T3 Defense Inc 8-K/A, filed Apr 1, 2026
T3 Defense Inc. (DFNS)
About this 8-K/A
T3 Defense Inc filed this 8-K/A on April 1, 2026, reporting on events of February 16, 2026.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
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. ☐
EXPLANATORY NOTE
This Amendment No. 1 should be read in conjunction with the Initial 8-K. Except as set forth herein, no modifications have been made to information contained in the Initial 8-K, and the Company has not updated any information contained therein to reflect events that have occurred since the date of the Initial 8-K. The pro forma financial information included as Exhibit 99.2 to this Amendment No. 1 has been presented for informational purposes only, as required by Form 8-K, and is not necessarily indicative of the financial position or results of operations that would have been realized if the Acquisition had been completed on the dates set forth therein, nor is it indicative of the future results or financial position of the combined company.
Forward-Looking Statements
This Amendment No. 1 may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the 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”), and other related laws, which relate to future events and are subject to risks and uncertainties. The forward-looking statements, which address the Company’s expected business and financial performance and financial condition, among other matters, may contain words and terms such as: “believe,” “could,” “estimate,” “expect,” “may,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” or “would” and other words and terms of similar meaning. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about expected earnings, revenues, growth, liquidity, and other matters. A further description of these uncertainties and other risks can be found in the Company’s filings with the Securities and Exchange Commission. These or other uncertainties could cause the Company’s actual future results to be materially different from those expressed in any forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements except as required by law.
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Item 9.01. Financial Statements and Exhibits.
| (a) | Financial statements of businesses or funds acquired |
The audited combined financial statements of ITS as of and for the years ended December 31, 2024 and 2023 and the related notes thereto, and the interim unaudited condensed consolidated financial statements as of September 30, 2025, are filed as Exhibit 99.1 hereto and incorporated herein by reference.
| (b) | Pro forma financial information |
The unaudited pro forma condensed combined financial information of T3 Defense Inc. giving effect to the acquisition of 51% of ITS, which includes the unaudited pro forma condensed combined balance sheet as of September 30, 2025 and the unaudited pro forma condensed combined statement of income for the nine month period ended September 30, 2025, is filed as Exhibit 99.2 hereto and incorporated herein by reference.
(d) Exhibits
| Exhibit No. | | Document Description |
| 99.1 | Audited combined financial statements of ITS as of and for the years ended December 31, 2024 and 2023 and the related notes thereto and interim unaudited condensed consolidated financial statements as of September 30, 2025. | |
| 99.2 | Unaudited pro forma condensed combined financial information. | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
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SIGNATURE
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.
| T3 DEFENSE INC. | ||
| Date: April 1, 2026 | By: | /s/ Menachem Shalom |
| Name: | Menachem Shalom | |
| Title: | Chief Executive Officer | |
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Exhibit 99.1
I.T.S. Industrial Techno-Logic Solutions Ltd.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2024
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I.T.S. Industrial Techno-Logic Solutions Ltd.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2024
TABLE OF CONTENTS
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Somekh Chaikin
17 Ha’arba’a Street, PO Box 609
KPMG Millennium Tower
Tel Aviv 6100601, Israel
+972 3 684 8000
To the Shareholders and the Board of Directors of
I.T.S. Industrial Techno-Logic Solutions Ltd.
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of I.T.S. Industrial Techno-Logic Solutions Ltd. and its subsidiary (the Company), which comprise the consolidated balance sheets as of December 31, 2024 and 2023, and the related consolidated statements of comprehensive loss, changes in shareholders’ deficit and cash flows for the years then ended, and the related notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Substantial Doubt About the Entity’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1C to the financial statements, the Company has incurred significant losses and negative cash flows from operations and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1C. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Responsibilities of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
KPMG Somekh Chaikin, an Israeli partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee
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Somekh Chaikin
17 Ha’arba’a Street, PO Box 609
KPMG Millennium Tower
Tel Aviv 6100601, Israel
+972 3 684 8000
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the consolidated financial statements are available to be issued.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with GAAS, we:
| ● | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| ● | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. |
| ● | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. |
| ● | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. |
| ● | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Somekh Chaikin
Member Firm of KPMG International
Tel Aviv, Israel
March 30, 2026
KPMG Somekh Chaikin, an Israeli partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee
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I.T.S. Industrial Techno-Logic Solutions Ltd.
CONSOLIDATED BALANCE SHEETS
(USD in thousands except share and per share data)
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | 1,229 | 1,788 | ||||||
| Short term bank deposits | 39 | 29 | ||||||
| Restricted cash | 14 | 14 | ||||||
| Accounts receivable | 340 | 1,015 | ||||||
| Inventory (Note 3) | 2,796 | 4,981 | ||||||
| Other current assets (Note 4) | 324 | 491 | ||||||
| Total Current Assets | 4,742 | 8,318 | ||||||
| Operating lease right-of-use asset and lease deposit (Note 5) | 2,898 | 3,352 | ||||||
| Property and equipment, net | 120 | 214 | ||||||
| Total Assets | 7,760 | 11,884 | ||||||
| Liabilities and Shareholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Short term loans (Note 6) | 2,142 | 2,432 | ||||||
| Accounts payable (Note 7) | 1,507 | 1,958 | ||||||
| Operating lease liability (Note 5) | 738 | 769 | ||||||
| Other current liabilities (Note 8) | 3,919 | 3,300 | ||||||
| Total current liabilities | 8,306 | 8,459 | ||||||
| Long term loans from Banks (Note 9) | 917 | 722 | ||||||
| Long term loans from Related Party (Note 9) | 987 | 993 | ||||||
| Operating lease liability (Note 5) | 2,205 | 2,620 | ||||||
| Total Liabilities | 12,415 | 12,794 | ||||||
| Shareholders’ Deficit (Note 10) | ||||||||
| Common stock of NIS 1 par value each (“Common Stock”): 38,000 shares authorized as of December 31, 2024 and 2023; issued and outstanding 200 shares as of December 31, 2024 and 2023. | (*) | (*) | ||||||
| Additional paid-in capital | 740 | 740 | ||||||
| Other comprehensive loss | (355 | ) | (274 | ) | ||||
| Accumulated deficit | (5,040 | ) | (1,379 | ) | ||||
| Total Shareholders’ Deficit | (4,655 | ) | (910 | ) | ||||
| Total liabilities and Shareholders’ Deficit | 7,760 | 11,884 | ||||||
| (*) | represents amount less than $1. |
| March 30, 2026 | ||
| Date of approval |
The accompanying notes are an integral part of the consolidated financial statements.
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I.T.S. Industrial Techno-Logic Solutions Ltd.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(USD in thousands, except share and per share data)
| Year ended | ||||||||
| December 31 | ||||||||
| 2024 | 2023 | |||||||
| Revenues | 8,867 | 15,953 | ||||||
| Cost of revenues (Note 11) | (10,384 | ) | (16,435 | ) | ||||
| Gross loss | (1,517 | ) | (482 | ) | ||||
| Selling, general and administrative expenses (Note 12) | (1,729 | ) | (1,988 | ) | ||||
| Operating loss | (3,245 | ) | (2,470 | ) | ||||
| Other Income (Note 13) | 7 | 440 | ||||||
| Financial expenses, net | (412 | ) | (286 | ) | ||||
| Net Loss | (3,664 | ) | (2,316 | ) | ||||
| Translation to presentation currency | (81 | ) | (59 | ) | ||||
| Total comprehensive loss | (3,746 | ) | (2,257 | ) | ||||
The accompanying notes are an integral part of the consolidated financial statements.
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I.T.S. Industrial Techno-Logic Solutions Ltd.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(USD in thousands, except share and per share data)
| Number of Shares | Amount | Additional paid-in capital | Other Comprehensive Loss | Accumulated deficit | Total stockholders’ deficit | |||||||||||||||||||
| BALANCE AT DECEMBER 31, 2022 | 200 | -(*) | 740 | (215 | ) | 940 | 1,465 | |||||||||||||||||
| Other comprehensive loss | - | - | - | (59 | ) | - | (59 | ) | ||||||||||||||||
| Loss for the year | - | - | - | (2,316 | ) | (2,316 | ) | |||||||||||||||||
| BALANCE AT DECEMBER 31, 2023 | 200 | -(*) | 740 | (274 | ) | (1,376 | ) | (910 | ) | |||||||||||||||
| Other comprehensive loss | - | - | - | (81 | ) | - | (81 | ) | ||||||||||||||||
| Loss for the year | - | - | - | - | (3,664 | ) | (3,664 | ) | ||||||||||||||||
| BALANCE AT DECEMBER 31, 2024 | 200 | -(*) | 740 | (355 | ) | (5,040 | ) | (4,655 | ) | |||||||||||||||
| (*) | represents amount less than $1. |
The accompanying notes are an integral part of the consolidated financial statements.
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I.T.S. Industrial Techno-Logic Solutions Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(USD in thousands, except share and per share data)
| Year ended | ||||||||
| December 31 | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss for the year | (3,664 | ) | (2,316 | ) | ||||
| Adjustments required to reconcile net loss for the year to net cash used in operating activities: | ||||||||
| Depreciation | 58 | 73 | ||||||
| Interest expenses | 5 | 3 | ||||||
| Change in liability for employee rights upon retirement | - | (35 | ) | |||||
| Change in right of use asset | 808 | 774 | ||||||
| Change in lease liability | (809 | ) | (764 | ) | ||||
| Decrease in accounts receivable | 654 | 2,592 | ||||||
| Decrease in inventory | 2,141 | 636 | ||||||
| Decrease (increase) in other current assets | 150 | (136 | ) | |||||
| Decrease in accounts payable | (444 | ) | (1,996 | ) | ||||
| Increase in other liabilities | 612 | 1,578 | ||||||
| Net cash provided by (used in) operating activities | (489 | ) | 409 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (27 | ) | (61 | ) | ||||
| Proceeds from sale property and equipment | 62 | - | ||||||
| Increase in short term bank deposit | (10 | ) | - | |||||
| Net cash provided by (used in) investment activities | 25 | (61 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Long-term loans from banking institutions | 752 | 550 | ||||||
| Repayment of loans from banking institutions | (502 | ) | (481 | ) | ||||
| Short-term credit from banking institutions, net | (335 | ) | 328 | |||||
| Net cash provided by (used in) financing activities | (85 | ) | 396 | |||||
| Exchange Rate Changes on Cash and Cash Equivalents | (10 | ) | (35 | ) | ||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (559 | ) | 710 | |||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR | 1,802 | 1,092 | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR | 1,243 | 1,802 | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non cash transactions: | ||||||||
| Initial recognition of operating lease right-of-use assets and liabilities | 213 | 264 | ||||||
| Cash transactions: | ||||||||
| Interest | 228 | 191 | ||||||
| Taxes | 42 | 30 | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
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I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 1 – GENERAL
| A. | I.T.S. Industrial Techno-Logic Solutions Ltd. (the “Company”) is an Israeli-based company engaged in the design, development, and serial production of fully integrated electro-mechanical systems and sophisticated assembly lines. |
The Group’s operations are conducted by the Company and its wholly-owned subsidiary, Positech, which specializes in the design and manufacture of high-performance motion control systems for both defense and commercial applications.
The Group provides a comprehensive “One-Stop-Shop” engineering and manufacturing solution, ranging from advanced R&D to the production of custom-made prototypes and OEM systems in small to medium-sized series. Its capabilities encompass a multi-disciplinary approach, integrating Mechanical, Electrical, Hardware (HW), Software (SW), and Firmware (FW) engineering. These services are delivered through both “Build to Spec” (development based on customer requirements) and “Build to Print” (manufacturing based on existing customer designs) models.
| B. | On October 7, 2023, Hamas launched a series of attacks on civilian and military targets in Southern Israel and Central Israel, to which the Israel Defense Forces have responded. In addition, both Hezbollah and the Houthi movement have attacked military and civilian targets in Israel, to which Israel has responded, including through increased air and ground operations in Lebanon. In addition, the Houthi movement has attacked international shipping lanes in the Red Sea, to which both Israel and the United States have responded. Further, on April 13, 2024 and October 1, 2024, Iran launched a series of drone and missile strikes against Israel, to which Israel has responded. Most recently, on June 13, 2025, Israel launched a preemptive attack on Iran, to which Iran responded with ballistic missile and drone attacks. |
On June 23, 2025, Israel and Iran agreed to a ceasefire, although there is no assurance that the ceasefire will continue.
On October 9, 2025, Israel, Hamas, the United States and other countries in the region agreed to a framework for a ceasefire in Gaza between Israel and Hamas. How long and how severe the current conflicts in Gaza, Northern Israel, Lebanon, Iran or the broader region become is unknown at this time and any continued clash among Israel, Hamas, Hezbollah, Iran or other countries or militant groups in the region may escalate in the future into a greater regional conflict. To date, the Company’s operations have not been materially affected. the Company expects that the current conflict in the Gaza Strip, Lebanon, Iran and the broader region, as well as the security escalation in Israel, will not have a material impact on the Company’s business results in the short term. However, since these are events beyond the Company’s control, their continuation or cessation may affect the Company’s expectations. The Company continues to monitor political and military developments closely and examine the consequences for the Company’s operations and assets.
| C. | The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2024, the Company had $1,229 in cash and cash equivalents, $3,564 in negative working capital, shareholder’s deficit of $4,655 and an accumulated deficit of $5,040. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. Management anticipates their business will require substantial additional investments that have not yet been secured. Management is continuing in the process of fund raising in the private equity and capital markets as the Company will need to finance future activities. These financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. See also note 16. |
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I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
| A. | Use of estimates in the preparation of financial statements |
The preparation of 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. As applicable to these financial statements, the most significant estimates and assumptions relate to revenue recognition, valuation of accounts receivable and inventories. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Actual results could differ from those estimates.
| B. | Functional currency |
The functional currency of the Company and its subsidiary is the New Israel Shekel (“NIS”). Most of the Company’s costs are denominated and determined in NIS. Management believes that the NIS is the currency in the primary economic environment in which the Company operates. Thus, the functional currency of the Company is the NIS.
The financial statements are presented in US dollars.
The records of the operations were maintained in NIS and translated to the US dollar as follows: assets and liabilities are translated using the balance sheet period-end date exchange rate. Expenses and income are translated using the weighted average exchange rates for the reporting period. The net exchange difference that arises from the translation as described above, is recorded as a foreign currency translation reserve and presented in equity. The periodic changes in the foreign currency translation reserve are recorded as other accumulated comprehensive income (loss).
| C. | Cash and cash equivalents and Restricted cash |
Cash equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired.
Restricted cash as of December 31, 2024 and 2023 included a $14 collateral account for guarantees issued by the bank in favor of the Company towards vendors and tenders the Company participated in.
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I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)
| D. | Inventories |
Substantially all of the Company’s inventory consists of raw materials. The 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 moving average inventory policy or specific cost. The Company does not hold finished goods as inventory.
Inventory write-downs are recorded at the end of each fiscal period for damaged, obsolete, excess and slow-moving inventory. These write-downs, to the lower of cost or net realizable value, create a new cost basis that is not subsequently marked up based on changes in underlying facts and circumstances.
| E. | Accounts Receivable |
The Company manages credit risk associated with accounts receivable at the customer level.
Pursuant to ASC Topic 326, the Company maintains an allowance for doubtful accounts that reflects the estimate of expected credit losses. The allowance is estimated using a loss-rate model based on delinquency. The estimated loss rate is based on the Company’s historical experience with specific customers, understanding of the current economic circumstances, reasonable and supportable forecasts, and the Company’s own judgment as to the likelihood of ultimate payment based upon available data. The actual rate of future credit losses, however, may not be similar to past experience. The estimate of doubtful accounts could change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, the Company may be required to increase or decrease its allowance for doubtful accounts.
| F. | Property, plant and equipment, net |
| 1. | Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. When an asset is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition is reflected in the Statements of Comprehensive Loss. |
| 2. | Rates of depreciation: |
| % | ||||
| Furniture and office equipment | 7-15 | |||
| Computers | 33 | |||
| Vehicles | 15 | |||
| G. | Impairment of long-lived assets |
The Company’s long-lived assets are reviewed for impairment in accordance with ASC Topic 360, “Property, Plant and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. No impairment expenses were recorded during the years ended December 31, 2024 and 2023.
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i.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)
| H. | Fair Value |
Fair value of certain of the Company’s financial instruments including cash, accounts payable, accrued expenses, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
Fair value, as defined by ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise.
Valuation techniques are generally classified into three categories: (i) the market approach; (ii) the income approach; and (iii) the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
Fair value measurements are required to be disclosed by the level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), (ii) segregating those gains or losses included in earnings, and (iii) a description of where those gains or losses included in earning are reported in the statement of operations.
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i.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)
| I. | Concentrations of credit risk |
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable, as well as certain other current assets that do not amount to a significant amount. Cash and cash equivalents, which are primarily held in US Dollars and NIS, are deposited with major banks in Israel. Management believes that such financial institutions are financially sound and, accordingly, minimal credit risk exists with respect to these financial instruments.
The Company performs ongoing credit evaluations of the financial condition of its customers. The risk of collection associated with trade receivables is reduced by the large number of the Company’s customer base.
The Company does not have any significant off-balance-sheet concentration of credit risk, such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
| J. | Contingencies |
The Company records accruals for loss contingencies arising from claims, litigation and other sources when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Legal costs incurred in connection with loss contingencies are expensed as incurred.
| K. | Leases |
The Company determines if an arrangement is or contains a lease at contract inception.
Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Group’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company generally uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in statement of comprehensive loss. For lease agreements, the Company has elected the practical expedient to account for the lease and non-lease maintenance components as a single lease component. Therefore, for those leases, the lease payments used to measure the lease liability include all of the fixed consideration in the contract.
F-13
I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)
| L. | Severance pay |
All the Company’s employees, besides one, have been signed on Section 14 of Israel’s Severance Compensation Law, 1963 (“Section 14”). Pursuant to Section 14, the Company’s employees, covered by this section, are entitled only to monthly deposits, at a rate of 8.33% of their monthly salary, made on their behalf by the Company. Payments in accordance with Section 14 release the Company from any future severance liabilities in respect of those employees. Neither severance pay liability nor severance pay fund under Section 14 are recorded in the Company’s balance sheets.
As to the employee that has not signed the Section 14 clause, the Company contributes the on-going contributions on monthly basis.
| M. | 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 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.
F-14
I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)
The Company provides services to customers and has related performance obligations and recognizes revenue in accordance with ASC 606. Revenues are recognized when the Company satisfies performance obligations under the terms of its contracts, and control of its services or products is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products. Control is transferred upon delivery of its services or products.
A typical contract with a customer specifies that the Company would receive an advance payment once the contract is signed, an additional payment would be made to the Company once the ordered product is manufactured and ready to be shipped to the customer and the remainder of the contract’s consideration would be made once the system is installed in the customer’s factory and its accepted by the customer.
According to ASC-606-10-50, and given the mentioned-above, once signed, the Company’s contracts are considered Contract Liability – as the Company has received the amount prior to delivering the goods to the customer. Those amounts are not recognized 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. The Company determined that the services and products provided to its customers consist of one performance obligation that is satisfied upon delivery of the products. The Company grants assurance type warranty to the products which is not considered a separate performance obligation.
| N. | 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-15
I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)
| O. | Income taxes |
Income taxes are accounted for under the asset and liability method. The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes”. Accordingly, deferred income taxes are determined based on the estimated future tax effects of differences between the financial accounting and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the enacted tax rates expected to be in effect when these differences reverse. Valuation allowances in respect of deferred tax assets are provided for, if necessary, to reduce deferred tax assets to amounts more likely than not to be realized.
The Company accounts for uncertain tax positions in accordance with ASC Topic 740-10, which prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements. According to ASC Topic 740-10, tax positions must meet a more-likely-than-not recognition threshold. The Company’s accounting policy is to classify interest and penalties relating to uncertain tax positions under income taxes, however the Company did not recognize such items in its 2024 financial statements and did not recognize any liability with respect to an unrecognized tax position in its balance sheets.
| P. | Government Grants |
Government grants are recognized when there is reasonable assurance that: (1) the Company will comply with the relevant conditions and (2) the grant disbursement will be received.
In 2023, the Company recognized other income of $ 415 from government grants, which were granted to certain entities that were negatively affected from the war condition as described in Note 1B.
| Q. | Accounting Standards Not Yet Adopted |
In June 2022, the FASB issued ASU 2022-03 (“ASU 2022-03”), ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASC 820”). ASU 2022-03 amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. ASU 2022-03 applies to both holders and issuers of equity and Equity-Linked Securities measured at fair value. The amendments in ASU 2022-03 are effective for the Company in fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company does not expect the ASU to have a material impact on its financial statements.
Income Taxes: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU add specific requirements for income tax disclosures to improve transparency and decision usefulness. The guidance in ASU 2023-09 requires that public business entities disclose specific categories in the income tax rate reconciliation and provide additional qualitative information for reconciling items that meet a quantitative threshold. In addition, the amendments in ASU 2023-09 require that all entities disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions. The ASU also includes other disclosure amendments related to the disaggregation of income tax expense between federal, state and foreign taxes.
F-16
I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continue)
For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis and retrospective application is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.
In November 2024, the FASB issued ASU No. 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The ASU improves the disclosures about a public business entity’s expense and provides more detailed information about the types of expenses in commonly presented expense captions. The amendments require that at each interim and annual reporting period an entity will, inter alia, disclose amounts of purchases of inventory, employee compensation, depreciation and amortization included in each relevant expense caption (such as cost of sales, SG&A and research and development). Amounts remaining in relevant expense captions that are not separately disclosed will be described qualitatively. Certain amounts that are already required to be disclosed under currently effective U.S GAAP will be included in the same disclosure as the other disaggregation requirements. The amendments also require disclosing the total amount of selling expenses and, in annual reporting periods, the definition of selling expenses. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.
In July 2025, the FASB issued ASU 2025-05 “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets”. The ASU introduces a practical expedient for all entities when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. Under the practical expedient, when developing reasonable and supportable forecast as part of estimating expected credit losses, an entity may assume that current conditions as of the balance sheet date do not change for the remining life of the asset. The ASU is effective for annual reporting period beginning after December 15, 2025 and interim reporting within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods. The Company is evaluating the impact of ASU 2025-05 on its consolidated financial statements if it elects to apply the practical expedient.
NOTE 3 – INVENTORIES
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Raw materials and Components | 2,655 | 2,890 | ||||||
| In process goods | 1,162 | 2,957 | ||||||
| 3,817 | 5,847 | |||||||
| Provision for inventory impairment | (1,021 | ) | (866 | ) | ||||
| 2,796 | 4,981 | |||||||
F-17
I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 4 – OTHER CURRENT ASSETS
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Prepaid expenses | 48 | 73 | ||||||
| Governmental institutions | 178 | 354 | ||||||
| Advances to suppliers | 98 | 64 | ||||||
| 324 | 491 | |||||||
NOTE 5 – LEASES
| A. | In January 2023, the Company exercised its final extension option of a lease agreement for the office space and warehouse in 5 Atir Yeda, Kefar Sava, Israel for a term of seven years. The monthly lease payments under the lease agreement are approximately NIS 166 (approximately $45). The annual discount rate as determined upon the business combination is 6%. |
In April 2023, Positech exercised its final extension option of a lease agreement for the office space and warehouse in 4 HaPeles, Haifa, Israel for a term of two years. The monthly lease payments under the lease agreement are approximately NIS 17 (approximately $5). The annual discount rate as determined upon the business combination is 6%.
| B. | The components of operating lease expense for the period ended December 31, 2024 and 2023 were as follows: |
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating lease expense | 795 | 774 | ||||||
| C. | Amounts reported in the balance sheets related to operating lease as of December 31, 2024 and 2023 are as follows: |
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating leases: | ||||||||
| Operating leases right-of-use asset | 2,898 | 3,352 | ||||||
| Current operating lease liabilities | 738 | 769 | ||||||
| Non-current operating lease liabilities | 2,205 | 2,620 | ||||||
| Total operating lease liabilities | 2,943 | 3,389 | ||||||
F-18
I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 5 – LEASES (continue)
| D. | Future minimum lease payments under non-cancellable leases as of December 31, 2024, are as follows: |
| 2025 | 769 | |||
| 2026 | 673 | |||
| 2027 | 641 | |||
| 2028 | 628 | |||
| 2029 | 606 | |||
| Total operating lease payments | 3,319 | |||
| Less: imputed interest | (376 | ) | ||
| Present value of lease liabilities | 2,943 |
| December 31, | ||||
| 2024 | ||||
| Weighted-average remaining lease term of operating leases | 4.7 Years | |||
| Weighted average discount rate of operating leases | 6 | % | ||
NOTE 6 – SHORT TERM LOANS
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Short term loans from Bank (1) | 1,785 | 2,132 | ||||||
| Long-term loan from Banks -current maturities (Note 9) | 357 | 300 | ||||||
| 2,142 | 2,432 | |||||||
| (1) | Annual interest – Prime + 1.4%-2% |
NOTE 7 – ACCOUNTS PAYABLE
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Open payables | 1,455 | 1,928 | ||||||
| Notes payable | 52 | 30 | ||||||
| 1,507 | 1,958 | |||||||
F-19
I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 8 – OTHER CURRENT LIABILITIES
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Deferred revenues | 1,636 | 1,605 | ||||||
| Advances received from customers | 1,327 | 667 | ||||||
| Employees and payroll accruals | 569 | 614 | ||||||
| Government Institutions | 2 | 25 | ||||||
| Related Party | 200 | 166 | ||||||
| Accrued expenses | 185 | 223 | ||||||
| 3,919 | 3,300 | |||||||
| Deferred revenues: | ||||||||
| 2024 | 2023 | |||||||
| Opening balance | 1,605 | 1,306 | ||||||
| New advance payments | 368 | 336 | ||||||
| Amount recognized as revenue | (334 | ) | - | |||||
| Foreign currency translation adjustment | (3 | ) | (37 | ) | ||||
| Closing balance | 1,636 | 1,605 | ||||||
NOTE 9 – LONG TERM LOANS
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Long term from bank (1) | 1,274 | 1,022 | ||||||
| Long term from controlling shareholder (2) | 987 | 993 | ||||||
| Long-term loan from Banks -current maturities | (357 | ) | (300 | ) | ||||
| 1,904 | 1,715 | |||||||
| (1) | Annual interest – Prime + 1.4%-2%. | |
| (2) | A loan of NIS 3.6 million does not bear interest and has not yet been set for repayment. |
Maturities of the loan from banks as of December 31, 2024, were as follows:
| Year ended December 31, | ||||
| 2025 | 362 | |||
| 2026 | 323 | |||
| 2027 | 233 | |||
| 2028 – 2030 | 370 | |||
| Total | 1,288 | |||
F-20
I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 10 – SHAREHOLDERS’ EQUITY
Description of the rights attached to the Shares in the Company:
The Ordinary shares confer upon their holders the right to participate and vote in the shareholders’ meetings of the Company and the right to participate in any distribution of dividends.
NOTE 11 – COST OF REVENUES
| Year ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| Materials | 4,371 | 8,840 | ||||||
| Salaries and related expenses | 4,631 | 5,696 | ||||||
| Rent | 913 | 1,065 | ||||||
| Depreciation | 13 | 19 | ||||||
| Other expenses | 456 | 815 | ||||||
| 10,384 | 16,435 | |||||||
NOTE 12 – GENERAL AND ADMINISTRATIVE EXPENSES
| Year ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| Salaries and related expenses | 739 | 953 | ||||||
| Management fee | 120 | 77 | ||||||
| Rent | 192 | 272 | ||||||
| Professional services | 165 | 162 | ||||||
| Depreciation | 45 | 54 | ||||||
| Other expenses | 468 | 470 | ||||||
| 1,729 | 1,988 | |||||||
NOTE 13 – OTHER INCOME
| Year ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| Government grants | - | 415 | ||||||
| Other expenses | 7 | 25 | ||||||
| 7 | 440 | |||||||
F-21
I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 14 – INCOME TAX
Income of the Company is taxable at corporate tax rate of 23%.
The Company and a subsidiary have not received final tax assessments since its inception although the tax reports of the Company for the years ended by December 31, 2019 are deemed to be final.
As of December 31, 2024, the Company and its subsidiary have carried forward losses for tax purposes of approximately $7,800 and $680, respectively, which can be offset against future taxable income, if any.
The following is reconciliation between the theoretical tax on pre-tax income, at the tax rate applicable to the Company (federal tax rate) and the tax expense reported in the financial statements:
| Year ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| Pretax loss | 3,664 | 2,316 | ||||||
| Statutory tax rate in Israel | 23 | % | 23 | % | ||||
| Income tax computed at the ordinary tax rate | 843 | 533 | ||||||
| Change in valuation allowance | (843 | ) | (533 | ) | ||||
| - | - | |||||||
Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:
| Year ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Deferred tax assets | ||||||||
| Carried forward losses | 1,970 | 1,110 | ||||||
| Employees accruals | 44 | 33 | ||||||
| Operating lease right-of-use asset | 667 | 771 | ||||||
| Provision for inventory impairment | 171 | 199 | ||||||
| Gross deferred tax assets | 2,852 | 2,113 | ||||||
| Deferred tax liabilities | ||||||||
| Operating lease liabilities | (667 | ) | (771 | ) | ||||
| Valuation allowance | (2,185 | ) | (1,342 | ) | ||||
| Total deferred tax assets, net | - | - | ||||||
F-22
I.T.S. Industrial Techno-Logic Solutions Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars, except share and per share data)
NOTE 15 – RELATED PARTIES
Balances with related parties:
| As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| Loans from related parties (Note 9) | 987 | 993 | ||||||
NOTE 16 – SUBSEQUENT EVENTS
On June 8, 2025, Star Twenty Six (“Star) entered into an agreement with the Company and its controlling shareholder Mr. Gera Eron, pursuant to which Star will lend to tha Company NIS 10,000,000 (approximately USD 3,000). In return Star would receive 51% of the share capital of the Company on a fully diluted basis. Pursuant to the terms of the agreement, Star was also granted an option to purchase the remainder 49% of ITS for three years from the controlling shareholder. Depending on whether the option is exercised in the first, second- or third-year hereafter, the agreed purchase price for the 49% is 25 million NIS, 30 million NIS or 35 million NIS, respectively.
As of December 31, 2025, the Star lent to the Cmpany NIS 10 million (approximately USD3,100).
On February 16, 2026, Star acquired 51% of the outstanding equity capital of the Company on a fully diluted basis. Star has a 3- year option to acquire the remainder 49% from the other shareholder of the Company.
F-23
Exhibit 99.2
T3 DEFENSE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2025
| T3 Defense Inc. | Acquisition of Star26 (*) | Transaction Adjustments (*) | Acquisition of ITS | Pro Forma Combined | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | 7,611,465 | 924,000 | $ | (3,500,000 | ) | 1,543,000 | $ | 7,299,865 | |||||||||||
| 721,400 | ||||||||||||||||||||
| Restricted Cash | - | 60,000 | - | - | 60,000 | |||||||||||||||
| Short term bank deposits | - | 119,000 | - | 43,000 | 162,000 | |||||||||||||||
| Marketable securities | - | 289,000 | - | - | 289,000 | |||||||||||||||
| Digital assets | 32,182 | - | (11,196 | ) | - | 20,986 | ||||||||||||||
| Accounts Receivable | - | 478,000 | - | 482,000 | 960,000 | |||||||||||||||
| Note receivable - related party | 4,500,000 | - | (4,500,000 | ) | - | - | ||||||||||||||
| Due from Affiliates | 243,915 | - | 243,915 | |||||||||||||||||
| Current assets from discontinued operations | - | - | - | - | - | |||||||||||||||
| Inventory | - | 1,544,000 | - | 2,871,000 | 4,415,000 | |||||||||||||||
| Other current assets | 730,894 | 412,000 | (125 | ) | 240,000 | 4,860,269 | ||||||||||||||
| Other current assets | 3,477,500 | |||||||||||||||||||
| Total current assets | 13,118,456 | 3,826,000 | (3,812,421 | ) | 5,179,000 | 18,311,035 | ||||||||||||||
| Funds in respect of employee rights upon retirement | - | 79,000 | - | - | 79,000 | |||||||||||||||
| Long-term loan to other Company | - | 2,432,000 | (2,432,000 | ) | - | - | ||||||||||||||
| Deferred taxes | - | 284,000 | - | 284,000 | ||||||||||||||||
| Intangible assets, net | 134,000 | 200,435 | - | 334,435 | ||||||||||||||||
| Goodwill | - | - | 66,416,272 | 90,859,272 | ||||||||||||||||
| 24,443,000 | ||||||||||||||||||||
| Operating lease right-of-use assets | 153,569 | 1,046,000 | - | 2,871,000 | 4,070,569 | |||||||||||||||
| Other assets from discontinued operations | - | - | - | - | ||||||||||||||||
| Property and equipment, net | 15,883 | 172,000 | - | 125,000 | 312,883 | |||||||||||||||
| Total assets | $ | 13,287,908 | 7,973,000 | $ | 84,815,286 | 8,175,000 | $ | 114,251,194 | ||||||||||||
| Liabilities and stockholders’ equity (deficit) | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Short term loans | $ | - | 1,903,000 | - | 2,295,000 | $ | 4,198,000 | |||||||||||||
| Short term loans – related party | - | 4,500,000 | - | - | 4,500,000 | |||||||||||||||
| Intercompany | - | - | - | - | - | |||||||||||||||
| Accounts payable | 87,420 | 865,000 | - | 1,689,000 | 2,641,420 | |||||||||||||||
| Convertible notes payable, net | - | - | 3,250,000 | - | 3,250,000 | |||||||||||||||
| Note Payable, net | - | - | 19,000,000 | - | 29,500,000 | |||||||||||||||
| 10,500,000 | - | |||||||||||||||||||
| Due to affiliates | 233,068 | - | - | - | 233,068 | |||||||||||||||
| Loans payable – related parties, current | 1,566,988 | - | - | - | 1,566,988 | |||||||||||||||
| Interest payable – related parties, current | 108,417 | - | - | - | 108,417 | |||||||||||||||
| Accrued expenses and other current liabilities | 816,224 | 1,630,000 | 42,091 | - | 2,488,315 | |||||||||||||||
| Accrued expenses and other current liabilities – related party | - | 548,000 | - | 3,396,000 | 3,944,000 | |||||||||||||||
| Derivative liabilities | - | - | ||||||||||||||||||
| Stock purchase warrants, liability classified | 40,740,193 | 203,000 | (3,048,532 | ) | - | 37,894,661 | ||||||||||||||
| Current liabilities from discontinued operations | - | - | - | |||||||||||||||||
| Operating lease liabilities, current portion | 78,575 | 316,000 | - | 811,000 | 1,205,575 | |||||||||||||||
| Total current liabilities | 43,630,885 | 9,965,000 | 29,743,559 | 8,191,000 | 91,530,444 | |||||||||||||||
| Liability for employees’ rights upon retirement | - | 112,000 | - | - | 112,000 | |||||||||||||||
| Loans payable - related parties, net of current portion | - | - | (2,432,000 | ) | 4,279,000 | 1,847,000 | ||||||||||||||
| Interest payable - related parties, net of current portion | - | - | - | - | - | |||||||||||||||
| Non-current liabilities from discontinued operations | - | - | ||||||||||||||||||
| Long-term loans from Banks | - | 537,000 | - | 1,277,000 | 1,814,000 | |||||||||||||||
| Operating lease liabilities | 74,994 | 752,000 | - | 2,111,000 | 2,937,994 | |||||||||||||||
| Total liabilities | 43,705,879 | 11,366,000 | 27,311,559 | 15,858,000 | 98,241,438 | |||||||||||||||
| Commitments and contingencies | ||||||||||||||||||||
| Stockholders’ equity | ||||||||||||||||||||
| Preferred stock ($0.0001 par value; 15,000,000 shares authorized; 200 shares issued and outstanding at September 30, 2025) | - | - | - | |||||||||||||||||
| Common stock ($0.0001 par value; 150,000,000 shares authorized; 11,096,264 shares issued and outstanding at September 30, 2025; on a proforma basis 29,168,154 shares issued and outstanding) | 1,110 | - | 477 | 2,917 | ||||||||||||||||
| 640 | ||||||||||||||||||||
| 386 | ||||||||||||||||||||
| 251 | ||||||||||||||||||||
| 53 | ||||||||||||||||||||
| Class A common stock, par value $0.0001 per share, 250,000,000 shares authorized and 5,075,000 shares issued and outstanding as of September 30, 2025 | - | 509 | (509 | ) | - | |||||||||||||||
| Class B common stock, par value $0.0001 per share, 50,000,000 shares authorized and 6,250,000 shares issued and outstanding as of September 30, 2025 | - | 625 | (625 | ) | - | |||||||||||||||
| Additional paid in capital | 81,047,703 | 322,868 | 35,114,271 | 740,000 | 152,860,369 | |||||||||||||||
| 24,362,316 | ||||||||||||||||||||
| 10,252,115 | ||||||||||||||||||||
| 299,749 | ||||||||||||||||||||
| 721,347 | ||||||||||||||||||||
| Other comprehensive income | (2,277 | ) | (74,000 | ) | 1,035,000 | (961,000 | ) | (2,277 | ) | |||||||||||
| Accumulated deficit | (111,464,507 | ) | (3,647,000 | ) | 11,109,000 | (7,462,000 | ) | (133,090,253 | ) | |||||||||||
| (21,325,746 | ) | |||||||||||||||||||
| (300,000 | ) | |||||||||||||||||||
| Total T3 Defense Inc. stockholders’ equity (deficit) | (30,417,971 | ) | (3,397,000 | ) | 61,268,727 | (7,683,000 | ) | 19,770,756 | ||||||||||||
| Non-controlling interest | - | 4,000 | (3,765,000 | ) | (3,761,000 | ) | ||||||||||||||
| Total stockholders’ equity (deficit) | (30,417,971 | ) | (3,393,000 | ) | 57,503,727 | (7,683,000 | ) | 16,009,756 | ||||||||||||
| Total liabilities and stockholders’ equity (deficit) | $ | 13,287,908 | 7,973,000 | $ | 84,815,286 | 8,175,000 | $ | 114,251,194 | ||||||||||||
1
T3 DEFENSE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025
| T3 Defense Inc. | Acquisition of Star26 (*) | Disposition of DRFQ (*) | Adjustments (*) | Acquisition of ITS | Pro Forma Combined | |||||||||||||||||||
| REVENUES | ||||||||||||||||||||||||
| Revenue - other | $ | - | 2,711,000 | - | $ | 4,475,000 | 7,186,000 | |||||||||||||||||
| Total revenues | - | 2,711,000 | - | - | 4,475,000 | 7,186,000 | ||||||||||||||||||
| COSTS OF REVENUES | ||||||||||||||||||||||||
| Cost of revenue - other | - | 2,355,000 | - | - | 5,377,000 | 7,732,000 | ||||||||||||||||||
| Total costs of revenues | - | 2,355,000 | - | - | 5,377,000 | 7,732,000 | ||||||||||||||||||
| GROSS PROFIT (LOSS) | ||||||||||||||||||||||||
| Gross Profit (loss) - other | - | 356,000 | - | - | (902,000 | ) | (546,000 | ) | ||||||||||||||||
| Total Gross Profit (Loss) | - | 356,000 | - | - | (902,000 | ) | (546,000 | ) | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Professional fees | 6,051,719 | 14,570,800 | 20,622,519 | |||||||||||||||||||||
| Compensation and related benefits | 365,988 | 4,243,750 | 4,609,738 | |||||||||||||||||||||
| Amortization of intangible assets | - | 63,000 | 2,500 | 65,500 | ||||||||||||||||||||
| Disposal of intangible assets | - | 1,812,000 | 1,812,000 | |||||||||||||||||||||
| Other general and administrative | 909,275 | 1,867,000 | 1,412,000 | 4,188,275 | ||||||||||||||||||||
| Other general and administrative - related party | - | 258,000 | 258,000 | |||||||||||||||||||||
| Total operating expenses | 7,326,982 | 4,000,000 | 18,817,050 | 1,412,000 | 31,556,032 | |||||||||||||||||||
| LOSS FROM OPERATIONS | (7,326,982 | ) | (3,644,000 | ) | (18,817,050 | ) | (2,314,000 | ) | (32,102,032 | ) | ||||||||||||||
| - | ||||||||||||||||||||||||
| OTHER (EXPENSE) INCOME: | - | |||||||||||||||||||||||
| Interest expense | (407,971 | ) | 423,000 | (280,000 | ) | (264,971 | ) | |||||||||||||||||
| Interest expense - related parties | (64,306 | ) | - | (64,306 | ) | |||||||||||||||||||
| Penalty - late registration | (800,000 | ) | (300,000 | ) | (1,100,000 | ) | ||||||||||||||||||
| Loss on debt extinguishment | (7,484,152 | ) | (7,484,152 | ) | ||||||||||||||||||||
| Change in fair value of liability classified stock purchase warrants | 123,369,695 | 123,369,695 | ||||||||||||||||||||||
| Change in fair value of derivative liabilities | 587,790 | 587,790 | ||||||||||||||||||||||
| Change in fair value of digital assets | (967,818 | ) | (2,511,196 | ) | (3,479,014 | ) | ||||||||||||||||||
| Gain on disposition of subsdiary | 2,491,485 | 2,491,485 | ||||||||||||||||||||||
| Day one loss on private placement | (19,605,956 | ) | (19,605,956 | ) | ||||||||||||||||||||
| Other income (expense) | 280,422 | - | 172,000 | 454,422 | ||||||||||||||||||||
| Total other income (expense), net | 97,399,189 | 423,000 | (2,811,196 | ) | (108,000 | ) | 94,904,993 | |||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | 90,072,207 | (3,221,000 | ) | (21,628,246 | ) | (2,422,000 | ) | 62,802,961 | ||||||||||||||||
| Income tax expense | - | 49,000 | - | - | 49,000 | |||||||||||||||||||
| NET INCOME (LOSS) FROM CONTINUING OPERATIONS | 90,072,207 | (3,172,000 | ) | (21,628,246 | ) | (2,422,000 | ) | 62,851,961 | ||||||||||||||||
| Net Income (loss) from discontinued operations | (460,971 | ) | - | 460,971 | - | - | ||||||||||||||||||
| Net Income (Loss) | 89,611,236 | (3,172,000 | ) | 460,971 | (21,628,246 | ) | (2,422,000 | ) | 62,851,961 | |||||||||||||||
| Net income (loss) attributable to noncontrolling interest | - | (82,000 | ) | (82,000 | ) | |||||||||||||||||||
| Net income (loss) attributable to T3 Defense Inc. | 89,611,236 | (3,090,000 | ) | 460,971 | (21,628,246 | ) | 62,767,961 | |||||||||||||||||
| Income (loss) per common share, basic: | ||||||||||||||||||||||||
| Income (loss) from continuing operations, net of tax | 14.74 | (1.20 | ) | 2.60 | ||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | (0.08 | ) | - | - | ||||||||||||||||||||
| Net income (loss) | 14.66 | (1.20 | ) | 2.60 | ||||||||||||||||||||
| Income (loss) per common share, diluted: | ||||||||||||||||||||||||
| Income (loss) from continuing operations, net of tax | 11.53 | (1.20 | ) | 2.42 | ||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | (0.06 | ) | - | - | ||||||||||||||||||||
| Net income (loss) | 11.47 | (1.20 | ) | 2.42 | ||||||||||||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||||||||||
| Basic | 6,111,279 | 18,071,890 | 24,183,169 | |||||||||||||||||||||
| Diluted | 7,813,592 | 18,071,890 | 25,885,482 | |||||||||||||||||||||
2
T3 DEFENSE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2024
| T3 Defense Inc. | Acquisition of Star26 (*) | Disposition of DRFQ (*) | Transaction Adjustments (*) | Acquisition of ITS | Pro Forma Combined | |||||||||||||||||||
| REVENUES | ||||||||||||||||||||||||
| Revenue - other | $ | - | 4,994,000 | - | 8,867,000 | $ | 13,861,000 | |||||||||||||||||
| Total revenues | - | 4,994,000 | - | - | 13,861,000 | |||||||||||||||||||
| COSTS OF REVENUES | - | |||||||||||||||||||||||
| Cost of revenue - other | - | 3,808,000 | - | - | 10,384,000 | 14,192,000 | ||||||||||||||||||
| Total costs of revenues | - | 3,808,000 | - | - | 10,384,000 | 14,192,000 | ||||||||||||||||||
| - | ||||||||||||||||||||||||
| GROSS PROFIT (LOSS) | - | |||||||||||||||||||||||
| Gross Profit (loss) - other | - | 1,186,000 | - | - | (1,517,000 | ) | (331,000 | ) | ||||||||||||||||
| Total Gross Profit (Loss) | - | 1,186,000 | - | - | (1,517,000 | ) | (331,000 | ) | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Professional fees | 7,596,190 | 7,596,190 | ||||||||||||||||||||||
| Compensation and related benefits | 1,270,799 | - | 1,270,799 | |||||||||||||||||||||
| Amortization of intangible assets | - | 74,000 | 13,333 | 87,333 | ||||||||||||||||||||
| Other general and administrative | 692,221 | 1,296,000 | 1,988,221 | |||||||||||||||||||||
| Other general and administrative | - | 307,000 | 1,729,000 | 2,036,000 | ||||||||||||||||||||
| Impairment loss | 293,413 | 293,413 | ||||||||||||||||||||||
| Total operating expenses | 9,852,622 | 1,677,000 | 13,333 | 1,729,000 | 13,271,955 | |||||||||||||||||||
| - | ||||||||||||||||||||||||
| LOSS FROM OPERATIONS | (9,852,622 | ) | (491,000 | ) | (13,333 | ) | (3,246,000 | ) | (13,602,955 | ) | ||||||||||||||
| OTHER (EXPENSE) INCOME: | ||||||||||||||||||||||||
| Interest expense | (696,826 | ) | (105,000 | ) | (412,000 | ) | (1,213,826 | ) | ||||||||||||||||
| Interest expense - related parties | (33,083 | ) | (38,000 | ) | (71,083 | ) | ||||||||||||||||||
| Loss on settlement of vendor obligations | (494,619 | ) | (494,619 | ) | ||||||||||||||||||||
| Gain on extinguishment of vendor obligations | 158,400 | 158,400 | ||||||||||||||||||||||
| Gain on extinguishment of due to affiliates | 144,052 | 144,052 | ||||||||||||||||||||||
| Gain on sale of investment | 63,759 | 63,759 | ||||||||||||||||||||||
| Day one loss on stock purchase warrants issued in connection with private placement | (13,533,404 | ) | (13,533,404 | ) | ||||||||||||||||||||
| Day one loss of stock purchase warrants issued in connection with conversion of convertible notes | (663,408 | ) | (663,408 | ) | ||||||||||||||||||||
| Change in fair value of liability classified stock purchase warrants | (140,584,780 | ) | (140,584,780 | ) | ||||||||||||||||||||
| Change in fair value of derivative liabilities | (624,888 | ) | (624,888 | ) | ||||||||||||||||||||
| Loss on reclassification of stock purchase warrants from equity-classified to liability-classified | (45,784 | ) | (45,784 | ) | ||||||||||||||||||||
| Gain on disposition of subsidiary | 2,074,600 | 2,074,600 | ||||||||||||||||||||||
| Other income (expense) | - | 55,000 | (7 | ) | 48,000 | |||||||||||||||||||
| Total other income (expense), net | (156,310,582 | ) | (88,000 | ) | 2,074,600 | (417,000 | ) | (154,740,982 | ) | |||||||||||||||
| - | ||||||||||||||||||||||||
| LOSS BEFORE INCOME TAXES | (166,163,203 | ) | (579,000 | ) | 2,061,267 | (164,680,937 | ) | |||||||||||||||||
| Income tax expense | - | 24,000 | - | 24,000 | ||||||||||||||||||||
| NET LOSS FROM CONTINUING OPERATIONS | $ | (166,163,203 | ) | (555,000 | ) | 2,061,267 | (3,665,000 | ) | (168,656,937 | ) | ||||||||||||||
| Net loss from discontinued operations | (1,013,666 | ) | - | 1,013,666 | - | |||||||||||||||||||
| NET LOSS | (167,176,869 | ) | (555,000 | ) | 1,013,666 | 2,061,267 | (3,665,000 | ) | $ | (168,956,937 | ) | |||||||||||||
| Net loss attributable to noncontrolling interest | - | 271,950 | - | - | 1,835,000 | 2,106,950 | ||||||||||||||||||
| Net loss attributable to T3 Defense Inc. | (167,176,869 | ) | (283,050 | ) | 1,013,666 | 2,061,267 | (1,830,000 | ) | (166,214,987 | ) | ||||||||||||||
| Income (loss) per common share, basic: | ||||||||||||||||||||||||
| Income (loss) from continuing operations, net of tax | $ | (33.70 | ) | 0.43 | $ | (17.34 | ) | |||||||||||||||||
| Income (loss) from discontinued operations, net of tax | $ | (0.21 | ) | - | $ | - | ||||||||||||||||||
| Net income (loss) | $ | (33.91 | ) | 0.43 | $ | (17.34 | ) | |||||||||||||||||
| Income (loss) per common share, diluted: | ||||||||||||||||||||||||
| Income (loss) from continuing operations, net of tax | $ | (33.70 | ) | 0.43 | $ | (17.34 | ) | |||||||||||||||||
| Income (loss) from discontinued operations, net of tax | $ | (0.21 | ) | - | $ | - | ||||||||||||||||||
| Net income (loss) | $ | (33.91 | ) | 0.43 | $ | (17.34 | ) | |||||||||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||||||||||
| Basic | 4,930,531 | 4,770,340 | 9,700,871 | |||||||||||||||||||||
| Diluted | 4,930,531 | 4,770,340 | 9,700,871 | |||||||||||||||||||||
| (*) | See the description of the unaudited pro forma condensed combined financial statements of the acquisition of Star in the Form S-1 filed with the Securities and Exchange Commission on February 11, 2026 (Registration No. 333-293384). |
3
T3 DEFENSE INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 - Description of Transaction
On February 16, 2026, T3 Defense Inc., a Delaware corporation (the “Company”), acquired 51% of the outstanding equity capital of I.T.S. Industrial Tecno-logic Solutions Ltd. (“ITS”) on a fully diluted basis. The Company has a 3- year option to acquire the remainder 49% from the other shareholder of ITS.
ITS is an Israeli company providing design, development, production, and manufacturing of serial, fully integrated electro-mechanical machines and sophisticated assembly lines. Positech Ltd., its wholly-owned subsidiary, designs and manufactures top-of-the-line, high-performance motion control systems for military and civilian use. ITS and Positech provide small to middle-series one-stop shop “Build to Spec” & “Build to print” custom-made prototypes and OEM systems in the mechanical, electrical, hardware, firmware and software engineering fields.
The acquisition was consummated pursuant to the terms of the Agreement dated June 8, 2025 (the “Agreement”) among Star Twenty Six Ltd., an Israeli company which is indirectly wholly-owned by the Company (“Star”), ITS and its controlling shareholder Gera Eron. As of February 15, 2026, the Company has lent ITS an aggregate of NIS 10,000,000 (approximately $3,235,500), with interest accruing at the annual rate of the Israeli Consumer Price Index plus 4%. Pursuant to the Agreement, the loans shall only be repaid after January 1, 2027 if (i) the aggregate amount of the assets of ITS will be at least 150% higher than the liabilities for at least 6 continuous months and (ii) the total aggregate amount of bank credit provided to ITS and Positech shall be lower than an aggregate of 3 months of income generated by ITS and Positech for 6 continuous months.
In consideration for the loan, Star received 51% of the share capital of ITS on a fully diluted basis. Neither Star nor the Company is required to provide any additional consideration for the ITS shares.
Pursuant to the terms of the Agreement, Star was also granted an exclusive option to purchase the remainder 49% of ITS for three years from the controlling shareholder. Depending on whether the option is exercised in the first, second or third year hereafter, the agreed purchase price for the 49% is 25 million NIS, 30 million NIS or 35 million NIS, respectively.
The unaudited pro forma condensed combined financial information is presented to illustrate the effects of the acquisition of ITS, as if it had occurred on January 1, 2024, the beginning of the most recently completed fiscal year preceding the ITS Acquisition. The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of Regulation S-X, as amended by Securities and Exchange Commission (the “SEC”) Final Rule Release No. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses and are presented to illustrate the estimated effects of the ITS Acquisition and Related Transactions.
4
The unaudited pro forma condensed combined balance sheet as of September 30, 2025 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2025 and for the year ended December 31, 2024 are based upon, derived from and should be read in conjunction with the Company’s historical unaudited condensed consolidated financial statements for the nine months ended September 30, 2025 and the Company’s historical audited consolidated financial statements for the three months ended December 31, 2024 and for the year ended September 30, 2024 (which are available in the Company’s Annual Report on Form 10-K for the three months ended December 31, 2024 and the year ended September 30, 2024, as filed with the SEC on May 8, 2025 and February 10, 2025, respectively), as amended on each of July 9, 2025 and April 14, 2025 and the unaudited historical financial statements as of September 30, 2025 and for the nine months ended September 30, 2025 of ITS and the audited historical financial statements of ITS as of and for the year ended December 31, 2024 included in this proxy statement.
The historical combined financial information has been adjusted to give pro forma effect to reflect the accounting for the ITS Acquisition in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial information have been made. The assumptions underlying the pro forma adjustments are described fully in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial information.
The ITS Acquisition is being accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations” (“ASC 805”). Under ASC 805, all assets acquired and liabilities assumed are recorded at their acquisition date fair value. The allocation of the purchase price as reflected in the unaudited pro forma condensed combined financial information is based upon management’s internally developed preliminary estimates of the fair market value of the assets acquired and liabilities assumed, as if the ITS Acquisition had occurred on the aforementioned dates. This allocation of the purchase price depends upon certain estimates and assumptions, all of which are preliminary and, in some instances, are incomplete and have been made solely for the purpose of developing the unaudited pro forma condensed combined financial information. Any adjustments to the preliminary estimated fair value amounts could have a significant impact on the unaudited pro forma condensed combined financial information contained herein, and our future results of operations and financial position.
The unaudited pro forma condensed combined financial information is not necessarily indicative of the combined financial position or results of operations that would have been realized had the ITS Acquisition occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the Company will experience after the ITS Acquisition.
Note 2 - Basis of Presentation
The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2025 was derived from the unaudited consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q (“the Q32025 Form 10-Q”) for the three and nine months ended September 30, 2025, and the unaudited historical financial statements of ITS for the nine months ended September 30, 2025, and has been prepared as if the ITS Acquisition had occurred on January 1, 2024.
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K (“the 2024 Form 10-K”) for the three months ended December 31, 2024 and for the year ended September 30, 2024, and the audited historical financial statements of ITS for the year ended December 31, 2024, and has been prepared as if the ITS Acquisition had occurred on January 1, 2024.
The unaudited pro forma condensed combined balance sheet as of September 30, 2025 combines the consolidated balance sheet included in the Q32025 Form 10-Q with the historical audited balance sheet for ITS as of September 30, 2025, and has been prepared as if the ITS Acquisition had occurred on September 30, 2025. The unaudited pro forma combined financial information herein has been prepared to illustrate the effects of the ITS Acquisition and Related Transaction in accordance with U.S. GAAP and pursuant to Article 11 of Regulation S-X.
5
The ITS unaudited historical consolidated financial statements as of and for the nine months ended September 30, 2025 and the ITS audited historical consolidated financial statements as of and for the year ended December 31, 2024 are included in this Proxy Statement. These unaudited pro forma condensed combined statements should be read in conjunction with such historical financial statements. The historical consolidated financial information has been adjusted to give pro forma effect to reflect the accounting for the ITS Acquisition in accordance with U.S. GAAP.
The Company has accounted for the ITS Acquisition under the acquisition method of accounting in accordance with the authoritative guidance on business combinations under the provisions of ASC 805. The allocation of the purchase price as reflected in the unaudited pro forma condensed combined financial information was based on a preliminary valuation of the assets acquired and liabilities assumed, and the accounting is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available. The final purchase price allocation may include changes to the amount of intangible assets, goodwill, and deferred taxes, as well as other items. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these preliminary estimates and the final purchase accounting may occur, and these differences could be material.
Assets acquired and liabilities assumed in a business combination that arise from contingencies must be recognized at fair value if the fair value can be reasonably estimated. If the fair value of an asset or liability that arises from a contingency cannot be determined, the asset or liability would be recognized in accordance with ASC 450, “Disclosure of Certain Loss Contingencies” (“ASC 450”). If the fair value is not determinable and the ASC 450 criteria are not met, no asset or liability would be recognized. Management is not aware of any material contingencies related to ITS.
The unaudited pro forma condensed combined financial information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods presented, nor is it necessarily indicative of the future results of the combined company. The unaudited pro forma combined financial information does not reflect any cost savings from future operating synergies or integration activities, if any, or any revenue, tax, or other synergies, if any, that could result from the ITS Acquisition.
6