Nukkleus Inc. Warrant

Company Overview

Business Model: T3 Defense Inc. has transformed from a financial technology services provider into a strategic acquirer and operator of aerospace and defense (A&D) businesses. The Company is building a portfolio of mission-critical suppliers and advanced technology companies, as well as strategic infrastructure opportunities across the defense, aerospace, and advanced manufacturing sectors in the United States, Israel, and Europe. Its strategy targets Tier 2 and Tier 3 suppliers that form the industrial backbone of national security infrastructure, with a particular emphasis on companies offering dual-use technologies, advanced AI applications, and critical manufacturing capabilities.

Market Position: T3 Defense Inc. is positioned as a strategic platform company focused on acquiring, integrating, and scaling high-impact businesses in the aerospace and defense industries. The Company's acquisition strategy focuses on small and medium businesses in highly fragmented markets, primarily in the U.S. and Israel. Management believes that economic and market dislocations resulting from global conflicts, particularly in Israel, provide opportunities for companies in the defense industry to experience higher-than-average demand for their products and services.

Recent Strategic Developments:

• Business Model Transformation: In September 2024, T3 Defense Inc. (formerly Nukkleus Inc.) pivoted from financial technology services to a strategic acquirer and operator in the aerospace and defense sector.
• Key Acquisitions (Post-December 31, 2025, but strategically significant):
  • Star 26 Capital Inc.: Acquired 100% on January 12, 2026, for $21,000 thousand in cash and notes, plus 4,770,340 shares of common stock and warrants. Star 26 Capital Inc. is an acquisition holding company with holdings including B. Rimon Agencies Ltd., Water.IO Ltd., and a 51% interest in I.T.S. Industrial Tecno-logic Solutions Ltd.
  • Tiltan Software Engineering Ltd.: Acquired 100% on December 30, 2025, for NIS 47,600 thousand (approximately $14,000 thousand) in cash and shares. Tiltan Software Engineering Ltd. develops simulation, geospatial, and operational software solutions for defense and homeland security.
  • Nimbus Drones Technologies and Marketing Ltd.: Acquired 100% on January 15, 2026, for 1,850,000 shares of common stock and a $3,250 thousand convertible note (converted to 1,625,000 shares by February 17, 2026). Nimbus Drones Technologies and Marketing Ltd. specializes in unmanned aerial systems and services.
  • I.T.S. Industrial Tecno-logic Solutions Ltd.: Acquired 51% on February 16, 2026, in consideration for a NIS 10,000 thousand (approximately $3,235.5 thousand) loan. I.T.S. Industrial Tecno-logic Solutions Ltd. designs, develops, and manufactures electro-mechanical machines and assembly lines.
• Strategic Partnerships & Initiatives:
  • Blade Ranger Ltd. Exclusive Distribution Agreement: Entered on August 20, 2025, granting exclusive U.S. distribution rights for a proprietary drone payload for defense and homeland security.
  • Mandragola Aviation Joint Venture: Established on August 28, 2025, with Nukk Picolo Ltd. holding a 51% equity interest in a JV Company to develop advanced manufacturing zones and a NATO-compliant logistics hub in the Baltics and Israel.
  • SC II Acquisition Corp. IPO: SC II Acquisition Corp., an indirect subsidiary where T3 Defense Inc. holds a majority interest through SC Capital II Sponsor LLC, completed an IPO on November 28, 2025, raising $172,500 thousand.
  • Proposed Business Combination: On March 31, 2026, SC II Acquisition Corp. entered a non-binding letter of intent for a potential business combination with a payments technology company.
• Financial Restructuring:
  • Cancellation of Indebtedness: On March 31, 2026, T3 Defense Inc. memorialized the termination of a $16,000 thousand intercompany note obligation to Star 26 Capital Inc., effective immediately, at no cost or dilution.
  • Private Placement: Closed on February 26, 2026, raising $10,000 thousand in gross proceeds from an accredited investor, with an agreement for an additional $10,000 thousand investment subject to conditions.

Geographic Footprint: T3 Defense Inc.'s primary operational regions are the United States, Israel, and Europe. The majority of the Company's operations, employees, and subsidiaries are located in Israel, including B. Rimon Agencies Ltd., Tiltan Software Engineering Ltd., Nimbus Drones Technologies and Marketing Ltd., I.T.S. Industrial Tecno-logic Solutions Ltd., Positech Ltd., and ZorroNet Ltd. The Company maintains a virtual office in New York, New York, and an office in Netanya, Israel. The Mandragola Aviation Joint Venture plans include operations in the Baltics and Israel.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 0.0%
• Operating Margin: N/A (due to zero revenue)
• Net Margin: N/A (due to zero revenue)

Investment in Growth (Year ended December 31, 2025):

• R&D Expenditure: Not explicitly stated as a separate line item.
• Capital Expenditures: $31 thousand (cash paid for property and equipment).
• Strategic Investments:
  • Investment of cash in Trust Account (SC II Acquisition Corp.): $172,500 thousand.
  • Loan granted to a third party: $2,351 thousand.
  • Issuance of common stock in exchange for digital assets (Darwin Tokens): $4,360 thousand.
  • Tiltan Software Engineering Ltd. acquisition consideration: approximately $14,000 thousand.

Key Business Holdings and Strategic Initiatives

T3 Defense Inc. reported one reportable segment as of December 31, 2025. Due to the recent completion of acquisitions, the results of operations for these subsidiaries were immaterial for the year ended December 31, 2025. The Company's strategy involves acquiring and integrating these businesses to build its aerospace and defense portfolio.

Star 26 Capital Inc.

Business Description: Star 26 Capital Inc. is an acquisition holding company focused on locating undervalued and undercapitalized companies, primarily in the defense, industrial machinery and application, manufacturing, transportation, information technology, and aerospace industries. It provides capitalization and leadership to maximize value and promote diversification. Key Holdings:

• B. Rimon Agencies Ltd. (100% owned): An Israeli defense technology company established in 1992, serving Israel as an exclusive distributor of military-grade generators, masts, and lighting solutions (including for "Iron Dome" launchers). It also engineers, designs, produces, integrates, and maintains special tactical vehicles and trailers for defense forces, intelligence agencies, and the Israeli Defense Forces.
• Water.IO Ltd. (67% owned): An Israeli corporation listed on the Tel Aviv Stock Exchange, engaged in smart hydration technology.
• I.T.S. Industrial Tecno-logic Solutions Ltd. (51% owned): An Israeli corporation that designs, develops, and manufactures fully integrated electro-mechanical machines, assembly lines, and custom motion systems.
• ZorroNet Ltd. (100% owned by Water.IO Ltd.): An Israeli technology company specializing in the development and deployment of artificial intelligence (AI) systems for perimeter security, defense, monitoring, and command and control applications. Operational Metrics: B. Rimon Agencies Ltd. employs 18 people (3 technicians, 2 engineers, 3 assembly workers, 3 sales, 1 customer support, 1 financial bookkeeper, 5 management).

Tiltan Software Engineering Ltd.

Financial Performance: Reported revenues of approximately $2,964 thousand for fiscal year 2024 and $2,185 thousand for fiscal year 2025 (not included in T3 Defense Inc.'s 2025 Financial Statements). Product Portfolio:

• T-AWARE: Exploitation system for processing, analyzing, and visualizing multi-sensor intelligence data.
• TOPS: Physics-based simulation platform generating high-fidelity imagery across visible light, infrared, and synthetic aperture radar (SAR).
• Majestic.ai: Generative AI platform for creating realistic synthetic datasets for AI system training.
• T-BAT: Software-only navigation solution for drones and aircraft, enabling autonomous operation in GPS-denied environments.
• AGM: Rapid automatic geo-mapping tool converting spatial data into actionable geospatial intelligence. Key Growth Drivers: Rising global defense spending, heightened geopolitical tensions, and proliferation of autonomous systems requiring advanced simulation, synthetic training data, and GPS-denied navigation. Actively pursuing international expansion in Asia, Europe, and the United States. Operational Metrics: Employs approximately 14 people in Israel, with expertise in AI, computer vision, geospatial engineering, 3D modeling, simulation, and software development.

Nimbus Drones Technologies and Marketing Ltd.

Financial Performance: Reported approximately $940 thousand in revenue for fiscal year 2025 (not included in T3 Defense Inc.'s 2025 Financial Statements). Product Portfolio: Engaged in the sale of various drone models, maintenance, aerial photography, mapping and imaging services, and professional UAV pilot training and knowledge transfer. Key Growth Drivers: Growing global UAV and counter-UAS markets, increasing adoption in defense, homeland security, public safety, agriculture, and commercial sectors. Israeli Ministry of Defense tenders for UAV-related contracts valued at approximately NIS 50 million. Operational Metrics: Employs 2 persons involved in operations and sales activities.

I.T.S. Industrial Tecno-logic Solutions Ltd. (ITS)

Financial Performance: Reported revenues of approximately $6,395 thousand for fiscal year 2024 and $4,549 thousand for fiscal year 2025 (not included in T3 Defense Inc.'s 2025 Financial Statements). Product Portfolio: Specializes in the serial production of complex electro-mechanical machines and integrated production systems on a build-to-spec and build-to-print basis. Services include mechanical and electrical engineering design, precision machining, firmware and software development, supply chain management, and factory deployment. Key Growth Drivers: Growing demand for reliable, scalable manufacturing solutions in Israel’s defense industrial base and commercial sectors (agricultural technology, additive manufacturing, industrial automation). Operational Metrics: Employs approximately 39 people in Israel, including mechanical and electrical engineers, machining specialists, firmware and software developers, and production technicians. Sub-segment Breakdown:

• Positech Ltd.: A wholly-owned subsidiary of I.T.S. Industrial Tecno-logic Solutions Ltd., specializing in multi-disciplinary mechanical design, engineering, assembly, and production of customized servo motion control systems for mission-critical defense platforms (e.g., sensors, radar, communications, remote weapon stations). Reported revenues of approximately $3,053 thousand for fiscal year 2024 and $1,600 thousand for fiscal year 2025 (not included in T3 Defense Inc.'s 2025 Financial Statements). Employs approximately 14 people in Israel.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Not disclosed.
• Dividend Payments: T3 Defense Inc. has not paid dividends on its common stock to date and does not expect to declare or pay dividends in the foreseeable future.
• Future Capital Return Commitments: Not disclosed.

Balance Sheet Position (as of December 31, 2025):

• Cash and Equivalents: $3,897 thousand (including $1,270 thousand from consolidated variable interest entity).
• Total Debt (cash-requiring liabilities): $16,418 thousand (includes short-term loan, operating lease liabilities, loans payable to former related parties, and deferred considerations).
• Net Cash Position: -$12,521 thousand.
• Credit Rating: Not disclosed.
• Debt Maturity Profile (key cash-requiring obligations, including subsequent events):
  • Tiltan Note: NIS 29,750 thousand (approx. $8,750 thousand) payable in five installments at 36-day intervals until June 29, 2026.
  • Star 26 Capital Inc. 3-Month Promissory Note: $3,000 thousand, matures April 12, 2026.
  • Star 26 Capital Inc. 6-Month Promissory Note: $3,000 thousand, matures July 12, 2026.
  • Loan granted to third party: $2,351 thousand, due October 30, 2026.
  • 2024 Shareholder Loans: $1,354 thousand principal, due three years from issuance (October 2023 through September 2024).
  • Operating Lease Payments: $257 thousand (2026), $262 thousand (2027), $185 thousand (2028).

Cash Flow Generation (Year ended December 31, 2025):

• Operating Cash Flow: -$6,198 thousand.
• Free Cash Flow: -$6,229 thousand (Operating Cash Flow less cash paid for property and equipment).
• Cash Conversion Metrics: Not explicitly stated.

Operational Excellence

Production & Service Model: T3 Defense Inc. operates as a strategic platform, with its subsidiaries providing specialized production and services. B. Rimon Agencies Ltd. focuses on exclusive distribution and engineering of defense systems. Tiltan Software Engineering Ltd. develops AI-based simulation and geospatial software. Nimbus Drones Technologies and Marketing Ltd. offers end-to-end UAV solutions. I.T.S. Industrial Tecno-logic Solutions Ltd. specializes in "Build to Spec" & "Build to Print" electro-mechanical machines and assembly lines using Design for Manufacturing (DFM) methodology. Positech Ltd. designs and manufactures high-precision direct-drive servo motion control systems. ZorroNet Ltd. develops AI systems for real-time perimeter security and command and control.

Supply Chain Architecture: B. Rimon Agencies Ltd. relies on exclusive distributorship agreements with key third-party suppliers. I.T.S. Industrial Tecno-logic Solutions Ltd. provides supply chain management as part of its integrated solutions. The Company's supply chain is exposed to geopolitical risks, including disruptions from conflicts in the Middle East and Red Sea attacks, leading to increased transportation costs and potential material/component shortages. Limitations on exports to Israel by certain countries also pose risks.

Key Suppliers & Partners:

• [Defense Product Suppliers]: B. Rimon Agencies Ltd. works with key third-party suppliers under exclusive distributorship agreements.
• [Defense Integrators]: Tiltan Software Engineering Ltd. serves as a direct supplier and subcontractor to major Israeli defense companies. Positech Ltd. is a direct supplier to Israel Aerospace Industries (IAI) and Rafael Advanced Defense Systems. ZorroNet Ltd. has active projects with Elbit Systems and Rafael Advanced Defense Systems.
• [Distribution Partners]: Blade Ranger Ltd. (exclusive U.S. distribution for drone payloads), KeepZone AI Inc. (U.S. distribution for ZorroNet's crowd analytics), MyTrade FZ LLC (UAE distribution for ZorroNet's products).
• [Joint Venture Partner]: Mandragola Ltd. (Israel) for the Mandragola Aviation Joint Venture.

Facility Network:

• Headquarters: 575 Fifth Ave, 14th Floor, New York, New York (virtual office space).
• Israeli Office: 8 Hagavish, Netanya (shared with Nukk Picolo Ltd.).
• Manufacturing/Operations:
  • B. Rimon Agencies Ltd.: 10 Hamelacha, Netanya, Israel and 14 Yad Harutzim, Netanya, Israel.
  • Tiltan Software Engineering Ltd.: 4 Granit, Petach Tikva, Israel.
  • I.T.S. Industrial Tecno-logic Solutions Ltd.: 5 Atir Yeda, Kfar Saba, Israel.
  • Positech Ltd.: 4 Hapeles, Haifa, Israel.
• Future Development: The Mandragola Aviation Joint Venture plans to establish advanced manufacturing zones in the Baltics and Israel, including a NATO-compliant logistics hub in Riga.

Operational Metrics:

• Total Employees (T3 Defense Inc. and subsidiaries): 112.
  • I.T.S. Industrial Tecno-logic Solutions Ltd.: 39 employees.
  • B. Rimon Agencies Ltd.: 18 employees.
  • Tiltan Software Engineering Ltd.: 14 employees.
  • Positech Ltd.: 14 employees.
  • ZorroNet Ltd.: 7 employees.
  • Nukk Picolo Ltd.: 17 employees.
  • Water.IO Ltd.: 2 employees.
  • Nimbus Drones Technologies and Marketing Ltd.: 2 employees.
  • T3 Defense Inc. (direct): 2 employees.

Market Access & Customer Relationships

Go-to-Market Strategy: T3 Defense Inc.'s subsidiaries employ a multi-faceted approach. B. Rimon Agencies Ltd. utilizes websites and an internal sales team for off-the-shelf or tailor-made solutions, with future plans for digital marketing and Web3 systems. Tiltan Software Engineering Ltd. focuses on direct contracts and subcontracting with major Israeli defense companies, supported by technical demonstrations and industry events. Nimbus Drones Technologies and Marketing Ltd. and I.T.S. Industrial Tecno-logic Solutions Ltd. engage directly with defense, public sector, and commercial clients. ZorroNet Ltd. leverages direct engagements and a growing network of international distributors.

Distribution Channels:

• Direct Sales: Employed by B. Rimon Agencies Ltd., Tiltan Software Engineering Ltd., Nimbus Drones Technologies and Marketing Ltd., I.T.S. Industrial Tecno-logic Solutions Ltd., and ZorroNet Ltd.
• Channel Partners:
  • Blade Ranger Ltd.: Exclusive U.S. distribution rights for a drone payload.
  • KeepZone AI Inc.: Distribution agreement for ZorroNet Ltd.'s crowd analytics systems in Israel and Mexico.
  • MyTrade FZ LLC: Exclusive distribution agreement for ZorroNet Ltd.'s products in the United Arab Emirates.
• Digital Platforms: B. Rimon Agencies Ltd. plans to utilize Web3 reservation systems.

Customer Portfolio:

• Enterprise Customers:
  • B. Rimon Agencies Ltd.: Country of Israel, special defense forces, intelligence agencies, Israeli Defense Forces (supplier for "Iron Dome" launchers).
  • Tiltan Software Engineering Ltd.: All major Israeli defense companies (governmental and non-governmental).
  • Nimbus Drones Technologies and Marketing Ltd.: Defense and security organizations, municipalities, local authorities, surveying and engineering firms.
  • I.T.S. Industrial Tecno-logic Solutions Ltd.: Netafim Ltd., Tritone Technologies Ltd., and other Israeli technology and defense companies.
  • Positech Ltd.: Israel Aerospace Industries (IAI), Rafael Advanced Defense Systems, Kappasense.
  • ZorroNet Ltd.: Security operations centers, border and base protection command rooms, transportation authorities (e.g., Israel Railways pilot), educational institutions, military and police agencies, energy companies, municipalities. Active projects with Elbit Systems and Rafael Advanced Defense Systems.
• Customer Concentration: Not explicitly quantified as a percentage of total revenue.

Geographic Revenue Distribution:

• Israel: Primary market for B. Rimon Agencies Ltd., Tiltan Software Engineering Ltd., Nimbus Drones Technologies and Marketing Ltd., I.T.S. Industrial Tecno-logic Solutions Ltd., Positech Ltd., and ZorroNet Ltd. Israel accounted for 4.4% of global arms exports (2021-2025) and $14.8 billion in defense exports in 2024.
• United States: T3 Defense Inc. intends to pursue opportunities, with Blade Ranger Ltd. distribution rights.
• Europe: Tiltan Software Engineering Ltd. has signed representative consultancy agreements in two major European countries.
• Asia: Tiltan Software Engineering Ltd. secured a purchase order from a governmental technology institute.
• Growth Markets: Emerging market initiatives include ZorroNet Ltd.'s distribution agreements in the United Arab Emirates and Mexico.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The global security environment has led to a significant increase in defense spending, with global military expenditure reaching a record $2.7 trillion in 2024 (9.4% increase YoY). The U.S. defense market was valued at approximately $314 billion in 2024, projected to reach $447 billion by 2033 (CAGR 4.0%). The broader global defense technology market is estimated at $750 billion in 2026, projected to reach $965 billion by 2030 (CAGR 6.5%), with the U.S. accounting for approximately 40%. NATO allies agreed to increase spending targets to 5% of GDP by 2035. The Israeli defense market saw record exports of $14.8 billion in 2024. The market for small and medium businesses in the defense sector is highly fragmented. Defense procurement processes are lengthy, complex, and highly competitive.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Tiltan Software Engineering Ltd.:
  • GPS-denied navigation: Sightec, Protrack (both Israel), Spleenlab (Germany), Daedalean (Switzerland), SSCI (United States).
  • Synthetic data for AI training: Sky Engine AI, Parallel Domain, Cognata, Bifrost, Anyverse, Simerse.
• Nimbus Drones Technologies and Marketing Ltd.: Lol TV, Profilor Drones (Israeli UAV service providers), and various international UAV service providers and manufacturers.
• I.T.S. Industrial Tecno-logic Solutions Ltd.: Flex Ltd., Dagesh, Ziv-Av Engineering Ltd., I. Sherman, ZUK Systems.
• Positech Ltd.: Novatec Ltd., Orbit Communication Systems Ltd. (Orbit CS division), Capture Ltd., BL.

Emerging Competitive Threats: Large technology companies (e.g., NVIDIA, Microsoft, Google) investing in AI training infrastructure, and data labeling companies (e.g., Alegion, CloudFactory, SuperAnnotate) are indirect competitors to Tiltan Software Engineering Ltd.'s synthetic data offerings. New entrants and disruptive technologies are a general threat in the rapidly evolving defense technology market.

Competitive Response Strategy: T3 Defense Inc.'s strategy involves acquiring and integrating high-impact businesses, providing capitalization and experienced leadership to maximize their value. The Company aims to achieve operational efficiencies, grow revenues, improve financial reporting, and leverage its management team's expertise and relationships to cross-sell products and expand globally, particularly in niche geographical markets with a competitive edge.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: T3 Defense Inc. faces significant risks due to its unprecedented transformation from financial technology to aerospace and defense, lacking an operational track record in the new sector. The Company is attempting to integrate multiple defense companies simultaneously without prior A&D acquisition or integration experience. It faces overwhelming competition from established prime contractors with extensive histories, R&D budgets, cleared personnel, and customer relationships. The lengthy, complex, and highly competitive defense procurement process may hinder achieving revenue targets. Shifts in government budget priorities, sequestration, and U.S. trade policy (tariffs, export restrictions) could adversely affect demand and increase costs. Intensifying great-power competition and fragmentation of international trade frameworks create systemic risks, including supply chain disruptions and restricted market access. Technology Disruption: The rapid technological development in the UAV and AI markets presents risks of obsolescence if T3 Defense Inc.'s portfolio companies do not continuously innovate.

Operational & Execution Risks

Supply Chain Vulnerabilities: The Company's exclusive distribution agreement with Blade Ranger Ltd. carries risks of termination, non-renewal, or disruption if minimum purchase commitments are not met, potentially straining liquidity and leading to excess inventory. Geopolitical conflicts, particularly the ongoing "Swords of Iron" war in Israel and Red Sea attacks, have caused and may continue to cause disruptions to supply chains, material and component shortages, and increased transportation costs. Limitations imposed by certain countries on exports to Israel also pose risks. Geographic Concentration: The majority of T3 Defense Inc.'s operations, employees, and subsidiaries are located in Israel, exposing the Company to direct consequences of military conflicts, including missile and drone attacks, temporary evacuations, and general economic instability. Capacity Constraints: Mandatory military reserve duty obligations under Israeli law have resulted in, and may continue to cause, significant personnel shortages, disrupting operations, production schedules, and the ability to fulfill contractual obligations, particularly for a smaller company.

Financial & Regulatory Risks

Market & Financial Risks: T3 Defense Inc. lacks the financial infrastructure required for defense contracting, including performance bonds, payment bonds, letters of credit, working capital lines for long payment cycles, and DCAA-compliant accounting systems. Fixed-price defense contracts expose the Company to unlimited losses without prior cost estimation experience. The Company has a history of losses, minimal current revenue, and massive transformation costs, with highly uncertain future revenue. It recorded negative working capital of approximately $30,000 thousand and a stockholders’ deficit of $15,600 thousand as of December 31, 2025. The stock price has been highly volatile, and there is a risk of failing to maintain Nasdaq listing requirements (minimum bid price, market value of listed securities), which could trigger debt acceleration and acquisition agreement breaches. Substantial dilution to existing stockholders is possible from outstanding warrants, convertible preferred stock, and an equity line of credit, exacerbated by price-based anti-dilution provisions. Regulatory & Compliance Risks: T3 Defense Inc. lacks the facility security clearances and cleared personnel required for approximately 90% of U.S. defense contracts. Its foreign ownership through Israeli subsidiaries may preclude certain clearance levels or require restrictive Foreign Ownership, Control, or Influence (FOCI) mitigation agreements. Operating in defense requires strict compliance with U.S. International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR), where violations carry criminal penalties and debarment. The Company lacks export compliance programs and infrastructure for complex defense regulations (DFARS, CMMC, FAR, CAS). Operating across multiple jurisdictions creates potential irreconcilable legal conflicts. Cybersecurity requirements for defense contractors exceed current capabilities, posing a high risk of breaches and non-compliance penalties.

Geopolitical & External Risks

Geopolitical Exposure: The ongoing "Swords of Iron" war in Israel and broader regional instability (including conflicts with Hezbollah, Houthi forces, and Iran) have had and may continue to have a material adverse effect on Israeli operations, supply chains, and personnel. Escalating global conflicts (Middle East, Ukraine) create severe operational risks. Trade Relations: Limitations imposed by certain countries on exports to Israel, restrictions on defense cooperation, and boycott, divestment, and sanctions (BDS) campaigns targeting Israeli companies may impair T3 Defense Inc.'s ability to conduct international business. Sanctions & Export Controls: Strict U.S. and international regulations governing defense technologies (ITAR, EAR) apply to the distribution of drone payloads and advanced defense software, with non-compliance risking significant fines and loss of export privileges. Insurance & Risk Transfer: T3 Defense Inc. does not carry war risk insurance for its Israeli operations, and standard commercial policies exclude war-related losses. Specialized coverage is unavailable or prohibitively expensive, meaning war-related losses would be entirely unrecovered.

Innovation & Technology Leadership

Research & Development Focus: T3 Defense Inc.'s innovation strategy is driven by its acquired portfolio companies.

• Core Technology Areas:
  • AI & Software: Tiltan Software Engineering Ltd. focuses on AI-driven simulation, synthetic data generation, geospatial intelligence, and GPS-denied navigation. ZorroNet Ltd. specializes in AI systems for perimeter security, monitoring, and command and control, investing in enhanced real-time analytics and edge processing.
  • Electro-Mechanical & Motion Control: I.T.S. Industrial Tecno-logic Solutions Ltd. focuses on design and manufacturing of complex electro-mechanical machines. Positech Ltd. specializes in high-precision direct-drive, gearless servo motion control systems.
• Innovation Pipeline: Tiltan Software Engineering Ltd. has a working alpha version of its Majestic.ai platform with early defense customer adoption. ZorroNet Ltd. is investing in enhanced real-time analytics capabilities and a unified operational environment.

Intellectual Property Portfolio:

• Patent Strategy: ZorroNet Ltd. filed a provisional patent application in July 2025 for data transfer and processing, receiving confirmation of innovation from the Israel Innovation Authority.
• Core IP: Tiltan Software Engineering Ltd.'s principal IP consists of proprietary software platforms and a physics-based 3D engine, along with over 30 years of accumulated know-how. I.T.S. Industrial Tecno-logic Solutions Ltd. and Positech Ltd. rely on unregistered manufacturing know-how and proprietary expertise in DFM methodologies and direct-drive motor design, respectively.
• Licensing Programs: T3 Defense Inc. entered an exclusive distribution agreement with Blade Ranger Ltd. for its drone payload in the U.S. defense and homeland security sector.

Technology Partnerships: T3 Defense Inc.'s subsidiaries engage in strategic alliances and collaborations, including Tiltan Software Engineering Ltd. serving as a subcontractor to major Israeli defense companies, Positech Ltd. supplying to Israel Aerospace Industries and Rafael Advanced Defense Systems, and ZorroNet Ltd. having active projects with Elbit Systems and Rafael Advanced Defense Systems.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Menachem Shalom's continued leadership is central to the Company's transformation strategy, with a new consulting agreement effective January 1, 2026, increasing his compensation and outlining his roles. However, his commitments to other companies (Star 26 Capital Inc., Motomova Inc., Hold Me Ltd.) are noted as a potential risk for his full-time attention to T3 Defense Inc.

Board Composition (as of March 31, 2026): The Board of Directors consists of four members. David Rokach, Tomer Nagar, and Reuven Yeganeh are independent directors. Reuven Yeganeh serves as the Audit Committee Financial Expert and Chairperson of the Audit Committee. David Rokach chairs the Compensation Committee and the Nominating and Corporate Governance Committee.

Human Capital Strategy

Workforce Composition:

• Total Employees: T3 Defense Inc. and its subsidiaries employ 112 people.
• Geographic Distribution: The majority of employees are located in Israel.
• Skill Mix: The workforce includes highly skilled personnel in AI, computer vision, geospatial engineering, 3D modeling, simulation, software development, mechanical and electrical engineering, machining, motion control, and production.

Talent Management:

• Acquisition & Retention: T3 Defense Inc. operates in an industry requiring highly skilled and technical personnel and faces intense competition for qualified individuals, particularly in executive, engineering, risk management, and financial regulatory expertise. The Company incurs significant costs for attracting and retaining key personnel, including salaries, benefits, and equity incentives.
• Employee Value Proposition: The Company emphasizes an entrepreneurial and innovative corporate culture to attract and retain talent.

Diversity & Development: Not explicitly detailed in the filing.

Culture & Engagement: The Company believes its entrepreneurial and innovative corporate culture has been a key contributor to its success, fostering innovation, creativity, and teamwork.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 0.0% for the years ended December 31, 2025, and 2024.
• Geographic Tax Planning: U.S. resident companies are taxed on worldwide income at a statutory rate of 21%, with income from foreign subsidiaries potentially tax-exempt under treaties. Israeli subsidiaries are taxable at corporate tax rates between 12% and 23%. SC II Acquisition Corp., an exempted Cayman Islands company, is not subject to income taxes.
• Operating Loss Carry-forwards: As of December 31, 2025, T3 Defense Inc. and its subsidiaries have operating loss carry-forwards of approximately $56,194 thousand. Of this, $258 thousand can offset taxable income until 2038, while $55,081 thousand can offset future taxable income indefinitely (limited to 80% of annual taxable income), and $855 thousand can offset future taxable income indefinitely. The use of U.S. federal net operating loss carry-forwards is subject to limitations under Section 382 of the Internal Revenue Code due to changes in stock ownership.