Note were 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.

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 Purchase 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.

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

The Company, with the assistance of a third-party specialist, calculated the total consideration at $69,433. The fair value of the share issued was determined at $18,151 based on the share price of Company’s common stock as the date of the closing. The Fair value of the promissory notes issued was determined at $5,636.

The fair value of the Common Warrant was calculated using the Black Scholes option pricing model. The assumptions used to perform the calculations are detailed below:

	January 12, 2026
Expected volatility (%)		264	%
Risk-free interest rate (%)		3.66	%
Expected dividend yield		0.0	%
Expected term (years)		5
Conversion price (U.S. dollars)		1.5
Underlying share price (U.S. dollars)		3.81
Fair value (U.S. dollars in thousands)		45,645

F-21

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 3 – ACQUISITION OF STAR 26 (continued)

The table below summarizes the fair value of assets acquired and liabilities assumed following the adjustments mentioned above as of the acquisition date:

	January 12, 2026
	U.S. Dollars (in thousands)

Working capital		(6,683	)
Long terms assets		4,805
Intangible assets		333
Intangible assets of available for sale, net		697
Goodwill		72,255
Other comprehensive income		139
Non-controlling interest		(734	)
Long term liabilities		(1,379	)
Net assets acquired		69,433

As of March 31, 2026, the Company, with the assistance of a third-party valuation specialist, completed the initial 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 $69.4 million.

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

	January 12, 2026
	January 1, 2026

Net tangible assets acquired		(3,702	)
Customer relationships (2-year useful life)		31
Distributor relations (3-year useful life)		16
Order backlog (2-year useful life)		190
Intangible assets of available for sale		905
Deferred tax liabilities		(54	)
Deferred tax liabilities of available for sale		(208	)
Goodwill		72,255
		69,433

Customer relationships, distributor relations and order backlog 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.

F-22

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 4 – ACQUISITION OF NIMBUS

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 into an aggregate of 1,625,000 shares of Common Stock.

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

The total consideration of the acquisition was calculated using a third-party appraiser at approximately $15,298 and is comprised of the following components:

Share consideration consisting of 1,850,000 shares of the Company’s Common Stock, issued to Elad, with an estimated fair value of $6,753, based on Company’s closing share price of $3.65 on the acquisition date.

The Nimbus Note, with an estimated fair value of approximately $8,545 thousand. The fair value of the Nimbus Note was estimated as of the acquisition date with the assistance of a third-party valuation specialist, considering the terms of the Nimbus Note, including the fixed conversion price of $2.00 per share, the Company’s closing share price of $3.65 on the acquisition date.

The Company completed the initial 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 following table summarizes the allocation of the purchase price as of January 15, 2026:

	January 15, 2026
	U.S. Dollars (in thousands)

Working capital		21
Long terms assets		2
Long term liabilities		(84	)
Goodwill		15,359
Total consideration transferred		15,298

No separately identifiable intangible assets were recognized, as the Company, with the assistance of the valuation specialist, did not identify any material order backlog, customer relationships, proprietary technology or non-compete arrangements that met the recognition criteria under ASC 805.

Goodwill represents the excess of the purchase price over the fair value of the identifiable net liabilities assumed 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.

The acquisition was completed on January 15, 2026.

F-23

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 5 – ACQUISITION OF ITS

On June 8, 2025, Star Twenty Six Ltd. (“Star Twenty Six”) entered into an agreement with ITS and its shareholder Mr. Gera Eron, pursuant to which Star Twenty Six will lend to ITS NIS 10,000,000 (approximately USD 3 miliion). In return Star Twenty Six would receive 51% of the share capital of ITS on a fully diluted basis. Pursuant to the terms of the agreement, Star Twenty Six was also granted an option to purchase the remainder 49% of ITS for three years from the controlling shareholder. Depending on whether the option is exercised in the first, second- or third-year hereafter, the agreed purchase price for the 49% is 25 million NIS, 30 million NIS or 35 million NIS, respectively.

On February 16, 2026, Star Twenty Six acquired 51% of the outstanding equity capital of ITS on a fully diluted basis and has a 3- year option to acquire the remainder 49% from the other shareholder of ITS.

	February 16, 2026
	U.S. Dollars (in thousands)

Working capital		(2,592	)
Long terms assets		2,915
Goodwill and Intangible assets		9,698
Non-controlling interest		(1,005	)
Long term liabilities		(7,972	)
Net assets acquired		1,044

The Company equally allocated the excess of the purchase price over the fair value of identifiable net assets acquired between goodwill and intangible assets.

The acquisition was completed on February 16, 2026.

NOTE 6 – STOCKHOLDERS’ EQUITY

Transactions:

On February 26, 2026, the Company 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) Common Warrants to purchase shares of common stock, par value $0.0001 per share, representing 150% of the number of shares of Common Stock initially issuable upon conversion of one share of Series B Preferred Stock, 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.

F-24

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 6 – STOCKHOLDERS’ EQUITY (continued)

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 to 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 is 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 B Preferred 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.

F-25

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 6 – STOCKHOLDERS’ EQUITY (continued)

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 for one share of Common Stock at an initial exercise price of $2.13 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”).

F-26

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 6 – STOCKHOLDERS’ EQUITY (continued)

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.

The Company analyzed the February 2026 Private Placement in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. The Company determined that the Common Warrant do not meet the criteria for equity classification. Accordingly, the Common Warrant were accounted for as a liability-classified instrument. The Common 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, with the assistance of a third-party specialist allocated the total proceeds received in the initial closing of the February 2026 Private Placement between the Common Warrant liability and the Series B Preferred Stock. Because the initial fair value of the Common Warrant liability exceeded the gross proceeds received, the entire $10.0 million of gross proceeds was allocated to the Common Warrant liability, the Series B Preferred Stock was initially recorded at zero, and the excess of approximately $15,429 thousand was recognized as financing expense upon initial recognition

Warrant Shares liability

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

	February 24, 2026			March 31, 2026
Expected volatility (%)		85.6	%		85.5	%
Risk-free interest rate (%)		3.61	%		3.91	%
Expected dividend yield		0.0	%		0.0	%
Expected term (years)		5			4.91
Conversion price (U.S. dollars)		2.130			2.130
Underlying share price (U.S. dollars)		2.130			0.717
Fair value (U.S. dollars in thousands)		25,429			43,503

Based on the above the entire February 2026 Private Placement proceeds were allocated to the Common Warrants liability.

For the three months ended March 31, 2026, the Company recognized a loss from the change in fair value of the Common Warrant liability of approximately $18,074 thousand, representing the increase in fair value from approximately $25,429 thousand at initial recognition to approximately $43,503 thousand as of March 31, 2026.

On January 2, 2026, the Company issued 2,439,000 shares of common stock in connection with the conversion of previously issued 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 as other expenses in the financial statements for the year ended December 31, 2025.

F-27

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 6 – STOCKHOLDERS’ EQUITY (continued)

On September 19, 2025, the Company and Esousa Company Holdings, LLC, a New York limited liability company (the “Investor”), entered into a common stock purchase agreement (the “ELOC Purchase Agreement”), pursuant to which, subject to the terms and conditions set forth therein, the Company may sell to the Investor, from time to time during the term of the ELOC Purchase Agreement, up to the lesser of (i) $250,000,000 of the Company’s common stock, par value $0.0001 per share (the “Common Shares”), and (ii) the Exchange Cap (as defined below) (subject to certain exceptions provided in the ELOC Purchase Agreement) (the “Total Commitment”). Upon entering into the ELOC Purchase Agreement, the Company agreed to issue to the Investor $1,250 worth of the Company’s Common Stock (the “Commitment Shares”), determined by the lower of (i) the VWAP on the effective date of the registration statement covering the Common Shares and the Commitment Shares and (ii) the closing sale price on the effective date of such registration statement; provided, however, that if the Company elects to terminate the ELOC Purchase Agreement, the Commitment Shares’ calculation shall be based on the date of termination rather than the effective date of the registration statement.

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.

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 as other expense in the financial statements for the year ended December 31, 2025.

During the period from January 1, 2026 to February 4, 2026, the Company elected to sell to the Investor an aggregate of 868,116 shares of Common Stock for total proceeds of $2,208. In addition, during February 2026, the Company advanced the Investor 3,100,000 shares of Common Stock to be applied against future sales of the Company’s Common Stock under the ELOC Purchase Agreement. During the period from February 9, 2026 to February 19, 2026, the Company elected to sell to the Investor an aggregate of 688,943 shares of Common Stock from the advance shares, for total proceeds of $1,322.

Advance shares are not treated as completed sales on the date they were transferred to the Investor. Rather, the related share issuances and proceeds were recognized upon each drawdown, when the applicable purchase price was determined in accordance with the VWAP pricing provisions of the ELOC Purchase Agreement

F-28

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 7 – WARRANTS

The following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding as of March 31, 2026:

	Warrants Outstanding
	Range of Exercise Price		Number Outstanding at December 31, 2025		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price

Public and Private Warrants		92.00		837,625		0.28		7.27
September 2025 Private Placement Warrant		5.405		2,716,388		3.35		1.39
February 2026 Warrants		2.13		7,042,200		4.91		1.42
		2.13-92.00		10,596,213		4.14		10.08

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

	Warrants Outstanding
	Range of Exercise Price		Number Outstanding at December 31, 2025		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price

Public and Private Warrants		92.00		837,625		0.53		16.19
April 2024 Warrants		6.88		14,535		0.01		0.02
August 2025 Warrant		4.4		250,000		0.24		0.23
September 2025 Private Placement Warrant		5.405		3,658,537		3.60		4.15
		4.4 – 92.00		4,760,697		2.87		20.59

Warrant activities for the three month ended March 31, 2026 were as follows:

	Number of warrants			Weighted Average Exercise Price
				USD

Outstanding at December 31, 2025		4,760,697			17.12
Expired		(14,535	)		6.88
Granted		7,042,200			2.13
Exercised		(1,192,149	)		5.19
		10,596,213			10.08

F-29

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 8 – STOCK BASED COMPENSATION

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 March 31, 2026 is summarized as follows:

	Number of Options		Weighted Average Exercise Price
			USD

Outstanding at December 31, 2025		4,823		550.60
Granted		-		-
Exercised		-		-
Outstanding at March 31, 2026		4,823		550.60
Exercisable at March 31, 2026		4,823		550.60
Options expected to vest		-		-

Stock-based compensation expense for three month ended March 31, 2026 and 2025, was $0 and $178, 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 March 31, 2026.

NOTE 9 – 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.

F-30

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 10 – RELATED PARTIES

Balances with related parties and officers:

	As of March 31,		As of December 31,
	2026		2025

Note receivable - related party		-		4,500
Promissory note – related party		5,691		-
Due from related parties		1,250		1,657
Other current liabilities		1,001		255

Other information:

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-competing 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.

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.

F-31

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 11 – SEGMENT REPORTING

As of March 31, 2026, the Company has several subsidiaries, each representing an operating segment: (i) Rimon, (ii) ITS, (iii) Tiltan, (iv) Nimbus and (v) Water. As of March 31, 2026, Nimbus and Water were not considered material and therefore were reported at other reportable segments.

The Company’s chief operating decision maker is its chief 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 gross profit (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.

The following table presents information about the Company’s reportable segments for the three months ended March 31, 2026 and 2025:

	Three months ended
	March 31
	2026			2025

Revenue from Rimon		1,601			-
Salaries and related compensation		(215	)
Depreciation		(6	)
Other cost related to Rimon (mainly materials)		(1,056	)		-
Gross income		325			-

Revenue from ITS		1,403			-
Salaries and related compensation		(722	)
Depreciation		(134	)
Other cost related to ITS (mainly materials)		(759	)		-
Gross loss		(212	)		-

Revenue from TILTAN		592			-
Salaries and related compensation		(164	)
Depreciation and amortization		(152	)
Cost related to TILTAN (mainly lease expenses)		(33	)		-
Gross income		243			-

Revenue from other reportable segments		57			-
Cost related to other reportable segments		(42	)		-
Gross income		15			-

Research and development expenses		(274	)		-
Selling and marketing expenses		(157	)		-
Professional services		(995	)		(1,187	)
Salaries and related compensation		(1,263	)		(33	)
Other general and administrative expenses		(1,270	)		(287	)
General and administrative expenses of consolidated variable interest entities		(223	)		-
Total Operating expenses		(4,182	)		(1,507	)

Loss from operations		(3,811	)		(1,507	)

Interest expense		(2,591	)		(197	)
Interest income of consolidated variable interest entities		1,790			-
Interest on related parties promissory note		(354	)		-
Change in fair value - convertible note		5,392			567
Change in fair value - stock purchase warrant liabilities		(26,635	)		104,278

Net loss before tax		(26,209	)		103,141

Discontinued operation		(104	)		(183	)
Income taxes		(38	)		-

Net loss		(26,351	)		102,958

F-32

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 12 – SUBSEQUENT EVENTS

Nasdaq Deficiency

On May 5, 2026, the Company received a written notice (the “Notice”) from The Nasdaq Stock Market, LLC (“Nasdaq”) that it is not in compliance with the minimum bid requirements set forth in Nasdaq Listing Rule 5450(a)(1) for continued listing on The Nasdaq Global Market. Nasdaq Listing Rule 5450(a)(1) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of the Company’s common stock between March 23, 2026 to May 4, 2026, the Company no longer meets the minimum bid price requirement. The Notice has no immediate effect on the listing or trading of the Company’s common stock on The Nasdaq Global Market and, at this time, the common stock will continue to trade on The Nasdaq Global Market under the symbol “DFNS.”

The Notice provides that the Company has 180 calendar days, or until November 2, 2026, to regain compliance with Nasdaq Listing Rule 5450(a)(1). To regain compliance, the bid price of the Company’s common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. If the Company does not regain compliance by November 2, 2026, the Company may be eligible for additional time to regain compliance. In such instance, the Company must submit an application and a non-refundable $5,000 application fee, so long as the Company applies to transfer the listing of its common stock to The Nasdaq Capital Market and meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market (except for the bid price requirement) and notifies Nasdaq in writing of its intention to cure the deficiency during the second compliance period. If the Company does not qualify or fails to regain compliance, then Nasdaq will notify the Company of its determination to delist the Company’s common stock.

The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider implementing available options, including, but not limited to, implementing a reverse stock split of its outstanding securities, to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules.

Conversion of Debt

On April 27, 2026, the Company, and Mr. Shalom, executed and delivered the Note Exchange Agreement, pursuant to which the original principal amount of the notes issued to Mr. Shalom and accrued interest thereon in the amount of $2,138,962 was cancelled in its entirety in exchange for the issuance of 4,174,399 shares of common stock (the “Exchange Shares”). The exchange price of $0.5124 was the last consolidated bid price of a share of common stock as reported by The Nasdaq Stock Market LLC. The Exchange Shares are restricted shares and may not be sold without registration or an applicable exemption therefrom.

The notes were assigned to Mr. Shalom from Star 26 Capital Inc. (“Star 26”) pursuant to the terms of the Amended and Restated Securities Purchase Agreement and Call Option dated September 15, 2025 (the “Star Purchase Agreement”) among the Company, Star 26 and the other parties signatory thereto and pursuant to the exercise by Mr. Shalom of his right to obtain shares, notes and warrants from Esousa Group Holdings LLC (“Esousa”) in accordance with the terms of the Call Option Agreement dated January 13, 2026.

In connection with the consummation of the transactions contemplated by the Star Purchase Agreement on January 12, 2026, the Company issued to Star 26 a warrant to purchase a total of 12,017,648 shares of Common Stock at an exercise price of $1.50 per share (the “Star Warrant”), which was then distributed to the equity holders of Star 26 on a pro rata basis. Mr. Shalom’s pro rata amount of the Star Warrant was to purchase 7,175,662 shares of Common Stock.

Sale of Zorronet

On April 10, 2026, Water IO Ltd. (“Water IO”), an Israeli public company traded on the Tel Aviv Stock Exchange in which Star 26 Capital Inc. (“Star 26”), a wholly-owned subsidiary of the Company, holds an approximately 67% equity interest, completed the sale of 100% of the issued and outstanding share capital of Zorro Net Ltd. (“Zorronet”), a wholly-owned subsidiary of Water IO, to BiomX Inc. (“BiomX”) (NYSE American: PHGE), pursuant to a Stock Purchase Agreement.

F-33

T3 DEFENSE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(USD in thousands, except share and per share data)

NOTE 12 – SUBSEQUENT EVENTS (continued)

As consideration for the Zorronet shares, BiomX issued to Water IO: (i) 1,300,000 shares of BiomX common stock; and (ii) a non-convertible promissory note in the principal amount of $1,250,000, bearing interest at the short-term applicable federal rate, maturing three months from the date of issuance. Additionally, BiomX assumed certain obligations of Water IO with respect to the founders and former shareholders of Zorronet, including a performance-based earnout payable no later than March 31, 2027 equal to the greater of 125% of Zorronet’s consolidated revenue or eight times Zorronet’s consolidated EBITDA for fiscal year 2026, and a commitment to retain certain key Zorronet personnel for three years on no less favorable terms.

As a result of the transaction, Water IO holds 1,300,000 shares of BiomX common stock, representing approximately 16.57% of BiomX’s issued and outstanding common stock following the issuance. The Company, through Star 26, beneficially owns approximately 67% of Water IO’s equity, and accordingly may be deemed to beneficially own such BiomX shares indirectly.

Resignation of Directors and Appointment of New Directors

On May 19, 2026, Shiran Fridman and Asaf Nachum were appointed to the Board of Directors of the Company, effective as of May 19, 2026.

Ms. Fridman, age 39, has been an independent business and financial consultant since 2025. From 2007 through 2025 she was an investment manager at Four Seasons Real Estate in Israel.

Mr. Nachum, age 49, is an independent investment advisor and portfolio manager.

Each of Ms. Fridman and Mr. Nachum is entitled to $5,000 per quarter they serve as directors of the Company and 5,000 shares of common stock of the Company.

The appointments were made to replace David Rokach and Reuven Yeganeh, both of whom resigned as of May 19, 2026.

Exchange of Shares with VisionWave

On May 17, 2026, T3 exchanged 6,000,000 newly issued restricted shares of common stock of the Company, representing 9.96% of the issued and outstanding shares, for 475,492 shares of common stock (the “Exchange Shares”) of VisionWave Holdings, Inc., a Delaware corporation listed on the Nasdaq Capital Market (“VisionWave”). The per share price of the shares of VisionWave was $5.59 and the per share price of the Company was $0.443. The market value of the Exchange Shares as of May 15, 2026 was $2,658,000.

VisionWave, through its own internal developments, various industry partnerships, and through its wholly owned subsidiaries VisionWave Technologies Inc., a Nevada corporation, and Solar Drone Ltd, an Israeli corporation, is at the forefront of creating software and hardware solutions for UxV (Unmanned Vehicles including UAVs, UGVs and USVs – Aerial, Ground and Submersible) capabilities by integrating advanced artificial intelligence (AI) and autonomous solutions for both defense and aerospace applications, and commercial uses. Its technologies, both those available for sale and in development— ranging from high-resolution radars and advanced vision systems; to radio frequency (RF) sensing technologies; to high-speed computer platforms; to payload management for various UxVs like drones and UGVs, seek to improve operational efficiency and precision dual markets; for military and homeland security applications, and for commercial use cases worldwide.

The exchange was consummated pursuant to the terms of the Share Exchange and Swap Agreement dated as of May 13, 2026 (the “Exchange Agreement”) by and between the Company and VisionWave. Both VisionWave and the Company agreed to a 6-month lockup of the shares exchanged and no registration rights were provided. The Exchange Agreement also contained typical representations and warranties for an agreement of this nature.

F-34

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q includes forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are statements in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year end December 31, 2025, as filed with the Securities and Exchange Commission (the “SEC”) on April 9, 2026, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation:

●

the availability and adequacy of capital to support and grow our business;

●

economic, competitive, business and other conditions in our local and regional markets;

●

actions taken or not taken by others, including competitors, as well as legislative, regulatory, judicial and other governmental authorities;

●

competition in our industry;

● ~~changes~~the inavailability ~~our~~of ~~business~~additional ~~and growth strategy,~~ capital ~~improvements~~to orsupport development ~~plans~~;

● the retention and availability of ~~additional~~key ~~capital to support development~~personnel; ~~and~~

●

our ability to successfully implement our business plan; and

●

other factors discussed elsewhere in this quarterly report.

~~The~~We undertake ~~cautionary~~no ~~statements~~obligation ~~made~~to inupdate ~~this~~or ~~quarterly report~~revise ~~are~~forward-looking ~~intended~~statements to bereflect ~~applicable~~events toor ~~all~~circumstances ~~related~~occurring ~~forward-looking~~after ~~statements~~the ~~wherever~~date ~~they~~of this ~~may~~Quarterly ~~appear~~Report, inexcept ~~this~~as ~~report~~required by law.

WeAs used ~~urge~~in ~~you~~this ~~not~~Quarterly toReport ~~place~~and ~~undue~~unless ~~reliance~~otherwise ~~on these forward-looking statements~~indicated, ~~which speak only as of~~ the ~~date~~terms of“Company,” ~~this~~“we,” ~~report.~~“us,” ~~We undertake no obligation to publicly update any forward~~and ~~looking-statements~~“our,” ~~whether~~refer asto aT3 ~~result~~Defense ofInc. ~~new~~and ~~information,~~its ~~future~~consolidated ~~events or otherwise~~subsidiaries.

~~All~~The following ~~references~~discussion and analysis summarizes the significant factors affecting our financial condition, operating results, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this ~~Form~~report. 10The discussion contains forward-Qlooking statements that ~~refer~~are to based on the ~~“Company”~~beliefs of management, ~~“Nukkleus”~~as well as assumptions made by, ~~“we~~and information currently available to,” ~~“us”~~management. Actual results could differ materially from those discussed in or ~~“our”~~implied ~~refer~~by toforward-looking ~~Nukkleus~~statements ~~Inc.~~as a result of various factors, including those discussed below and elsewhere in this report, particularly in the sections titled “Risk Factors” and “Special ~~its~~Note ~~consolidated~~Regarding ~~subsidiaries~~Forward-Looking Statements.”

iiOverview

~~PART~~Following the Iappointment in September 2024 of Menachem Shalom, our current chief executive officer and a director, we have transformed from a financial technology services provider into a strategic acquirer and operator of aerospace and defense (A&D) businesses. We are building a portfolio of mission-critical ~~FINANCIAL~~suppliers ~~INFORMATION~~and advanced technology companies and strategic infrastructure opportunities across the defense, aerospace, and advanced manufacturing sectors across the United States, Israel and Europe.

~~Item~~The Company 1is positioned as a strategic platform company focused on acquiring, integrating, and scaling high-impact businesses in the aerospace and defense industries. ~~Interim~~Our ~~Financial~~strategy ~~Statements~~targets Tier 2 and Tier 3 suppliers that form the industrial backbone of national security infrastructure, with particular emphasis on companies offering dual-use technologies, advanced AI applications, and critical manufacturing capabilities.

~~NUKKLEUS INC. AND SUBSIDIARIES~~1

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~Recent Developments

	September 30,			December 31,
	2025			2024
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	7,611,465		$	6,897,697
Digital assets		32,182			-
Note receivable - related party		4,500,000			1,000,000
Due from affiliates		243,915			-
Other current assets		730,894			107,648
Current assets from discontinued operations		-			1,089,052
TOTAL CURRENT ASSETS		13,118,456			9,094,397
NON-CURRENT ASSETS:
Right-of-use asset, operating lease		153,569			-
Fixed assets, net		15,883			-
Other assets from discontinued operations		-			14,887
TOTAL NON-CURRENT ASSETS		169,452			14,887
TOTAL ASSETS	$	13,287,908		$	9,109,284
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	87,420		$	69,600
Operating lease liability, current portion		78,575			-
Convertible notes payable, net		-			706,354
Note payable, net		-			64,399
Due to affiliates		233,068			42,471
Loans payable - related parties, current		1,566,988			619,440
Interest payable - related parties, current		108,417			-
Accrued expenses and other current liabilities		816,224			1,167,315
Stock purchase warrant liabilities		40,740,193			164,770,525
Derivative liability		-			847,753
Current liabilities from discontinued operations		-			3,162,509
TOTAL CURRENT LIABILITIES		43,630,885			171,450,366
NON-CURRENT LIABILITIES:
Operating lease liability, net of current portion		74,994			-
Loan payable - related parties, net of current portion		-			947,548
Interest payable - related parties, net of current portion		-			44,111
Non-current liabilities from discontinued operations		-			17,368
TOTAL NON-CURRENT LIABILITIES		74,994			1,009,027
TOTAL LIABILITIES		43,705,879			172,459,393
COMMITMENTS AND CONTINGENCIES - (Note 12)
STOCKHOLDERS’ DEFICIT:
Preferred stock ($0.0001 par value; 15,000,000 shares authorized; 200 and 0 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively)		-			-
Common stock ($0.0001 par value; 150,000,000 shares authorized; 11,096,264 and 4,930,531 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively)		1,110			493
Additional paid-in capital		81,047,703			37,759,589
Accumulated deficit		(111,464,507	)		(201,075,743	)
Accumulated other comprehensive (loss)		(2,277	)		(34,448	)
TOTAL STOCKHOLDERS’ DEFICIT		(30,417,971	)		(163,350,109	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	13,287,908		$	9,109,284

Nasdaq Deficiency

On May 5, 2026, the Company received a written notice (the “Notice”) from The ~~accompanying~~Nasdaq ~~notes~~Stock Market, LLC (“Nasdaq”) that it is not in compliance with the minimum bid requirements set forth in Nasdaq Listing Rule 5450(a)(1) for continued listing on The Nasdaq Global Market. Nasdaq Listing Rule 5450(a)(1) requires listed securities to ~~condensed~~maintain ~~consolidated~~a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) ~~financial~~provides ~~statements~~that ~~are~~a anfailure ~~integral~~to ~~part~~meet the minimum bid price requirement exists if the deficiency continues for a period of ~~these~~30 ~~statements~~consecutive business days. Based on the closing bid price of the Company’s common stock between March 23, 2026 to May 4, 2026, the Company no longer meets the minimum bid price requirement. The Notification Letter has no immediate effect on the listing or trading of the Company’s common stock on The Nasdaq Global Market and, at this time, the common stock will continue to trade on The Nasdaq Global Market under the symbol “DFNS.”

~~NUKKLEUS~~The Company ~~INC.~~intends ~~AND~~to ~~SUBSIDIARIES~~monitor the closing bid price of its common stock and may, if appropriate, consider implementing available options, including, but not limited to, implementing a reverse stock split of its outstanding securities, to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules.

~~CONDENSED CONSOLIDATED STATEMENTS~~Conversion OFof ~~OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited)~~Debt

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2025			2024			2025			2024
REVENUES
Revenue - general support services - related party	$	-		$	-		$	-		$	-
Revenue - financial services		-			-			-			-
Total revenues		-			-			-			-
COSTS OF REVENUES
Cost of revenue - general support services - related party		-			-			-			-
Cost of revenue - financial services		-			-			-			-
Total costs of revenues		-			-			-			-
GROSS PROFIT (LOSS)
Gross profit - general support services - related party		-			-			-			-
Gross profit (loss) - financial services		-			-			-			-
Total gross profit (loss)								-			-
OPERATING EXPENSES:
Professional fees		4,359,640			552,845			6,051,719			3,266,539
Compensation and related benefits		230,988			53,333			365,988			108,333
Other general and administrative		180,947			191,291			909,275			537,146
Impairment loss		-			391,217			-			391,217
Total operating expenses		4,771,575			1,188,686			7,326,982			4,303,235
LOSS FROM OPERATIONS		(4,771,575	)		(1,188,686	)		(7,326,982	)		(4,303,235	)
OTHER (EXPENSE) INCOME:
Interest expense		(36,346	)		(303,626	)		(407,971	)		(343,333	)
Interest expense - related parties		(13,545	)		(15,521	)		(64,306	)		(38,249	)
Loss on settlement of vendor obligations		-			(112,436	)		-			(288,835	)
Gain on settlement of vendor obligations		-			211,200			-			211,200
Gain on settlement of due to affiliates		-			192,069			-			192,069
Loss on debt extinguishment		(7,484,152	)		-			(7,484,152	)		-
Penalty - late registration		-			-			(800,000	)		-
Change in fair value - convertible note embedded derivative		-			-			587,790			-
Change in fair value - stock purchase warrant liabilities		13,963,884			-			123,369,695			-
Change in fair value – digital assets		(967,818	)		-			(967,818	)		-
Gain on deconsolidation		2,491,485			-			2,491,485			-
Day one loss on private placement		(19,605,956	)		-			(19,605,956	)		-
Other income (expense)		118,795			14			280,422			-
Total other income (expense), net		(11,533,653	)		(28,300	)		97,399,189			(267,148	)
INCOME (LOSS) BEFORE INCOME TAXES		(16,305,228	)		(1,216,986	)		90,072,207			(4,570,383	)
INCOME TAXES		-			-			-			-
NET INCOME (LOSS) FROM CONTINUING OPERATIONS		(16,305,228	)		(1,216,986	)		90,072,207			(4,570,383	)
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS		(60,264	)		5,672,219			(460,971	)		4,979,958
NET INCOME (LOSS)	$	(16,365,492	)	$	4,455,233		$	89,611,236		$	409,575
COMPREHENSIVE INCOME (LOSS):
NET INCOME (LOSS)	$	(16,365,492	)	$	4,455,233		$	89,611,236		$	409,575
OTHER COMPREHENSIVE (LOSS) INCOME
Unrealized foreign currency translation (loss) gain		214,149			(134,503	)		32,171			(113,529	)
COMPREHENSIVE INCOME (LOSS)	$	(16,151,343	)	$	4,320,730		$	89,643,407		$	296,046
NET INCOME (LOSS) PER COMMON SHARE:
Continuing operations, basic		(2.01	)		(0.60	)		14.74		$	(2.45	)
Discontinued operations, basic		(0.01	)		2.78			(0.08	)		2.67
Basic	$	(2.02	)	$	2.18		$	14.66		$	0.22
Continuing operations, diluted		(2.01	)		(0.60	)		11.53		$	(2.45	)
Discontinued operations, diluted		(0.01	)		2.78			(0.06	)		2.67	)
Diluted	$	(2.02	)	$	2.18		$	11.47		$	0.22	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		8,124,786			2,043,928			6,111,279			1,864,566
Diluted		8,124,786			2,043,928			7,813,592			1,864,566

The notes ~~accompanying~~were ~~notes~~assigned to ~~consolidated~~Mr. ~~financial~~Shalom from Star 26 Capital Inc. (“Star 26”) pursuant to the terms of the Amended and Restated ~~statements~~Securities ~~are~~Purchase anAgreement ~~integral~~and ~~part~~Call Option dated September 15, 2025 (the “Star Purchase Agreement”) among the Company, Star 26 and the other parties signatory thereto and pursuant to the exercise by Mr. Shalom of ~~these~~his ~~statements~~right to obtain shares, notes and warrants from Esousa Group Holdings LLC (“Esousa”) in accordance with the terms of the Call Option Agreement dated January 13, 2026.

2In connection with the consummation of the transactions contemplated by the Star Purchase Agreement on January 12, 2026, the Company issued to Star 26 a warrant to purchase a total of 12,017,648 shares of Common Stock at an exercise price of $1.50 per share (the “Star Warrant”), which was then distributed to the equity holders of Star 26 on a pro rata basis. Mr. Shalom’s pro rata amount of the Star Warrant was to purchase 7,175,662 shares of Common Stock.

~~NUKKLEUS INC. AND SUBSIDIARIES~~2

~~CONDENSED CONSOLIDATED STATEMENTS OF~~Sale ~~CHANGES~~of ~~IN STOCKHOLDERS’ DEFICIT~~Zorronet

~~For~~On April 10, 2026, Water IO Ltd. (“Water IO”), an Israeli public company traded on the ~~Three~~Tel Aviv Stock Exchange in which Star 26 Capital Inc. (“Star 26”), a wholly-owned subsidiary of the Company, holds an approximately 67% equity interest, completed the sale of 100% of the issued and ~~Nine~~outstanding ~~Months~~share ~~Ended~~capital ~~September~~of 30Zorro Net Ltd. (“Zorronet”), ~~2025~~a wholly-owned subsidiary of Water IO, to BiomX Inc. (~~Unaudited~~“BiomX”) (NYSE American: PHGE), pursuant to a Stock Purchase Agreement.

	Series A														Accumulated
	Preferred Stock				Common Stock				Additional						Other			Total
	Number of				Number of				Paid-in			Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Income (Loss)			Deficit
Balance as of December 31, 2024		-	$	-		4,930,531	$	493		37,759,589			(201,075,743	)		(34,448	)		(163,350,109	)
Issuance of common stock from exercise of pre-funded warrants		-		-		83,332		8		3,055,806			-			-			3,055,814
Stock-based compensation		-		-		-		-		177,905			-			-			177,905
Net income for the three months ending March 31, 2025		-		-		-		-		-			102,958,139			-			102,958,139
Foreign currency translation adjustment		-		-		-		-		-			-			(58,765	)		(58,765	)
Balance as of March 31, 2025		-		-		5,013,863		501		40,993,300			(98,117,604	)		(93,213	)		(57,217,016	)
Issuance of common stock in relation to settlement agreement		-		-		12,500		1		157,499			-			-			157,500
Issuance of common stock in relation to conversion of note		-		-		260,300		26		780,540			-			-			780,566
Issuance of common stock from exercise of options		-		-		84,276		9		(9	)		-			-			-
Net income for the three months ending June 30, 2025		-		-		-		-		-			3,018,589			-			3,018,589
Foreign currency translation adjustment		-		-		-		-		-			-			(123,213	)		(123,213	)
Balance as of June 30, 2025		-		-		5,370,939		537		41,931,330			(95,099,015	)		(216,426	)		(53,383,574	)
Issuance of common stock from exercise of warrants		-		-		5,023,026		502		28,882,963			-			-			28,883,465
Issuance of common stock in relation to conversion of note		-		-		243,155		24		1,011,500			-			-			1,011,524
Issuance of common stock from exercise of options		-		-		1,434		1		-			-			-			1
Issuance of common stock for services performed		-		-		310,000		31		1,143,869			-			-			1,143,900
Issuance of common stock in exchange for digital assets		-		-		147,710		15		999,860			-			-			999,875
Issuance of preferred stock in relation to private placement		200		-		-		-		-			-			-			-
Issuance of equity-classified warrants		-		-		-		-		7,080,516			-			-			7,080,516
Adjustments in relation to deconsolidation of subsidiary		-		-		-		-		(2,335	)		-			213,716			211,381
Net loss for the three months ending September 30, 2025		-		-		-		-		-			(16,365,492	)					(16,365,492	)
Foreign currency translation adjustment		-		-		-		-		-			-			433			433
Balance as of September 30, 2025		200		-		11,096,264		1,110		81,047,703			(111,464,507	)		(2,277	)		(30,417,971	)

~~The~~As a ~~accompanying~~result ~~notes~~of tothe ~~condensed~~transaction, ~~consolidated~~Water IO holds 1,300,000 shares of BiomX common stock, representing approximately 16.57% of BiomX’s ~~financial~~issued ~~statements~~and ~~are~~outstanding ancommon ~~integral~~stock ~~part~~following the issuance. The Company, through Star 26, beneficially owns approximately 67% of ~~these~~Water IO’s ~~statements~~equity, and accordingly may be deemed to beneficially own such BiomX shares indirectly.

3Results of Operations

~~NUKKLEUS~~Comparison of ~~INC.~~the ~~AND~~Three ~~SUBSIDIARIES~~Months Ended March 31, 2026 to the Three Months Ended March 31, 2025

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT~~Revenues

For the ~~Three~~three ~~and~~months ~~Nine~~ended March ~~Months~~31, ~~Ended~~2026 ~~September~~we 30had revenues of $3,653,000, ~~2024~~as compared to revenues of $0 for the three months ended March 31, 2025.

~~(Unaudited)~~Operating Expenses

														Accumulated
	Preferred Stock				Common Stock				Additional					Other			Total
	Number of				Number of				Paid-in		Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Income (Loss)			Deficit
Balance as of December 31, 2023		-	$	-		1,737,464	$	174		30,781,934		(40,697,339	)		(31,354	)		(9,946,585	)
Stock-based compensation		-		-		-		-		74,668		-			-			74,668
Issuance of common stock as compensation for services		-		-		25,338		3		749,997		-			-			750,000
Net loss for the three months ending March 31, 2024		-		-		-		-		-		(2,429,417	)		-			(2,429,417	)
Foreign currency translation adjustment		-		-		-		-		-		-			26,582			26,582
Balance as of March 31, 2024		-	$	-		1,762,802	$	177		31,606,599		(43,126,756	)		(4,772	)		(11,524,752	)
Allocated value of warrants related to issuance of convertible debt		-		-		-		-		300,000		-			-			300,000
Allocated value of warrants related to debt issuance		-		-		-		-		40,804		-			-			40,804
Issuance of common stock to settle debt		-		-		87,500		9		500,991		-			-			501,000
Stock-based compensation		-		-		-		-		74,667		-			-			74,667
Net loss for the three months ending June 30, 2024		-		-		-		-		-		(1,616,241	)		-			(1,616,241	)
Foreign currency translation adjustment		-		-		-		-		-		-			(5,608	)		(5,608	)
Balance as of June 30, 2024		-	$	-		1,850,302	$	186		32,523,061		(44,742,997	)		(10,380	)		(12,230,130	)
Issuance of stock purchase warrants		-		-		-		-		176,898		-			-			176,898
Issuance of common stock to settle accrued expenses and other current liabilities		-		-		248,697		23		629,164		-			-			629,187
Stock-based compensation		-		-		-		-		5,602		-			-			5,602
Net income for the three months ending September 30, 2024		-		-		-		-		-		4,455,233			-			4,455,233
Foreign currency translation adjustment		-		-		-		-		-		-			(134,503	)		(134,503	)
Balance as of September 30, 2024		-	$	-		2,098,999	$	209		33,334,725		(40,287,764	)		(144,883	)		(7,097,713	)

For the three months ended March 31, 2026 we had operating expenses of $4,182,000, as compared to operating expenses of $1,507,107 for the three months ended March 31, 2025. Operating expenses consisted of research and development expenses ($274,000), selling and marketing expenses ($157,000), and other general and administrative expenses ($3,528,000), as well as general and administrative expenses of consolidated variable entities of $223,000. The $3,528,000 of general and administrative expenses was comprised of professional services ($995,000), salaries and related compensation ($1,263,000) and other general and administrative expenses ($1,270,000), For the three months ended March 31, 2025, professional fees were $1,187,000, compensation and benefits was $33,000 and other general and administrative expenses was $287,000.

~~The accompanying notes to condensed consolidated financial statements are an integral part of these statements.~~3

4Other Income (Expenses)

~~NUKKLEUS~~For the ~~INC~~three months ended March 31, 2026, other income (expenses) decreased from $104,648,000 for the three months ended March 31, 2025, as compared to an expense of $22,398,000 the three months ended March 31, 2026. ~~AND~~The ~~SUBSIDIARIES~~decrease was mainly attributable to the change in fair value of stock purchase warrant liabilities from $104,278,000 as of March 31, 2025 to a loss of $26,635,000 as of March 31, 2026.

~~CONSOLIDATED~~Net ~~STATEMENTS~~Income ~~OF CASH FLOWS~~(Loss)

~~(Unaudited)~~For the three months ended March 31, 2026, we had a net loss of $26,351,000, as compared to net income of $102,958,000 for the three months ended March 31, 2025.

	Nine months ended
	September 30,
	2025			2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		89,611,236			409,575
Net income (loss) from discontinued operations		(460,971	)		4,979,958
Net income from continuing operations	$	90,072,207		$	(4,570,383	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of debt discount		322,247			315,834
Depreciation expense		2,807			-
Stock-based compensation		177,905			154,938
Gain on deconsolidation		(2,491,485	)		-
Loss on extinguishment of convertible notes payable		7,484,152			-
Gain on settlement of due to affiliates		-			(192,069	)
Loss on settlement of vendor obligations		-			288,835
Gain on settlement of vendor obligations		-			(211,200	)
Impairment loss		-			391,217
Day one loss on private placement		19,605,956			-
Change in fair value - convertible note embedded derivative		(587,790	)		-
Change in fair value - stock purchase warrant liabilities		(123,369,695	)		-
Change in fair value - digital assets		967,818			-
Changes in operating assets and liabilities:
Other current assets		(623,246	)		(81,181	)
Due from affiliates		(243,915	)		-
Accounts payable		17,820			-
Due to affiliates		190,597			-
Interest payable - related parties		64,306			38,248
Accrued liabilities and other payables		3,466,426			2,229,486
Net cash used in operating activities from continuing operations		(4,943,890	)		(1,636,275	)
Net cash used in operating activities from discontinued operations		(255,556	)		(1,576,016	)
NET CASH USED IN OPERATING ACTIVITIES		(5,199,446	)		(3,212,291	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of computer equipment		(18,690	)		-
Advance to target of planned acquisition		(3,500,000	)		-
Net cash (used in) provided by operating activities from continuing operations		(3,518,690	)		-
Net cash (used in) provided by operating activities from discontinued operations		-			-
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(3,518,690	)		-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan payable - related parties		-			730,639
Repayment of note payable		(78,000	)		-
Payments of penalty - late registration		(800,000	)		-
Proceeds from issuance of private placement, net of issuance costs		9,225,000			-
Proceeds from issuance of convertible debt and warrants, net of issuance costs		-			996,075
Proceeds from issuance of note payable and warrants		-			78,000
Net cash provided by financing activities from continuing operations		8,347,000			1,804,714
Net cash provided by financing activities from discontinued operations		-			582,233
NET CASH PROVIDED BY FINANCING ACTIVITIES		8,347,000			2,386,947
EFFECT OF EXCHANGE RATE ON CASH FROM CONTINUING OPERATIONS		90,398			-
EFFECT OF EXCHANGE RATE ON CASH FROM DISCONTINUED OPERATIONS		34,562			(2,617	)
Net change in cash, including cash from discontinued operations		(246,176	)		(827,961	)
Cash, including cash from discontinued operations - beginning of period		7,857,641			863,610
Cash, including cash from discontinued operations - end of period		7,611,465			35,649
Less cash from discontinued operations		-			35,276
Cash from continuing operations, end of period	$	7,611,465		$	373
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	6,240		$	18
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Fair value of warrants exercised	$	31,939,279		$	-
Fair value of the stock purchase warrants issued in connection with the private placement agreement	$	29,605,956		$	-
Fair value of the stock purchase warrants issued in connection with joint venture agreement	$	1,672,686		$	-
Fair value of the derivative liability extinguished from conversion of convertible note	$	259,963		$	-
Fair value of common stock issued in connection with settlement agreement	$	157,500		$	-
Fair value of common stock issued in connection with conversion of convertible note	$	520,603		$	-
Fair value of common stock issued in exchange for digital assets	$	1,000,000		$	-
Issuance of common stock to settle accrued expenses and other current liabilities	$	-		$	750,000
Fair value of warrants issued	$	-		$	40,804
Settlement of accrued expenses and other current liabilities through issuance of common stock	$	-		$	324,601
Issuance of Old Nukk common stock to Brilliant vendors in exchange for receivable from Brilliant	$	-		$	-
Settlement of loans payable – related parties through exchange of notes receivable – related parties and accrued and unpaid interest	$			$	0
Settlement of loans payable – related parties through exchange of due from affiliates	$			$	0

Liquidity and Capital Resources

~~The~~As ~~accompanying~~of ~~notes~~March to31, ~~consolidated~~2026, ~~financial statements~~we ~~are~~had an$22,811,000 ~~integral~~of ~~part~~current assets, including $7,362,000 of ~~these~~cash ~~statements~~and cash equivalents. Based on management’s current expectations, we anticipate that we will need approximately $6,000,000 for the next 12 months of operations.

At March 31, 2026, the Company had negative working capital of approximately $69 million (of which $56 million consists of stock purchase warrant liabilities that do not require cash settlement) and stockholders’ equity of $42.5 million as of March 31, 2026; For the three month ended March 31, 2026, the Company reported a net operating loss of $3.8 million and net cash used in operations of $4.9 million. Absent any other action, the Company will require additional liquidity to continue its operations for the next 12 months.

~~NUKKLEUS~~After ~~INC~~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. ~~AND~~Those ~~SUBSIDIARIES~~plans include: (i) the Company’s existing unrestricted cash balance of approximately $7.4 million, sufficient to fund projected operating expenses through the look-forward period; (ii) 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; (iii) the Company’s majority-owned subsidiaries, including Rimon Ltd. and Nimbus Drones, which are cash-positive and require no capital support from the Company; (iv) management’s ongoing efforts to assist subsidiaries in securing or expanding bank credit facilities; and (v) the option to satisfy certain obligations through issuance of equity in lieu of cash.

~~NOTES~~In TOaddition, ~~CONDENSED~~management ~~CONSOLIDATED~~believes ~~FINANCIAL~~that ~~STATEMENTS~~the completion of the sale by Water IO Ltd., a majority-owned indirect subsidiary of the Company, of Zorro Net Ltd. to BiomX Inc., pursuant to which Water IO received 1,300,000 shares of BiomX common stock and a $1.25 million promissory note due within three months, may provide additional liquidity and financial flexibility to the Company and its subsidiaries. The sale occurred on April 10, 2026.

~~(Unaudited)~~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. In the event management is incorrect in its determination and current and anticipated future sources of liquidity are insufficient to fund our future business activities, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders.

~~NOTE 1 – DESCRIPTION OF BUSINESS AND~~Cash ~~BASIS OF PRESENTATION~~Flows

~~Nukkleus Inc. and its wholly owned subsidiaries,~~Investing were financial technology companies that were previously focused on providing software, technology solutions, customer sales and marketing, and risk management technology hardware and software solutions packages for the worldwide retail foreign exchange (“FX”) trading industry and payment services from one fiat currency to another or to digital assets.Activities

InNet ~~January~~cash ~~2024,~~used ~~Nukkleus~~in ~~Inc~~investing ~~and~~activities ~~its~~for ~~wholly owned subsidiaries ceased its general support service operations, terminating~~ the ~~existing~~three ~~customer~~months ~~and~~ended ~~supplier contracts with a related party,~~March ~~and shifted its focus to the payment services operations. In November 2024~~31, ~~Nukkleus~~2026 ~~Inc.~~was ~~entered into a Settlement Agreement and Release (the “Settlement Agreement”) with a shareholder and one of our subsidiaries to sell DRFQ~~$3, ~~the subsidiary that operates the payment services operations~~823, ~~to the shareholder in consideration of GBP 1,~~000~~. In August 2025~~, ~~the~~as ~~Company~~compared ~~was notified that on July 29, 2025, Match Financial was placed into administration in the United Kingdom pursuant~~ to the Insolvency Act 1986 resulting in the appointment of two administrators (the “Administrators”). The administration was initiated by the sole director of Match Financial. According to the notice sent to the Company$810,000 onfor ~~July 29, 2025,~~ the ~~Administrators~~three ~~completed~~months aended ~~pre-packaged~~March ~~sale of Match Financial’s entire shareholding in DRFQ to Match Financial Holdings Limited~~31, ~~a newly formed entity~~2025. ~~The transaction results in the divestiture of DRFQ.~~

~~In December 2024, Nukkleus Inc. entered into a~~Financing Securities Purchase Agreement and Call Option (the “Star Agreement”) with Star 26 Capital Inc. (“Star”), the shareholders of Star (“Star Equity Holders”) and an officer of Nukkleus, acting in his capacity as the representative of the Star Equity Holders, to acquire a controlling 51% interest in Star, an Israeli corporation engaged as a supplier of generators for “iron dome” launchers and other defense products. In September 2025, the Star Agreement was amended and restated (“Amended Star Agreement”). Pursuant to the Amended Star Agreement, Nukkleus will acquire 100% controlling interest in Star. As a result of the Settlement Agreement and subject to the closing of the acquisition of Star, Nukkleus Inc.’s business will be focused on the defense sector.Activities

OnNet ~~February~~cash ~~14,~~provided ~~2025,~~by ~~the~~financing ~~Board~~activities offor ~~Directors of Nukkleus Inc. and its wholly owned subsidiaries approved a change in~~ the ~~Company’s~~three ~~fiscal~~months ~~year end from September 30 to December~~ended March 31, ~~effective~~2026 ~~for~~was ~~the~~$12,476,000, ~~fiscal~~as ~~year~~compared ~~beginning~~to ~~January~~having 1,no ~~2024.~~net ~~This~~cash ~~change~~from ~~results~~financing activities in athe ~~transition~~three ~~period~~months ~~from~~ended ~~October~~March ~~1, 2024, to December~~ 31, ~~2024~~2025.

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.4

~~Basis of Presentation and Principles of~~Off-Balance ~~Consolidation:~~Sheet On December 22, 2023 (the “Closing Date”), Brilliant Acquisition Corp (“Brilliant”) entered into a business combination agreement (the “Business Combination”) with each of the shareholders of Nukkleus Inc. (“Old Nukk”). Pursuant to the Business Combination, Brilliant acquired all of the issued and outstanding shares of common stock from the Old Nukk shareholders.Arrangements

~~On the Closing Date, and in connection with the~~We ~~closing~~had ofno ~~the~~outstanding ~~Business~~derivative ~~Combination,~~financial Brilliant changed its name to Nukkleus Inc (the “Company”) and the Company’s common stock began trading on the NASDAQ under the ticker symbol NUKK. Old Nukk was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805instruments, Business Combinations (“ASC 805”). The determination was primarily based on Old Nukk’s shareholders prior to the Business Combination having a majority of the voting interests in the combined company, Old Nukk’s ability to exert control over the majority of the board of directors of the combined company, and given the board of directors election and retention provisions, Old Nukk’s ability to maintain control of the board of directors on a gooff-~~forward~~balance ~~basis,~~sheet Old Nukk’s senior management comprising the senior management of the combined company; and old Nukk’s operations prior to the Business Combination comprise the ongoing operations of the combined company. Accordinglyguarantees, ~~for~~ ~~accounting~~interest ~~purposes,~~rate ~~the~~swap ~~Business~~transactions ~~Combination~~or ~~was~~foreign ~~treated as the equivalent of Old Nukk issuing stock for the net assets of Brilliant,~~currency ~~accompanied by a recapitalization~~contracts. ~~The~~We ~~net~~do ~~assets~~not ofengage ~~Brilliant~~in ~~were~~trading ~~stated~~activities atinvolving ~~historical~~non-exchange ~~cost,~~traded ~~with no goodwill or other intangible assets recorded~~contracts.

~~While Brilliant was the legal acquirer in the~~Critical ~~Business~~Accounting Combination, because Old Nukk was deemed the accounting acquirer, the historical financial statements of Old Nukk became the historical financial statements of the combined company, upon consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Old Nukk prior to the Business Combination; (ii) the combined results of Brilliant and Old Nukk following the closing of the Business Combination; (iii) the assets and liabilities of Old Nukk at their historical cost; and (iv) the Company’s equity structure for all periods presented.Estimates

6Our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, operating results, and cash flows will be affected.

~~Effective~~See Note ~~October~~2 ~~24,~~Summary ~~2024,~~of Significant Accounting Policies of the ~~Company~~Notes ~~amended~~for a summary of significant accounting policies and significant estimates ~~its~~and ~~amended~~assumptions and ~~restated~~their ~~certificate~~effects ofon ~~incorporation~~our tofinancial ~~implement~~statements. aBelow ~~one-for-eight~~are ~~reverse~~the ~~stock~~significant ~~split~~estimates ofand ~~its~~assumptions ~~common~~that ~~stock~~we ~~(the~~consider ~~“2024~~critical ~~Reverse~~because ~~Stock~~they ~~Split”)~~involve ~~and~~a ~~increased~~significant ~~the~~amount ~~number~~ of ~~authorized~~estimation ~~shares~~uncertainty ofand ~~the~~have ~~Company’s~~had ~~common~~or ~~stock~~are ~~from~~reasonably ~~40,000,000~~likely to ~~150,000,000~~have a material impact on ~~(see~~our ~~Note~~financial 9)condition or results of operations.

~~In accordance with guidance applicable to these~~Recently ~~circumstances,~~Issued ~~the~~Accounting equity structure has been restated in all comparative periods to give effect to the number of shares of the Company’s common stock, $0.0001 par value per share, issued to Old Nukk shareholders during the Business Combination and the 2024 Reverse Stock Split. Accordingly, the disclosure of common shares and per common share data in the accompanying consolidated financial statements and related notes reflect the Business Combination and 2024 Reverse Stock Split for all periods presented.Pronouncements

~~The accompanying consolidated financial statements~~For ~~include~~information ~~the~~about ~~accounts~~recently ofissued ~~Nukkleus~~accounting ~~Inc~~standards, ~~and~~refer its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation. The consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Any reference in these footnotes to ~~the~~Note ~~applicable~~2 ~~guidance is meant~~ to ~~refer to~~our ~~the~~Consolidated ~~authoritative~~Financial ~~U.S.~~Statements ~~GAAP~~appearing ~~as found~~ elsewhere in ~~the~~this ~~ASC and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”)~~report.

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Due to the Company’s inability to access complete financial data from a subsidiary classified as discontinued operations, estimates were used to present this entity’s financial results for the period of April 1, 2025 through July 29, 2025 (see Note 4).5

~~The accompanying condensed consolidated financial~~Foreign ~~statements~~Currency do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.Risk

~~NOTE 2 – LIQUIDITY~~Foreign ~~AND~~currency ~~CAPITAL~~transaction ~~RESOURCES~~risk

~~The accompanying consolidated financial statements~~ITEM ~~have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business~~3. AsQUANTITATIVE ofAND ~~September~~QUALITATIVE ~~30,~~DISCLOSURES ~~2025,~~ABOUT ~~the~~MARKET Company had cash of approximately $7,611,000, a working capital deficit of approximately $30,512,000 and incurred cash flow used in operating activities from continuing operations of approximately $4,944,000 for the nine months ended September 30, 2025. These are indicators of substantial doubt as to the Company’s ability to continue as a going concern for at least one year from issuance of these consolidated financial statements. The Company’s ability to continue as a going concern is dependent upon the management of expenses and ability to obtain necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due, and upon profitable operations.RISK

IfWe ~~additional~~are ~~equity~~a orsmaller ~~debt financing is required~~reporting ~~from~~company ~~outside~~as ~~sources,~~defined ~~the~~in ~~Company~~Rule ~~may~~12b-2 ~~not~~of ~~be able to raise it on terms acceptable to it or at all. If~~ the ~~Company~~Exchange isAct ~~unable to raise additional capital on acceptable terms when needed, its results of operations~~ and ~~financial~~are ~~condition~~not ~~would~~required ~~be materially and adversely affected. Any such financing likely would be dilutive~~ to ~~existing~~provide ~~stockholders~~the ~~and~~information ~~could~~required ~~result~~under inthis ~~significant financial operating covenants that would negatively impact the Company business~~item.

~~As a result of the above, in connection with the~~ITEM Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company’s liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern through twelve months from the date these financial statements are available to be issued4. ~~These~~CONTROLS ~~financial~~AND statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.PROCEDURES

7Our management, under the supervision of and with the participation of our principal executive officer and our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), as of March 31, 2026.

~~NOTE~~Based on 3such –evaluation, ~~SUMMARY~~management concluded that our disclosure controls and procedures as of March 31, 2026 were (1) designed and OFfunctioning ~~SIGNIFICANT~~effectively ~~ACCOUNTING~~to ~~POLICIES~~ensure that material information relating to T3 Defense Inc., including its consolidated subsidiaries, is made known to our principal executive officer and principal financial officer by others within those entities, particularly during the period in which this report was being prepared and (2) operating effectively in that they provided reasonable assurance that information required to be disclosed by T3 Defense Inc. in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to management, including our principal executive officer or principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

~~Emerging growth company: The Company~~There ishave annot ~~emerging~~been ~~growth~~any ~~company,~~changes ~~as defined~~ in ~~the~~our ~~Jumpstart~~internal ~~Our~~control ~~Business~~over ~~Startups~~financial ~~(“JOBS”)~~reporting ~~Act.~~during ~~Under~~our ~~the~~fiscal ~~JOBS~~quarter ~~Act,~~ended ~~emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act~~March 31, ~~until~~2026 ~~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~~materially itaffected, ~~(i) is no longer an emerging growth company~~ or ~~(ii) affirmatively~~are ~~and~~reasonably ~~irrevocably~~likely ~~opts~~to ~~out~~materially ofaffect, ~~the~~our ~~extended~~internal ~~transition period~~control ~~provided~~over ~~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~~reporting.

~~Use of estimates: The preparation~~Changes ~~of the financial statements~~ in ~~conformity~~Internal ~~with~~Control ~~U.S.~~Over ~~GAAP~~Financial requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. The Company’s most significant estimates and judgments involve valuation of share-based compensation, valuation of equity-classified stock purchase warrants, valuation of liability-classified stock purchase warrants, valuation of derivative liability, classification of gains and losses on settlement of related party liabilities, the useful lives of long-lived assets, assumptions used in assessing impairment of long-lived assets, valuation of deferred tax assets and the associated valuation allowances, and estimates of financial results for a subsidiary classified as discontinued operations. For the period beginning April 1, 2025 and ending July 29, 2025, the Company used estimates to report the financial results of this subsidiary.Reporting

~~Segment reporting: ASC 280, Segment~~There ~~Reporting~~were ~~(“ASC~~no ~~280”),~~changes ~~defines~~in ~~operating~~our ~~segments~~internal ascontrol ~~components~~over ~~of an enterprise where discrete~~ financial ~~information is~~reporting ~~available~~ that isoccurred evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM is the chief executive officer, who has ultimate responsibility for the operating performance of the Company and the allocation of resources. The CODM uses operating results as the primary measure to manage the business. As a result of transactions entered into during the three months ended ~~December~~March 31, ~~2024~~2026 ~~(see~~that ~~Note~~have materially 4)affected, ~~the~~or ~~CODM~~are ~~determined~~reasonably itlikely ~~has~~to ~~one operating~~materially ~~segment as of September 30~~affect, ~~2025.~~our ~~Accordingly,~~internal ~~the~~control ~~Company~~over ~~has recast the presentation of its reportable segments for the periods presented in these consolidated~~ financial ~~statements~~reporting. The CODM assesses performance on consolidated operating expenses as the CODM is focused on managing cash flow until a pending acquisition (see Note 13) is completed during the fourth quarter of fiscal year 2025.

~~Cash and cash equivalents: The Company~~Limitations ~~considers~~on ~~all~~Effectiveness ~~highly liquid instruments with a maturity date~~ of ~~three~~Controls ~~months or less at the time of purchase~~ and ~~money market accounts to be cash equivalents. The Company had cash equivalents of approximately $5,307,000 and $0 at September 30, 2025 and December 31, 2024, respectively.~~Procedures

~~The~~In designing ~~Company’s cash~~ and ~~cash~~evaluating ~~equivalents are~~the ~~potentially~~disclosure ~~subject~~controls toand ~~concentration~~procedure, ofmanagement ~~credit~~recognizes ~~risk.~~that ~~Cash~~any controls and ~~cash~~procedures, ~~equivalents~~no ~~are~~matter ~~primarily~~how well ~~placed~~designed ~~with~~and ~~financial~~operated, ~~institutions~~cannot ~~which are~~provide ofabsolute ~~high~~assurance ~~credit~~that ~~quality.~~the ~~The~~objectives ~~Company~~of ~~invests~~the ~~cash~~controls ~~and~~system ~~cash~~are ~~equivalents~~met, ~~primarily~~and inno ~~highly~~evaluation ~~liquid,~~of controls ~~highly~~can ~~rated~~provide ~~instruments~~absolute ~~which~~assurance ~~are uninsured.~~that ~~The~~all ~~Company~~control ~~may~~issues ~~also~~and ~~have~~instances ~~corporate~~of ~~deposit~~fraud, ~~balances~~if ~~with~~any, ~~financial~~within ~~institutions~~a ~~which~~company ~~exceed~~have ~~the~~been ~~Federal Deposit Insurance~~detected. ~~Corporation~~In ~~insurance~~addition, ~~limit~~the design of ~~$250,000.~~disclosure ~~The~~controls ~~Company~~and ~~has~~procedures ~~not~~must ~~experienced~~reflect ~~losses~~the onfact ~~these~~that ~~accounts~~there ~~and~~are ~~does~~resource ~~not~~constraints ~~believe~~and itthat management is ~~exposed~~required to ~~any~~ ~~significant~~apply ~~credit~~judgment ~~risk~~in ~~with~~evaluating ~~respect~~the benefits of possible controls and procedure relative to ~~these~~their ~~accounts~~costs.

8ITEM 5. OTHER

Fair value measurements: ASC 820, Fair Value Measurements (“ASC 820”), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participantsNone. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows

~~● Level 1 – Inputs based on unadjusted quoted market prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.~~6

●PART II ~~Level~~- 2OTHER – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar instruments in markets that are not active or for which all significant inputs are observable or can be corroborated by observable market data.INFORMATION

~~● Level 3 – Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date~~Item 1. ~~The~~Legal ~~inputs are both unobservable for the asset and liability in the market and significant to the overall fair value measurement.~~Proceedings

AnOn March ~~asset’s~~3, or2026, ~~liability’s~~the ~~fair~~Company ~~value measurement~~obtained ~~level~~a ~~within~~copy ~~the~~of ~~fair~~a ~~value~~summons ~~hierarchy~~and iscomplaint ~~based~~filed onin the ~~lowest~~Supreme ~~level~~Court of ~~any~~the ~~input~~State ~~that~~of isNew ~~significant~~York todated ~~the~~February 24, ~~fair~~2026 ~~value~~by ~~measurement~~Kingswood Capital Partners, LLC against Star 26 Capital, Inc., Nukkleus, Inc. and the Company. The complaint alleges that ~~Valuation~~a ~~techniques~~success ~~used~~fee ~~need~~is todue ~~maximize~~for ~~the~~an ~~use~~earned ofinvestment ~~observable~~banking ~~inputs~~success ~~and~~fee ~~minimize~~arising from a transaction. The Company denies all the ~~use~~allegations and ofintends ~~unobservable~~to ~~inputs~~vigorously defend such action, which it believes is without merit.

~~Assets and liabilities measured at fair value~~Item ~~are~~1A. ~~based~~Risk ~~on one or more of the following techniques noted in ASC 820:~~Factors

●An investment ~~Market~~in ~~approach:~~our ~~Prices~~common stock involves significant risk. We describe the most significant risks that management believes affect or could affect us under Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year end December 31, 2025, as filed with the Securities and ~~other~~Exchange ~~relevant~~Commission ~~information~~(the ~~generated~~“SEC”) byon ~~market~~April ~~transactions~~9, ~~involving~~2026 ~~identical~~(“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report which could materially affect our business, financial condition or ~~comparable~~future ~~assets~~results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or ~~liabilities~~that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

●Item 2. ~~Cost~~Unregistered ~~approach:~~Sales ~~Amount~~of ~~that~~Equity ~~would~~Securities beand ~~required~~Use ~~to replace the service capacity~~ of ~~an asset (replacement cost)~~Proceeds.

● Income approach: Techniques to convert future amounts to a single present value amount based upon market expectations (including present value techniques, option pricing, and excess earnings models)Not applicable.

~~The Company believes its valuation methods are~~Item ~~appropriate~~3. ~~and~~Defaults ~~consistent~~Upon ~~with~~Senior other market participants, however the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.Securities

~~The~~Not Company’s financial instruments with a carrying value that approximates fair value consist of cash, advances, other current assets, accounts payable, due to affiliates, accrued expenses and other current liabilities, interest payable – related parties, and short-term borrowings due to their liquid or short-term nature or expected settlement dates of these instrumentsapplicable. ~~If these financial instruments were recorded at fair value, they would be based on Level 1 inputs, except for short-term borrowings which would be based on Level 2 and Level 3 inputs, respectively.~~

~~The Company’s non-financial assets, such~~Item ~~as intangible assets, and financial assets are adjusted to fair value when an impairment charge is recognized~~4. ~~The~~Mine ~~impairment~~Safety charge recognized on non-financial assets that consist of acquired intangible assets is based on Level 3 inputs, including a comparison of the Company’s results with expectations and expectation for future profits. The impairment charge recognized for financial assets that consist of investment in privately held equity securities is based on Level 3 inputs, including the global economic environment, adjustments for investment-specific developments and the rights and obligations of the securities the Company holds.Disclosures

~~The~~Not Company’s financial instruments that are measured at fair value on a recurring basis consist of liability-classified stock purchase warrants and liability-classified derivative financial instruments (see Note 11)Applicable.

~~Related parties: The Company considers~~Item parties to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions5. ~~Parties~~Other are also considered to be related if they are subject to common control or significant influence of the same party, such as a family member or relative, shareholder, or a related corporation. The Company reviews the relationships of its vendors, customers, shareholders, and board members to determine whether there are any parties meet the criteria to be considered related. Any party that is deemed to be related to the Company is referred to as an “affiliate” or “related party” in these consolidated financial statements.Information

~~Due from affiliates and notes receivable~~Insider –Trading ~~related~~Arrangements ~~parties, net: Due from affiliates~~ and notes receivable – related parties, net are contractual rights to receive cash on demand or on fixed or determinable dates and are recognized as an asset on the consolidated balance sheets. Due from affiliates consist of amounts owed from affiliates of the Company for either services provided to the affiliate or expenses paid by the Company on behalf of the affiliate (see Note 12). Notes receivable – related parties, net consist of advances made to affiliates in exchange for a promissory note from the affiliate (see Note 12).Policies

~~Digital~~During the ~~assets:~~quarter ~~The~~ended ~~Company~~March ~~holds certain~~31, ~~digital assets~~2026, ~~which~~no ~~primarily~~director ~~consist~~or ofofficer adopted or terminated (i) ~~tokens~~any ~~that~~contract, ~~are~~instruction ~~recorded~~or aswritten plan ~~intangible~~for ~~assets~~the inpurchase ~~accordance~~or ~~with~~sale ~~ASC~~of ~~350-60,~~securities ~~Intangibles-Goodwill and~~of ~~Other~~the ~~(Crypto~~Company ~~Assets).~~intended Into ~~accordance~~satisfy ~~with~~the ~~ASU~~affirmative ~~2023-08,~~defense ~~effective~~conditions ~~January~~of Rule 10b5-1,(c) ~~2025,~~or (ii) ~~the~~any ~~Company~~“non-Rule ~~elected~~10b5-1 totrading ~~apply~~arrangement” ~~the~~as ~~fair~~defined ~~value~~in ~~measurement option~~paragraph ~~for~~(c) ~~its~~of ~~crypto~~item ~~assets~~408 of Regulation S-K.

~~Under~~Resignation ~~this standard, digital assets are measured at fair value at each reporting date, with changes in fair value recognized in earnings as a component~~ of ~~other~~Directors ~~income~~and ~~(expense).~~Appointment ~~The Company determines fair value based on quoted market prices from active exchanges as~~ of ~~the~~New ~~balance sheet date.~~Directors

~~Digital~~On ~~assets~~May ~~are~~19, ~~classified~~2026, asShiran ~~either~~Fridman and ~~current~~Asaf orNachum ~~non-current~~were ~~assets~~appointed ~~based~~to on the ~~Company’s~~Board ~~intent~~of ~~and ability~~Directors toof ~~sell or hold~~ the ~~assets beyond one year. The~~ Company, ~~does~~effective ~~not account for its digital assets~~ as ~~securities~~of orMay ~~cash~~19, ~~equivalents~~2026.

~~Other~~Ms. Fridman, ~~current~~age ~~assets:~~39, ~~Other~~has ~~current assets~~been ~~primarily~~an ~~consist~~independent ofbusiness ~~escrow cash~~ and ~~prepaid~~financial ~~miscellaneous~~consultant ~~items~~since 2025. ~~The~~From ~~Company~~2007 ~~expects~~through ~~all~~2025 ~~current~~she ~~assets~~was toan beinvestment ~~collected and/or~~manager ~~realized~~at ~~within~~Four ~~the~~Seasons ~~next~~Real 12Estate ~~months~~in Israel.

~~Leases: The Company determines if an arrangement is a lease at inception of the contract~~Mr. ~~Operating~~Nachum, ~~leases~~age ~~are included in operating lease right-of-use (“ROU”) assets~~49, ~~current~~is ~~portion~~an ofindependent ~~operating~~investment ~~lease~~advisor ~~liabilities,~~ and ~~operating~~portfolio ~~lease liabilities, net of current portion in the accompanying consolidated balance sheets~~manager.

~~ROU~~Each ~~assets~~of ~~represent~~Ms. ~~the~~Fridman ~~Company’s right to use underlying assets for the lease term,~~ and ~~lease~~Mr. ~~liabilities~~Nachum ~~represent~~is ~~the~~entitled ~~Company’s obligation~~ to ~~make lease payments arising~~$5,000 ~~from~~per ~~the~~quarter ~~contracts.~~they ~~ROU~~serve ~~assets~~as ~~and~~directors ~~lease~~of ~~liabilities are recognized at~~ the ~~commencement~~Company ~~date~~and ~~based~~5,000 onshares ~~the~~of ~~present~~common ~~value~~stock of ~~lease payments over~~ the ~~lease term~~Company.

~~The~~Ms. ~~Company’s~~Fridman ~~vehicle~~and ~~leases~~Mr. ~~may~~Nachum ~~include~~will become ~~transfer~~members ~~rights or options to purchase at the end~~ of the ~~lease~~Audit ~~that~~Committee, the ~~Company~~Compensation isCommittee ~~reasonably~~and ~~certain to exercise. Interest expense is recognized using~~ the ~~effective~~Nominating ~~interest rate method,~~ and ~~the~~Corporate ~~ROU~~Governance ~~asset~~Committees isof ~~amortized over~~ the ~~useful~~Board ~~life~~of Directors of the ~~underlying asset~~Company.

~~Impairment of long-lived assets:~~There Inare ~~accordance~~no ~~with~~arrangements ~~ASC 360, Impairment~~ or ~~Disposal~~understandings ofbetween ~~Long-Lived~~either ~~Assets~~Ms. ~~(“ASC~~Fridman ~~360”), the Company reviews the carrying values of long-lived assets for impairment whenever events~~ or ~~changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable~~Mr. ~~Based~~Nachum onand ~~the~~any ~~existence~~other ofpersons ~~one~~pursuant orto ~~more~~which ~~indicators~~each of ~~impairment,~~them ~~the Company measures any impairment of long-lived~~was ~~assets~~appointed ~~using~~a ~~the~~director ~~projected discounted cash flow method at the asset group level. The estimation~~ of ~~future cash flows requires significant management judgment based on~~ the Company’s, ~~historical results~~ and ~~anticipated~~there ~~results~~are ~~and~~no isfamily ~~subject~~relationships tobetween ~~many~~either ~~factors~~Ms. ~~The~~Fridman ~~discount rate~~or ~~that is commensurate with the risk inherent in the Company’s business model is determined by its management~~Mr. AnNachum ~~impairment loss~~and ~~would~~any bedirector ~~recorded if the Company determined that the carrying value of long-lived assets may not be recoverable. The impairment to~~or beexecutive ~~recognized~~officer ~~is measured by the amount by which the carrying values~~ of the ~~assets exceed the fair value of the assets~~Company.

~~Note~~The ~~payable,~~appointments ~~loans~~were ~~payable~~made –to ~~related parties,~~replace ~~convertible~~David ~~notes~~Rokach ~~payable:~~and ~~Debt~~Reuven ~~issuance costs~~Yeganeh, ~~including original issue discounts, will be recorded to debt discount,~~ ~~reducing~~both ~~the face amount~~ of ~~the~~whom ~~note.~~resigned ~~Debt~~as ~~issuance costs will be amortized to interest expense over the contractual term~~ of ~~the~~May ~~respective debt obligation using the effective interest method. If a conversion of the underlying debt occurs~~19, ~~a proportionate share of the unamortized discount is immediately expensed~~2026.

10The Company is not aware of any disagreements between either of Messrs. Rokach or Yeganeh and any other officer or director of the Company.

~~The~~We ~~Company~~are ~~evaluates~~providing ~~convertible~~Messrs. ~~notes payable~~Rokach inand ~~accordance~~Yeganeh with ~~ASC~~copies ~~470,~~of ~~“Debt~~this ~~with~~Form ~~Conversion~~10-Q ~~and~~concurrent ~~Other~~with ~~Options”~~this ~~(“ASC~~filing. Should ~~470”)~~any tosubsequent ~~determine~~communications ifwith ~~embedded conversion~~any ~~features~~director ~~present~~regarding their inrespective ~~the~~decision ~~convertible~~to ~~instrument~~resign ~~shall~~reveal beany ~~recognized~~disagreement ~~separately~~between atthem ~~issuance~~and bythe ~~allocating~~Company, athe ~~portion~~Board of ~~the~~Directors ~~proceeds equal~~or toany ~~the~~executive ~~intrinsic~~officer of ~~value~~the ofCompany ~~that~~regarding ~~feature~~our tooperations, ~~additional~~policies ~~paid-in~~or ~~capital.~~practices, ~~Debt~~we ~~issuance~~will ~~costs~~amend ~~are~~this ~~allocated~~report ~~proportionately~~accordingly to ~~the~~disclose ~~debt host~~any ~~and~~such ~~conversion feature~~disagreement.

~~Derivative~~Exchange ~~financial~~of ~~instruments: The~~Shares ~~Company accounts for derivative instruments in accordance~~ with ASC 815, Derivatives and Hedging (“ASC 815”). The Company’s objectives and strategies for using derivative instruments, and how the derivative instruments and related hedged items are accounted for affect the consolidated financial statements. The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risk.VisionWave

~~The~~On ~~Company~~May ~~evaluates~~17, ~~all of its financial instruments~~2026, ~~including~~ ~~notes~~T3 ~~payable and warrants~~exchanged 6,000,000 tonewly ~~determine~~issued ifrestricted ~~such~~shares ~~instruments~~of ~~are~~common ~~derivatives~~stock orof ~~contain~~the ~~features~~Company, ~~that~~representing ~~qualify as embedded derivatives~~9. ~~The~~96% ~~Company~~of ~~applies~~the ~~significant~~issued ~~judgment to identify~~ and ~~evaluate~~outstanding ~~complex~~shares, ~~terms~~for 475,492 ~~and~~shares ~~conditions~~of incommon ~~its~~stock ~~contracts~~(the ~~and~~“Exchange ~~agreements~~Shares”) toof ~~determine whether~~VisionWave ~~embedded~~Holdings, ~~derivatives exist~~Inc., ~~Embedded~~a ~~derivatives~~Delaware ~~must~~corporation belisted ~~separately~~on ~~measured from~~ the ~~host contract if all the requirements for~~Nasdaq ~~bifurcation~~Capital ~~are~~Market ~~met~~(“VisionWave”). The ~~assessment~~per ofshare ~~the~~price ~~conditions~~of ~~surrounding~~ the ~~bifurcation~~shares of ~~embedded~~VisionWave ~~derivatives~~was ~~depends~~$5.59 onand the ~~nature~~per share price of the Company ~~host~~was ~~contract~~$0.443. ~~Bifurcated~~The ~~embedded~~market ~~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~~Exchange ~~host~~Shares ~~contract~~as onof ~~the~~May ~~Company’s~~15, ~~balance~~2026 ~~sheet~~was $2,658,000.

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.8

~~Stock purchase warrants: The Company~~VisionWave, ~~accounts~~through ~~for~~its ~~stock~~own ~~purchase~~internal ~~warrants~~developments, asvarious ~~either~~industry ~~equity-classified~~partnerships, orand ~~liability-classified~~through ~~instruments~~its ~~based~~wholly onowned ansubsidiaries ~~assessment~~VisionWave ofTechnologies Inc., ~~the~~a ~~warrant’s specific~~Nevada ~~terms~~corporation, and ~~applicable~~Solar ~~authoritative~~Drone ~~guidance~~Ltd, inan ~~ASC~~Israeli ~~480~~corporation, ~~Distinguishing~~is ~~liabilities~~at ~~from~~the ~~equity~~forefront ~~(“ASC~~of ~~480”),~~creating software and ~~ASC~~ ~~815.~~hardware ~~The~~solutions ~~assessment~~for ~~considers~~UxV ~~whether~~(Unmanned ~~the~~Vehicles ~~stock~~including ~~purchase~~UAVs, ~~warrants~~UGVs ~~are~~and ~~freestanding~~USVs ~~financial~~– ~~instruments pursuant to ASC 480~~Aerial, ~~meet~~Ground ~~the~~and ~~definition~~Submersible) ofcapabilities aby integrating ~~liability~~advanced ~~pursuant~~artificial ~~to ASC~~intelligence ~~480,~~(AI) and ~~whether~~autonomous ~~the~~solutions ~~stock~~for ~~purchase~~both ~~warrants~~defense ~~meet~~and ~~all~~aerospace ofapplications, ~~the~~and ~~requirements~~commercial ~~for~~uses. ~~equity~~Its ~~classification under ASC 815~~technologies, ~~including~~both ~~whether~~those ~~the~~available ~~stock~~for ~~purchase~~sale ~~warrants~~and ~~are~~in ~~indexed~~development— toranging ~~the~~from ~~Company’s~~high-resolution ~~own~~radars ~~common shares~~ and ~~whether~~advanced ~~the~~vision systems; ~~holders~~to ~~could~~radio ~~potentially~~frequency ~~require~~(RF) ~~“net~~sensing ~~cash~~technologies; ~~settlement”~~to inhigh-speed acomputer ~~circumstance~~platforms; ~~outside~~to ofpayload ~~the~~management ~~Company’s control, among other conditions~~ for ~~equity~~various ~~classification.~~UxVs ~~This~~like ~~assessment,~~drones and ~~which requires the use of professional judgment~~UGVs, isseek ~~conducted at~~to ~~the~~improve ~~time~~operational ofefficiency ~~issuance, modification,~~ and asprecision ofdual ~~each~~markets; ~~subsequent~~for ~~quarterly~~military ~~period~~and ~~end~~homeland ~~date~~security ~~while~~applications, ~~the~~and ~~stock~~for commercial ~~purchase~~use ~~warrants~~cases ~~are outstanding~~worldwide.

~~For~~The ~~issued~~exchange orwas ~~modified~~consummated ~~stock~~pursuant ~~purchase~~to ~~warrants~~the terms ~~that~~of ~~meet~~the ~~all~~Share Exchange and Swap Agreement dated as of May 13, 2026 (the ~~criteria~~“Exchange ~~for~~Agreement”) ~~equity~~by ~~classification,~~and between the ~~stock~~Company ~~purchase~~and VisionWave. ~~warrants~~Both ~~are~~VisionWave ~~required~~and tothe beCompany ~~recorded~~agreed asto a ~~component~~6-month lockup of ~~additional~~the shares exchanged and no registration rights were provided. ~~paid-~~The Exchange Agreement also contained typical representations and warranties for an agreement of this nature. The description of the Exchange Agreement is qualified in ~~capital~~its atentirety by reference to the ~~time~~Agreement, a copy of ~~issuance~~which is attached hereto as Exhibit 10.54.

~~For issued or modified stock purchase warrants~~Availability ~~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.Information

~~The~~T3 Defense’s ~~Company~~website ~~assesses~~address ~~the~~is ~~classification~~www.t3dfns.com. ofInvestors ~~its common stock~~and ~~purchase~~others ~~warrants~~should atnote ~~each~~that ~~reporting~~the ~~date~~Company toannounces ~~determine~~material ~~whether~~information ato its ~~change~~investors inusing ~~classification~~SEC ~~between~~filings, ~~equity~~press ~~and~~releases, ~~liability is~~its ~~required.~~investor ~~For~~relations ~~modified~~website, ~~stock~~public ~~purchase~~conference ~~warrants~~calls, ~~that~~webcasts ~~result~~and incertain asocial media ~~change~~channels, ofincluding ~~classification~~the ~~from~~following ~~equity~~LinkedIn toaccount: ~~liability,~~https://www.linkedin.com/in/mennyshalom/. aThe ~~liability~~Company isuses ~~recognized equal~~these channels to communicate ~~the~~with ~~fair~~investors, ~~value~~customers onand the ~~date~~public ofabout ~~modification~~the Company, ~~additional~~its ~~paid-in~~products ~~capital~~and isother ~~adjusted~~issues byand ~~the~~for ~~fair~~complying ~~value~~with ofits ~~the~~disclosure obligations ~~warrant~~under Regulation onFD. ~~the~~The ~~date of~~information ~~issuance~~on, ~~and~~or ~~the~~that ~~difference~~may be accessed through, T3’s website is ~~recognized~~not asincorporated aby reference ~~non-cash~~into ~~gain~~this orQuarterly ~~loss~~Report on ~~the~~Form ~~accompanying~~10-Q ~~consolidated~~and ~~statements~~should not be considered a part of ~~operations~~this ~~and comprehensive~~Quarterly ~~loss~~Report on Form 10-Q.

11Item 6. Exhibits

Assets held for sale: Assets held for sale represent property, equipment, and leasehold improvements less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business. 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.

Exhibit Number		Description
10.54		Share Exchange and Swap Agreement dated as of May 17, 2026, by and between T3 Defense Inc. and VisionWave Holdings, Inc.
31.1		Certification of the Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Chief Financial Officer
32.1		Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer
32.2		Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Chief Financial Officer
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document

Discontinued operations: 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 4). For long-lived assets or disposals groups 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.9

~~Advertising: Costs related to advertising are expensed as incurred.~~SIGNATURES

~~Stock-based compensation: The Company~~Pursuant ~~accounts~~to ~~for~~the ~~stock-based~~requirements ~~compensation~~of bythe ~~measuring~~Securities ~~and~~Exchange ~~recognizing~~Act compensation expense for all share-based awards, including stock options and stock grants, based on estimated grant-date fair values. The Company measures employee, director and nonemployee awards at the date of ~~grant~~1934, ~~which generally is~~ the ~~date~~registrant athas ~~which~~duly ~~the~~caused ~~Company~~this ~~and~~report ~~the~~to ~~nonemployee~~be ~~reach~~signed aon ~~mutual~~its ~~understanding~~behalf of by the ~~key~~undersigned, ~~terms~~thereunto ~~and~~duly ~~conditions of a share-based payment award~~authorized.

The Company estimates the grant date fair value of each stock option award using the Black-Scholes option-pricing model. The model requires management to make a number of assumptions, including the fair value and expected volatility of the Company’s underlying common stock price on the date of grant, expected live of the option, risk-free interest rate and expected dividend yield. The Company sets the grant date fair value of each stock grant equal to the fair value of the Company’s common stock on the date of grant.

T3 DEFENSE INC.

By:	/s/ Menachem Shalom
	Menachem Shalom
	Chief Executive Officer
	(Principal Executive Officer)

	/s/ Morel Levi
	Morel Levi
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

Date:	May 20, 2026

The Company uses the straight-line attribution method to allocate compensation cost to reporting periods over the requisite service period during which the employee, board member, director, or advisor is required to provide services in exchange for the award. The Company has elected to account for forfeitures of awards as they occur, with previously recognized compensation reversed in the period that the awards are forfeited.10

Income taxes: The Company accounts for income taxes using the asset and liability method whereby deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is established when management estimates that it is more likely than not that deferred tax assets will not be realized. Realization of deferred tax assets is dependent upon future pre-tax earnings, the reversal of temporary differences between book and tax income, and the expected rates in future periods.

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The Company is required to evaluate the tax positions taken in the course of preparing its tax returns to determine whether tax positions are more likely than not of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax expense in the current year. The amount recognized is subject to estimate and management judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount that is initially recognized. The Company recognizes interest and penalties related to income tax matters in general and administrative expense.

For U.S. federal tax purposes, digital asset transactions are treated on the same tax principles as property transactions. The Company recognizes a gain or loss when digital assets are exchanged for other property, in the amount of the difference between the fair market value of the property received and the tax basis of the exchanged digital assets. Receipts of digital assets in exchange for goods or services are included in taxable income at the fair market value on the date of receipt.

Foreign currency translation: The Company’s consolidated financial statements are presented in the reporting currency of the U.S. dollar. Functional currencies of the Company and its wholly-owned subsidiaries is the local currency used in each entities primary economic environment, some of which are different than the reporting currency. Assets and liabilities of the Company are translated into the reporting currency using the exchange rate in effect at the balance sheet dates. Equity transactions are translated using the historical exchange rate in effect on the date of the transaction, except for the change in accumulated deficit during the year, which is the results of the operations translation process. Results of operations and cash flows are translated using the weighted average exchange rates in effect during the period. As a result, amounts relating to the assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the accompanying consolidated balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into the reporting currency are recorded as a component of comprehensive income (loss). The unrealized foreign currency exchange gain (loss) for the three and nine months ended September 30, 2025 and 2024 is included as a component of other comprehensive income (loss) on the accompanying consolidated statements of operations and comprehensive loss.

Remeasurement gains and losses from transactions that are not denominated in the functional currency are recorded as a component of other income in the consolidated statements of operations and comprehensive loss. Most of the Company’s revenue transactions are transacted in the functional currency of the Company. The Company does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.

Comprehensive loss: Comprehensive loss is comprised of net loss and all changes to the statements of equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the Company, comprehensive loss for the three and nine months ended September 30, 2025 and 2024 consisted of net loss and unrealized loss from foreign currency translation adjustment.

Net loss per share: Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period, excluding the effects of any potential dilutive securities. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common share equivalents had been issued and if the additional common shares were dilutive. Earnings per share excludes all potential dilutive shares of common shares if their effect is anti-dilutive.

For the three and nine months ended September 30, 2025 and 2024, potentially dilutive common shares consist of the common shares issuable upon the exercise of common stock options and warrants (using the treasury stock method) and the conversion of convertible notes payable. In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact.

The following table summarizes the potentially dilutive securities excluded from the computation of diluted shares outstanding because the effect of including these potential shares was anti-dilutive:

	Nine Months Ended September 30,
	2025		2024
Options to purchase common stock		4,823		15,538
Convertible notes payable that convert into common stock		—		—
Stock purchase warrants to acquire common stock		4,780,449		987,625
Total potentially dilutive securities		4,785,272		1,003,163

Recently issued accounting pronouncements, adopted

ASU 2023-07, Segment Reporting – Improvements to Reportable Segment Disclosures (“ASU 2023-07”), requires enhanced disclosures related to significant segment expenses and a description of how the chief operating decision maker utilizes segment operating profit or loss to assess segment performance. ASC 2023-07 is effective for fiscal years beginning after December 15, 2023 and for interim reporting periods starting after December 15, 2024, and is to be applied retrospectively. The Company adopted ASU 2023-07 for the nine months ended September 30, 2025 and its adoption did not have a material impact on the consolidated financial statements.

Recently issued accounting pronouncements, not yet adopted

ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”) incorporates several disclosure and presentation requirements currently residing in SEC Regulation S-X and S-K into the ASC. The amendments are applied prospectively and are effective when the SEC removes the related requirements from Regulation S-X and S-K. Any amendments the SEC does not remove by June 30, 2027 will not be effective. Early adoption is prohibited. The Company is currently evaluating the potential impact of this guidance on its disclosures. 

ASU 2023-09, Income Taxes (“ASU 2023-09”), requires disclosure of specific categories and disaggregation of information in the rate reconciliation table and expands disclosures related to income taxes paid. The new standard is effective for fiscal years beginning after December 15, 2024 and is to be applied prospectively. The Company is currently evaluating the impact, if any, adoption will have on its consolidated financial statements and disclosures.

ASU 2024-02, Codification Improvements-Amendments to Remove References to the Concepts Statements (“ASU 2024-02”) updates accounting standards for revenue recognition (ASC 606), lease accounting (ASC 842), and impairment of long-lived assets (ASC 360). ASU 2024-02 provides enhanced guidance for estimating variable consideration, accounting for contract modifications, determining lease terms, and simplifying impairment testing for long-lived assets. It also introduces increased disclosure requirements for financial instruments and derivatives. ASU 2024-02 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact, if any, adoption will have on its consolidated financial statements and disclosures.

ASU 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”), requires public companies to disaggregate key expense categories, such as inventory purchases, employee compensation and depreciation in their financial statements. This aims to improve investor insight into company performance. ASU 2024-03 was originally effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted.

ASU 2025-01, Income Statement – Expense Disaggregation Disclosures – Clarifying the Effective Date (“ASU 2025-01”), clarifies the effective date of ASU 2024-03. This amendment states that ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact, if any, adoption will have on its consolidated financial statements and disclosures.

ASU 2025-03, Business Combinations and Consolidation: Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (VIE) (“ASU 2025-03”), updates accounting standards for business combinations (ASC 805) on identifying the accounting acquirer in a business combination when the legal acquiree is a VIE and the transaction is effected primarily by the exchange of equity interests. This new guidance requires an entity to consider the factors in ASC 805-10-55-12 through 55-15 in such cases, thereby enhancing comparability between business combinations involving VIEs and voting-interest entities. ASU 2025-03 is effective for fiscal years beginning after December 15, 2026, and interim reporting periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact, if any, adoption will have on its consolidated financial statements and disclosures.

ASU 2025-05, Financial Instruments-Credit Losses: Measurement of Credit Losses for Accounts Receivable and Contract Assets for Private Companies and Certain Not-for-profit Entities (PCC) (“ASU 2025-05”), updates accounting standards for revenue from contracts with customers (ASC 606). ASU 2025-05 permits an entity to assume that current conditions as of the balance sheet date will not change for the remaining life of the asset when estimated expected credit losses, and an accounting policy election to consider subsequent cash-collection activity after the balance sheet date. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact, if any, adoption will have on its consolidated financial statements and disclosures.

NOTE 4 – DISCONTINUED OPERATIONS AND DECONSOLIDATION

In accordance with ASC 205-20 Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major impact on an entity’s operations and financial results when the components of an entity meets the criteria in ASC paragraph 205-20-45-10. In the period in which the component meets the held for sale or discontinued operations criteria the major assets, other assets, current liabilities and non-current liabilities shall be reported as a component of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the income (loss) of continuing operations.

Disposition of a Subsidiary: On November 8, 2024, the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”) with a shareholder of the Company and a subsidiary of the Company to sell the subsidiary to the shareholder or his nominee subject to the Company obtaining shareholder approval. As required by the Settlement Agreement, a Share Purchase Agreement was entered into between the same parties dated December 23, 2024 providing that the Company, subject to it obtaining shareholder approval, will sell the subsidiary to the officer of the Company in consideration of GBP 1,000. On August 5, 2025, the Company was notified that on July 29, 2025, Match Financial, the subsidiary’s direct parent, was placed into administration in the United Kingdom pursuant to the Insolvency Act 1986 resulting in the appointment of two administrators (the “Administrators”). The administration was initiated by the shareholder. According to the notice sent to the Company, on July 29, 2025, the Administrators completed a pre-packaged sale of Match Financial’s entire shareholding of the subsidiary to a newly formed entity owned by Mr. Khurshid. The transaction results in the divestiture of the subsidiary effective as of July 29, 2025.

The subsidiary comprises our financial services operating segment. As a result of the planned disposition of the subsidiary, the financial services operating segment meets the held for sale criteria of ASC 205-20. Accordingly, the historical results of operations of the financial services operating segment has been reflected as discontinued operations in our consolidated financial statement for all periods prior to the Settlement Agreement on November 8, 2024.

During the preparation of the consolidated financial statements for the quarter ended June 30, 2025, management was unable to obtain complete financial data from the subsidiary due to the subsidiary’s personnel being uncooperative, not providing the information needed and loss of direct access to the subsidiary’s systems. As a result, the financial results of the discontinued operations for the period beginning April 1, 2025 and ending July 29, 2025 are based on reasonable estimates derived from historical operating trends and partial information available to the Company. Management believes the estimates used are reasonable under the circumstances. Furthermore, as a result of the sale of the subsidiary completed during the administration, the Company deconsolidated the subsidiary as of July 29, 2025. Therefore, the Company reported no assets or liabilities of the subsidiary as of September 30, 2025 and recognized a net gain on deconsolidation of approximately $2,491,000, which has been reflected as a component of other (expense) income on the accompanying 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:

NUKKLEUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
	2025		2024
	(Unaudited)		(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	-	$	148,679
Customer custodial funds		-		811,265
Customer digital currency assets		-		22,930
Digital assets		-		550
Due from affiliates		-		50,768
Other current assets		-		54,860
TOTAL CURRENT ASSETS		-		1,089,052
NON-CURRENT ASSETS:
Intangible assets, net		-		14,887
TOTAL NON-CURRENT ASSETS		-		14,887
TOTAL ASSETS	$	-	$	1,103,939
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	-	$	504,249
Customer custodial cash liabilities		-		972,941
Customer digital currency liabilities		-		10,514
Due to affiliates		-		479,608
Loans payable - related parties, current		-		682,875
Interest payable - related parties, current		-		203,755
Accrued expenses and other current liabilities		-		308,567
TOTAL CURRENT LIABILITIES		-		3,162,509
NON-CURRENT LIABILITIES:
Loan payable - related parties, net of current portion		-		17,368
TOTAL NON-CURRENT LIABILITIES		-		17,368
TOTAL LIABILITIES		-		3,179,877

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

NUKKLEUS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2025			2024			2025			2024
REVENUES
Revenue - financial services		83,309			226,960			568,860			661,931
Total revenues		83,309			226,960			568,860			661,931
COSTS OF REVENUES
Cost of revenue - financial services		16,371			15,558			95,929			128,492
Total costs of revenues		16,371			15,558			95,929			128,492
GROSS PROFIT (LOSS)
Gross profit (loss) - financial services		66,938			211,402			472,931			533,439
Total gross profit (loss)		66,938			211,402			472,931			533,439
OPERATING EXPENSES:
Advertising		2,260			113			9,950			23,036
Professional fees		36,480			165,950			273,835			599,978
Compensation and related benefits		42,327			157,419			331,057			591,856
Amortization of intangible assets		1,030			3,445			7,727			10,360
Other general and administrative		20,343			114,559			169,187			235,241
Total operating expenses		102,440			441,486			791,756			1,460,471
LOSS FROM OPERATIONS		(35,502	)		(230,084	)		(318,825	)		(927,032	)
OTHER (EXPENSE) INCOME:
Interest expense - related parties		(23,318	)		(149,523	)		(189,664	)		(161,029	)
Gain on termination of GSS GSA – related party		-			6,082,962			-			6,082,962
Other income (expense)		(1,444	)		(31,136	)		47,518			(14,943	)
Total other income (expense), net		(24,762	)		5,902,303			(142,146	)		5,906,990
LOSS BEFORE INCOME TAXES		(60,264	)		5,672,219			(460,971	)		4,979,958
INCOME TAXES		-			-			-			-
NET LOSS FROM DISCONTINUED OPERATIONS	$	(60,264	)		5,672,219			(460,971	)	$	4,979,958

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

NOTE 5 – DIGITAL ASSETS

The Company holds certain digital assets that consist of cryptocurrencies and tokens. These assets are not financial instruments, cash equivalents, or securities. The Company maintains custody of its digital assets in secured digital wallets under its sole control and does not engage in staking, lending, or other yield-generating activities.

At the time of initial acquisition in July 2025, the Company exercised a warrant to acquire 50 million DARWIN tokens for a total exercise price of $1,000,000, representing the cost basis of the Company’s digital asset holdings. These DARWIN tokens are the sole holding of digital assets for the Company as of September 30, 2025.

The fair value of the DARWIN tokens as of September 30, 2025, based on their quoted market price of $0.0006436 per token, was $32,182, resulting in a loss from change in fair value of $967,818 for the three and nine months ended September 30, 2025, which has been included as a component of other income (loss) on the accompanying consolidated statements of operations and comprehensive loss.

NOTE 6 – LOANS PAYABLE – RELATED PARTIES

The Company’s loans payable – related parties consisted of the following:

During the twelve months ended September 30, 2024, the Company issued promissory notes in the aggregate principal of $1,105,639 and $248,000 to a shareholder and to an entity managed by that shareholder, respectively, (collectively, the “Shareholder 2024 Loans”), in consideration of cash proceeds in the same amount in the following tranches:

October 2023	$	199,000
December 2023		424,000
January 2024		25,000
February 2024		188,000
March 2024		80,000
April 2024		31,000
May 2024		100,000
June 2024		120,500
July 2024		59,000
August 2024		58,000
September 2024		69,139
Total Shareholder 2024 Loans	$	1,353,639

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 September 30, 2025, the outstanding principal balance and accrued and unpaid interest of the Shareholder 2024 Loans was $1,353,639 and $108,417, 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. In December 2024, the Company repaid approximately $1,000,000 of the July 2024 loan. As of September 30, 2025, the outstanding principal balance of the July 2024 Loan was $213,349.

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

	September 30,			December 31,
	2025			2024
Shareholder 2024 Loans	$	1,353,639		$	1,353,639
July 2024 Loan		1,213,349			1,213,349
		2,566,988			2,566,988
Less: repayments to date		(1,000,000	)		(1,000,000	)
Loans payable – related parties, current and noncurrent	$	1,566,988		$	1,566,988

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 2024 Shareholder Loans and July 2024 Loan was due and payable on demand.

For the three and nine months ended September 30, 2025, the interest expense related to above loans payable – related parties amounted to $13,545 and $64,306, respectively, and has been reflected as a component of other (expense) income on the accompanying consolidated statements of operations and comprehensive loss.

For the three and nine months ended September 30, 2024, the interest expense related to above loans payable – related parties amounted to $15,521 and $38,249, respectively, and has been reflected as a component of other (expense) income on the accompanying consolidated statements of operations and comprehensive loss.

As of September 30, 2025 and December 31, 2024, the related accrued and unpaid interest for above loans was $108,417 and $44,111, respectively, which was reflected as interest payable – related parties, net of current portion on the accompanying consolidated balance sheets.

The loans payable – related parties mature as follows:

For the Period Ending:
June 30, 2024	$	619,440
June 30, 2026		947,548
	$	1,566,988

NOTE 7 – NOTE PAYABLE, NET

In April 2024, the Company issued a promissory note in the principal amount of $78,000 to an investor in consideration of cash proceeds in the same amount (the “April 2024 Loan”). In addition, the Company issued a stock purchase warrant for the purchase of 14,535 shares of the Company’s common stock (the “April 2024 Warrant”) that is exercisable for three years at an exercise price of $0.86 per warrant. The April 2024 Loan bears interest of 8.0% per annum and is due and payable on April 30, 2025. The April 2024 Warrant was determined to be an equity classified warrant and fair value of $40,804 determined using the Black-Scholes option-pricing model with the following assumptions: volatility of 174.03%, risk-free rate of 4.87%, annual dividend yield of 0.0% and expected life of 3 years. The principal amount of the April 2024 Loan was allocated to the April 2024 Loan and April 2024 Warrant in the amount of $37,196 and $40,804, respectively. The amount allocated to the April 2024 Warrant was recorded as a discount on the April 2024 Loan. In April 2025, the April 2024 Loan was repaid in full.

Amortization of the debt discount and interest expense related to the April 2024 Loan amounted to $0 and $0, and $13,601 and $2,035, respectively, for the three and nine months ended September 30, 2025 and $10,201 and $1,590, and $17,002 and $2,633 respectively, for the three and nine months ended September 30, 2024, which are both included as a component of interest expense on the accompanying consolidated statements of operations and comprehensive loss.

The balance of the April 2024 Loan, net of unamortized discount, was $0 and $64,399 as of September 30, 2025 and December 31, 2024, respectively and reflected as note payable, net on the accompanying consolidated balance sheets.

NOTE 8 – CONVERTIBLE NOTES PAYABLE, NET

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

	September 30,		December 31,
	2025		2024
August 2024 Note	$	-	$	515,000
December 2024 Note		-		500,000
		-		1,015,000
Less: debt issuance costs		-		(308,646	)
Convertible notes payable, net	$	-	$	706,354

August 2024 Note: In August 2024, the Company issued a senior unsecured promissory note (the “August 2024 Note”) in the principal amount of $515,000 to a new lender in consideration of cash proceeds in the amount of $412,075. 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 of five 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 $447,316 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 of five 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 $275,611 and $239,389, 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. 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.

December 2024 Note: On December 3, 2024, the Company issued a convertible promissory note (the “December 2024 Note”) in the principal amount of $500,000 to a lender, in consideration of cash proceeds in the amount of $450,000 after an original issue discount of $25,000 and issuance costs of $25,000 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:

Conversion rights – The December 2024 Note and accrued and unpaid interest is convertible at the option of the lender (the “Conversion Option”) into shares of the Company’s common stock at a per share conversion price of the lower of (i) $2.00 per share (the “Fixed Price”) and (ii) 90% of the lowest daily volume weighted average price (the “VWAP”) during the ten consecutive trailing days immediately preceding the conversion, with a floor of $0.33 (the “Floor Price”).

Interest – The December 2024 Note bears interest of 10.0% per annum. Upon an event of default, the December 2024 Note becomes immediately due and payable, with the interest increasing to 18.0%.

Optional redemption – The December 2024 Note is redeemable by the Company in the event that the VWAP of the Company’s common stock was less than the Fixed Price on the date the Company provides the redemption notice to the lender. The redemption price will be equal to the outstanding principal amount of the December 2024 Note plus the 10% of the principal amount being redeemed (the “Redemption Premium”) plus all accrued and unpaid interest, if any. The lender has ten days from the date the redemption notice is received to elect to convert all or a portion of the December 2024 Note.

Event of Default – If any event of default as defined in the December 2024 Note occurs, the full unpaid principal amount of the December 2024 Note, accrued and unpaid interest, and other amounts owed become at the lender’s election immediately due and payable in cash. The lender has the right, but not the obligation, to convert all or part of the December 2024 Note in accordance with the terms of the December 2024 Note.

Exchange Cap – The lender shall not have the right to convert any portion of the December 2024 Note to the extent that after giving effect to such conversion, the lender, along with its affiliates, would beneficially own in excess of 4.99% of the outstanding common stock immediately after giving effect to such conversion (the “Exchange Cap”), unless the Company has obtained shareholder approval for conversion.

Amortization Event – In no event shall the lender be allowed to effect a conversion if such conversion, along with all other shares of common stock then beneficially owned by the lender and its affiliates would exceed 4.99% of the then outstanding shares of the common stock of the Company. If at any time (i) the daily VWAP is less than the Floor Price for three trading days during a period of five consecutive trading days (a “Floor Price Event”), (ii) the Company has issued in excess of 99.0% of the shares of common stock available under the Exchange Cap (an “Exchange Cap Event”), or (iii) at any time after the effectiveness deadline set forth in the Registration Rights Agreement, dated as of December 3, 2024, by and between the Company and the lender (the “Registration Rights Agreement”), the lender is unable to utilize a registration statement to resell the shares of the Company’s common stock receivable by the lender for a period of ten consecutive trading days (a “Registration Event,” and collectively with a Floor Price Event and an Exchange Cap Event, each an “Amortization Event”), then the Company shall make monthly payments to the lender beginning on the seventh trading day after the Amortization Event and continuing monthly in the amount of $150,000 plus a 10.0% premium and accrued and unpaid interest. The Exchange Cap Event will not apply in the event the Company has obtained the approval from its stockholders for the issuance of shares of common stock pursuant to the conversion of the December 2024 Note in excess of the Exchange Cap.

Embedded Derivatives – The optional redemption and event of default include an exercise contingency, which requires the Company to obtain shareholder approved for conversions subject to the Exchange Cap, which fails the equity classification guidance in ASC 815 and is thus precluded from being classified in equity. Therefore, the embedded derivatives are required to be bifurcated from the December 2024 Note and accounted for at fair value at each reporting date. A fair value of $222,865 was determined for the embedded derivative liabilities using a Monte Carlo Simulation model. The embedded derivative liabilities will be re-measured to fair value each reporting period until settlement (see Note 11).

During the three months ended June 30, 2025, the lender exercised conversion of the December 2024 Note and 260,300 shares of common stock were issued to the lender.

For the three and nine months ended September 30, 2025, amortization of debt discount and interest expense related to convertible promissory notes amounted to $0 and $36,337, and $308,646 and $83,613, respectively, which are both included as a component of interest expense on the accompanying condensed consolidated statements of operations and comprehensive loss.

NOTE 9 – STOCKHOLDERS’ DEFICIT

As a result of the 2024 Reverse Stock Split, each eight pre-split shares of common stock outstanding automatically combined and converted to one issued and outstanding share of common stock without any action on the part of stockholders. No fractional shares of common stock were issued to any stockholders in connection with the 2024 Reverse Stock Split. Each stockholder was entitled to receive one share of common stock in lieu of the fractional share that would have resulted from the 2024 Reverse Stock Split. The number of the Company’s authorized common stock remain unchanged, and the par value of the common stock following the 2024 Reverse Stock Split remained at $0.0001 per share.

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. As of September 30, 2025 and December 31, 2024, there were 200 and 0 shares of preferred stock issued and outstanding, respectively.

Common stock: The Company is authorized to issue 150,000,000 shares of common stock with a par value of $0.0001 per shares, of which 11,096,264 and 4,930,531 shares were issued and outstanding as of September 30, 2025 and December 31, 2024, respectively. The following shares of common stock are reserved for future issuance:

Stock options issued and outstanding			4,823
Stock purchase warrants			6,497,072
			6,501,895

Dividend rights: the 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.

Voting rights: the common stock possesses all voting power of the Company. Each share of common stock is entitled to one vote.

Liquidation: 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.

Common Stock Issuances:

On December 18, 2024, the Company entered into a securities purchase agreement for a private placement (the “Private Placement”) pursuant to which an investor purchased from the Company 1,666,666 units for an aggregate purchase price of $9,999,996 or a per unit price of $6.00 with each unit consisting of (i) one share of the Company’s common stock and (ii) a stock purchase warrant to purchase up to one and one half shares of the Company’s common stock (the “Private Placement Warrant”). The investor may elect to acquire one pre-funded common stock purchase warrant in lieu of one share (the “Pre-Funded Warrant”). The Units were priced in excess of the average Nasdaq Official Closing Price of the Company’s common stock for the five trading days immediately preceding the signing of the Private Placement. The Private Placement closed on December 20, 2024. Issuance costs totaled $865,143 and were recorded as a reduction to additional paid-in capital. On December 19, 2024, 230,000 shares of common stock were issued in connection with the Private Placement.

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.

In February 2025, the investor sold 83,333 and 125,000 units of the Pre-funded Warrant and Private Placement Warrant, respectively, to a third party. In February 2025, the third party submitted a cashless exercise of their 83,333 units in relation to the Pre-Funded Warrant, which resulted in an issuance of 83,332 shares of common stock. During the three months ended September 30, 2025, the remaining 1,353,333 Pre-funded Warrant units and the 2,499,999 Private Placement Warrant units were exercised on a cashless basis, resulting in the issuance of 4,899,166 total shares of common stock.

In April 2025, the Company issued 12,500 shares of common stock in connection with a settlement agreement with a former consultant.

In May 2025, the Company issued 84,276 shares of common stock to a consultant in connection with a cashless exercise of an option.

In May and June 2025, the Company issued a total of 260,300 shares of common stock to a lender in connection with the full conversion of the December 2024 Note (see Note 8).

In July 2025, the Company issued 1,434 shares of common stock to a former officer and director of the Company in connection with a cashless exercise of an option.

In August 2025, the Company issued 123,860 and 243,155 shares of common stock in connection with the cashless exercise of the August 2024 Warrant and the conversion of the August 2024 Note, respectively (see Note 8).

In September 2025, the Company issued 310,000 shares of common stock in connection with a new joint venture agreement.

During the nine months ending September 30, 2024, the Company issued a total of 361,531 shares of common stock to settle obligations to vendors.

Warrants:

Public Warrants: On June 26, 2020, Brilliant completed an initial public offering that included warrants for shares of common stock (the “Public Warrants’). Each Public Warrant entitles the holder the right to purchase one share of common stock at an exercise price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. The Company may elect to redeem the Public Warrants, in whole and not in part, at a price of $0.01 per Public Warrant if (i) 30 days’ prior written notice of redemption is provided to the holders, and (ii) the last reported sale price of the Company’s common stock equals or exceeds $16.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders have a period of 30 days to exercise for cash, or on a cashless basis. On the Closing Date, there were 805,000 Public Warrants issued and outstanding.

Private Warrants: Simultaneous with Brilliant’s initial public offering in June 2020, Brilliant sold warrants to its sponsor and certain of its directors and advisors in a private placement (the “Private Warrants”). The Private Warrants may not be redeemed by the Company so long as the Private Warrants are held by the initial purchasers, or such purchasers’ permitted transferees. The Private Warrants have terms and provisions identical to the Public Warrants, including as to exercise price, exercisability and exercise period, except if the Private Warrants are held by someone other than the initial purchasers’ permitted transferees, then the Private Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. On the Closing Date, there were 32,625 Private Warrants issued and outstanding.

As a result of the Business Combination which was completed on December 22, 2023, Public Warrants and Private Warrants totaling 837,625 were converted into 837,625 warrants of the Company.

Stock Purchase Warrants: In connection with certain note payable agreements (see Note 7) certain convertible notes payable (see Note 8), and private placement transactions (see Note 9) the Company issued stock purchase warrants to certain lenders and investors that permit the lender or investor to acquire a fixed amount of shares of the Company’s common stock at a per share price that ranges between $.0001 and $6.88 for a term that ranges between three and five years that may be exercised on a cash or cashless basis.

Certain warrants were determined to be equity-classified at issuance, and as such, were recorded to additional-paid-in capital at the time of issuance. Certain warrants were determined to be liability-classified at issuance, and as such, were recorded at fair value as a liability on the accompanying consolidated balance sheets and re-measured to fair value each reporting period with the change in fair value recorded as a component of other income (expense) on the accompanying consolidated statements of operations and comprehensive loss. Certain warrants were modified during the three months ended December 31, 2024 at which time the warrant’s classification was re-assessed and the classification changed from equity to liability.

The following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at September 30, 2025:

	Warrants Outstanding
	Range of Exercise Price		Number Outstanding at September 30, 2025		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
Public and Private Warrants	$	92.00		837,625		0.42	$	11.86
April 2024 Warrants		6.88		14,535		0.00		0.02
June 2024 Warrants		2.00		150,000		0.09		0.05
November 2024 Warrant		2.41		351,424		0.22		0.13
August 2025 Pre-funded Warrants		0.0001		1,702,088		1.27		0.00
August 2025 Warrant		4.40		250,000		0.19		0.17
September 2025 Private Placement Warrant		5.405		3,191,400		2.42		2.65
	$	0.0001 – 92.00		6,497,072		4.62	$	14.88

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

	Warrants Outstanding
	Range of Exercise Price		Number Outstanding at December 31, 2024		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
Public and Private Warrants	$	92.00		837,625		0.61	$	14.10
April 2024 Warrants		6.88		14,535		0.01		0.02
June 2024 Warrants		2.00		150,000		0.12		0.05
August 2024 Warrants		2.00		175,000		0.15		0.06
November 2024 Warrant		2.41		351,424		0.31		0.15
Pre-funded Warrants		0.0001		1,436,666		1.30		0.00
Private Placement Warrant		6.00		2,499,999		2.27		2.74
	$	0.0001 – 92.00		5,465,249		4.77	$	17.12

Warrant activities for the nine months ended September 30, 2025 were as follows:

	Number of Options			Weighted Average Exercise Price
Outstanding at December 31, 2024		5,465,249			17.12
Granted		5,143,488			3.57
Exercised		(4,111,665	)		3.73
Outstanding at September 30, 2025		6,497,072		$	14.88

NOTE 10 – 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 84,276 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. The 2025 Plan will be administered by the Board of Directors and has 3,950,000 shares of the Company’s common stock reserved for issuance. The 2025 Plan is subject to shareholder approval at a meeting scheduled to occur during the fourth quarter of calendar year 2025.

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 nine months ended September 30, 2025 is summarized as follows:

	Number of Options			Weighted Average Exercise Price
Outstanding at December 31, 2024		104,823		$	27.61
Exercised		(100,000	)		-
Outstanding at September 30, 2025		4,823			550.60
Options exercisable at September 30, 2025		4,823		$	550.60
Options expected to vest		—		$	—

Share-based compensation expense for three and nine months ended September 30, 2025 was $0 and $177,905, respectively. Share-based compensation expense for the three and nine months ended September 30, 2024 was $5,602 and $154,937, respectively, which was recorded as professional fees on the accompanying consolidated statements of operations and comprehensive loss. There was no unrecognized share-based compensation at September 30, 2025.

NOTE 11 – FAIR VALUE MEASUREMENT

Customer digital currency assets and liabilities represent the Company’s obligation to safeguard customer digital currencies. Accordingly, the Company has valued the assets and liabilities using quoted market prices for the underlying digital currencies which is based on Level 2 inputs.

The Black-Scholes option pricing model is used to estimate fair value of liability-classified stock purchase warrants issued in connection with convertible notes (see Note 8) and the liability-classified pre-funded stock purchase warrants issued in connection with the December 2024 Private Placement (see Note 9). A Monte Carlo simulation model is used to estimate the fair value of liability-classified stock purchase warrants issued in connection with the December 2024 Private Placement and the September 2025 Private Placement (see Note 9). Both models utilize the following assumptions:

● Risk-free interest rates are derived from the yield on U.S. Treasury debt securities in effect on the date of measurement.

● Dividend yields are based on our historical dividend payments, which have been zero to date.

● Volatility is estimated from historical volatility of a peer group over a similar period.

● The expected term is based on the time to expiration of the warrants from the date of measurement.

The Monte Carlo simulation model also incorporates management’s judgments for the occurrence or non-occurrence of certain events as well as the probability of certain scenarios impactful to the valuation of the liability-classified stock purchase warrants issued in connection with the December 2024 Private Placement and the September 2025 Private Placement.

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

June 2024 Warrants	September 30, 2025			November 2024 Modification
Expected term (years)		3.7 years			4.6 years
Risk-free interest rate		3.74	%		4.4	%
Expected volatility		110.0	%		113.8	%
Expected dividend yield		0.0	%		0.0	%

November 2024 Warrants	September 30, 2025			November 2024 Issuance
Expected term (years)		4.1 years			5.0 years
Risk-free interest rate		3.74	%		4.2	%
Expected volatility		110.0	%		113.8	%
Expected dividend yield		0.0	%		0.0	%

The assumptions used for the Monte Carlo simulation model for liability-classified stock purchase warrants are as follows:

August 2025 Warrants	September 30, 2025			August 2025 Issuance
Expected term (years)		4.9 years			5.0 years
Risk-free interest rate		3.73	%		3.65	%
Expected volatility		108.3	%		110.1	%
Expected dividend yield		0.0	%		0.0	%
Probability of a fundamental event		10.0	%		10.0	%

September 2025 Private Placement Warrants	September 30, 2025			September 2025 Issuance
Expected term (years)		4.9 years			5.0 years
Risk-free interest rate		3.74	%		3.65	%
Expected volatility		158.4	%		156.9	%
Expected dividend yield		0.0	%		0.0	%
Probability of a fundamental event		10.0	%		10.0	%

The following table sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities measured and recorded at fair value on a recurring basis as of September 30, 2025:

	Quoted Price in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs		Balance at September 30,
	(Level 1)		(Level 2)		(Level 3)		2025
Liabilities
June 2024 Warrant		—		—		914,583		914,583
November 2024 Warrant		—		—		2,133,949		2,133,949
August 2025 Warrant		—		—		2,210,729		2,210,729
Private Placement Warrants		—		—		35,480,932		35,480,932
Embedded derivative liability		—		—		-		-
Total liabilities	$	—	$	—	$	40,740,193	$	40,740,193

The Company did not make any transfers into or out of Level 3 of the fair value hierarchy during the nine months ended September 30, 2025.

The following table provides a reconciliation of the warrants measured at fair value using Level 3 inputs:

	Embedded Derivative			June 2024			November 2024			Pre-funded			Common Stock			August 2025		September 2025
	Liability			Warrant			Warrant			Warrant			Warrant			Warrant		Warrant
Balance at January 1, 2025	$	847,753		$	5,333,794		$	12,467,515		$	52,682,426		$	94,286,790		$	-	$	-
Additions		-			-			-			-			-			1,672,686		29,605,956
Subtractions		(259,963	)		-			-			(12,421,864	)		(19,517,415	)		-		-
Change in fair value		(587,790	)		(4,419,211	)		(10,333,566	)		(40,260,562	)		(74,769,375	)		538,043		5,874,976
Ending balance, September 30, 2025	$	-		$	914,583		$	2,133,949		$	-		$	-		$	2,210,729	$	35,480,932

NOTE 12 – RELATED PARTY TRANSACTIONS

Note receivable – related party: In December 2024, the Company advanced $1,000,000 to Star pursuant to the terms of the Star Agreement (see Note 1). During the nine months ended September 30, 2025, the Company advanced an additional $3,500,000 to Star pursuant to the first and second amendments of the Star Agreement, bringing the total amount of the advance made to Star to $4,500,000 as of September 30, 2025.

Due from affiliates: Amounts due from affiliates totaled $243,915 and $0 as of September 30, 2025 and December 31, 2024, respectively. Amounts due from these affiliates are short-term in nature, non-interest bearing, unsecured and repayable on demand.

Due to affiliates: Amounts owed to affiliates totaled $233,068 and $42,471 as of September 30, 2025 and December 31, 2024, respectively. Amounts due to these affiliates are short-term in nature, non-interest bearing, unsecured and repayable on demand.

Loans payable – related parties: The Company has entered into several promissory notes, and made repayments thereon, with shareholders and affiliates (see Note 6).

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Indemnifications: The Company has indemnity agreements with certain officers and directors of the Company pursuant to which the Company must indemnify the officer or director against all expenses, judgments, fines, and amounts paid in settlement reasonably incurred in connection with a third party proceeding, if the indemnitee acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Company, and in the case of a criminal proceeding, had no reasonable cause to believe the indemnitee’s conduct was unlawful. It is not possible to determine the maximum potential exposure under these indemnification agreements: (i) because the facts and circumstances involved in each claim are unique and the Company cannot predict the number or nature of claims that may be made; (ii) due to the unique facts and circumstances involved in each particular agreement; and (iii) due to the requirement for a registration of the Company’s securities before any of the indemnification obligations contemplated in the IRA become effective.

Legal and regulatory proceedings: The Company is subject to various litigation, regulatory investigations, and other legal proceedings that arise in the ordinary course of its business. The Company is also subject to regulatory oversight by numerous regulatory and other governmental agencies. The Company reviews its lawsuits, regulatory investigations, and other legal proceedings on an ongoing basis and provides disclosure and records loss contingencies in accordance with the loss contingencies accounting guidance. In accordance with such guidance, the Company establishes accruals for such matters when potential losses become probable and can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the possible loss in the consolidated financial statements.

White lion stock purchase agreement: On May 17, 2022, the Company entered into a Stock Purchase Agreement (the “White Lion Agreement”) with White Lion Capital Partners, LLC a California-based investment fund (“White Lion”). Under the terms of the White Lion Agreement, the Company had the right, but not the obligation, to require White Lion to purchase shares of its common stock up to a maximum amount of $75,000,000. In January 2024, the Company issued 202,702 shares of the Company’s common stock with a fair value of $750,000 to settle its obligation owed under the White Lion Agreement (see Note 9). On February 21, 2024, the Company terminated the White Lion Agreement.

December 2024 Private Placement: On December 18, 2024, the Company entered into a securities purchase agreement for a private placement offering (the “Private Placement”) pursuant to which an investor purchased from the Company 1,666,666 units for an aggregate purchase price of $9,999,996 or a per unit price of $6.00 with each unit consisting of (i) one share of the Company’s common stock and (ii) a stock purchase warrant to purchase up to one share of the Company’s common stock. 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 the nine months ended September 30, 2025, the Company made cash payments to the investor totaling $800,000 to satisfy these penalties. On September 15, 2025, the Company requested a withdrawal of the registration statement.

Securities Purchase Agreement: 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 (the “Star Agreement”) with Star 26 Capital Inc. (“Star”), the shareholders of Star (“Star Equity Holders”) and an officer of the Company acting in his capacity as the representative of the Star Equity Holders, to acquire a controlling 51% interest in Star, an Israeli corporation engaged as a supplier of generators for “iron dome” launchers and other defense products. On September 15, 2025, the Company entered into an Amended and Restated Securities Purchase Agreement and Call Option (“Amended Star Agreement”), which amended and restated in its entirety the Star Agreement. Pursuant to the Amended Star Agreement, the Company shall acquire 100% controlling interest in Star in exchange for:

● A minimum amount of $5,000,000 in cash

● a promissory note in the principal amount of $16,000,000, less (i) the amounts outstanding under Seller Notes, which shall be forgiven and cancelled as of the closing of the transaction, and (ii) any portion of the cash payment to the Sellers in excess of $5,000,000 (the “Investment Note”). The Investment Note matures 12 months following the closing.

● 4,770,340 shares of the Company’s common stock issued to the Star Equity Holders

● 12,017,648 stock purchase warrants with a five year term and an exercise price of $1.50 per share

● $3,000,000 in cash,

● a promissory note in the principal amount of $3,000,000, which accrues interest at 8.0% per annum and is due and payable six months after the issuance thereof,

If, for a period of 12 months after the closing of the Star Agreement, the Company’s shares of common stock are delisted from Nasdaq, Star shall have the right, at its own discretion, to require the Company to exchange the Investment Note for all the shares of Star then held by the Company, provided, however, the Option shall be automatically cancelled and Star shall retain any cash payments made by the Company to Star and the Company shall retain an equity interest in Star equivalent to all cash payments. The closing of the Transaction is subject to customary closing conditions, including regulatory approvals, third-party consents, fairness opinion, and approval by the Company’s shareholders as required under applicable Nasdaq listing rules.

If the Star Agreement is canceled because stockholder approval was not obtained within 90-days after the date of the Star Agreement and the failure was a result of the Company failing to perform or observe the covenants or agreements of the Company provided for in the terms of the Star Agreement, the Seller is entitled to damages of $3,000,000 from the Company.

As a result of the Settlement Agreement and subject to the closing of the acquisition of Star, the Company’s business will be focused on the defense sector.

September 2025 Private Placement: On September 4, 2025, Nukkleus Inc. (the “Company”) entered into a Securities Purchase Agreement with certain accredited investors (the “Securities Purchase Agreement”) for a private placement (the “2025 Private Placement”) pursuant to which the investors (the “Purchasers”) agreed to purchase from the Company 200 units for an aggregate purchase price of $10,000,000 or a per unit price of $50,000, with each unit consisting of (i) one restricted share (each a “Share” and collectively, the “Shares”) of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), and (ii) restricted common stock purchase warrants to initially purchase up to 15,957 shares of common stock, par value $0.0001 per share (the “Common Stock”), of the Company, subject to adjustment and exchange 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 Shares of Series A Preferred Stock will be issued at closing of the 2025 Private Placement pursuant to the Certificate to be filed with the Secretary of State of the State of Delaware prior to closing of the 2025 Private Placement. Each Share of Series A Preferred Stock has a stated value of $50,000 (the “Stated Value”) and will initially be convertible into 10,224 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 $4.89 per Share (the “Initial Conversion Price”).

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 is required to seek stockholder approval (the “Stockholder Approval”) related to certain provisions contained in the Certificate. In furtherance thereof, the Company is required 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’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 four (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 has 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.

Equity Line of Credit: On September 19, 2025, Nukkleus Inc., a Delaware company (the “Company”) and Esousa Group Holdings, LLC, a New York limited liability company (the “Investor”), entered into a common stock purchase agreement (the “ELOC Purchase Agreement”), which provides that subject to the terms and conditions set forth therein, the Company may sell to the Investor up to the lesser of (i) $250,000,000 of the Company’s common shares, par value $0.0001 per share (the “Common Shares”) and (ii) the Exchange Cap (as defined below) (subject to certain exceptions provided in the ELOC Purchase Agreement) (the “Total Commitment”), from time to time during the term of the ELOC Purchase Agreement. Upon entering into the ELOC Purchase Agreement, the Company agreed to issue to the Investor $1,250,000 worth of the Company’s Common Stock (the “Commitment Shares”), determined by the lower of the (i) the VWAP on the effective date of the registration statement covering the Common Shares and the Commitment Shares and (ii) the closing sale price on the effective date of said registration statement; provided, however, that if the Company elects to terminate the ELOC Purchase Agreement, the Commitment Shares’ calculation shall be based on the date of termination rather than the effective date of the registration statement.

NOTE 14– SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

On October 9, 2025, the Company issued an aggregate of 377,432 restricted shares of common stock to an affiliated entity upon the full cashless exercise of the 150,000 June 2024 Warrant units and the 351,424 November 2024 Warrant units.

On October 9, 2025, the Company issued an aggregate of 1,702,070 restricted shares of common stock in connection with the full cashless exercise of the August 2025 Pre-funded Warrants.

On October 9, 2025, the Company issued 375,000 shares to Synthetic Darwin LLC upon the Company’s exercise of the second tranche of 50 million Darwin tokens.

On October 17, 2025, the Company issued a press release regarding the proposed initial public offering of units of SC II Acquisition Corp. I (“SCII”), a newly formed special purpose acquisition company and indirect subsidiary of the Company.

On November 6, 2025, the Company held its 2025 annual meeting of stockholders. At the meeting, the Company’s stockholders approved all proposals presented, including:

1. The re-election of five directors to serve until the next annual meeting or until their successors are duly elected and qualified,

2. The ratification of the appointment of Somekh Chaikin, a member firm of KPMG International as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2025, and

3. The approval of the Company’s 2025 Equity Incentive Plan

The results of the annual meeting were reported on Form 8-K filed with the SEC on November 10, 2025.

On November 13, 2025, the Company issued an aggregate of 3,095,000 shares of common stock pursuant to the 2025 Equity Incentive Plan. The issuance to employees and consultants of the Company was made pursuant to Rule 701 adopted pursuant to Section 3(b) of the Securities Act of 1933, as amended. Included in such issuance was 750,000 shares issued to Menachem Shalom, our CEO and director, 10,000 shares to Reuven Yeganeh, a director, and 5,000 shares to each of David Rokach, Aviya Volodarsky, and Tomer Nagar, directors of the Company.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report on Form 10-Q includes forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are statements in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the transition period from September 30, 2024 to December 31, 2024, as filed with the Securities and Exchange Commission (the “SEC”) on May 8, 2025, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation:

● the availability and adequacy of capital to support and grow our business; ● economic, competitive, business and other conditions in our local and regional markets; ● actions taken or not taken by others, including competitors, as well as legislative, regulatory, judicial and other governmental authorities; ● competition in our industry; ● the availability of additional capital to support development; ● the retention and availability of key personnel; ● our ability to successfully implement our business plan; and ● other factors discussed elsewhere in this quarterly report.

We undertake no obligation to update or revise forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report, except as required by law.

As used in this Quarterly Report and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our,” refer to Nukkleus Inc. and its consolidated subsidiaries.

The following discussion and analysis summarizes the significant factors affecting our financial condition, operating results, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Overview

Currently, Nukkleus Inc., through its US-based subsidiary, is engaged in the distribution of drones’ payloads in the defense and homeland security markets within the US. In addition, through its Israeli subsidiary, we are engaged in providing services to support civil and defense aviation needs, including maintenance and repair (MRO) services, aircraft modernization, resale, and leasing, which includes the deployment of the de-icing technology for commercial aircrafts.

Previously we were a financial technology company that was focused on providing software, technology solutions, customer sales and marketing, and risk management technology hardware and software solutions packages for the worldwide retail foreign exchange (“FX”) trading industry and payment services from one fiat currency to another or to digital assets.

On September 15, 2025, Nukkleus Inc. (the “Company”) entered into an Amended and Restated Securities Purchase Agreement and Call Option (the “Star Agreement”) which amended and restated in its entirety the Securities Purchase Agreement and Call Option dated December 15, 2024 (“Purchase Agreement”) between the Company, Star 26 Capital Inc., a Nevada corporation (“Star”), the shareholders of Star (the “Star Equity Holders”) and Menachem Shalom, the representative of such shareholders, as amended by Amendment No. 1, dated as of February 11, 2025, Amendment No. 2 dated May 13, 2025, Amendment No. 3, dated as of June 15, 2025 and Amendment No. 4 dated June 21, 2025. Pursuant to the Star Agreement, the Company is to acquire a controlling 100% interest in Star, a defense acquisition company (the “Transaction”). Star currently holds (1) 100% of B. Rimon Agencies Ltd. (“Rimon”), an Israeli corporation engaged as distributor of military-grade generators, masts and lighting systems and that is, among other clients, a supplier of generators for “Iron Dome” launchers, (2) 67% of Water.IO Ltd., an Israeli corporation engaged in smart hydration technology, and (3) a convertible loan issued by I.T.S. Industrial Techno-logic Solutions Ltd., an Israeli corporation which designs, develops and manufactures fully integrated electro-mechanical machines, assembly lines and custom motion systems. Pursuant to the Star Agreement, at closing the Company will acquire 100% of the issued and outstanding capital of Star in consideration of (i) $21,000,000, to be paid by a 12-month $16,000,000 promissory note and the balance in $5,000,000 cash, less any amounts lent to Star from the Company since the Purchase Agreement signed among the parties, (ii) 4,770,340 shares of common stock of the Company, (iii) a five-year warrant to purchase an aggregate of 12,017,648 shares of the Company’s common stock for an exercise price of $1.50 per share, (iv) $3,000,000 in cash and (v) a 6-month promissory note in the principal amount of $3,000,000, which shall accrue interest at the rate of 8%.The shares, warrants, cash and the 6-month note will be assigned by Star to the Star Equity Holders pro ratably.

If, for a period of 12 months after the closing, the Company’s shares of common stock are delisted from Nasdaq, Star shall have the right, at its own discretion, to require the Company to exchange the Investment Note for all the shares of Star then held by the Company, provided, however, Star shall retain any cash payments made by the Company to Star and the Company shall retain an equity interest in Star equivalent to all cash payments.

Subject to the closing of the acquisition of Star, our business will be focused on the defense sector.

Recent Developments

Darwin Labs Warrants

On July 30, 2025 the Company entered into a warrant agreement with Synthetic Darwin LLC (“Darwin”), enabling the Company to acquire up to 200 million Darwin tokens, a new class of self-evolving AI network tokens developed by Darwin. Darwin is a self-training and evolving AI that can be used to test and simulate multiple scenarios in finance, healthcare and defense. This software aims to allow companies to run scenarios and find the best configuration for financial services, drugs, defense-related software and more. The Company has identified the potential in such AI software and decided to enter into this warrant agreement for Darwin tokens, which will allow the Company and the Company’s future subsidiaries to use this platform. The Company currently owns 100 million Darwin tokens.

Blade Ranger Distribution Agreement

On August 20, 2025, the Company obtained exclusive distribution rights for BladeRanger Ltd.’s drone payload systems within the U.S. defense and homeland security markets. BladeRanger, founded in 1968 and reporting 237% revenue growth in 2024, develops advanced hardware and software drone payloads with patent-pending autonomous drone navigation technology. The agreement requires minimum purchase commitments of 5 payloads in Year 1, 10 in Year 2, and 15 in Year 3, with automatic five-year extension upon meeting commitments. As of the date of this report, the Company has not purchased any payloads.

Mandragola Joint Venture

On August 28, 2025, the Company, Nukk Picolo and Mandragola Ltd., an Israeli company (“Mandragola”) entered into a Joint Venture Agreement (the “JV Agreement”). Pursuant to the terms of the JV Agreement, the parties will establish a joint venture company in Israel (the “JV Company”) which is intended to establish advanced manufacturing zones in both the Baltics and Israel, designed to support civil and defense aviation needs. Plans also include the development of a NATO-compliant logistics hub in Riga in cooperation with additional regional partners, as well as facilities dedicated to licensed MRO services, aircraft modernization, resale, and leasing, including the deployment of the de-icing technology for commercial aircrafts which Nukkleus recently licensed (on an exclusive basis) from Blade Ranger Ltd. Pursuant to the JV Agreement, Nukk Picolo will hold 51% equity interest in the JV Company. The JV Agreement provides that, under certain specified conditions, Nukkleus can require Mandragola sell to Nukkleus its participating interest in the JV Company in consideration for the issuance of Nukkleus’ common stock based on the then specified valuation of JV Company as set forth in the JV Agreement. Under the JV Agreement, Mandragola has undertaken to provide to the JV Company a 24 month committed credit line of up to $1.5 million on an as needed basis. Nukk Picolo has the right to designate three of the five member board of the JV Company with Mandragola designating the remaining two directors. Under the JV Agreement, Nukkleus will issue to Mandragola 310,000 restricted shares of Nukkleus common stock. In addition, Nukkleus will issue to Mandragola (i) five year warrants to purchase 250,000 shares of Nukkleus’ common stock at a per share exercise price of $4.00 (the “Warrants”) and (ii) five year warrants for an additional 350,000 shares at a per share exercise price of $6.50 (the “Performance Warrants”). The Performance Warrants only vest upon the JV Company achieving $25 million cumulative revenue. If the revenues targets are not achieved by the JV Company within the five-year period, the Performance Warrants expire.

Tiltan Acquisition

On September 1, 2025, the Company and Nukk Picolo Ltd., a wholly-owned Israeli subsidiary of the Company (“Nukk Picolo”) entered into a Stock Purchase Agreement (the “Agreement”) with Tiltan Software Engineering Ltd. (“Tiltan”), an Israeli corporation specializing in AI software solutions for the defense and aerospace industry, and Arie Shafir, the sole shareholder of Tiltan (the “Shareholder”). Tiltan is an Israeli company established in 2015 that specializes in AI solutions used for Geographic Information Systems (GIS), mapping, modeling, and simulation technologies for defense and commercial applications. Pursuant to the Agreement, Nukk Picolo will acquire 100% of the issued and outstanding share capital of Tiltan for a total purchase price of NIS 47,600,000 (approximately $14 million at current exchange rates) (the “Purchase Price”). The Purchase Price will be paid through a combination of cash and equity consideration as follows:

Cash Component: NIS 35,700,000 (approximately $10.5 million), representing 75% of the Purchase Price, will be paid in six equal installments of NIS 5,950,000 (approximately $1.75 million) each. The first installment is payable at closing, with subsequent payments due every 36 days thereafter over a 180-day period. In connection with the cash component, upon execution and delivery of the Agreement the Company issued a secured promissory note (the “Note”) to the Shareholder in the principal amount of NIS 29,750,000 (approximately $8.75 million), representing five-sixths of the cash component. The Note is non-interest bearing unless an event of default occurs, in which case interest accrues at 10% per annum. The Note is payable in five equal installments of NIS 5,950,000 each, payable over the 180-day payment period. The Company may prepay the Note at any time without penalty. Additionally, NIS 666,667 from each of the first three cash payments (totaling NIS 2,000,000) will be retained by Tiltan as working capital rather than distributed to the Shareholder. The Note is secured by a first-priority lien on the Tiltan shares to be transferred to the Company.

Equity Component: At closing, the Company will deposit into escrow shares of Nukkleus common stock to secure the payment due on the 180th day after closing (the “Settlement Date”). On the Settlement Date, the Shareholder will receive from escrow the number of shares equal to 25% of the Purchase Price, with the number of shares to be based on the market price on the Settlement Date. If the value of the shares in escrow are more than 25% of the Purchase Price, the Shareholder shall receive only that number of shares to which he is entitled to and the excess shares shall be returned to the Company. If the value of the escrowed shares are less than 25% of the Purchase Price, or NIS 11,900,000 (approximately $3.5 million), the Company will issue additional shares to the Shareholder or pay the differential in cash.

The transaction is subject to customary closing conditions, including, the receipt of regulatory approvals, including the Israel Ministry of Defense and the delivery of PCAOB-compliant audited financial statements of Tiltan for fiscal years 2023 and 2024 and quarterly statements. The Company has provided information requested by the Israel Ministry of Defense and hopes to close the transaction before the end of 2025.

In connection with the transaction, the parties have agreed to establish an employee retention and incentive program consisting of (i) NIS 500,000 to be allocated by the Shareholder from the Purchase Price, (ii) NIS 1,000,000 in cash to be contributed by Nukkleus, and (iii) NIS 1,000,000 in Nukkleus stock options to be granted to Tiltan employees. Tiltan’s CEO will determine individual allocations under this program.

Components of Results of Operations

Operating expenses consist of professional fees, compensation and related benefits, and other general and administrative expenses.

Professional fees consists of professional services, such as audit fees, legal service fees, advisory fees, and consulting fees.

Compensation and related benefits consists of personnel related expenses incurred in operating our business, including cash compensation and our benefit programs.

Other general and administrative consists of personnel-related expenses incurred to support our business, including executive, customer support, compliance, finance, human resources, legal, and other support operations, and include rent, filing fee, platform fee, travel and entertainment, miscellaneous taxes, and other miscellaneous items.

Impairment loss consists of impairment losses recognized on long-lived assets where there was a triggering event that indicated a long-lived assets carrying amount may not be recoverable. The impairment loss represents the amount the carrying value exceeds the fair value. Because these components fluctuate with market conditions, impairment loss can vary widely between periods.

Other (expense) income, net consists of interest expense, gain (loss) on extinguishment of liabilities, day one loss on issuance of liability-classified stock purchase warrants and embedded derivatives within convertible notes, change in fair value of liability-classified stock purchase warrants and derivative assets and liabilities, and gain on deconsolidation.

Because these components fluctuate with market conditions, other (expense) income, net can vary widely between periods.

Results of Operations

	Three Months Ending September 30,						Changes in
	2025			2024			Amount			Percentage
Operating expenses:
Professional fees	$	4,359,640		$	552,845		$	3,806,795			688.6	%
Compensation and benefits		230,988			53,333			177,655			333.1	%
Other general and administrative		180,947			191,291			(10,344	)		(5.4	)%
Impairment loss		-			391,217			(391,217	)		(100.0	)%
Total operating expenses		4,771,575			1,188,686			3,582,889			301.4	%
Other (expense) income, net
Interest expense		(36,346	)		(303,626	)		267,280			(88.0	)%
Interest expense – related parties		(13,545	)		(15,521	)		1,976			(12.7	)%
Loss on settlement of vendor obligations		-			(112,436	)		112,436			(100.0	)%
Gain on settlement of vendor obligations			-		211,200			(211,200	)		(100.0	)%
Gain on settlement of due to affiliates			-		192,069			(192,069	)		(100.0	)%
Loss on debt extinguishment		(7,484,152	)		-			(7,484,152	)		100.0	%
Change in fair value – stock purchase warrant liabilities		13,963,884			—			13,963,884			100.0	%
Change in fair value – digital assets		(967,818	)		-			(967,818	)		100.0	%
Gain on deconsolidation		2,491,485			-			2,491,485			100.0	%
Day one loss on private placement		(19,605,956	)		-			(19,605,956	)		100.0	%
Other income (expense)		118,795			14			118,781			848,436	%
Total other (expense) income, net		(11,533,653	)		(28,300	)		(11,505,353	)		40,655.0	%
Net income (loss) from continuing operations		(16,305,228	)	$	(1,216,986	)		(15,088,242	)		1,239.8	%
Net income (loss) from discontinued operations		(60,264	)		5,672,219			(5,732,483	)		(101.1	)%
Net income (loss)	$	(16,365,492	)	$	4,455,233		$	(20,820,725	)		(467.3	)%

	Nine Months Ending September 30,						Changes in
	2025			2024			Amount			Percentage
Operating expenses:
Professional fees	$	6,051,719		$	3,266,539		$	2,785,180			85.3	%
Compensation and benefits		365,988			108,333			257,655			237.8	%
Other general and administrative		909,275			537,146			372,129			69.3	%
Impairment loss		-			391,217			(391,217	)		(100.0	)%
Total operating expenses		7,326,982			4,303,235			3,023,747			70.3	%
Other (expense) income, net
Interest expense		(407,971	)		(343,333	)		(64,638	)		18.8	%
Interest expense – related parties		(64,306	)		(38,249	)		(26,057	)		68.1	%
Loss on settlement of vendor obligations		-			(288,835	)		288,835			(100.0	)%
Gain on settlement of vendor obligations		-			211,200			(211,200	)		(100.0	)%
Gain on settlement of due to affiliates		-			192,069			(192,069	)		(100.0	)%
Loss on debt extinguishment		(7,484,152	)		-			(7,484,152	)		100.0	%
Penalty – late registration		(800,000	)		-			(800,000	)		100.0	%
Change in fair value – convertible note embedded derivative		587,790			—			587,790			100.0	%
Change in fair value – stock purchase warrant liabilities		123,369,695			—			123,369,695			100.0	%
Change in fair value – digital assets		(967,818	)		-			(967,818	)		100.0	%
Gain on deconsolidation		2,491,485			-			2,491,485			100.0	%
Day one loss on private placement		(19,605,956	)		-			(19,605,956	)		100.0	%
Other income (expense)		280,422			-			280,422			100.0	%
Total other (expense) income, net		97,399,189			(267,148	)		97,666,337			(36,558.9	)%
Net income (loss) from continuing operations		90,072,207		$	(4,570,383	)		94,642,590			(2,070.8	)%
Net income (loss) from discontinued operations		(460,971	)		4,979,958			(5,440,929	)		(109.3	)%
Net income (loss)	$	89,611,236		$	409,575		$	89,201,661			21,779.1	%

Comparison For the Three and Nine Months Ended September 30, 2025 Versus the Three and Nine Months Ended September 30, 2024

Revenue

We had no revenue from continuing operations during the three and nine months ended September 30, 2025 and 2024, due to the discontinuation of subsidiary DRFQ’s operations and the subsequent sale and deconsolidation of DRFQ in July 2025. We expect to report revenue upon the closing of the Star and Tiltan acquisitions, which we expect to be complete by and near the end of the fourth quarter of this year. At this time, the Company does not expect to generate revenue from other sources prior to the closing of these acquisitions.

Operating Expenses

Professional fees

For the three months ended September 30, 2025, professional fees increased by approximately $3,807,000, or 688.6%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, professional fees increased by approximately $2,785,000, or 85.3%. This increase was primarily attributable to increases in consulting fees of approximately $3,758,000, and audit fees of approximately $196,000, offset by decreases in advisory fees of approximately $1,055,000 and legal fees of approximately $114,000. This net increase in professional fees is mainly attributable to the consulting fees expense recognized from the fair value of the shares of common stock and the August 2025 Warrant both issued to Mandragola in connection with the new joint venture agreement entered into in August 2025. We expect that our professional fees will decrease in the near future as this report is reflecting inflated costs due to the aforementioned issuance of shares and warrants. Also, subsequent to the closing of the Star acquisition, we expect professional fees to decrease as we anticipate the frequency of one-time costs of professional fees to decrease.

Compensation and related benefits

For the three months ended September 30, 2025, our compensation and related benefits increased by approximately $178,000, or 333.1%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, our compensation and related benefits increased by approximately $258,000, or 237.8%, as compared to the nine months ended September 30, 2024. We expect that our compensation and related benefits will increase in the near future if the pending acquisition of Star completes during fiscal year 2025, as the Company expects to employ several individuals immediately following the closing of the acquisition. Our compensation and related benefits have been significantly lower than our professional fees due to the engagement of several professionals working for the Company on a consulting basis.

Other general and administrative expenses

For the three months ended September 30, 2025, total other general and administrative expenses decreased by approximately $10,000, or 5.4%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, total other general and administrative expenses increased by approximately $372,000, or 69.3%, as compared to the nine months ended September 30, 2024. The increase was mainly attributable to additional costs associated with operating as a public company, including an increase in D&O insurance of approximately $138,000, marketing fees of approximately $113,000, rent expenses of approximately $101,000 attributable to new offices established in Israel and New York, entertainment and travel of approximately $121,000 attributable to the travel by our CEO and other business expenses of approximately $95,000, offset by a decrease in filing fees of approximately $198,000. We expect that other general and administrative expenses will continue to increase in the near future if the pending acquisition of Star completes during fiscal year 2025, as the Company expects to incur higher costs such as insurance, rent, advertising, and travel expenses.

Other Income (Expense)

For the three months ended September 30, 2025, other income (expense), net, decreased approximately $11,505,000, or 40,634.8%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, other income (expense), net, increased approximately $97,666,000, or 36,558.9%, as compared to the nine months ended September 30, 2024. The increase was attributable to, an increase in gain from change in fair value – stock purchase warrant liabilities of approximately $123,370,000 (see Note 11), a gain on deconsolidation of approximately $2,491,000 (see Note 4), a gain from change in fair value – convertible note embedded derivative of approximately $588,000, realized and unrealized gains of approximately $280,000, and a decrease in loss on debt settlement of approximately $289,000, offset by a decrease in gains on settlement of vendor obligations and due to affiliates of approximately $403,000, and increases in day one loss on private placement of approximately $19,606,000 (see Note 13), loss on debt extinguishment of approximately $7,484,000, a loss from change in fair value – digital assets of approximately $968,000, penalties – late registration, payable to the investor in connection with the December 2024 Private Placement, of $800,000, interest expense due to amortization of debt discounts of approximately $65,000, and interest expense on debt of approximately $26,000. The significant changes in fair value recognized on the Company’s stock purchase warrant liabilities are directly related to several warrants granted during fiscal year 2024. For the duration of the life of these warrants, the Company expects to continue to recognize significant gains or losses heavily driven by any changes in the Company’s stock price at each quarterly and annual report date.

Discontinued Operations

Net loss from discontinued operations was estimated to be $60,264 for the three months ended September 30, 2025 compared to net income of $5,672,219 for the three months ended September 30, 2024. Net loss from discontinued operations was estimated to be $460,971 for the nine months ended September 30, 2025 compared to net income of $4,979,958 for the nine months ended September 30, 2024. These decreases were due to a decrease in net loss from the operations of the Company’s wholly owned subsidiary DRFQ, which was the sole driver of the Company’s former financial services segment. The Company deconsolidated DRFQ as of July 29, 2025, and reported a net gain on deconsolidation of $2,491,485 during the three months ended September 30, 2025 (see Note 4).

Liquidity and Capital Resources

We generated a pre-tax net income from continuing operations of $90,072,207 for the nine months ended September 30, 2025 and incurred a pre-tax net loss from continuing operations of $4,570,383 for the nine months ended September 30, 2024, and have an accumulated deficit of $111,464,507 as of September 30, 2025 and $201,075,743 at December 31, 2024. As of September 30, 2025, we had a working capital deficit of $30,512,429, including $7,611,465 of cash and cash equivalents. The pre-tax net income from continuing operations of approximately $90,000,000 for the nine months ended September 30, 2025 is primarily due to the applicable accounting treatment used to recognize gains from changes in fair value of liability-classified warrants which does not impact our cash position. During the nine months ended September 30, 2025 the most significant use of the Company’s cash was for the purpose of advance cash payments to Star of $3,500,000 pursuant to the amended terms of the Star transaction. The Company intends to make an additional final advance payment of $500,000 subsequent to September 30, 2025.

We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. However, we expect to generate revenue beginning immediately after the closing of the Star acquisition, which we expect to be completed near the end of the fourth quarter of 2025. Since our inception, we have raised capital through private sales of common stock and debt securities. Most recently, we raised $10,000,000 in gross proceeds from a private placement entered into on September 4, 2025. Our future success is dependent upon our ability to achieve profitable operations and generate cash from operating activities. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support our operations.

To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and cash and other requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. Even if debt financing is available, the cost of additional financing may be significantly higher than our current debt.

The risks and uncertainties surrounding the Company’s ability to continue to raise capital and its limited capital resources raise substantial doubt as to the Company’s ability to continue as a going concern for twelve months from the issuance of these consolidated financial statements. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern.

Cash Flows

The following summarizes the key components of our cash flows for the nine months ended September 30, 2025 and 2024:

	Nine Months Ended September 30,
	2025			2024
Net cash used in operating activities	$	(5,199,446	)	$	(3,212,291	)
Net cash used in investing activities		(3,518,690	)		-
Net cash provided by (used in) financing activities		8,347,000			2,386,947
Effect of exchange rate on cash		124,960			(2,617	)
Net change in cash	$	(246,176	)	$	(827,961	)

Operating activities

Net cash flow used in operating activities for the nine months ended September 30, 2025 was approximately $5,199,000, which primarily reflected our consolidated net income of approximately $89,611,000, adjusted for changes in working capital accounts and certain non-cash income (expenses) of approximately $97,888,000 (including the change in fair value of our liability-classified stock purchase warrants and derivative liabilities of approximately $123,957,000, and gain on deconsolidation of approximately $2,491,000, offset by day one loss on private placement of approximately $19,606,000, loss on debt extinguishment of approximately $7,484,000, change in fair value of digital assets of approximately $968,000, amortization of debt discount of approximately $322,000, stock-based compensation of approximately $178,000, and depreciation expense of approximately $2,800).

Net cash flow used in operating activities for the nine months ended September 30, 2024 was $3,212,000, which primarily reflected our consolidated net income of approximately $407,000, adjusted for changes in working capital accounts and certain non-cash expense of approximately $748,000 (including loss on settlement of vendor obligations of approximately $289,000, stock-based compensation of approximately $155,000, and amortization of debt discount of approximately $316,000, offset by a gain on settlement of due to affiliates of approximately $192,000, and a gain on settlement of vendor obligations of approximately $211,000).

Investing activities

Net cash flow used in investing activities was approximately $3,519,000 for the nine months ended September 30, 2025, which consisted of additional advance payments to Star of $3,500,000 in connection with the planned acquisition of Star, and a purchase of computer equipment of approximately $19,000.

There were no cash flows provided by investing activities for the nine months ended September 30, 2024.

Financing activities

Net cash flow provided by in financing activities was approximately $8,347,000 for the nine months ended September 30, 2025, which consisted of net proceeds from issuance of private placement of approximately $9,225,000, offset by a repayment of note payable of $78,000 and payments of penalty – late registration of $800,000.

Net cash flow provided by financing activities was approximately $2,387,000 for the nine months ended September 30, 2024, which consisted of proceeds from loan payable – related parties of approximately $731,000, proceeds from issuance of convertible debt, net of issuance costs of approximately $996,000, proceeds from issuance of note payable of approximately $78,000, and cash provided by financing activities from discontinued operations of approximately $582,000.

In September 2025, we entered into a common stock purchase agreement with an investor in the form of an Equity Line of Credit (“ELOC”). Pursuant to the ELOC, we may sell to the investor up to $250 million of our common stock. The proceeds received in connection with the ELOC will be used to finance the Company’s ongoing operations, working capital, and expected acquisitions.

Off-Balance Sheet Arrangements

We had no outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

Critical Accounting Estimates

Our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, operating results, and cash flows will be affected.

See Note 3. Summary of Significant Accounting Policies of the Notes to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a summary of significant accounting policies and significant estimates and assumptions and their effects on our financial statements. Below are the significant estimates and assumptions that we consider critical because they involve a significant amount of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Discontinued Operations

As discussed in Note 4 to the unaudited financial statements in this Quarterly Report on Form 10-Q, the Company was unable to obtain complete financial information from a subsidiary for the period beginning April 1, 2025 and ending July 29, 2025. Consequently, management relied on historical trends and partial records to estimate the operating results of the discontinued operations for this period.

The inability to verify actual results introduces a level of uncertainty into the reported net loss from discontinued operations. Management continues to monitor the situation and may adjust its estimates in future filings should additional information become available.

Stock-based Compensation

We account for share-based payments that involve the issuance of shares of our common stock to employees and nonemployees and meet the criteria for share-based awards as stock-based compensation expense based on the grant-date fair value of the award. The Company has elected to recognize the adjustment to stock-based compensation expense in the period in which forfeitures occur. We recognize compensation expense for awards with only service conditions on a straight-line basis over the requisite service period for the entire award.

If factors change, and we utilize different assumptions including the probability of achieving performance conditions, share-based compensation cost on future award grants may differ significantly from share-based compensation cost recognized on past award grants. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate any remaining unearned share-based compensation cost or incur incremental cost. Share-based compensation cost affects our compensation and benefits expenses.

Warrants

Classification: The Company determines the accounting classification of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480”), then in accordance with ASC 815-40 (“ASC 815”), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its Common Stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.

We assess the classification of our 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, and the difference is recognized as a non-cash gain or loss on the consolidated statements of operations and comprehensive loss.

Valuation: The fair value of our equity-classified stock purchase warrants and liability-classified stock purchase warrants are determined utilizing Level 3 inputs using a Black-Scholes-Merton option valuation model and a Monte Carlo simulation model, respectively.

In both models, the fair value of an award is affected by our stock price on the date of measurement as well as other assumptions, including the estimated volatility of our stock price over the term of the stock purchase warrant as of the measurement date and the estimated period of time that we expect third parties to hold the stock purchase warrants at the measurement date. The risk-free interest rate assumption we use is based upon United States Treasury interest rates appropriate for the expected life of the stock purchase warrant.

As our stock has limited trading history on NASDAQ, we use the historical volatility of our peer companies in order to estimate future stock price trends. We expect third parties to hold their stock purchase warrants for the contractual term as we do not have any history to support a shorter term and do not anticipate stock purchase warrants to be exercised prior to the end of the term. Our expected dividend rate is zero since we do not currently pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future.

We use the Monte Carlo simulation model for our liability-classified stock purchase warrants in order to incorporate other subjective assumptions based on the terms of the specific stock purchase warrant agreements or the related host contract. For our liability-classified stock purchase warrants as of September 30, 2025, we included the probability of a fundamental event, as defined in the relevant agreements, occurring in our assumptions.

The aforementioned inputs entered into the models we use to fair value our stock purchase warrants are subjective estimates and changes to these estimates will cause the fair value of our stock purchase warrants and related debt issuance discount we recognize to vary.

Derivative Financial Instruments

Classification: We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations and comprehensive loss included in this Report under “Item 8. Financial Statements”. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. Bifurcated embedded derivatives are classified with the related host contract on the Company’s balance sheet.

Valuation: We use the Monte Carlo simulation model for our bifurcated embedded derivatives in order to incorporate subjective assumptions based on the terms of the specific host contracts. For our bifurcated embedded derivatives issued in connection with our December 2024 convertible note payable, we included the probability of a fundamental event, as defined in the relevant agreements, occurring in our assumptions in addition to the estimated volatility of our stock price over the term of the bifurcated embedded derivative as of the measurement date, the remaining term of the host contract at the measurement date, the risk-free interest rate based upon United States Treasury interest rates appropriate for the expected term, the conversion discount, and the redemption premium.

Legal and other contingencies

We are subject to various legal proceedings and claims that arise in the ordinary course of business, the outcomes of which are inherently uncertain, and such uncertainty may be enhanced due to the industry in which we operate. We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. In addition, we record recoveries of these losses when it is probable that they will be collected. These estimates are highly sensitive to change and involve variables that are not completely within our control nor practicable to model, including decisions made by regulators and settlement negotiations. Resolution of legal and other contingencies in a manner inconsistent with management’s expectations could have a material impact on our financial condition and results of operations.

Recently Issued Accounting Pronouncements

For information about recently issued accounting standards, refer to Note 3 to our Consolidated Financial Statements appearing elsewhere in this report.

Foreign Currency Risk

Foreign currency transaction risk

Revenues, expenses, and financial results of our foreign subsidiaries are recorded in the functional currency of these subsidiaries. Our foreign currency exposure is primarily related to transactions denominated in British Pounds attributable to cash, customer custodial funds and customer custodial cash liabilities and intercompany transactions where the transaction currency is different from a subsidiary’s functional currency. Changes in foreign exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our results of operations as expressed in U.S. dollars. We have experienced and will continue to experience fluctuations in our results of operations as a result of gains or losses on the settlement and the remeasurement of monetary assets and liabilities denominated in foreign currencies that are not the functional currency of the respective entity.

If an adverse 10% foreign currency exchange rate change was applied to the largest foreign currency exposure (e.g. British Pound) or to all foreign currency exposures in aggregate, of monetary assets, liabilities, and commitments denominated in currencies other than its functional currency as of September 30, 2025 and December 31, 2024, it would not have a material impact on our financial results.

From time to time, we may enter into derivatives or other financial instruments in an attempt to hedge our exposure to foreign currency exchange risk. It is difficult to predict the impact hedging activities would have on our results of operations. Additionally, the volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Our international operations increase our exposure to exchange rate fluctuations and, as a result, such fluctuations could have a material impact on our future results of operations and cash flows.

Fluctuations in functional currencies from our net investment in international subsidiaries expose us to foreign currency translation risk, where changes in foreign currency exchange rates may adversely affect our results of operations upon translation into U.S. dollars. See the consolidated statements of comprehensive income (loss) in Part I, Item 1 of this Quarterly Report on Form 10-Q for translation adjustments for the three and nine months ended September 30, 2025 and 2024, a 10% increase or decrease in foreign currency exchange rates used in translating the financial statements of subsidiaries with functional currencies other than our reporting currency would not have a material impact on our financial results.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls

Our management conducted an evaluation, with the participation of its Chief Executive Officer, who is also its Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a—15(e) and 15d—15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Executive Officer concluded that our disclosure controls and procedures were not effective in reporting, on a timely basis, information required to be disclosed by us in the reports we file or submit under the Exchange Act, because of material weaknesses in internal control over financial reporting as of September 30, 2025, as described below.

Plan of Remediation of Material Weaknesses in Internal Control Over Financial Reporting

Following the identification and communication of the material weakness described above, management commenced remediation actions relating to this material weakness beginning in the fourth quarter of fiscal year 2024, as follows:

● We are utilizing the services of external consultants for non-routine and/or technical accounting issues as they arise.

● We are expanding and improving our review process for complex accounting transactions. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.

● We are implementing enhancements and process improvements, including the design and implementation of well-defined controls and related control attributes.

The material weaknesses identified above will not be considered fully remediated until these additional controls and procedures have operated effectively for a sufficient period of time and management has concluded, through testing, that these controls are effective. Our management will monitor the effectiveness of our remediation plans and will make changes management determines to be appropriate. If not remediated, these material weaknesses could result in material misstatements to our annual or interim consolidated financial statements that may not be prevented or detected on a timely basis or result in a delayed filing of required periodic reports. If we are unable to assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected, and we could become subject to litigation or investigations by Nasdaq, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Notwithstanding the above, management believes that the consolidated financial statements included in this Quarterly Report on Form 10-Q, fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in accordance with generally accepted accounting principles.

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resources constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can only be reasonable assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting, known to the Chief Executive Officer that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

From time to time, we are subject to ordinary routine litigation incidental to our normal business operations. We are not currently a party to any material legal proceedings.

Item 1A. Risk Factors

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-KT for the period ended December 31, 2024 as filed with the SEC on May 8, 2025, as amended July 9, 2025 (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Except as set forth below, there were no sales of equity securities sold during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.

During the three months ended September 30, 2025, the remaining 1,353,333 Pre-funded Warrant units and the 2,499,999 Private Placement Warrant units were exercised on a cashless basis, resulting in the issuance of an aggregate 4,899,166 shares of common stock.

In September 2025, the Company issued 310,000 shares of common stock to Mandragola Ltd. in connection with a new joint venture agreement.

The above issuance[s] did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe are exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(a)(2) thereof.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

During the quarter ended September 30, 2025, no director or officer adopted or terminated (i) any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or (ii) any “non-Rule 10b5-1 trading arrangement” as defined in paragraph (c) of item 408 of Regulation S-K.

Item 6. Exhibits

The following exhibits are incorporated into this Form 10-Q Quarterly Report:

		Incorporated by Reference
Exhibit	Description	Schedule/ Form	Exhibits	Filing Date
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer and Principal Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer and Principal Financial Officer
101.INS	Inline XBRL Instance Document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

*	Indicates management contract or compensatory plan or arrangement.
#	Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601. The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NUKKLEUS INC.
	By:	/s/ Menachem Shalom
Dated: November 14, 2025		Menachem Shalom
		Chief Executive Officer (Principal Executive Officer), and Principal Financial and Accounting Officer and Director

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