DFNS 10-Q
T3 Defense Inc. (DFNS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from __________ to __________
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The |
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant
(1) has filed all reports required 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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging 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 13(a) of the Exchange 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 the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.
| Class | Outstanding August 14, 2026 | |
| Common Stock, $0.0001 par value per share |
T3 DEFENSE INC.
FORM 10-Q
June 30, 2026
TABLE OF CONTENTS
i
FORWARD LOOKING STATEMENTS
This report contains forward-looking 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”), 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 statements can be identified by the use of forward-looking words such as “may,” “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:
| ● | 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 in our business and growth strategy, capital improvements or development plans; |
| ● | the availability of additional capital to support development; and |
| ● | other factors discussed elsewhere in this quarterly report. |
The cautionary statements made in this quarterly report are intended to be applicable to all related forward-looking statements wherever they may appear in this report.
We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly update any forward looking-statements, whether as a result of new information, future events or otherwise.
All references in this Form 10-Q that refer to the “Company”, “T3”, “we,” “us” or “our” refer to T3 Defense Inc. and its consolidated subsidiaries.
ii
PART I - FINANCIAL INFORMATION
T3 DEFENSE INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
AS OF JUNE 30, 2026
TABLE OF CONTENTS
F-1
T3 DEFENSE INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(USD in thousands, except share and per share data)
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Current assets of consolidated variable interest entities | ||||||||
| Cash and cash equivalents | ||||||||
| Other current assets | ||||||||
| Short term deposits and restricted cash | ||||||||
| Marketable securities | ||||||||
| Inventories | ||||||||
| Note receivable - related party | ||||||||
| Due from related parties | ||||||||
| Accounts receivable | ||||||||
| Other current assets | ||||||||
| Loan granted | ||||||||
| Total Current assets | ||||||||
| Non-Current Assets | ||||||||
| Operating right of use assets | ||||||||
| Non-Current assets of consolidated variable interest entities | ||||||||
| Cash and securities held in trust account | ||||||||
| Other non-current assets | ||||||||
| Investment under the fair value option | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Other intangible assets | ||||||||
| Intangible assets | ||||||||
| Deferred taxes | ||||||||
| Funds in respect of employee rights upon termination | ||||||||
| Total Non-Current assets | ||||||||
| Total Assets | ||||||||
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)
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Liabilities and Stockholders' Deficit | ||||||||
| Current Liabilities | ||||||||
| Short term loan | ||||||||
| Accounts payable | ||||||||
| Operating lease liability, current portion | ||||||||
| Promissory note – related party | ||||||||
| Due to related parties | ||||||||
| Other current liabilities | ||||||||
| Other current liabilities of consolidated variable interest entities | ||||||||
| Loans payable - former related parties, current maturities | ||||||||
| Stock purchase warrant liabilities | ||||||||
| Deferred considerations | ||||||||
| Total current liabilities | ||||||||
| Non-Current liabilities | ||||||||
| Non-current operating lease liabilities | ||||||||
| Loan payable - former related parties, net of current maturities | ||||||||
| Liability in respect of employee rights upon termination | ||||||||
| Deferred tax liability | ||||||||
| Total Non-Current liabilities | ||||||||
| Total Liabilities | ||||||||
| Noncontrolling interests Subject to Possible Redemption | ||||||||
| Stockholders' Deficit | ||||||||
| Preferred stock ($ | ||||||||
| Common stock ($ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Company’s stockholders’ deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ||||||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | ||||||||
(*)
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)
| Six Months Ended | Three Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | ||||||||||||||||
| Cost of revenues | ( | ) | ( | ) | ||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development expenses | ( | ) | ( | ) | ||||||||||||
| Selling and marketing expenses | ( | ) | ( | ) | ||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses of consolidated variable interest entities | ( | ) | ( | ) | ||||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income of consolidated variable interest entities | ||||||||||||||||
| Interest on related parties promissory note | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on marketable securities | ( | ) | ( | ) | ||||||||||||
| Penalty – late registration | ( | ) | ( | ) | ||||||||||||
| Change in fair value - convertible note | ||||||||||||||||
| Change in fair value - stock purchase warrant liabilities | ( | ) | ( | ) | ||||||||||||
| Other income | ||||||||||||||||
| Total other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Net income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Income taxes | ||||||||||||||||
| Net income (loss) from continuing operation | ( | ) | ( | ) | ||||||||||||
| Gain (loss) from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Net income attributable to non-controlling interests | ||||||||||||||||
| Net income (loss) attributable to the Company's stockholders | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Earnings (loss) per share from continuing operations (basic) (*) | ( | ) | ( | ) | ||||||||||||
| Earnings (loss) per share from discontinued operations (basic) (*) | ( | ) | ( | ) | ||||||||||||
| Total loss per share (basic) (*) | ( | ) | ( | ) | ||||||||||||
| Weighted average number of shares of Common Stock outstanding - basic | ||||||||||||||||
| Earnings (loss) per share from continuing operations (diluted) (*) | ( | ) | ( | ) | ||||||||||||
| Loss per share from discontinued operations (diluted) (*) | ( | ) | ( | ) | ||||||||||||
| Total loss per share (diluted)(*) | ( | ) | ( | ) | ||||||||||||
| Weighted average number of shares of Common Stock outstanding – diluted(*) | ||||||||||||||||
| (*) |
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)
| Six Months Ended | Three Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Comprehensive income (loss): | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Unrealized foreign currency translation loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Comprehensive income attributable to non-controlling interests | ||||||||||||||||
| Comprehensive income (loss) attributable to the Company’s stockholders | ( | ) | ( | ) | ||||||||||||
| Comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
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’ DEFICIT
(USD in thousands, except share and per share data)
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares (**) | Amount | Additional paid-in capital | Accumulated deficit | Accumulated Other Comprehensive Income (Loss) | Non-controlling interest | Total stockholders’ equity (deficit) | ||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common stock from exercise of warrants | - | - | - | - | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||
| Issuance of common stock in relation to private placement | - | - | - | - | ||||||||||||||||||||||||||||||||
| Issuance of preferred stock in relation to private placement | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Issuance of common stock for purchase of subsidiaries | - | - | - | - | ||||||||||||||||||||||||||||||||
| Conversion of note into equity | - | - | - | - | ||||||||||||||||||||||||||||||||
| Equity classified warrants issued as part of purchase of subsidiaries | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Shares issued as penalty | - | - | - | - | ||||||||||||||||||||||||||||||||
| Shares issued to settle commitment under ELOC agreement | - | - | - | - | ||||||||||||||||||||||||||||||||
| Issuance of shares from ELOC exercises | - | - | - | - | ||||||||||||||||||||||||||||||||
| Issuance of shares for settlement of debt on related party | - | - | - | - | ||||||||||||||||||||||||||||||||
| Subsidiary consolidation for the first time | - | - | - | - | - | ( | ) | |||||||||||||||||||||||||||||
| Accretion of noncontrolling interests subject to possible redemption | - | - | - | - | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | ||||||||||||||||||||||||||||||||
| Comprehensive loss for the period | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2026 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| (*) |
| (**) |
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’ DEFICIT
(USD in thousands, except share and per share data)
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares (**) | Amount | Additional paid-in capital | Accumulated deficit | Accumulated Other Comprehensive Income (Loss) | Non-controlling interest | Total stockholders’ equity (deficit) | ||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2026 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common stock from exercise of warrants | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the VisionWave share exchange | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Issuance of common stock in relation to conversion of note | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Issuance of shares from ELOC exercises | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Transaction with non-controlling interests and deconsolidation of subsidiary | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Accretion of noncontrolling interests subject to possible redemption | - | - | - | - | ( | ) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Comprehensive loss for the period | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2026 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| (*) | Less than $1 thousand. |
| (**) | Share amounts have been retroactively adjusted to reflect the 1-for-125 Reverse Stock Split (see Note 1). |
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 CHANGES IN STOCKHOLDERS’ DEFICIT
(USD in thousands, except share and per share data)
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares (**) | Amount | Additional paid-in capital | Accumulated deficit | Accumulated Other Comprehensive Income (Loss) | Non-controlling interest | Total stockholders’ equity (deficit) | ||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock from exercise of pre-funded warrants | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Comprehensive income for the period | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2025 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock in relation to settlement agreement | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Issuance of common stock in relation to conversion of note | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Issuance of common stock from exercise of options | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Comprehensive income for the period | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2025 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
(*) Less than $1 thousand.
(**) Share amounts have been retroactively adjusted to reflect the 1-for-125 Reverse Stock Split (see Note 1).
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-8
T3 DEFENSE INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(USD in thousands, except share and per share data)
| Six months ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) for the period | ( | ) | ||||||
| Net loss (income) from discontinued operations | ( | ) | ||||||
| Net income (loss) for the period from continuing operation | ( | ) | ||||||
| Adjustments required to reconcile net loss for the period to net cash used in operating activities: | ||||||||
| Amortization and Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ||||||
| Employee extermination | ( | ) | ||||||
| Deferred taxes | ( | ) | ||||||
| Interest on loans | ( | ) | ||||||
| Gain on sale of subsidiary | ( | ) | ||||||
| Loss on marketable securities | ||||||||
| Change in fair value – convertible note embedded derivative | ( | ) | ( | ) | ||||
| Change in fair value - stock purchase warrant liabilities | ( | ) | ||||||
| Changes in lease assets and lease liabilities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Trade receivables | ( | ) | ||||||
| Other current assets | ( | ) | ( | ) | ||||
| Due from related parties | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Accounts payable | ||||||||
| Due to affiliates | ||||||||
| Interest payable - related parties | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Net cash used in operating activities – continuing operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities – discontinuing operations | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
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)
| Six months ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash used in purchase of subsidiaries | ( | ) | ||||||
| Short term deposit | ( | ) | ||||||
| Deconsolidation of subsidiary | ( | ) | ||||||
| Proceeds from sales short term securities | ||||||||
| Cash provided by purchase of subsidiaries | ||||||||
| Payment on property and equipment | ( | ) | ( | ) | ||||
| Advance to target of planned acquisition | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment on short term bank credit | ( | ) | ||||||
| Repayment of note payable | ( | ) | ( | ) | ||||
| Payments of penalty – late registration | - | ( | ) | |||||
| Proceeds from loans payable - related parties | ||||||||
| Repayments of loans | ( | ) | ||||||
| Payment of liability to former shareholder of a subsidiary | ( | ) | ||||||
| Company's portion in investment of minority in subsidiary | ||||||||
| Proceeds from issuance of ELOC | ||||||||
| Proceeds from issuance of private placement, net | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents – continuing operations | ( | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents – discontinuing operations | ||||||||
| INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD, INCLUDING DISCONTINUED OPERATIONS | ||||||||
| CASH, CASH EQUIVALENTS, RESTRICTED CASH INCLUDING CASH FROM HELD FOR SELL COMPANY AT END OF PERIOD, INCLUDING DISCONTINUED OPERATIONS | ||||||||
| LESS CASH FROM DISCONTINUED OPERATIONS | ||||||||
| CASH, CASH EQUIVALENTS, RESTRICTED CASH INCLUDING CASH FROM DISCONTINUED OPERATIONS AT END OF PERIOD FROM CONTINUING OPERATIONS | ||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-10
T3 DEFENSE INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(USD in thousands, except share and per share data)
| Six months ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for: Interest | ||||||||
| Non-cash transactions: | ||||||||
| Investment in investee | ||||||||
| Fair value of pre-funded warrants exercised | ||||||||
| Fair value of the derivative liability extinguished from conversion of convertible note | ||||||||
| Fair value of common stock issued in connection with settlement agreement | ||||||||
| Fair value of common stock issued in connection with conversion of convertible note | ||||||||
| Exercise of Warrants | ||||||||
| Initial recognition of operating lease liability and a corresponding right-of- use asset | ||||||||
| Conversion of promissory note | ||||||||
| Conversion of note receivable into shares of Nimbus | ||||||||
| Six months ended | ||||
| June 30, | ||||
| 2026 | ||||
| Cash provided by purchase of subsidiaries consolidated for the first time: | ||||
| Working capital (excluding cash and cash equivalents) | ( | ) | ||
| Long terms assets | ||||
| Intangible assets | ||||
| Goodwill | ||||
| Intangible assets held for sale | ||||
| Long terms liabilities | ( | ) | ||
| Other | ||||
| Non-controlling interest | ( | ) | ||
| Issuance of common stock and warrants | ( | ) | ||
| Net cash provided by the purchase of subsidiaries consolidated for the first time | ( | ) | ||
| Six months ended | ||||
| June 30, | ||||
| 2026 | ||||
| Subsidiaries Deconsolidation: | ||||
| Working capital (excluding cash and cash equivalents) | ||||
| Investment in investee | ( | ) | ||
| Tangible assets | ||||
| loan from the Company | ||||
| Non-controlling interest | ||||
| Net cash derived from deconsolidation of subsidiary | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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
| A. | T3 Defense Inc. (formerly known as Nukkleus Inc.) (the “Company”
or “T3”) was formed on |
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.
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 £
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”).
The Company approved a reverse stock split of its issued and outstanding shares of common stock (“Common Stock”), at a ratio of 1-for-125 (the “Reverse Stock Split”). The Reverse Stock Split was duly approved in a special meeting of the stockholders held on June 24, 2026. On July 16, 2026, the Company filed with the Secretary of State of the State of Delaware the Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) to effect the Reverse Stock Split. The Reverse Stock Split became effective as of 12:01 a.m., Eastern Time, on July 20, 2026, and the Company’s Common Stock began trading on the Nasdaq Stock Market on a split-adjusted basis when the market opened on July 20, 2026.
All shares, stock option and per share information in these consolidated financial statements have been restated to reflect the Reverse Stock Split on a retroactive basis.
F-12
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 1 – GENERAL (cont.)
| B. | 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
Simultaneously with the closing of
the IPO, the Sponsor purchased
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 June 30, 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 | ||||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Class A ordinary shares subject to redemption as of March 31, 2026 | ||||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Class A ordinary shares subject to redemption as of June 30, 2026 |
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
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.
On July 12, 2026, the SPAC informed the Target that it is terminating the LOI, effective immediately, as the SPAC does not intend to pursue the Proposed Transaction. As a result of such termination, the SPAC no longer has any obligations pursuant to the LOI, other than certain confidentiality obligations.
F-13
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 1 – GENERAL (cont.)
| C. | Star 26 Capital Inc. Acquisition |
On
January 12, 2026, the Company consummated the acquisition of
| D. | Nimbus Drones Technologies and Marketing Ltd Acquisition |
On January 15, 2026, the Company consummated
its acquisition (the “Nimbus Acquisition”) of
| E. | I.T.S. Industrial Techno-Logic Solutions Ltd. Acquisition |
On
February 16, 2026, the Company consummated its acquisition (the “ITS Acquisition”) of
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.
| F. | Israel – Hamas 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.
F-14
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 1 – GENERAL (cont.)
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 June 30, 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 with respect to the hostilities with Iran described above; however, the ceasefire remains fragile and the overall security situation in Israel and the region continues to be uncertain.
| G. | 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 June 30, 2026, the Company had negative working capital of
approximately $
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 $
In addition, management believes that
the completion of the sale in April 2026 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
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.
F-15
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
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 June 30, 2026, and its results of operations, changes in stockholders’ equity, and cash flows for the six months ended June 30, 2026 and 2025. The results of operations for the six and three months ended June 30, 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 April 9, 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.
Inventories
Substantially all inventory consists of raw materials are valued at the lower of historic cost or net realizable value; where net realizable value is considered to be the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion, disposal and transportation. Historic inventory costs are calculated on a first-in, first-out basis or specific cost .The Company does not hold finished goods as inventory
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 lighting
Revenues from integration projects where the Company designs, engineers, sources raw materials, assembles and completes tactical vehicles and trailers.
F-16
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
Revenue recognition (cont.)
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 it is 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.
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.
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. |
F-17
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
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.
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.
The costs incurred by the Company between technological feasibility and general release to the public have been insignificant. Accordingly, all research and development costs have been expensed as incurred.
Severance pay
Labor laws in effect in Israel require the Company to pay severance pay to employees dismissed or retiring in certain other circumstances. The liability is calculated based on the employees’ most recent monthly salary multiplied by the number of years of service. The said liability is partially covered by purchase of insurance policies. The Company's liability for employee rights upon retirement includes the severance pay liability to its employees in accordance with existing labor laws and based on salary components for which employees are entitled to receive severance pay, according to management.
F-18
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
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 earnings are reported in the statement of operations.
F-19
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
Fair value (cont.)
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 June 30, 2026 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| US$ | ||||||||||||||||
| Assets: | ||||||||||||||||
| Marketable Securities | ||||||||||||||||
| Investment under the fair value option | ||||||||||||||||
| Total assets | ||||||||||||||||
| As of December 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| US$ | ||||||||||||||||
| Assets: | ||||||||||||||||
| Marketable Securities | ||||||||||||||||
| Total assets | ||||||||||||||||
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 June 30, 2026 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| US$ | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Stock purchase warrant liabilities | ||||||||||||||||
| Total liabilities | ||||||||||||||||
| As of December 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| US$ | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Private Placement Warrant | ||||||||||||||||
| Total liabilities | ||||||||||||||||
F-20
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
Fair value (cont.)
The following table presents the changes
in fair value of the level 3 liabilities for the period from December 31, 2025 through June 30, 2026. Changes in fair value are recognized
in the consolidated statement of operations within finance expenses.
| Private Placement Warrant | February 2026 Warrants | Derivative liabilities | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Outstanding at December 31, 2025 | ||||||||||||||||
| Additions | ||||||||||||||||
| Liabilities assumed as part of subsidiary consolidated for the first time | ||||||||||||||||
| Exercised | ( | ) | ( | ) | ( | ) | ||||||||||
| Changes in fair value | ( | ) | ( | ) | ||||||||||||
| Outstanding at June 30, 2026 | ||||||||||||||||
Investment under the fair value option:
Investments in entities over which the Company has the ability to exercise significant influence, but which it does not control, are within the scope of the equity method in ASC 323, Investments — Equity Method and Joint Ventures, and are therefore eligible items for the fair value option under ASC 825-10-15-4. The Company has elected the fair value option for such investments. The election is made instrument by instrument and is irrevocable, and was made at the eligibility date, which is the date on which control over the former subsidiary was lost. The investment is initially recognized at the fair value determined on the loss-of-control date and is subsequently remeasured to fair value at each reporting date, with changes in fair value recognized in earnings. Dividends received from the investee are recognized in earnings rather than as a reduction of the carrying amount of the investment.
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. As of June 30, 2026, no indicators of impairment were identified, and accordingly no impairment loss in respect of goodwill was recognized during the six months then ended.
F-21
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 3 – ACQUISITION OF STAR 26
On January 12, 2026, T3 acquired
In addition, Star received:
| - |
| - | a five-year warrant to purchase an aggregate of |
| - | A promissory note in the principal amount of $ |
| - | A promissory note in the principal amount of $ |
The shares, warrants, the Six-Month Note and the Three-Month Note were assigned by Star to the equity holders of Star, 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 $
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 $
F-22
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 3 – ACQUISITION OF STAR 26 (cont.)
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 (%) | % | |||
| Risk-free interest rate (%) | % | |||
| Expected dividend yield | % | |||
| Expected term (years) | ||||
| Conversion price (U.S. dollars) | ||||
| Underlying share price (U.S. dollars) | ||||
| Fair value (U.S. dollars in thousands) | ||||
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 | ( | ) | ||
| Long terms assets | ||||
| Intangible assets | ||||
| Intangible assets available for sale, net | ||||
| Goodwill | ||||
| Other comprehensive income | ||||
| Non-controlling interest | ( | ) | ||
| Long term liabilities | ( | ) | ||
| Net assets acquired | ||||
As of January 12, 2026, the Company,
with the assistance of a third-party valuation specialist, prepared 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 $
The allocation of the purchase price was as follows (in thousands):
| January 12, | ||||
| 2026 | ||||
| Net tangible assets acquired | ( | ) | ||
| Customer relationships ( | ||||
| Distributor relations ( | ||||
| Order backlog ( | ||||
| Intangible assets available for sale | ||||
| Deferred tax liabilities | ( | ) | ||
| Deferred tax liabilities available for sale | ( | ) | ||
| Goodwill | ||||
F-23
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 3 – ACQUISITION OF STAR 26 (cont.)
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.
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
See Note 7D below.
NOTE 4 – ACQUISITION OF NIMBUS
On January 15, 2026, the Company consummated
its acquisition (the “Nimbus Acquisition”) of
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.
F-24
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 4 – ACQUISITION OF NIMBUS (cont.)
The total consideration of the acquisition
was calculated using a third-party appraiser at approximately $
| 1. | Share consideration consisting of |
| 2. | The Nimbus Note, with an estimated fair value of approximately $ |
The Company prepared 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.
| January 15, 2026 | ||||
| U.S. Dollars (in thousands) | ||||
| Working capital | ||||
| Long terms assets | ||||
| Long term liabilities | ( | ) | ||
| Goodwill | ||||
| Total consideration transferred | ||||
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.
NOTE 5 – ACQUISITION OF ITS
On June 8, 2025, Star Twenty Six Ltd.
(“Star Twenty Six”) entered into an agreement with I.T.S. Industrial Techno-Logic Solutions Ltd. and its shareholder Mr. Gera
Eron, pursuant to which Star Twenty Six will lend to ITS NIS
On
February 16, 2026, Star Twenty Six acquired
F-25
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 5 – ACQUISITION OF ITS (cont.)
The Company prepared 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.
| February 16, 2026 | ||||
| U.S. Dollars (in thousands) | ||||
| Working capital | ( | ) | ||
| Long terms assets | ||||
| Goodwill and Intangible assets | ||||
| Non-controlling interest | ( | ) | ||
| Long term liabilities | ( | ) | ||
| Net assets acquired | ||||
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 – DECONSOLIDATION OF WATER IO LTD.
On June 24, 2026,
Star Twenty Six entered into a share purchase agreement with unrelated purchasers for the sale of
Following the completion of the sale,
the holding of Star Twenty Six in Water IO decreased to approximately
Upon the loss of control, the Company
derecognized the assets and liabilities of Water IO, including the related non-controlling interests, and recognized its retained interest
in Water IO at fair value as of the date control was lost. Following the deconsolidation, the Company’s retained interest of approximately
F-26
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 6 – DECONSOLIDATION OF WATER IO LTD. (cont.)
The effect of the deconsolidation of Water IO on the condensed consolidated statements of cash flows for the six months ended June 30, 2026 is as follows:
| Six months ended June 30, 2026 | ||||
| U.S. Dollars (in thousands) | ||||
| Subsidiaries deconsolidation: | ||||
| Working capital (excluding cash and cash equivalents) | ( | ) | ||
| Investment in investee | ( | ) | ||
| Other current assets | ||||
| Investment under the fair value option | ||||
| Tangible assets | ||||
| Loan from the Company | ||||
| Non-controlling interest | ||||
| Net cash used in the deconsolidation of subsidiary | ||||
The composition of the Company’s investment in Water IO as of June 30, 2026 is as follows:
| June 30, 2026 | ||||
| U.S. Dollars (in thousands) | ||||
| Investment under the fair value option | ||||
| Loan granted | ||||
| Total investment in Water IO | ||||
NOTE 7 – EVENTS DURING THE REPORTING PERIOD
| A. | Sale of Zorro Net Ltd |
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, held, as of that date, an approximately
As consideration for the Zorronet shares,
BiomX issued to Water IO: (i)
F-27
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 7 – EVENTS DURING THE REPORTING PERIOD (cont.)
On July 27, 2026, BiomX and Water IO entered into Amendment No.
1 and Waiver, dated as of July 24, 2026, to the Note (the “Amendment”) pursuant to which (i) the maturity date of the Note
was extended from July 10, 2026 to November 1, 2026; (ii) the Company agreed to pay $
The sale resulted in a gain of approximately
$
| B. | Resignation 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.
Mr. Nachum, age 49, is an independent investment advisor and portfolio manager.
Each of Ms. Fridman and Mr. Nachum is entitled to $
The appointments were made to replace David Rokach and Reuven Yeganeh, both of whom resigned as of May 19, 2026.
F-28
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 7 – EVENTS DURING THE REPORTING PERIOD (cont.)
| C. | 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 $
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
F-29
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 7 – EVENTS DURING THE REPORTING PERIOD (cont.)
| D. | Exchange of Shares with VisionWave |
On May 17, 2026, T3 exchanged
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, develops software and hardware solutions for UxV (Unmanned Vehicles including UAVs, UGVs and USVs – Aerial, Ground and Submersible) capabilities by integrating artificial intelligence (AI) and autonomous capabilities for defense, aerospace and commercial applications. Its technologies, both those available for sale and in development — ranging from radars and vision systems; to radio frequency (RF) sensing technologies; to computer platforms; to payload management for various UxVs like drones and UGVs, are intended for military and homeland security applications and for commercial use.
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.
NOTE 8 – STOCKHOLDERS’ EQUITY
Transactions:
| A. | 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 |
F-30
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 8 – STOCKHOLDERS’ EQUITY (cont.)
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 $
On June 24, 2026, at a special meeting of the shareholders of the Company, the shareholders approved, among other items, (i) the issuance of shares of Common Stock upon conversion of the Series B Preferred Stock issued or issuable in connection with the Private Placement as required by Nasdaq Listing Rules 5635(d) and (ii) the issuance of shares of Common Stock upon exercise of certain restricted common stock purchase warrants issued or issuable to the Purchaser pursuant to the terms of the Securities Purchase Agreement for purposes of complying with the Nasdaq Listing Rules.
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
F-31
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 8 – STOCKHOLDERS’ EQUITY (cont.)
The holders of Series B Preferred Stock
are entitled to
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 $
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
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).
F-32
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 8 – STOCKHOLDERS’ EQUITY (cont.)
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
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
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 Warrants do not meet the criteria for equity classification. Accordingly, the Common Warrants were accounted for as liability-classified instruments. 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 $
F-33
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 8 – STOCKHOLDERS’ EQUITY (cont.)
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 | June 30, 2026 | |||||||
| Expected volatility (%) | % | % | ||||||
| Risk-free interest rate (%) | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Expected term (years) | ||||||||
| Conversion price (U.S. dollars) | ||||||||
| Underlying share price (U.S. dollars) | ||||||||
| Fair value (U.S. dollars in thousands) | ||||||||
Based on the above, the entire February 2026 Private Placement proceeds were allocated to the Common Warrants liability.
For the six and three months ended
June 30, 2026, the Company recognized a loss from the change in fair value of the Common Warrant liability of approximately $
On January 2, 2026, the Company issued
In addition, on January 2, 2026, the
Company issued
| B. | 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) $ |
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.
F-34
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 8 – STOCKHOLDERS’ EQUITY (cont.)
On January 2, 2026, the Company issued
During the period from January 1, 2026
to February 4, 2026, the Company elected to sell to the Investor an aggregate of
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
NOTE 9 – WARRANTS
The following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding as of June 30, 2026:
| Warrants Outstanding | ||||||||||||||||
| Range of Exercise Price | Number Outstanding at June 30, 2026 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | |||||||||||||
| Public and Private Warrants | ||||||||||||||||
| September 2025 Private Placement Warrant | ||||||||||||||||
| February 2026 Warrants | ||||||||||||||||
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 | ||||||||||||||||
| April 2024 Warrants | ||||||||||||||||
| August 2025 Warrant | ||||||||||||||||
| September 2025 Private Placement Warrant | ||||||||||||||||
F-35
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 9 – WARRANTS (cont.)
Warrant activities for the six months ended June 30, 2026 were as follows:
| Number of warrants | Weighted Average Exercise Price | |||||||
| USD | ||||||||
| Outstanding at December 31, 2025 | ||||||||
| Expired | ( | ) | ||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
NOTE 10 – 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 of a vesting condition based on a period of service. Total stock options activity for the six months ended June 30, 2026 is summarized as follows:
| Number of Options | Weighted Average Exercise Price | |||||||
| USD | ||||||||
| Outstanding at December 31, 2025 | ||||||||
| Granted | ||||||||
| Exercised | ||||||||
| Outstanding at June 30, 2026 | ||||||||
| Exercisable at June 30, 2026 | ||||||||
| Options expected to vest | ||||||||
Stock-based compensation expense for
the six months ended June 30, 2026 and 2025, was
NOTE 11 – 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. The court has referred the matter to mandatory mediation.
F-36
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 12 – RELATED PARTIES
| A. |
| As of June 30, | As of December 31, | |||||||
| 2026 | 2025 | |||||||
| Note receivable - related party | ||||||||
| Promissory note – related party | ||||||||
| Due from related parties | - | |||||||
| Due to related parties | ||||||||
| Other current liabilities | ||||||||
| B. | Other information: |
On February 17, 2026, the Board of Directors, based on the recommendations and approval of the Compensation Committee, approved 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 $
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 $
F-37
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 12 – RELATED PARTIES (cont.)
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.
NOTE 13 – SEGMENT REPORTING
As of June 30, 2026, the Company's
reportable segments are (i) Rimon, (ii) ITS and (iii) Tiltan. Nimbus and Water were not considered material and are therefore included
within
The Company’s chief operating decision maker is its .
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 six months ended June 30, 2026 and 2025:
| Six months ended | ||||||||
| June 30 | ||||||||
| 2026 | 2025 | |||||||
| Revenue from Rimon | ||||||||
| Salaries and related compensation | ( | ) | ||||||
| Depreciation | ( | ) | ||||||
| Other cost related to Rimon (mainly materials) | ( | ) | ||||||
| Gross Profit | ||||||||
| Revenue from ITS | ||||||||
| Salaries and related compensation | ( | ) | ||||||
| Depreciation | ( | ) | ||||||
| Other cost related to ITS (mainly materials) | ( | ) | ||||||
| Gross loss | ||||||||
| Revenue from TILTAN | ||||||||
| Salaries and related compensation | ( | ) | ||||||
| Depreciation and amortization | ( | ) | ||||||
| Cost related to TILATN | ( | ) | ||||||
| Gross income | ||||||||
F-38
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 13 – SEGMENT REPORTING
| Six months ended | ||||||||
| June 30 | ||||||||
| 2026 | 2025 | |||||||
| Revenue from other reportable segments | ||||||||
| Cost related to other reportable segments | ( | ) | ||||||
| Gross income | ( | ) | ||||||
| Research and development expenses | ( | ) | ||||||
| Selling and marketing expenses | ( | ) | ||||||
| Professional services | ( | ) | ( | ) | ||||
| Salaries and related compensation | ( | ) | ||||||
| Other general and administrative expenses | ( | ) | ||||||
| General and administrative expenses of consolidated variable interest entities | ( | ) | ||||||
| Total Operating loss | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest on related parties promissory note | ( | ) | ||||||
| Change in fair value - convertible note | ||||||||
| Change in fair value - stock purchase warrant liabilities | ( | ) | ||||||
| Other (expenses) income | ( | ) | ||||||
| Net loss before tax | ( | ) | ||||||
| Discontinued operation | ( | ) | ||||||
| Income taxes | ||||||||
| Net loss | ( | ) | ||||||
NOTE 14 – SUBSEQUENT EVENTS
| A. | Annual Meeting |
On August
5, 2026, the Company held its annual meeting of stockholders for the calendar year 2026 (the “Annual Meeting”). As of the
record date of July 9, 2026 (the “Record Date”),
The number of shares issued and outstanding as of the Record Date and the number present or represented by proxy at the Annual Meeting are not reflective of the 1:125 reverse stock split effective July 20, 2026.
The stockholders voted on and approved the following proposals at the Annual Meeting:
| 1. | Election of four directors to hold office until the 2027 annual meeting of stockholders of the Company and until their respective successors have been duly elected and qualified. The Company’s nominees were Menachem Shalom, Shiran Fridman, Tomer Nagar and Asaf Nachum. |
| 2. | Ratification of the appointment of Somekh Chaikin, a member firm of KPMG International, as the Company’s independent external auditors for the fiscal year ending December 31, 2026 and to authorize the Company’s Board of Directors to fix their remuneration. |
| 3. | Approval and adoption of the 2026 Evergreen Equity Incentive Plan and the initial authorization of 176,000 post-split shares of common stock for issuance thereunder, with such number to increase 8% annually. |
F-39
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 14 – SUBSEQUENT EVENTS (cont.)
| B. | Reverse Stock Split |
The Company approved a reverse stock split of its issued and outstanding shares of common stock (“Common Stock”), at a ratio of 1-for-125 (the “Reverse Stock Split”). The Reverse Stock Split was duly approved in a special meeting of the stockholders held on June 24, 2026. On July 16, 2026, the Company filed with the Secretary of State of the State of Delaware the Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) to effect the Reverse Stock Split. The Reverse Stock Split became effective as of 12:01 a.m., Eastern Time, on July 20, 2026, and the Company’s Common Stock began trading on the Nasdaq Stock Market on a split-adjusted basis when the market opened on July 20, 2026.
The Company implemented the Reverse Stock Split to raise the per share bid price of the Company’s Common Stock above $1.00 per share and bring the Company back into compliance with Nasdaq Listing Rule 5550(a)(2). The Company will have regained compliance on July 31, 2026, once the Company’s Common Stock has traded at or above $1.00 for ten consecutive trading days.
The Reverse Stock Split became effective on July 20, 2026 (the “Effective Date”) and began trading on a split-adjusted basis at the commencement of trading on the Effective Date, under the Company’s existing trading symbol “DFNS.” The new CUSIP number for the Common Stock following the Reverse Stock Split is 67054R302.
On the Effective Date, the total number of shares of Common Stock held by each stockholder of the Company were exchanged for the number of shares of Common Stock equal to the number of issued and outstanding shares of Common Stock held by each such stockholder immediately prior to the Reverse Stock Split, divided by one hundred twenty-five (125), with such resulting number of shares rounded up to the nearest whole share. As a result, no fractional shares were issued in connection with the Reverse Stock Split and no cash or other consideration was be paid in connection with any fractional shares that would otherwise have resulted from the Reverse Stock Split. The Company did round up fractional shares at the beneficial level and instead round up any such fractional shares up at the participant level. Also on the Effective Date, all equity awards outstanding immediately prior to the Reverse Stock Split were adjusted to reflect the Reverse Stock Split.
The Reverse Stock Split was effected pursuant to the Company’s filing of the Certificate of Amendment with the Secretary of State of the State of Delaware.
The Company
is authorized to issue
Immediately after the Reverse Stock Split, each Common Stockholder’s percentage ownership interest in the Company’s Common Stock and proportional voting power of the Company’s Common Stock remained unchanged, except for minor changes and adjustments that will result from the treatment of fractional shares. The rights and privileges of the holders of shares of Common Stock remain unaffected by the Reverse Stock Split.
F-40
T3 DEFENSE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 14 – SUBSEQUENT EVENTS (cont.)
| C. | Acquisition of Project 35 |
On July 6,
2026, T3 Defense Inc., a Delaware corporation (the “Company”), acquired
Project35 supplies defense organizations, including Israel Aerospace Industries (IAI), ELTA Systems, Rafael Advanced Defense Systems, and Elbit Systems, as well as the Israel Ministry of Defense. Project35’s unmanned aerial platforms are in operational use. Over the past three and a half years, Project 35 has focused on developing the HY-380, an autonomous, man-portable aerial interceptor designed to neutralize hostile drones within seconds of detection using a dual-sensor guidance system that combines RF and optical AI tracking. The interceptor has completed initial live-fire field trials, validating its performance and accuracy for high-intensity conflict environments. Project35’s aerial platforms range from heavy-lift multirotor cargo drones and long-endurance fixed-wing VTOL aircraft for intelligence, surveillance, and reconnaissance to high-speed, AI-guided tactical FPV systems. Complementing these is a dedicated counter-UAV suite comprising the HY-380 autonomous interceptor, radar and GNSS countermeasure systems, RF jamming and direction-finding, and cybersecure, anti-jam mesh data links. The company’s systems are built from composite materials and aerospace-grade structures, hold AS9100 aviation quality certification, and are engineered to Western supply-chain standards, including Blue UAS and NDAA compliance.
The acquisition was made pursuant to the Stock Purchase Agreement dated as of July 6, 2026 among the Company, Project 35 and X S.A. Security and Defense Ltd., as the seller of the shares of Project35.
Given the limited time between the acquisition date and June 30, 2026, the Company has not yet completed the valuation procedures necessary to determine the fair values of the identifiable assets acquired and liabilities assumed, including intangible assets, contingent consideration (if any), and the resulting goodwill. As permitted under ASC 805-10-25-13 through 25-19 (the measurement period provisions), the Company has recorded the assets acquired and liabilities assumed at provisional amounts based on management's preliminary estimates, and will finalize the purchase price allocation within the one-year measurement period following the acquisition date, as additional information regarding facts and circumstances that existed as of the acquisition date becomes available. Accordingly, certain disclosures otherwise required under ASC 805-10-50, including a detailed breakdown of the fair value of assets acquired and liabilities assumed by major class, the amount of goodwill by reportable segment, and pro forma revenue and earnings information as if the acquisition had occurred at the beginning of the reporting period, have not been presented in these financial statements because they are not yet practicable to determine. These disclosures will be included in the Company's financial statements for the period in which the purchase price allocation is finalized.
F-41
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, and in our Quarterly Reports on Form 10-Q for the quarterly periods ended subsequent to our filing of such Annual Report, as well as any amendments thereto reflected in subsequent filings with the Securities and Exchange Commission (the “SEC”). Any of these risks 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 T3 Defense 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, the Company, through its subsidiaries, is a strategic acquirer and operator of aerospace and defense (A&D) businesses. We are building a portfolio of mission-critical suppliers and advanced technology companies and strategic infrastructure opportunities across the defense, aerospace, and advanced manufacturing sectors across the United States, Israel and Europe. Following the appointment in September 2024 of Menachem Shalom, our current chief executive officer and a director, we are positioning the Company as a strategic platform company focused on acquiring, integrating, and scaling high-impact businesses in the aerospace and defense industries. Our strategy 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.
1
Recent Developments
Annual Meeting
On August 5, 2026, the Company held its annual meeting of stockholders for the calendar year 2026 (the “Annual Meeting”). As of the record date of July 9, 2026 (the “Record Date”), 126,311,902 shares of common stock, $0.0001 par value per share (the “Common Stock”), were issued and outstanding and entitled to vote at the Annual Meeting. The number of shares of Common Stock present or represented by valid proxy at the Annual Meeting was 66,928,688 shares of Common Stock, representing a quorum.
The number of shares issued and outstanding as of the Record Date and the number present or represented by proxy at the Annual Meeting are not reflective of the 1:125 reverse stock split effective July 20, 2026.
The stockholders voted on and approved the following proposals at the Annual Meeting:
| 1. | Election of four directors to hold office until the 2027 annual meeting of stockholders of the Company and until their respective successors have been duly elected and qualified. The Company’s nominees were Menachem Shalom, Shiran Fridman, Tomer Nagar and Asaf Nachum. |
| 2. | Ratification of the appointment of Somekh Chaikin, a member firm of KPMG International, as the Company’s independent external auditors for the fiscal year ending December 31, 2026 and to authorize the Company’s Board of Directors to fix their remuneration. |
| 3. | Approval and adoption of the 2026 Evergreen Equity Incentive Plan and the initial authorization of 176,000 post-split shares of common stock for issuance thereunder, with such number to increase 8% annually. |
Reverse Stock Split
The Company approved a reverse stock split of its issued and outstanding shares of common stock (“Common Stock”), at a ratio of 1-for-125 (the “Reverse Stock Split”). The Reverse Stock Split was duly approved in a special meeting of the stockholders held on June 24, 2026. On July 16, 2026, the Company filed with the Secretary of State of the State of Delaware the Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) to effect the Reverse Stock Split. The Reverse Stock Split became effective as of 12:01 a.m., Eastern Time, on July 20, 2026, and the Company’s Common Stock began trading on the Nasdaq Stock Market on a split-adjusted basis when the market opened on July 20, 2026.
The Company implemented the Reverse Stock Split to raise the per share bid price of the Company’s Common Stock above $1.00 per share and bring the Company back into compliance with Nasdaq Listing Rule 5550(a)(2). The Company regained compliance on July 31, 2026, once the Company’s Common Stock had traded at or above $1.00 for ten consecutive trading days.
The Reverse Stock Split became effective on July 20, 2026 (the “Effective Date”) and began trading on a split-adjusted basis at the commencement of trading on the Effective Date, under the Company’s existing trading symbol “DFNS.” The new CUSIP number for the Common Stock following the Reverse Stock Split is 67054R302.
On the Effective Date, the total number of shares of Common Stock held by each stockholder of the Company were exchanged for the number of shares of Common Stock equal to the number of issued and outstanding shares of Common Stock held by each such stockholder immediately prior to the Reverse Stock Split, divided by one hundred twenty-five (125), with such resulting number of shares rounded up to the nearest whole share. As a result, no fractional shares were issued in connection with the Reverse Stock Split and no cash or other consideration was be paid in connection with any fractional shares that would otherwise have resulted from the Reverse Stock Split. The Company did round up fractional shares at the beneficial level and instead round up any such fractional shares up at the participant level. Also on the Effective Date, all equity awards outstanding immediately prior to the Reverse Stock Split were adjusted to reflect the Reverse Stock Split.
The Reverse Stock Split was effected pursuant to the Company’s filing of the Certificate of Amendment with the Secretary of State of the State of Delaware.
The Company is authorized to issue 500,000,000 shares of Common Stock and 10,000,000 shares of preferred stock (the “Preferred Stock”). There was no change to the number of authorized capital stock of the Company or to the rights limitations and privileges, including voting rights, of the Company’s designated and outstanding shares of Preferred Stock. The Reverse Stock Split had no effect on the par value of the Common Stock or the Preferred Stock.
Immediately after the Reverse Stock Split, each Common Stockholder’s percentage ownership interest in the Company’s Common Stock and proportional voting power of the Company’s Common Stock remained unchanged, except for minor changes and adjustments that will result from the treatment of fractional shares. The rights and privileges of the holders of shares of Common Stock remain unaffected by the Reverse Stock Split.
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Acquisition of Project 35
On July 6, 2026, T3 acquired 60% of the outstanding equity capital of Project 35, an Israeli corporation (“Project 35”) on a fully diluted basis. In consideration for the 60 ordinary shares of Project 35, the Company issued 168,479 shares of common stock and a $1,250,000 note for the shares of Project 35. The note bears interest at the rate of 12% and matures July 5, 2027. The Company also has an obligation to provide Project 35 with funding of $2,500,000 for its operations during the next 12 months.
Project35 is a trusted supplier to the region’s leading defense organizations, including Israel Aerospace Industries (IAI), ELTA Systems, Rafael Advanced Defense Systems, and Elbit Systems, as well as the Israel Ministry of Defense. Project35’s unmanned aerial platforms are field-proven and already in active operational use. Over the past three and a half years, Project 35 has focused on developing the HY-380, an autonomous, man-portable aerial interceptor designed to neutralize hostile drones within seconds of detection using a dual-sensor guidance system that combines RF and optical AI tracking. The interceptor has recently completed a series of successful initial live-fire field trials, validating its performance and accuracy for high-intensity conflict environments. Project35’s aerial platforms range from heavy-lift multirotor cargo drones and long-endurance fixed-wing VTOL aircraft for intelligence, surveillance, and reconnaissance to high-speed, AI-guided tactical FPV systems. Complementing these is a dedicated counter-UAV suite comprising the HY-380 autonomous interceptor, radar and GNSS countermeasure systems, RF jamming and direction-finding, and cybersecure, anti-jam mesh data links. The company’s systems are built from composite materials and aerospace-grade structures, hold AS9100 aviation quality certification, and are engineered to Western supply-chain standards, including Blue UAS and NDAA compliance.
Appointment of CFO
On June 11, 2026, the Board of Directors (the “Board”) of the Company, appointed Roy Cohen as the Chief Financial Officer, to serve at the discretion of the Board, until his successor is duly appointed and qualified, with such appointment being effective as of June 1, 2026. Mr. Cohen brings over 25 years of extensive financial leadership in global public and private organizations. From 2023 to the present, Mr. Cohen served as a Senior Financial Consultant, advising boards and executive management on financial infrastructure and corporate governance. Previously, he served as Chief Financial Officer of Pangaya Ltd. from 2022 to 2023, and as VP Finance and Chief Controller of Cintec Media Ltd. from 2020 to 2022. Notably, Mr. Cohen has extensive experience with NASDAQ-listed companies and US GAAP reporting standards. He served as the Global Chief Controller at Orbotech Ltd. (NASDAQ: ORBK), a global technology leader with over $1 billion in annual revenue. In this capacity, he was responsible for consolidated financial reporting under US GAAP and oversaw the company’s global Sarbanes-Oxley (SOX) compliance and internal control frameworks. Mr. Cohen is a Certified Public Accountant and holds a B.A. in Business Administration (Accounting and Finance) from the College of Management Academic Studies. Mr. Cohen will receive NIS 55,000 per month until September 2026, at which time he will receive NIS 65,000 per month thereafter.
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 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.”
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.
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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.
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.
On July 27, 2026, BiomX and Water IO entered into Amendment No. 1 and Waiver, dated as of July 24, 2026, to the Note (the “Amendment”) pursuant to which (i) the maturity date of the Note was extended from July 10, 2026 to November 1, 2026; (ii) the Company agreed to pay $250,000 of principal within two business days after execution of the Amendment, and the remaining principal in four equal monthly installments of $250,000 each on August 1, September 1, October 1 and November 1, 2026, with the outstanding balance continuing to bear interest at the short-term Applicable Federal Rate payable with the final installment; (iii) in full satisfaction of interest accrued through the date of the Amendment and as consideration for the delay in payment and the waiver and extension, BiomX agreed to issue to Water IO 800,000 restricted shares of common stock, subject to clearance of an additional listing application with the NYSE American and written confirmation by each party of its corporate approvals, with an August 31, 2026 longstop after which such amount is payable in cash and no shares will be issued; and (iv) Water IO irrevocably waived, retroactively to the original maturity date, any default, event of default or right of acceleration arising from the non-payment of the Note at its original maturity date, and confirmed that the Note has not been accelerated.
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.
Results of Operations
Comparison For the Six Months Ended June 30, 2026 Versus the Six Months Ended June 30, 2025
Revenues
For the six months ended June 30, 2026 we had revenues of $7,649,000, as compared to revenues of $0 for the six months ended June 30, 2025.
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Cost of Revenues and Gross Profit
For the six months ended June 30, 2026, cost of revenues was $6,265,000 and gross profit was $1,384,000, as compared to $0 for the six months ended June 30, 2025.
Operating Expenses
For the six months ended June 30, 2026 we had operating expenses of $8,573,000, as compared to operating expenses of $2,555,000 for the six months ended June 30, 2025. Operating expenses consisted of research and development expenses $622,000, selling and marketing expenses $341,000, and general and administrative expenses $7,121,000, as well as general and administrative expenses of consolidated variable entities of $489,000.
Other Income (Expense)
For the six months ended June 30, 2026, we had total other expense, net, of $104,902,000, as compared to total other income, net, of $108,933,000 for the six months ended June 30, 2025. The change was driven primarily by a loss of $107,641,000 from the change in fair value of stock purchase warrant liabilities in 2026, compared with a gain of $109,406,000 on the same item in 2025.
Net Income (Loss)
For the six months ended June 30, 2026, we had a net loss of $107,780,000, as compared to net income of $105,977,000 for the six months ended June 30, 2025. Net loss attributable to the Company’s stockholders for the six months ended June 30, 2026 was $109,634,000.
Comparison of the Three Months Ended June 30, 2026 to the Three Months Ended June 30, 2025
Revenues
For the three months ended June 30, 2026 we had revenues of $3,996,000, as compared to revenues of $0 for the three months ended June 30, 2025.
Cost of Revenues and Gross Profit
For the three months ended June 30, 2026, cost of revenues was $2,983,000 and gross profit was $1,013,000, as compared to $0 for the three months ended June 30, 2025.
Operating Expenses
For the three months ended June 30, 2026 we had operating expenses of $4,391,000, as compared to operating expenses of $1,048,000 for the three months ended June 30, 2025. Operating expenses consisted of research and development expenses $348,000, selling and marketing expenses $184,000, and general and administrative expenses $3,593,000, as well as general and administrative expenses of consolidated variable entities of $266,000.
Other Income (Expense).
For the three months ended June 30, 2026, we had total other expense, net, of $82,504,000, as compared to total other income, net, of $4,285,000 for the three months ended June 30, 2025. The change was driven primarily by a loss of $81,006,000 from the change in fair value of stock purchase warrant liabilities.
Net Income (Loss)
For the three months ended June 30, 2026, we had a net loss of $81,429,000, as compared to net income of $3,019,000 for the three months ended June 30, 2025. Net loss attributable to the Company’s stockholders for the three months ended June 30, 2026 was $82,487,000.
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Liquidity and Capital Resources
As of June 30, 2026, we had $21,242,000 of current assets, including $4,085,000 of cash and cash equivalents. Based on management’s current expectations, we anticipate that we will need approximately $5,000,000 for the next 12 months of operations.
At June 30, 2026, the Company had negative working capital of approximately $131 million (of which $124 million consists of stock purchase warrant liabilities that do not require cash settlement) and a stockholders’ deficit of $19 million as of June 30, 2026; For the six months ended June 30, 2026, the Company reported a net operating loss of $7.2 million, and $3.4 million for the three months ended June 30, 2026, and net cash used in operations of $9.8 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 $4.1 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; (v) the option to satisfy certain obligations through issuance of equity in lieu of cash; and (vi) management's plans to conduct efficiency measures and cost reduction steps in certain subsidiaries.
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 by November 2026 with monthly installment payments, 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. 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.
Cash Flows
The following summarizes the key components of our cash flows for the six months ended June 30, 2026 and June 2025:
For the six months ended June 30, 2026, net cash used in operating activities was $9,781,000, net cash used in investing activities was $4,443,000 and net cash provided by financing activities was $15,353,000. For the six months ended June 30, 2025, net cash used in operating activities was $2,694,000, net cash used in investing activities was $1,515,000 and net cash used in financing activities was $878,000.
Cash Flows from Operating Activities
Net cash used in operating activities was $9,781,000 for the six months ended June 30, 2026, as compared to $2,694,000 for the six months ended June 30, 2025. The change was primarily attributable to the net loss of $107,780,000, offset by non-cash items, principally the $102,231,000 change in fair value of warrant and convertible note instruments, $1,907,000 of stock-based compensation, $3,111,000 of interest earned on marketable securities held in the trust account and a $1,744,000 gain on the sale of a subsidiary, together with changes in operating assets and liabilities, including inventory of $916,000 and trade receivables of $255,000.
Cash Flows from Investing Activities
Net cash used in investing activities was $4,443,000 for the six months ended June 30, 2026, as compared to $1,515,000 for the six months ended June 30, 2025. Cash used in 2026 consisted primarily of $4,476,000 used in the purchase of subsidiaries, $1,112,000 relating to the deconsolidation of a subsidiary and $180,000 of payments for property and equipment, partially offset by $1,138,000 of cash acquired in a subsidiary purchase and $239,000 of investments in short-term securities.
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Cash Flows from Financing Activities
Net cash provided by financing activities was $15,353,000 for the six months ended June 30, 2026, as compared to net cash used in financing activities of $878,000 for the six months ended June 30, 2025. Cash provided in 2026 consisted primarily of $10,000,000 of net proceeds from the sale of SPAC units and private placement units and $8,073,000 of proceeds from the ELOC, partially offset by $2,543,000 of repayments of notes payable, $455,000 of repayments of short-term bank credit and $288,000 of dividend payments.
Seasonality
The Company’s business is not subject to seasonality.
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 2. Summary of Significant Accounting Policies of the Notes to our consolidated financial statements included in Part II, Item 8 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.
Recently Issued Accounting Pronouncements
For information about recently issued accounting standards, refer to Note 2 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 June 30, 2026 and December 31, 2025, it would not have a material impact on our financial results.
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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.
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 principal executive officer and our principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” as of June 30, 2026, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Based on the evaluation of our disclosure controls and procedures as of June 30, 2026, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedure, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedure relative to their costs.
Item 5. Other
None.
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Part II - Other Information
Item 1. Legal Proceedings
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 26 Capital, Inc., 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. A mediation assessment conference is scheduled for September 22, 2026 to assess whether the matter is ripe for mediation.
Item 1A. Risk Factors
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
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.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the quarter ended
June 30, 2026, no director or officer
On August 11, 2026, Roy Cohen, our Chief Financial Officer as of June 11, 2026, announced that he will be resigning as of September 10, 2026. Mr. Cohen’s resignation was not the result of any dispute or disagreement relating to the Company’s operations, policies or practices.
Availability of Information
T3 Defense’s website address is www.t3dfns.com. Investors and others should note that the Company announces material information to its investors using SEC filings, press releases, its investor relations website, public conference calls, webcasts and certain social media channels, including the following LinkedIn account: https://www.linkedin.com/in/mennyshalom/. The Company uses these channels to communicate with investors, customers and the public about the Company, its products and other issues and for complying with its disclosure obligations under Regulation FD. The information on, or that may be accessed through, T3’s website is not incorporated by reference into this Quarterly Report on Form 10-Q and should not be considered a part of this Quarterly Report on Form 10-Q.
Item 6. Exhibits
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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.
Date: August 18, 2026
| By: | /s/ Menachem Shalom | |
| Menachem Shalom | ||
| Chief Executive Officer (Principal Executive Officer) |
| By: | /s/ Roy Cohen | |
| Roy Cohen | ||
| Chief Financial Officer (Principal Financial and Accounting Officer |
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