UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2025

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

For the transition period from __________ to __________

Commission file number: 001-39341

Nukkleus Inc.

(Exact name of registrant as specified in its charter)

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

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

(Address of principal executive offices, including zip code)

212-791-4663

(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
Common Stock, $0.0001 par value per share	NUKK	The Nasdaq Stock Market LLC

Warrants, each warrant exercisable for one Share of Common Stock for $92.00 per share	NUKKW	The Nasdaq Stock Market LLC

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. Yes ☒ No ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller 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	☐
Non-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 13, 2025
Common Stock, $0.0001 par value per share		7,072,721 shares

NUKKLEUS INC.

FORM 10-Q

June 30, 2025

TABLE OF CONTENTS

		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Interim Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30, 2025 (Unaudited) and December 31, 2024	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2025 and 2024	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Six Months Ended June 30, 2025 and 2024	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Recent Sales of Unregistered Securities	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
Signatures		42

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”, “Nukkleus”, “we,” “us” or “our” refer to Nukkleus Inc. and its consolidated subsidiaries.

PART I - FINANCIAL INFORMATION

Item 1. Interim Financial Statements.

NUKKLEUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2025			2024
	(Unaudited)			(Audited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	1,519,647		$	6,897,697
Note receivable - related party		2,500,000			1,000,000
Due from affiliates		132,088			-
Other current assets		551,149			107,648
Current assets from discontinued operations		2,256,993			1,089,052

TOTAL CURRENT ASSETS		6,959,877			9,094,397

NON-CURRENT ASSETS:
Right-of-use asset, operating lease		165,228			-
Fixed assets, net		13,383			-
Other assets from discontinued operations		8,746			14,887

TOTAL NON-CURRENT ASSETS		187,357			14,887

TOTAL ASSETS	$	7,147,234		$	9,109,284

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES:
Accounts payable	$	97,157		$	69,600
Operating lease liability, current portion		76,810			-
Convertible notes payable, net		515,000			706,354
Note payable, net		-			64,399
Due to affiliates		129,037			42,471
Loans payable - related parties, current		1,566,988			619,440
Interest payable - related parties, current		94,872			-
Accrued expenses and other current liabilities		733,477			1,167,315
Stock purchase warrant liabilities		52,308,900			164,770,525
Derivative liability		-			847,753
Current liabilities from discontinued operations		4,901,164			3,162,509

TOTAL CURRENT LIABILITIES		60,423,405			171,450,366

NON-CURRENT LIABILITIES:
Operating lease liability, net of current portion		88,418
Loan payable - related parties, net of current portion		-			947,548
Interest payable - related parties, net of current portion		-			44,111
Non-current liabilities from discontinued operations		18,985			17,368

TOTAL NON-CURRENT LIABILITIES		107,403			1,009,027

TOTAL LIABILITIES		60,530,808			172,459,393

COMMITMENTS AND CONTINGENCIES - (Note 12)

STOCKHOLDERS’ DEFICIT:
Preferred stock ($0.0001 par value; 15,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2025 and December 31, 2024)		-
Common stock ($0.0001 par value; 150,000,000 shares authorized; 5,370,939 and 4,930,531 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively)		537			493
Additional paid-in capital		41,931,330			37,759,589
Accumulated deficit		(95,099,015	)		(201,075,743	)
Accumulated other comprehensive (loss) income		(216,426	)		(34,448	)

TOTAL STOCKHOLDERS’ DEFICIT		(53,383,574	)		(163,350,109	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	7,147,234		$	9,109,284

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

NUKKLEUS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2025			2024			2025			2024
REVENUES
Revenue - general support services - related party	$	-		$	-		$	-		$	-
Revenue - financial services		-			-			-			-
Total revenues		-			-			-			-

COSTS OF REVENUES
Cost of revenue - general support services - related party		-			-			-			-
Cost of revenue - financial services		-			-			-			-
Total costs of revenues		-			-			-			-

GROSS PROFIT (LOSS)
Gross profit - general support services - related party		-			-			-			-
Gross profit (loss) - financial services		-			-			-			-
Total gross profit (loss)								-			-

OPERATING EXPENSES:
Professional fees		737,937			881,947			1,692,079			2,713,694
Compensation and related benefits		71,490			25,000			135,000			55,000
Other general and administrative		238,873			122,426			728,328			345,855

Total operating expenses		1,048,300			1,029,373			2,555,407			3,114,549

LOSS FROM OPERATIONS		(1,048,300	)		(1,029,373	)		(2,555,407	)		(3,114,549	)

OTHER (EXPENSE) INCOME:
Interest expense		(207,049	)		(39,707	)		(371,625	)		(39,707	)
Interest expense - related parties		(16,920	)		(12,703	)		(50,761	)		(22,728	)
Loss on settlement of vendor obligations		-			(176,399	)		-			(176,399	)
Penalty - late registration		(800,000	)		-			(800,000	)		-
Change in fair value - convertible note embedded derivative		20,377			-			587,790			-
Change in fair value - stock purchase warrant liabilities		5,127,524			-			109,405,811			-
Unrealized gain (loss)		3,575			-			3,575			-
Realized gain (loss)		142,480			-			142,480			-
Other income (expense)		14,854			(14	)		15,572			(14	)

Total other income (expense), net		4,284,841			(228,823	)		108,932,842			(238,848	)

INCOME (LOSS) BEFORE INCOME TAXES		3,236,541			(1,258,196	)		106,377,435			(3,353,397	)

INCOME TAXES		-			-			-			-

NET INCOME (LOSS) FROM CONTINUING OPERATIONS		3,236,541			(1,258,196	)		106,377,435			(3,353,397	)
NET LOSS FROM DISCONTINUED OPERATIONS		(217,952	)		(358,045	)		(400,707	)		(692,261	)

NET INCOME (LOSS)	$	3,018,589		$	(1,616,241	)	$	105,976,728		$	(4,045,658	)

COMPREHENSIVE INCOME (LOSS):
NET INCOME (LOSS)	$	3,018,589		$	(1,616,241	)	$	105,976,728		$	(4,045,658	)
OTHER COMPREHENSIVE (LOSS) INCOME
Unrealized foreign currency translation (loss) gain		(123,213	)		(5,608	)		(181,978	)		20,974
COMPREHENSIVE INCOME (LOSS)	$	2,895,376		$	(1,621,849	)	$	105,794,750		$	(4,024,684	)

NET INCOME (LOSS) PER COMMON SHARE:
Continuing operations, basic		0.62			(0.70	)		20.40		$	(1.91	)
Discontinued operations, basic		(0.04	)		(0.20	)		(0.08	)		(0.39	)
Basic	$	0.58		$	(0.90	)	$	20.32		$	(2.31	)

Continuing operations, diluted		0.58			(0.70	)		19.02		$	(1.91	)
Discontinued operations, diluted		(0.04	)		(0.20	)		(0.07	)		(0.39	)
Diluted	$	0.54		$	(0.90	)	$	18.95		$	(2.31	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		5,246,945			1,792,610			5,215,174			1,754,449
Diluted		5,623,924			1,792,610			5,592,153			1,754,449

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

NUKKLEUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Three and Six Months Ended June 30, 2025
(Unaudited)

																Accumulated
	Preferred Stock					Common Stock				Additional						Other			Total
	Number of					Number of				Paid-in			Accumulated			Comprehensive			Stockholders’
	Shares		Amount			Shares		Amount		Capital			Deficit			Income (Loss)			Deficit

Balance as of December 31, 2024		-		$	-		4,930,531	$	493		37,759,589			(201,075,743	)		(34,448	)		(163,350,109	)

Issuance of common stock from exercise of pre-funded warrants		-			-		83,332	$	8	$	3,055,806			-			-			3,055,814

Stock-based compensation		-			-		-		-	$	177,905			-			-			177,905

Net income for the three months ending March 31, 2025		-			-		-		-		-			102,958,139			-			102,958,139

Foreign currency translation adjustment		-			-		-		-		-			-			(58,765	)		(58,765	)

Balance as of March 31, 2025		-			-		5,013,863		501		40,993,300			(98,117,604	)		(93,213	)		(57,217,016	)

Issuance of common stock in relation to settlement agreement							12,500		1		157,499			-			-			157,500

Issuance of common stock in relation to conversion of note							260,300		26		780,540			-			-			780,566

Issuance of common stock from exercise of options							84,276		9		(9	)		-			-			-

Net income for the three months ending June 30, 2025							-		-		-			3,018,589			-			3,018,589

Foreign currency translation adjustment		-			-		-		-		-			-			(123,213	)		(123,213	)

Balance as of June 30, 2025		-			-		5,370,939		537		41,931,330			(95,099,015	)		(216,426	)		(53,383,574	)

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

NUKKLEUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Three and Six Months Ended June 30, 2024

(Unaudited)

														Accumulated
	Preferred Stock				Common Stock				Additional					Other			Total
	Number of				Number of				Paid-in		Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Income (Loss)			Deficit

Balance as of December 31, 2023		-	$	-		1,737,464	$	174		35,025,036		(44,940,441	)		(31,354	)		(9,946,585	)

Stock-based compensation		-		-		-		-		74,668		-			-			74,668

Issuance of common stock as compensation for services		-		-		25,338		3		749,997		-			-			750,000

Net loss for the three months ending March 31, 2024		-		-		-		-		-		(2,429,417	)		-			(2,429,417	)

Foreign currency translation adjustment		-		-		-		-		-		-			26,582			26,582

Balance as of March 31, 2024		-	$	-		1,762,802	$	177		35,849,701		(47,369,858	)		(4,772	)		(11,524,752	)

Allocated value of warrants related to issuance of convertible debt		-		-		-		-		300,000		-			-			300,000

Allocated value of warrants related to debt issuance		-		-		-		-		40,804		-			-			40,804

Issuance of common stock to settle debt		-		-		87,500		9		500,991		-			-			501,000

Stock-based compensation		-		-		-		-		74,667		-			-			74,667

Net loss for the three months ending June 30, 2024		-		-		-		-		-		(1,616,241	)		-			(1,616,241	)

Foreign currency translation adjustment		-		-		-		-		-		-			(5,608	)		(5,608	)

Balance as of June 30, 2024		-	$	-		1,850,302	$	186		36,766,163		(48,986,099	)		(10,380	)		(12,230,130	)

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

NUKKLEUS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended
	June 30,
	2025			2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		105,976,728			(4,045,658	)
Net loss from discontinued operations		(400,707	)		(692,261	)
Net income (loss) from continuing operations	$	106,377,435		$	(3,353,397	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		322,247			36,315
Depreciation expense		1,464			-
Stock-based compensation		177,905			149,335
Loss on settlement of vendor obligations		-			176,399
Change in fair value - convertible note embedded derivative		(587,790	)		-
Change in fair value - stock purchase warrant liabilities		(109,405,811	)		-
Changes in operating assets and liabilities:
Other current assets		(443,501	)		(96,799	)
Due from affiliates		(132,088	)		-
Accounts payable		27,557			-
Due to affiliates		86,566			18,895
Interest payable - related parties		50,761			22,742
Accrued liabilities and other payables		544,264			2,297,488

Net cash used in operating activities from continuing operations		(2,980,991	)		(749,022	)
Net cash provided by (used in) operating activities from discontinued operations		287,093			(1,071,692	)
NET CASH USED IN OPERATING ACTIVITIES		(2,693,898	)		(1,820,714	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of computer equipment		(14,847	)		-
Advance to target of planned acquisition		(1,500,000	)		-

Net cash (used in) provided by investing activities from continuing operations		(1,514,847	)		-
Net cash (used in) provided by investing activities from discontinued operations		-			-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(1,514,847	)		-

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan payable - related parties		-			544,500
Repayment of note payable		(78,000	)		-
Payments of penalty – late registration		(800,000	)
Proceeds from issuance of convertible debt and warrants, net of issuance costs		-			300,000
Proceeds from issuance of note payable and warrants		-			78,000

Net cash (used in) provided by financing activities from continuing operations		(878,000	)		922,500
Net cash provided by financing activities from discontinued operations		-			582,956
NET CASH PROVIDED BY FINANCING ACTIVITIES		(878,000	)		1,505,456

EFFECT OF EXCHANGE RATE ON CASH FROM CONTINUING OPERATIONS		(4,213	)		-
EFFECT OF EXCHANGE RATE ON CASH FROM DISCONTINUED OPERATIONS		106,910			(9,580	)

Net change in cash, including cash from discontinued operations		(4,984,048	)		(324,838	)

Cash, including cash from discontinued operations - beginning of period		7,857,641			863,610

Cash, including cash from discontinued operations - end of period		2,873,593			538,772

Less cash from discontinued operations		1,353,946			536,825

Cash from continuing operations, end of period	$	1,519,647		$	1,947

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	6,240		$	18

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Fair value of pre-funded warrants exercised	$	3,055,814		$	-
Fair value of the derivative liability extinguished from conversion of convertible note	$	259,963		$	-
Fair value of common stock issued in connection with settlement agreement	$	157,500		$	-
Fair value of common stock issued in connection with conversion of convertible note	$	520,603		$	-
Issuance of common stock to settle accrued expenses and other current liabilities	$	-		$	750,000
Fair value of warrants issued	$	-		$	40,804
Settlement of accrued expenses and other current liabilities through issuance of common stock	$	-		$	324,601

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

NUKKLEUS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

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

In January 2024, Nukkleus Inc and its wholly owned subsidiaries 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. In November 2024, Nukkleus Inc. entered into a Settlement Agreement and Release (the “Settlement Agreement”) with a shareholder and one of our subsidiaries to sell the subsidiary that operates the payment services operations to the shareholder in consideration of GBP 1,000 (approximately $1,372 at June 30, 2025). The sale is subject to stockholder approval as required under Nasdaq rules which is still pending.

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

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

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

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

On the Closing Date, and in connection with the closing of the Business Combination, Brilliant changed its name to Nukkleus Inc (the “Company”) and the Company’s common stock began trading on the NASDAQ under the ticker symbol NUKK. Old Nukk was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The determination was primarily based on Old Nukk’s shareholders prior to the Business Combination having a majority of the voting interests in the combined company, Old Nukk’s ability to exert control over the majority of the board of directors of the combined company, and given the board of directors election and retention provisions, Old Nukk’s ability to maintain control of the board of directors on a go-forward basis, Old Nukk’s senior management comprising the senior management of the combined company; and old Nukk’s operations prior to the Business Combination comprise the ongoing operations of the combined company. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Old Nukk issuing stock for the net assets of Brilliant, accompanied by a recapitalization. The net assets of Brilliant were stated at historical cost, with no goodwill or other intangible assets recorded.

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

Effective October 24, 2024, the Company amended its amended and restated certificate of incorporation to implement a one-for-eight reverse stock split of its common stock (the “2024 Reverse Stock Split”) and increased the number of authorized shares of the Company’s common stock from 40,000,000 to 150,000,000 (see Note 8).

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

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

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Due to the Company’s inability to access complete financial data from a subsidiary classified as discontinued operations, estimates were used to present this entity’s financial results for the three months ended June 30, 2025 (see Note 4).

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

NOTE 2 – LIQUIDITY AND CAPITAL RESOURCES

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business. As of June 30, 2025, the Company had cash of approximately $1,520,000, a working capital deficit of approximately $53,464,000 and incurred cash flow used in operating activities from continuing operations of approximately $2,981,000 for the six months ended June 30, 2025. These are indicators of substantial doubt as to the Company’s ability to continue as a going concern for at least one year from issuance of these consolidated financial statements. The Company’s ability to continue as a going concern is dependent upon the management of expenses and ability to obtain necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due, and upon profitable operations.

If additional equity or debt financing is required from outside sources, the Company may not be able to raise it on terms acceptable to it or at all. If the Company is unable to raise additional capital on acceptable terms when needed, its results of operations and financial condition would be materially and adversely affected. Any such financing likely would be dilutive to existing stockholders and could result in significant financial operating covenants that would negatively impact the Company business.

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

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Use of estimates: The preparation of the financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. The Company’s most significant estimates and judgments involve valuation of share-based compensation, valuation of equity-classified stock purchase warrants, valuation of liability-classified stock purchase warrants, valuation of derivative liability, classification of gains and losses on settlement of related party liabilities, the useful lives of long-lived assets, assumptions used in assessing impairment of long-lived assets, valuation of deferred tax assets and the associated valuation allowances, and estimates of financial results for a subsidiary classified as discontinued operations. For the three months ended June 30, 2025, the Company used estimates to report the financial results of this subsidiary.

Segment reporting: ASC 280, Segment Reporting (“ASC 280”), defines operating segments as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM is the chief executive officer, who has ultimate responsibility for the operating performance of the Company and the allocation of resources. The CODM uses operating results as the primary measure to manage the business. As a result of transactions entered into during the three months ended December 31, 2024 (see Note 4), the CODM determined it has one operating segment as of June 30, 2025. Accordingly, the Company has recast the presentation of its reportable segments for the periods presented in these consolidated financial statements. The CODM assesses performance on consolidated operating expenses as the CODM is focused on managing cash flow until a pending disposition (see Note 12) and a pending acquisition (see Note 12) are completed during the third quarter of fiscal year 2025.

Cash and cash equivalents: The Company considers all highly liquid instruments with a maturity date of three months or less at the time of purchase and money market accounts to be cash equivalents. The Company had no cash equivalents at June 30, 2025 and December 31, 2024.

The Company’s cash and cash equivalents are potentially subject to concentration of credit risk. Cash and cash equivalents are primarily placed with financial institutions which are of high credit quality. The Company invests cash and cash equivalents primarily in highly liquid, highly rated instruments which are uninsured. The Company may also have corporate deposit balances with financial institutions which exceed the Federal Deposit Insurance Corporation insurance limit of $250,000. The Company has not experienced losses on these accounts and does not believe it is exposed to any significant credit risk with respect to these accounts.

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

●

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

●

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

●

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

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following techniques noted in ASC 820:

●

Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

●

Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).

●

Income approach: Techniques to convert future amounts to a single present value amount based upon market expectations (including present value techniques, option pricing, and excess earnings models).

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

The Company’s financial instruments with a carrying value that approximates fair value consist of cash, advances, other current assets, accounts payable, due to affiliates, accrued expenses and other current liabilities, interest payable – related parties, and short-term borrowings due to their liquid or short-term nature or expected settlement dates of these instruments. If these financial instruments were recorded at fair value, they would be based on Level 1 inputs, except for short-term borrowings which would be based on Level 2 and Level 3 inputs, respectively.

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

The Company’s financial instruments that are measured at fair value on a recurring basis consist of liability-classified stock purchase warrants and liability-classified derivative financial instruments (see Note 10).

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

Due from affiliates and notes receivable – related parties, net: Due from affiliates and notes receivable – related parties, net are contractual rights to receive cash on demand or on fixed or determinable dates and are recognized as an asset on the consolidated balance sheets. Due from affiliates consist of amounts owed from affiliates of the Company for either services provided to the affiliate or expenses paid by the Company on behalf of the affiliate (see Note 11). Notes receivable – related parties, net consist of advances made to affiliates in exchange for a promissory note from the affiliate (see Note 11).

Other current assets: Other current assets primarily consist of escrow cash and prepaid miscellaneous items. The Company expects all current assets to be collected and/or realized within the next 12 months.

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

ROU assets represent the Company’s right to use underlying assets for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the contracts. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

The Company’s vehicle leases may include transfer rights or options to purchase at the end of the lease that the Company is reasonably certain to exercise. Interest expense is recognized using the effective interest rate method, and the ROU asset is amortized over the useful life of the underlying asset.

Impairment of long-lived assets: In accordance with ASC 360, Impairment or Disposal of Long-Lived Assets (“ASC 360”), the Company reviews the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets using the projected discounted cash flow method at the asset group level. The estimation of future cash flows requires significant management judgment based on the Company’s historical results and anticipated results and is subject to many factors. The discount rate that is commensurate with the risk inherent in the Company’s business model is determined by its management. An impairment loss would be recorded if the Company determined that the carrying value of long-lived assets may not be recoverable. The impairment to be recognized is measured by the amount by which the carrying values of the assets exceed the fair value of the assets.

Note payable, loans payable – related parties, convertible notes payable: Debt issuance costs, including original issue discounts, will be recorded to debt discount, reducing the face amount of the note. Debt issuance costs will be amortized to interest expense over the contractual term of the respective debt obligation using the effective interest method. If a conversion of the underlying debt occurs, a proportionate share of the unamortized discount is immediately expensed.

The Company evaluates convertible notes payable in accordance with ASC 470, “Debt with Conversion and Other Options” (“ASC 470”) to determine if embedded conversion features present in the convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. Debt issuance costs are allocated proportionately to the debt host and conversion feature.

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

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

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

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

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

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

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

Assets held for sale: Assets held for sale represent property, equipment, and leasehold improvements less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business. The Company records assets held for sale in accordance with ASC 360 at the lower of carrying value or fair value less costs to sell. Fair value is the amount obtainable from the sale of the asset in an arm’s length transaction. The reclassification takes place when the assets are available for immediate sale and the sale is highly probable. These conditions are usually met from the date on which a letter of intent or agreement to sell is ready for signing.

Discontinued operations: A component of an entity is identified as operations and cash flows that can be clearly distinguished, operationally and financially, from the rest of the entity. Under ASC 205-20, “Presentation of Financial Statements - Discontinued Operations” (“ASC 205-20”), a discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale and represents a strategic shift that has or will have a major effect on the entity’s operations and financial results, or a newly acquired business or nonprofit activity that upon acquisition is classified as held for sale. Discontinued operations are presented separately from continuing operations in the consolidated statements of Operations and the consolidated statements of cash flows (see Note 4). For long-lived assets or disposals groups that are classified as held for sale but do not meet the criteria for discontinued operations, the assets and liabilities are presented separately on the balance sheet of the initial period in which it is classified as held for sale.

Advertising: Costs related to advertising are expensed as incurred.

Stock-based compensation: The Company accounts for stock-based compensation by measuring and recognizing compensation expense for all share-based awards, including stock options and stock grants, based on estimated grant-date fair values. The Company measures employee, director and nonemployee awards at the date of grant, which generally is the date at which the Company and the nonemployee reach a mutual understanding of the key terms and conditions of a share-based payment award.

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

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

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

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

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

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

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

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

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

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

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

	Six Months Ended June 30,
		2025	2024
Options to purchase common stock		4,823	15,538
Convertible notes payable that convert into common stock		—	—
Stock purchase warrants to acquire common stock		5,192,381	987,625
Total potentially dilutive securities		5,197,204	1,003,163

Recently issued accounting pronouncements, adopted

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

Recently issued accounting pronouncements, not yet adopted

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

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

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

ASU 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”), requires public companies to disaggregate key expense categories, such as inventory purchases, employee compensation and depreciation in their financial statements. This aims to improve investor insight into company performance. ASU 2024-03 is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the impact, if any, adoption will have on its consolidated financial statements and disclosures.

NOTE 4 – DISCONTINUED OPERATIONS

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

Disposition of a Subsidiary: On November 8, 2024, the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”) with a shareholder of the Company and a subsidiary of the Company to sell the subsidiary to the shareholder or his nominee subject to the Company obtaining shareholder approval. As required by the Settlement Agreement, a Share Purchase Agreement was entered into between the same parties dated December 23, 2024 providing that the Company, subject to it obtaining shareholder approval, will sell the subsidiary to the officer of the Company in consideration of GBP 1,000 (approximately $1,372 at June 30, 2025).

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

During the preparation of the consolidated financial statements for the quarter ended June 30, 2025, management was unable to obtain complete financial data from the subsidiary due to the subsidiary’s personnel being uncooperative, not providing the information needed and loss of direct access to the subsidiary’s systems. As a result, the financial results of the discontinued operations for the three months ended June 30, 2025 are based on reasonable estimates derived from historical operating trends and partial information available to the Company. Management believes the estimates used are reasonable under the circumstances.

Summary Reconciliation of Discontinued Operations

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

NUKKLEUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,		December 31,
	2025		2024
	(Unaudited)		(Audited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	15,412	$	148,679
Customer custodial funds		1,338,534		811,265
Customer digital currency assets		862,139		22,930
Digital assets		432		550
Due from affiliates		-		50,768
Other current assets		40,476		54,860

TOTAL CURRENT ASSETS		2,256,993		1,089,052

NON-CURRENT ASSETS:
Intangible assets, net		8,746		14,887

TOTAL NON-CURRENT ASSETS		8,746		14,887

TOTAL ASSETS	$	2,265,739	$	1,103,939

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES:
Accounts payable	$	755,883	$	504,249
Customer custodial cash liabilities		2,354,955		972,941
Customer digital currency liabilities		9,603		10,514
Due to affiliates		546,447		479,608
Loans payable - related parties, current		746,445		682,875
Interest payable - related parties, current		259,764		203,755
Accrued expenses and other current liabilities		228,067		308,567

TOTAL CURRENT LIABILITIES		4,901,164		3,162,509

NON-CURRENT LIABILITIES:
Loan payable - related parties, net of current portion

SEC Form 10-Q filed by Nukkleus Inc.