Nauticus Robotics, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (WithumSmith + Brown, PC, PCAOB ID: 100) F-2 Report of Independent Registered Public Accounting Firm (Whitley Penn LLP, PCAOB ID: 726) F-3 Consolidated Balance Sheets F- 4 Consolidated Statements of Operations F- 6 Consolidated Statements of Comprehensive Loss F- 7 Consolidated Statements of Changes in Stockholders’ Deficit F- 8 Consolidated Statements of Cash Flows F- 9 Notes to Consolidated Financial Statements F- 11 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Nauticus Robotics, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Nauticus Robotics, Inc. and subsidiaries (the “Company”) as of December 31, 2025 , and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company has had recurring net losses, negative operating cash flows, a working capital deficit, and insufficient cash and cash equivalents to fund operations for twelve months from the date of this report. All of these matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ WithumSmith+Brown, PC We have served as the Company’s auditor since 2025. Whippany, New Jersey April 15, 2026 PCAOB ID Number 100 F-2 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Nauticus Robotics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Nauticus Robotics, Inc. and subsidiary (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Whitley Penn LLP We have served as the Company's auditor since 2021. Houston, Texas April 15, 2025 F-3 Table of Contents NAUTICUS ROBOTICS, INC. CONSOLIDATED BALANCE SHEETS December 31, 2025 2024 Assets Current Assets: Cash and cash equivalents $ 7,016,610 $ 1,186,047 Restricted cash 600,342 52,151 Accounts receivable, net 378,683 238,531 Inventories - 880,594 Prepaid expenses 1,055,324 1,389,434 Other current assets 203,025 574,025 Total Current Assets $ 9,253,984 $ 4,320,782 Property and equipment, net 21,827,769 17,115,246 Operating lease right-of-use assets, net 559,005 1,094,743 Goodwill 9,600,745 - Intangible Assets, net 1,276,916 - Other assets 91,276 154,316 Total Assets $ 42,609,695 $ 22,685,087 Liabilities and Stockholders’ Equity (Deficit) Current Liabilities: Accounts payable $ 3,128,459 $ 5,916,693 Accrued liabilities 10,139,275 5,602,721 Contract liability - 346,279 Operating lease liabilities - current 434,200 435,307 Notes payable - current 2,296,627 - November 2024 Debentures - current, fair value option (related party) 163,672 - Senior Secured Convertible Term Loan - current, net of discount (related party) 14,113,871 - Senior Secured Convertible Term Loan - current, net of discount 4,939,247 - Other creditors 160,110 - Total Current Liabilities 35,375,461 12,301,000 Warrant liabilities 11,281 181,913 Operating lease liabilities - long-term 203,547 768,939 November 2024 Debentures - long-term, fair value option (related party) - 2,583,832 Senior Secured Convertible Term Loan - long-term, net of discount (related party) - 13,820,366 Senior Secured Convertible Term Loan - long-term, net of discount - 12,531,332 Other liabilities - 895,118 Total Liabilities $ 35,590,289 $ 43,082,500 Stockholders’ Equity (Deficit): Series A Convertible Preferred Stock $ 0.0001 par value; 40,000 shares authorized, 5,546 and 35,034 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively. 1 4 F-4 Table of Contents Series B Convertible Preferred Stock $ 0.0001 par value; 50,000 shares authorized, 2,813 and 0 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively. - - Series C Convertible Preferred Stock $ 0.0001 par value; 100,000 shares authorized, 2,154 and 0 issued and outstanding at December 31, 2025 and December 31, 2024 respectively. - - Common Stock, $ 0.0001 par value; 625,000,000 shares authorized, 28,811,198 and 1,084,655 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively.* 2,881 108 Additional paid-in capital 330,578,863 233,343,056 Accumulated other comprehensive loss ( 42,229 ) ( 42,229 ) Accumulated deficit ( 323,520,110 ) ( 253,698,352 ) Total Stockholders’ Equity (Deficit) 7,019,406 ( 20,397,413 ) Total Liabilities and Stockholders’ Equity (Deficit) $ 42,609,695 $ 22,685,087 * Reflects the 1-for-36 reverse split effected July 22, 2024 and the 1-for-9 effected September 5, 2025. See accompanying notes to the consolidated financial statements. F-5 Table of Contents NAUTICUS ROBOTICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the year ended December 31, 2025 2024 Revenue: Service $ 5,274,915 $ 1,807,472 Total revenue 5,274,915 1,807,472 Costs and expenses: Cost of revenue (exclusive of items shown separately below) 12,336,520 9,732,205 Depreciation and amortization 2,344,826 1,736,828 Research and development - 82,850 General and administrative 14,320,568 13,570,486 Total costs and expenses $ 29,001,914 $ 25,122,369 Operating loss ( 23,726,999 ) ( 23,314,897 ) Other (income) expense: Other income, net ( 134,322 ) ( 70,918 ) Foreign currency transaction loss 54,527 61,597 Loss on extinguishment of debt 6,371,971 127,605,940 Change in fair value of warrant liabilities ( 170,632 ) ( 13,559,010 ) Change in fair value of New Convertible Debentures - ( 7,989,948 ) Change in fair value of November 2024 Debentures 2,247,848 435,864 Interest expense, net 8,732,011 5,108,227 Total other expense, net 17,101,403 111,591,752 Net loss $ ( 40,828,402 ) $ ( 134,906,649 ) Basic and diluted loss per share (As adjusted, see Note 21) $ ( 10.45 ) $ ( 330.55 ) Basic and diluted weighted average shares outstanding (As adjusted, see Note 21)* 6,681,851 408,133 * Reflects the 1-for-36 reverse split effected July 22, 2024 and the 1-for-9 effected September 5, 2025. See accompanying notes to the consolidated financial statements. F-6 Table of Contents NAUTICUS ROBOTICS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS For the year ended December 31, 2025 2024 Net loss $ ( 40,828,402 ) $ ( 134,906,649 ) Other comprehensive loss: Foreign currency translation adjustment - ( 42,229 ) Comprehensive loss $ ( 40,828,402 ) $ ( 134,948,878 ) See accompanying notes to the consolidated financial statements. F-7 Table of Contents NAUTICUS ROBOTICS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT Series A Preferred Stock Series B Preferred Stock Series C Preferred Stock Common Stock* Additional Paid-in Capital Accumulated other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity (Deficit) Shares Amount Shares Amount Shares Amount Shares Amount Balance at December 31, 2023 - $ - - $ - - $ - 154,432 $ 15 $ 77,004,838 $ - $( 118,791,703 ) $( 41,786,850 ) Foreign currency translation adjustment - - - - - - - - - ( 42,229 ) - ( 42,229 ) Stock-based compensation - - - - - - - - 2,303,054 - - 2,303,054 Reverse stock split round up - - - - - - 14,886 2 ( 2 ) - - - Vesting of RSUs - - - - - - 12,074 1 ( 1 ) - - - Restricted stock forfeited for taxes - - - - - - ( 410 ) - - - - - Exercise of warrants - - - - - - 72,646 7 4,635,250 - - 4,635,257 Conversion of convertible secured debentures to Common Stock - - - - - - 613,099 61 29,741,798 - - 29,741,859 Exchange of convertible secured debentures to Series A Preferred Stock 35,434 4 - - - - - - 110,300,187 - - 110,300,191 Conversion of Series A Preferred Stock to Common Stock ( 400 ) - - - - - 61,659 6 ( 6 ) - - - At the Market (ATM) share offering - - - - - - 156,269 16 9,357,938 - - 9,357,954 Net loss - - - - - - - - - - ( 134,906,649 ) ( 134,906,649 ) Balance at December 31, 2024 35,034 $ 4 - $ - - $ - 1,084,655 $ 108 $ 233,343,056 $ ( 42,229 ) $ ( 253,698,352 ) $ ( 20,397,413 ) Stock-based compensation - - - - - - - - 1,296,555 - - 1,296,555 Conversion of November 24 Debenture to Common Stock - - - - - - 4,549,509 455 4,667,553 - - 4,668,008 Conversion of Term Loan notes to Common Stock - - - - - - 2,344,895 234 6,644,297 - - 6,644,531 Inducement on convertible debt - - - - - - - - 3,941,929 - - 3,941,929 Conversion of Series A Preferred Stock to Common Stock ( 29,488 ) ( 3 ) - - - - 10,768,900 1,077 ( 1,074 ) - - - Issue of Series B Preferred Stock - - 3,000 - - - - - 2,855,000 - - 2,855,000 Conversion of Series B Preferred Stock to Common Stock - - ( 187 ) - - - 392,490 39 ( 39 ) - - - Exchange of convertible term loan to Series C Preferred Stock - - - - 3,814 - - - 10,185,929 - - 10,185,929 Conversion of Series C Preferred Stock to Common Stock - - - - ( 1,660 ) - 2,740,740 274 ( 274 ) - - - At the Market (ATM) share offering - - - - - - 6,826,700 683 31,947,967 - - 31,948,650 Earnout shares - - - - - - - - 6,864,729 - - 6,864,729 Vesting of RSUs - - - - - - 36,995 4 ( 4 ) - - - Reverse stock split round up & Adj - - - - - - 66,314 7 ( 7 ) - - - Preferred stock dividend - - - - - - - - 845,890 - ( 1,006,000 ) ( 160,110 ) Deemed dividend - - - - - - - - 27,987,356 - ( 27,987,356 ) - Net loss - - - - - - - - - - ( 40,828,402 ) ( 40,828,402 ) Balance at December 31, 2025 5,546 $ 1 2,813 $ - 2,154 $ - 28,811,198 $ 2,881 $ 330,578,863 $ ( 42,229 ) $ ( 323,520,110 ) $ 7,019,406 *Reflects the 1-for-36 reverse split effected July 22, 2024 and the 1-for-9 effected September 5, 2025. See accompanying notes to the consolidated financial statements. F-8 Table of Contents NAUTICUS ROBOTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended December 31, 2025 2024 Cash flows used in operating activities: Net loss $ ( 40,828,402 ) $ ( 134,906,649 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,344,826 1,736,828 Accretion of debt discount 40,253 411,705 Amortization of debt issuance cost 886,504 664,690 Capitalized paid-in-kind (PIK) interest 696,345 900,383 Accretion of exit fee ( 9,663 ) 97,694 Stock-based compensation 1,296,555 2,303,054 Change in fair value of warrant liabilities ( 170,632 ) ( 13,559,010 ) Change in fair value of New Convertible Debentures - ( 7,989,948 ) Change in fair value of November 2024 Convertible Debentures 2,247,848 435,864 Loss on extinguishment of debt 6,371,971 127,605,940 Induced conversion expense 3,941,929 - Non-cash lease expense 535,738 504,097 Loss on disposal of assets 25,788 19,202 Loss on lease termination 2,639 18,721 Inventory write-off 500,332 - Other notes payable adjustments - 115,394 Changes in operating assets and liabilities: Accounts receivable ( 1,798 ) ( 26,103 ) Inventories 41,146 ( 58,683 ) Other assets 830,664 995,999 Accounts payable and accrued liabilities 54,009 ( 1,696,525 ) Contract liabilities ( 346,279 ) ( 2,421,634 ) Operating lease liabilities ( 569,139 ) ( 397,375 ) Other liabilities ( 895,118 ) 895,118 Net cash used in operating activities ( 23,004,484 ) ( 24,351,238 ) Cash flows from (used in) investing activities: Capital expenditures ( 961,814 ) ( 501,600 ) Acquisition of business, net of cash acquired ( 4,371,992 ) - Proceeds from sale of assets held for sale - 676,177 Proceeds from sale of property and equipment 150 5,705 Net cash from (used in) investing activities ( 5,333,656 ) 180,282 Cash flows from financing activities: Proceeds from notes payable - 14,305,000 Payment of debt issuance costs on notes payable - ( 1,316,791 ) Proceeds from November 2024 Debentures - 2,150,000 Proceeds from At the Market (ATM) offering, net 31,948,650 9,357,954 F-9 Table of Contents Issuance of Series B Preferred Stock 2,855,000 - Repayment on Ameristate Loan ( 86,755 ) - Net cash from financing activities 34,716,895 24,496,163 Effect of changes in exchange rates on cash and cash equivalents - ( 42,229 ) Net change in cash, cash equivalents and restricted cash 6,378,755 282,978 Cash, cash equivalents and restricted cash, beginning of year 1,238,198 955,220 Cash, cash equivalents and restricted cash, end of year $ 7,616,953 $ 1,238,198 Supplemental disclosure of cash flow information: Cash paid for interest $ 163,571 $ 158,559 Cash paid for taxes $ - $ - Non-cash investing and financing activities: Conversion of Term Loan notes and interest to common stock $ 6,644,531 $ - Conversion of convertible debt to Common Stock $ 4,668,008 $ 29,741,859 Issuance of Series B preferred stock $ 2,855,000 $ - Series C preferred stock issued in exchange for convertible debt $ 10,480,581 $ - Transfer from inventories to property and equipment $ 414,416 $ 1,376,885 Earnout shares for acquisition $ 6,864,729 $ - Debt assumed in acquisition $ 2,383,382 $ - Accrued purchase price $ 3,287,881 $ - Preferred stock dividend $ 1,006,000 $ - Deemed dividend $ 27,987,356 $ - Exchange of convertible debt and accrued interest expense to preferred stock $ - $ 61,429,200 Series A preferred stock issued in exchange for convertible debt $ - $ 110,300,191 Exercise of warrants $ - $ 4,635,257 Liabilities relieved through sale of assets held for sale $ - $ 1,158,609 Transfer from assets held for sale to property and equipment $ - $ 1,093,653 Operating leases at inception $ - $ 1,185,119 See accompanying notes to the consolidated financial statements. F-10 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of the Business Nauticus Robotics, Inc. (the "Company", "our", "us" or "we") is a technology-driven Company specializing in the development of advanced fully electric autonomous robotic solutions for subsea applications. Our portfolio includes autonomous underwater vehicles (AUVs), electric robotic manipulators, an open robotic operating system, and related consulting and prototype services with a strong alignment to offshore energy and national security interests. Our technology solutions enable autonomous operations for both the commercial and defense sectors. The Company’s addressable markets include upstream, midstream, and downstream oil and gas, defense, offshore renewables, seafloor telecommunications, aquaculture, port security, oceanographic research, and subsea mining. Currently, our primary focus is on oil and gas operations and defense applications. Liquidity and Going Concern— The Company has incurred recurring losses each year since its inception and currently does not generate sufficient revenue to cover operating expenses, working capital and capital expenditures. The Company continues to develop its principal products and conduct research and development activities. The Company currently funds its operations with cash on hand, availability under the November 2024 Debentures (see Note 8 - Notes Payable) and the offer and sale of additional shares of Common Stock under the At The Market Offering Agreement (see Note 24 - Subsequent Events). The Company may require additional liquidity to continue its operations over the next twelve months. While a current investor has expressed an intention to provide financial support, factors such as stock price, volatility, trading volume, market conditions, demand and regulatory requirements may adversely affect the Company's ability to raise capital in an efficient manner. Because of these factors, the Company believes that this creates substantial doubt about the Company's ability to continue as a going concern for a period of at least twelve months form the date these financial statements were issued. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. Reverse Stock Split - On September 5, 2025, the Company effected a 1-for-9 reverse stock split of the shares of the Company's common stock, par value $ 0.0001 per share. No fractional shares were issued in connection with the reverse stock split, but were instead rounded up to the nearest whole share. The Reverse Stock Split resulted in 42,758,379 shares of common stock being converted in to 4,750,954 shares of common stock. The Board of Directors of the Company approved the Certificate of Amendment to meet the share bid price requirements of the NASDAQ Capital Market. The Company’s stockholders authorized the reverse stock split and the Certificate of Amendment at a special meeting held on June 25, 2025. On July 22, 2024, the Company effected a 1-for-36 reverse stock split of the shares of the Company's common stock, par value $ 0.0001 per share. No fractional shares were issued in connection with the Reverse Stock Split, but were instead rounded up to the nearest whole share. The reverse stock split resulted in 150,107,598 shares of common stock being converted in to 4,169,679 shares of common stock. The Board of Directors of the Company approved the Certificate of Amendment effecting the reverse stock split in order to meet the share bid price requirements of the NASDAQ Capital Market. The Company’s stockholders authorized the reverse stock split and the Certificate of Amendment at a special meeting held on June 17, 2024. All options, warrants and other convertible securities of the Company outstanding immediately prior to the split have been adjusted in accordance with the terms of the plans, agreements or arrangements governing such options, warrants and other convertible securities and subject to rounding to the nearest whole share. Each stockholder’s percentage ownership interest in the Company and proportional voting power remain virtually unchanged by the split, except for minor changes and adjustments that resulted from rounding fractional shares into whole shares. The rights and privileges of the holders of shares of the Company’s Common Stock were substantially unaffected. As the par value per share of common stock was not changed in connection with the 1-for-9 or 1-for-36 reverse stock splits, there was no change in the par value of the preferred stock related to the reverse stock splits recorded in the years ended December 31, 2025 and 2024. An adjustment to round fractional shares into whole shares was recorded in the year ended December 31, 2025 which increased Common Stock by 64,142 shares and $ 6 with a corresponding decrease in additional paid-in capital. An F-11 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS adjustment to round fractional shares into whole shares was recorded in the year ended December 31, 2024 which increased Common Stock by 14,886 shares and $ 1 with a corresponding decrease in additional paid-in capital. 2. Summary of Significant Accounting Policies Basis of Presentation - The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), under the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All intercompany balances and transactions have been eliminated in preparation of these consolidated financial statements. Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make 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 period. Significant items subject to such estimates and assumptions include the (i) estimates of future costs to complete customer contracts recognized over time, (ii) valuation allowances for deferred income tax assets, (iii) valuation of stock-based compensation awards, (iv) the valuation of conversion options, warrants and earnouts, (v) fair value of New Convertible Debentures and November 2024 Debentures, and (vi) fair value of Preferred Stock. Actual results could differ from those estimates. Cash and Cash Equivalents - The Company classifies all highly-liquid instruments with an original maturity of three months or less as cash equivalents. The Company maintains cash and cash equivalents in bank deposit accounts, which at times may exceed federally insured limits of $250,000. Historically, the Company has not experienced any losses in such accounts. There were no cash equivalents at December 31, 2025 and 2024, respectively. Restricted Cash - The Company had a restricted cash balance of $ 600,342 at December 31, 2025 relating to a letter of credit for imported inventory items. The Company had a restricted certificate of deposit, held by a bank on our behalf, of $ 52,151 as of December 31, 2024 which related to a guarantee against corporate credit cards. Accounts Receivable, Unbilled Revenues, and Allowance for Credit Losses - With the adoption of ASU 2016-13, accounts receivable and contract assets are recorded at the invoiced amount and do not typically bear interest. The Company regularly monitors and assesses its risk of not collecting amounts owed by customers. At each balance sheet date, the Company recognizes an expected allowance for credit losses. In addition, at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis where similar risk characteristics exist. If applicable, accounts receivable and contract assets are evaluated individually when they do not share similar risk characteristics which could exist in circumstances where amounts are considered at risk or uncollectible. The allowance estimate is derived from a review of the Company’s historical losses based on the aging of receivables. This estimate is adjusted for management’s assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company. The Company believes historical loss information is a reasonable starting point in which to calculate the expected allowance for credit losses as the Company’s portfolio segments have remained constant since the Company’s inception. The Company writes off receivables when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery. If any recoveries are made from any accounts previously written off, they will be recognized in income in the year of recovery, in accordance with the entity’s accounting policy election. The total allowance for credit losses was de minimis for the years ending December 31, 2025 and 2024, respectively. Property and Equipment - Property and equipment is recorded at cost and depreciated using the straight-line method. Expenditures which extend the useful lives of existing property and equipment are capitalized. Those costs which do not extend the useful lives are expensed as incurred. Upon disposition, the cost and accumulated depreciation are removed and any gain or loss on the disposal is reflected in the consolidated statements of operations. Goodwill – Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations. Pursuant to ASC Topic 350, Intangibles-Goodwill and Other, the Company tests goodwill for impairment on an annual basis in the fourth quarter, or between annual tests, in certain circumstances. Under authoritative guidance, the F-12 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Company first assessed qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment test. The assessment considers factors such as, but not limited to, macroeconomic conditions, data showing other companies in the industry and our share price. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price Intangible Assets - Intangible assets consist primarily of trade-names/trademarks, intellectual property and non-compete agreements acquired through the SeaTrepid acquisition. Finite-lived intangible assets are amortized on a straight-line bases over their estimated useful lives, ranging from 3 to 15 years. Impairment of Long-Lived Assets - The Company reviews long-lived assets for potential impairment when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In this assessment, future pre-tax cash flows (undiscounted) resulting from the use of the asset and its eventual disposal are estimated. If the undiscounted future cash flows are less than the carrying amount of the asset, an impairment loss is recognized for the difference between its carrying value and estimated fair value. For the years ended December 31, 2025 and 2024 no property and equipment was impaired. Segment Reporting - In November of 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The amendments are intended to increase reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The ASU is effective on a retrospective basis for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Operating segments refer to components of a company that engage in activities for which separate financial information is available and reviewed regularly by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and assessing performance. The CODM reviews the Balance Sheet and Statement of Operations quarterly and reviews as a single reportable segment. The CODM is the Company's Chief Executive Officer. The Company manages its operations as a single segment because each revenue stream possesses similar production methods, distribution methods, and customer quality and consumption characteristics, resulting in similar long-term expected financial performance. Revenue - Our primary sources of revenue are from providing technology engineering services and products to the offshore industry and governmental entities. Revenue is generated pursuant to contractual arrangements to design and develop subsea robots and software and to provide related engineering, technical, and other services according to the specifications of the customers. These contracts can be service sales (cost plus fixed fee or firm fixed price) or product sales and typically have terms of up to 18 months. The Company had no product sales in 2025 and 2024, respectively, nor has it had any firm fixed fee contracts in 2025. A performance obligation is a promise in a contract to transfer distinct goods or services to a customer. For all contracts, we assess if there are multiple promises that should be accounted for as separate performance obligations or combined into a single performance obligation. Our service arrangements generally represent a single performance obligation. Our performance obligations under service agreements generally are satisfied over a short period of time as the service is provided. Revenue under these contracts is recognized using an input method based on costs incurred relative to total estimated costs. This requires management to make estimates and assumptions to estimate contract sales and costs associated with its contracts with customers. Changes in estimates are recognized in the period in which they become known. Where the estimated total costs to complete a contract exceed the expected consideration to be received, the full amount of the anticipated loss is recorded in the period the loss becomes evident. Inventories – Inventories consist of raw materials, work in progress and finished goods, as applicable, and are stated at the lower of cost or net realizable value. Work in progress and finished goods inventories include raw materials, direct labor and production overhead. The Company periodically reviews inventories on hand and current market conditions to determine if the cost of raw materials, work in progress and finished goods inventories exceed current market prices and impairs the cost basis of the inventory accordingly. The associated impairment is charged as a standalone expense on the statements of operations. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its net realizable value if those amounts are determined to be less than cost. The associated write-downs or write-offs of inventory are charged to cost of sales. Inventory write-offs totaling $ 500,332 were included in cost of sales for F-13 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS the year ended December 31, 2025 relating to inventory deemed as obsolete. During the year ended December 31, 2025, $ 414,416 of inventory was transferred from inventories to construction in progress relating to items to be used on our subsea vehicle. Inventories consisted of the following: December 31, 2025 December 31, 2024 Raw material and supplies $ - $ 880,594 Work in progress - - Total inventories $ - $ 880,594 Leases – The Company’s lease arrangements are operating leases which are capitalized on the balance sheet as right-of-use (“ROU”) assets and obligations. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. These are recognized at the lease commencement date based on the present value of payments over the lease term. If leases do not provide for an implicit rate, we use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term as the lease payments. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less ("short term leases") are not recorded on the balance sheet; and the lease expense on short-term leases is recognized on a straight-line basis over the lease term. Stock-Based Compensation – The Company accounts for employee stock-based compensation using the fair value method. Compensation cost for equity incentive awards is based on the fair value of the equity instrument generally on the date of grant and is recognized over the requisite service period. The Company’s policy is to issue new shares upon the exercise or conversion of options and recognize option forfeitures as they occur. Income Taxes – Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax asset (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the benefit from the deferred tax asset will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company had no material uncertain tax positions as of December 31, 2025 or 2024 . Foreign Currency Translation – Prior to January 1, 2025, all assets and liabilities in the consolidated balance sheet of the Company's foreign subsidiary, whose functional currency is the Brazilian Real, were translated at period-end exchange rates. All revenues and expenses in the consolidated statements of operations, of this foreign subsidiary, were translated at average exchange rates for the period. Translation gains and losses were not included on determining net loss but were shown in accumulated other comprehensive loss on the consolidated balance sheet. Effective January 1, 2025, the functional currency for the Company's foreign subsidiary was changed from Brazilian Real to U.S. dollars due to changes in operational and economic circumstances. The previously recorded cumulative translation adjustment in Accumulated Other Comprehensive Income as of the date of the change remains in equity and will not be reclassified to earnings unless the subsidiary is sold or liquidated. The change was accounted for prospectively. Foreign Currency Gains and Losses – Foreign currency transaction gains and losses are included on determining net loss. The Company purchases certain materials and equipment from foreign companies and these transactions are generally F-14 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS denominated in the vendors’ local currency. The Company recorded $ 54,527 and $ 61,597 of foreign currency transaction losses for the years ended December 31, 2025 and 2024, respectively that are included in other income, net. Fair Value Measurements - The Company categorizes financial assets and liabilities using a three-tier fair value hierarchy, based on the nature of the inputs used to determine fair value. Inputs refer broadly to assumptions that market participants would use to value an asset or liability and may be observable or unobservable. When determining the fair value of assets and liabilities, the Company uses the most reliable measurement available. See Note 22, “Fair Value Measurements.” Common Stock Warrants – We account for Common Stock warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance. This assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability or requirements for equity classification, including whether the warrants are indexed to the Company’s Common Stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. We have determined that the private warrants sold in a private placement (the “Private Warrants”) and warrants sold to the public (the “Public Warrants”) should be accounted for as liabilities. The Private Warrants and Public Warrants were initially recorded at their estimated fair value on the issuance. They are then revalued at each reporting date thereafter, with changes in the fair value reported in the consolidated statements of operations. Derivative warrant liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The fair value of the Private Warrants was estimated using a Black-Scholes option pricing model (a Level 3 measurement). The Public Warrants are valued using their publicly-traded price at each measurement date (a Level 1 measurement). We have determined that the SPA Warrants should be accounted for as liabilities. The SPA Warrants were initially recorded at their estimated fair value on the issuance and are then revalued at each reporting date thereafter, with changes in the fair value reported in the consolidated statements of operations. Derivative warrant liabilities are classified in our balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. Fair Value Election for New Co nvertible Debentures and November 2024 Debentures - The Company has elected to measure its new 5 % Original Issue Discount Senior Secured Convertible Debentures (the "New Convertible Debentures") and the 2 % Original Issue Discount Senior Secured Convertible Debentures (the "November 2024 Debentures") at fair value under the fair value option in accordance with ASC 825-10, Financial Instruments – Fair Value Option. This election was made to provide greater transparency and to more accurately reflect the economic value of the New Convertible Debentures and November 2024 Debentures in the Company's consolidated financial statements. Under the fair value option, the New Convertible Debentures and the November 2024 Debentures are recorded at their estimated fair value at each reporting date, with changes in fair value recognized in earnings within "Other (income) expense" in the Consolidated Statements of Operations. The fair value of the New Convertible Debentures and November 2024 Debentures are determined using a Monte Carlo simulation model that uses inputs such as the Company’s stock price (KITT), stock price volatility, risk-free interest rate and conversion terms. The New Convertible Debentures were exchanged to Series A Preferred stock on December 27, 2024 and December 31, 202 4. The init ial fair value of the New Convertible Debentures was $ 99,195,791 as of January 30, 2024, A loss on extinguishment of debt of $ 48,870,991 r elated to this transaction was reported in the consolidated statements of operations for the year ended December 31, 2024 . November 2024 Debentures - The November 2024 Debentures were estimated to have a fair value of $ 163,672 and $ 2,583,832 as of December 31, 2025 and December 31, 2024 respectively. The fair value option eliminates the requirement to separately account for embedded conversion features that would otherwise be bifurcated under ASC 815-15, Derivatives and Hedging – Embedded Derivatives. Instead, all economic impacts of the New Convertible Deb entures and November 2024 Debentures—including interest, conversion features, and market fluctuations—are captured in the fair value measurement. F-15 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company believes that the fair value measurement provides a more relevant representation of the liability’s impact on financial position and performance, as it reflects the new convertible debentures’ current economic value and reduces potential measurement inconsistencies. Earnout Shares – Earnout Shares that may be issued to former holders of Nauticus Robotics Holdings, Inc.’s common stock are held in escrow and will only be issued upon the occurrence of specified Triggering Events within 5 years of September 9, 2022. As of the reporting date, the Earnout Shares have not been issued and therefore are not considered issued or outstanding shares of common stock. The Company evaluated the earnout arrangement under ASC 815 – Derivatives and Hedging and concluded that, upon issuance, the Earnout Shares would qualify for equity classification. Accordingly, the Earnout Shares will be recognized in stockholders’ equity at fair value on the issuance date and will not be subsequently remeasured. The fair value will be determined using a Monte Carlo simulation model, which represents a Level 3 fair value measurement under ASC 820 – Fair Value Measurement. Earnings (Loss) per Share – Basic earnings per share is computed by dividing income attributable to common stockholders by the weighted average number of shares of Common Stock outstanding during the period. Diluted earnings per share is computed in the same manner as basic earnings per share except that the denominator is increased to include the number of additional shares of Common Stock that could have been outstanding assuming the exercise of stock options and warrants (determined using the treasury stock method) and conversion of convertible debt. The Earnout Shares, which are subject to forfeiture if the achievement of certain stock price thresholds is not met, are not considered participating securities and are not included in the weighted-average shares outstanding for purposes of calculating loss per share. The Company’s Convertible Preferred Stock is considered a non-participating security as it does not have the right to participate in dividends with common stockholders beyond its stated dividend or share in undistributed earnings. Accordingly, the Company does not apply the two-class method in computing earnings (loss) per share. Dividends on preferred stock are recorded as a reduction to net income (loss) attributable to common stockholders in the calculation of basic earnings (loss) per share. Major Customer and Concentration of Credit Risk – We have a limited number of customers. During the year ended December 31, 2025, sales to five customers accounted for 69 % of total revenue. Sales to Customer A and Customer B accounted for 19 % of total revenue, respectively; sales to Customer C accounted for 11 % of total revenue; and sales to Customer D and E accounted for 10 % of total revenue, respectively. Total accounts receivable as of December 31, 2025 was made up by three customers. As of December 31, 2024, sales to three customers accounted for 82 % of total revenue. Sales to Customer F accounted for 39 % of total revenue; sales to Customer G accounted for 27 % of total revenue; and sales to customer H accounted for 16 % of total revenue. Total accounts receivable for the year ended December 31, 2024 was made up by three customers. Loss of these customers could have a material adverse impact on the Company. Reclassifications – Financial statements presented for prior periods include reclassifications that were made to conform to the current year presentation. For the year ended December 31, 2024, we reclassified $ 200,000 of franchise tax expense from other expense to general and administrative expense in the consolidated statements of operations to conform to the current year presentation. There were no other reclassifications that materially impacted the consolidated financial statements. Distinguishing Liabilities from Equity – The Company evaluates financial instruments, including preferred stock, convertible debt, equity line of credit, and warrants to determine whether they should be classified as liabilities or equity in accordance with ASC 480 and ASC 815. For warrants, the Company assess whether the instrument is indexed to its own stock and meets the equity classification conditions. Instruments that fail equity classification are recorded as liabilities and measured at fair value, with changes recognized in earnings. This assessment is performed at issuance and reassessed each reporting period while outstanding. Accounting for Business Combinations – The Company accounts for acquisitions in accordance with ASC 805, using the acquisition method. Under this method, the consideration transferred is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. Any excess of the purchase price over the fair value of net identifiable assets acquired is recorded as goodwill. Identifiable intangible assets, are recognized separately from goodwill if they meet the separability criteria and are amortized over the estimated useful lives. Provisional amounts are adjusted during the measurement period as new information becomes available about facts and circumstances that existed as of the acquisition date. Accounting Standards Issued and adopted as of December 31, 2025 - The Company has adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures as issued by the Financial Accounting Standards Board F-16 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (“FASB”) in December 2023, which is an update that improves income tax disclosure requirements. Other than providing additional disclosures related to our income taxes, the adoption, which was done on a prospective basis, did not materially impact our consolidated financial statements. See “Note 14 – Income Taxes”. Accounting Standards Issued but not adopted as of December 31, 2025 – In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, an update that improves income statement expense disclosure requirements. Under ASU 2024-03 issuers will be required to incorporate new tabular disclosures disaggregating prescribed expense categories within relevant income statement captions in the notes to their financial statements. These categories include purchases of inventory, employee compensation, depreciation and intangible asset amortization. The amendments are effective for fiscal years beginning after December 15, 2026 and should be applied prospectively. The adoption of ASU 2024-03 will require us to provide additional disclosures related to certain income statement expenses, but otherwise will not materially impact our consolidated financial statements. Accounting Standards Issued but not adopted as of December 31, 2025 – In December 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-10, Accounting for Government Grants (Topic 832) , which establishes guidance on the recognition, measurement, presentation and disclosure of government grants received by business entities. The Company does not currently receive government grants within the scope of this guidance. The Company is evaluating the potential impact of the adoption of this standard on its consolidated financial statements and if arrangements in the future meet the definition of a government grant, such arrangements would be evaluated under this provision. All other new accounting pronouncements that have been issued, but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our consolidated financial statements. 3. Revenue The following table presents the components of our revenue: Year Ended December 31, 2025 2024 Cost plus fixed fee $ 5,274,915 $ 311,041 Firm fixed-price - 1,446,376 Firm fixed-price-vehicle lease - 50,055 Total $ 5,274,915 $ 1,807,472 Our performance obligations under service agreements are generally satisfied over time as the service is provided and, therefore, all revenue above has been recognized over time. Contract Balances – Accounts receivable, net as of December 31, 2025 totaled $ 378,683 due from customers for contract billings and is expected to be collected within the next three to six months. At December 31, 2024 accounts receivable, net totaled $ 238,531 . Allowances for credit losses included in accounts receivable were de minimis for as of December 31, 2025 and December 31, 2024, respectively. Bad debt expense was de minimis for the years ended December 31, 2025 and 2024. Contract assets include unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized, and revenue recognized exceeds the amount billed to the customer. Contract assets are recorded at the net amount expected to be billed and collected. There were no contract assets as of December 31, 2025 and December 31, 2024. Contract liabilities include billings in excess of revenue recognized and accrual of certain contract obligations. The Company had contract liabilities at December 31, 2025 and 2024 of $ 0 and $ 346,279 , respectively. Contract liabilities at December 31, 2024 relate to billings in excess of revenue recognized. F-17 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Cash, cash equivalents and restricted cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statements of Cash Flows to the amounts shown in the Consolidated Balance Sheets: December 31, 2025 December 31, 2024 Cash and cash equivalents $ 7,016,610 $ 1,186,047 Restricted cash 600,342 52,151 Total cash, cash equivalents and restricted cash $ 7,616,953 $ 1,238,198 The balance reported as restricted cash for the year ended December 31, 2025 relates primarily to a letter of credit for imported inventory items. The balance restricted cash for the year ended December 31, 2024 relates to a guarantee against corporate credit cards. F-18 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Prepaid Expenses Prepaid expenses consisted of the following: December 31, 2025 December 31, 2024 Prepaid material purchases $ 5,400 $ 394,950 Prepaid insurance 827,713 817,717 Other prepayments 222,211 176,767 Total prepaid expenses $ 1,055,324 $ 1,389,434 6. Property and Equipment Property and equipment consisted of the following: Useful Life (years) December 31, 2025 December 31, 2024 Land n/a $ 444,435 $ - Leasehold improvements 5 years 1,823,586 833,920 Property & equipment 3 - 5 years 11,242,513 7,528,597 Technology hardware equipment 3 - 5 years 1,973,983 1,966,841 Total 15,484,517 10,329,358 Less accumulated depreciation ( 6,127,543 ) ( 3,958,780 ) Construction in progress 12,470,795 10,744,668 Total property and equipment, net $ 21,827,769 $ 17,115,246 The Company reported a loss on disposal of property and equipment of $ 25,788 and $ 19,202 for the years ended December 31, 2025 and 2024, respectively, which is reported on the consolidated statements of operations in other (income) expense. During the year ended December 31, 2025, $ 414,416 of inventory was transferred from inventories to construction in progress relating to items to be used on our subsea vehicle. Depreciation expense for the years ended December 31, 2025 and 2024 was $ 2,192,342 and $ 1,736,828 , respectively. 7. Accrued Liabilities Accrued liabilities consisted of the following: F-19 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 December 31, 2024 Accrued compensation $ 221,724 $ 956,399 Accrued severance 274,038 1,031,731 Accrued professional fees 96,786 2,350 Accrued insurance 331,607 440,562 Accrued sales and property taxes 202,638 428,801 Accrued royalties 337,500 400,000 Accrued interest 4,303,157 2,302,878 Accrued Audit Fees 531,000 - Accrued settlement 319,546 - Other accrued expenses 233,398 40,000 Accrued purchase liability - SeaTrepid 3,287,881 - Total accrued expenses $ 10,139,275 $ 5,602,721 On March 20, 2025, the Company completed the acquisition of SeaTrepid International LLC (“SeaTrepid”), an expert in providing subsea robotic services to customers throughout the world, for total consideration of $ 14,209,810 (see Note 11, "Business Combination"). As of December 31, 2025, a liability of $ 3,287,881 , is outstanding to SeaTrepid payable in cash on or before June 30, 2026. A partial payment of $ 500,000 was made in the fourth quarter of 2025. This liability includes the preliminary post-closing working capital adjustment. 8. Notes Payable Notes payable consisted of the following: December 31, 2025 December 31, 2024 November 2024 Debentures (fair value) $ 163,672 $ 2,583,832 Convertible senior secured term loan 19,284,709 27,500,383 SBA Loan 485,300 - Ameristate Loan 1,811,327 - Total 21,745,008 30,084,215 Less: debt discount, net ( 26,225 ) ( 66,478 ) Less: capitalized debt issuance costs ( 321,004 ) ( 1,207,509 ) 2023 Term Loan Agreement exit fee provision 115,638 125,302 Total notes payable $ 21,513,417 $ 28,935,530 November 2024 Debentures (principal amount) $ 100,000 $ 2,150,000 Convertible Secured Debentures On September 9, 2022, we issued Debentures, secured debt instruments, which featured a 2 % original issue discount, in an aggregate principal amount of $ 36,530,320 , together with 9,020 associated warrants ("Original SPA Warrants"), for gross proceeds of $ 35,800,000 . The fair value of the Original SPA Warrants was estimated to be $ 20,949,110 using a Monte Carlo valuation model incorporating future projections of the various potential outcomes and any exercise price adjustments based on future financing events. This amount was recorded as a warrant liability and, together with the original issue discount, was recognized as a debt discount upon issuance totaling $ 21,679,716 . The debt discount is being amortized to interest expense over the four-year term of the Debentures. The Debentures were convertible at each holder’s option at 120 % of the principal amount at a conversion price of $ 4,860 or 9,020 shares of Common Stock, subject to certain adjustments including full ratchet anti-dilution price protections. F-20 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Interest accrued on the outstanding principal amount of the Debentures at 5 % per annum, payable quarterly. The Debentures were secured by first priority interests, and liens on, all our assets, and were scheduled to mature on the fourth anniversary of the date of issuance, September 9, 2026. Exchanged Senior Secured Convertible Debenture On January 30, 2024, the Company and certain of its subsidiaries and ATW Special Situations I LLC ("ATW I") entered into an Amendment and Exchange Agreement (the “Amendment and Exchange Agreement”), pursuant to which ATW I transferred its existing Original Issue Discount Senior Secured Convertible Debenture to the Company in exchange for a new Original Issue Discount Exchanged Senior Secured Convertible Debenture due September 9, 2026 (the “New Debenture”) in the aggregate principal amount of $ 29,591,600 . In addition, on January 30, 2024, the Company and certain of its subsidiaries entered into additional Amendment and Exchange Agreements with Material Impact Fund II, L.P. ("MIF") and SLS Family Irrevocable Trust ("SLS") on substantially similar terms, pursuant to which MIF and SLS transferred their existing 5 % Original Issue Discount Senior Secured Convertible Debentures to the Company in exchange for New Debentures in the aggregate principal amount of $ 5,102,000 and $ 1,836,720 , respectively. The New Debentures provide for, among other items: (a) an interest rate of 5 % per annum, payable quarterly in shares of the Company’s Common Stock (if the conditions described therein are met) and/or in cash, at the Company’s option; (b) conversion by the holder into shares of the Company’s Common Stock at any time (subject to limitations on conversion described therein); (c) a conversion price of $ 148.50 (subject to adjustment as provided therein) with shares of the Company’s Common Stock issuable on conversion determined by dividing 120 % of the applicable “conversion amount” (as defined in the New Debenture) by the conversion price; (d) prior to the date of sale of the Company’s Common Stock (or equivalents) in one or in a series of transactions resulting in net cash proceeds to the Company of at least $ 30 million an alternate conversion price at the lower of (1) $ 148.50 (subject to adjustment as provided therein) and (2) the greater of a floor price of $ 28.45 (subject to adjustment as provided therein) and 98 % of the lowest volume-weighted average price ("VWAP") of the Company’s shares of commons stock during the applicable 10 -trading day period (subject to payment in cash if the applicable VWAP calculation is less than the floor price), and an interest conversion rate of 90 % of such alternate conversion price; and (e) an option by the holder to extend the maturity date by an additional year. On the closing of the Amendment and Exchange Agreement the existing Original Issue Discount Senior Secured Convertible Debentures were extinguished. The Company has elected to measure the New Convertible Debentures at fair valu e under the fair value option in accordance with ASC 825-10, Financial Instruments – Fair Value Option which eliminates the requirement to separately account for embedded conversion features that would otherwise be bifurcated under ASC 815-15, Derivatives and Hedging – Embedded Derivatives. The New Convertible Debentures were measured at a fair value of $ 99,195,791 , estimated using Monte Carlo simulations with the following Split assumptions: stock price of $ 148.65 , a risk free rate of 4.23 %, implied volatility of 121 % and a remaining term of 2.61 years. A loss on extinguishment of debt of $ 78,734,949 related to this transaction was reported in the consolidated statements of operations for the year ended December 31,2024. Conversion of New Convertible Debentures During the year ended December 31, 2024, ATW I and SLS converted New Convertible Debentures with a fair value of $ 29,741,859 , principal value of $ 12,869,231 and $ 1,836,720 and payable interest of $ 442,140 and $ 4,785 into 535,426 and 77,673 shares of Common Stock, respectively. Second Amendment and Exchange Agreement On November 4, 2024, the Company entered into the Second Amendment and Exchange Agreement by and among the Company and ATW I, SLS and MIF pursuant to which such investors would exchange the remaining portion of the amount outstanding under the New Convertible Debentures and certain other amounts outstanding with respect thereto, into shares of Series A preferred convertible stock (see Note 15 - "Preferred Stock"). On December 27, 2024, the Company and ATW I closed the exchange transaction, and the Company issued 27,588 shares of Series A Preferred Stock to ATW I in exchange for a principal value of $ 16,672,369 and other amounts outstanding of $ 10,915,974 . On December 31, 2024, the Company issued 2,504 and 5,342 shares of Series A Preferred Stock to SLS and MIF in exchange for principal values of $ 0 and $ 5,102,000 and interest payable and other amounts outstanding of $ 2,504,440 and $ 240,219 , respectively. The total fair value of these exchange transactions was $ 110,300,191 . A loss on F-57 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS extinguishment of debt of $ 48,870,991 related to this transaction was reported in the consolidated statements of operations for the year ended December31,2024. November 2024 Debentures On November 4, 2024, the Company entered into a Securities Purchase Agreement with ATW, pursuant to which ATW purchased, in a private placement, $ 1,150,000 in principal amount of debentures, with an option to purchase up to an additional aggregate of $ 20,000,000 in principal amount of original issue discount senior secured convertible debentures (the “November 2024 Debentures”). On December 11, 2024, ATW purchased, in a private placement, $ 1,000,000 in principal amount of debentures. The November 2024 Debentures feature an original issue discount of 2 % and incurred legal fees of $ 190,000 which were expensed through the consolidated statement of operations as the debt is being fair valued. The November 2024 Debentures provide for, among other items: (a) an interest rate of the Prime Rate published in the Wall Street Journal plus 2 % per annum, payable quarterly and added to the principal amount of the November 2024 Debentures, and/or in cash, at the Company’s option; (b) conversion by the holder into shares of the Company’s Common Stock at any time (subject to limitations on conversion described therein); (c) a conversion price of $ 11.07 (subject to adjustment as provided therein) with shares of the Company’s Common Stock issuable on conversion determined by dividing 120 % of the applicable “conversion amount” (as defined in the November 2024 Debentures) by the conversion price; (d) an alternate conversion price at the lower of (1) $ 11.07 (subject to adjustment as provided therein) and (2) the greater of a floor price of $ 2.214 (subject to adjustment as provided therein) and 98 % of the lowest VWAP of the Company’s shares of Common Stock during the applicable 10 -trading day period (subject to payment in cash if the applicable VWAP calculation is less than the floor price); (e) a maturity date of September 9, 2026, and (f) an option by the holder to extend the maturity date by an additional year. The Company has elected to add the interest payable to the principal amount of the November 2024 Debentures. In addition, the exercise price of the November 2024 Debentures is subject to customary anti-dilution adjustments, and, in the case of a subsequent equity sale at a per share price below the exercise price, the exercise price will be adjusted to such lower price. During the year ended December 31, 2025, November 2024 Debentures with a principal value of $ 2,050,000 and interest of $ 202,642 , and fair value of $ 4,668,008 , were converted into 4,549,509 shares of Common Stock. The fair value of the November 2024 Debentures at December 31, 2025 and December 31,2024 was estimated at $ 163,672 and $ 2,583,832 using Monte Carlo simulations with the following assumptions at December 31, 2025: stock price of $ 0.77 , a risk free rate of 3.55 % implied volatility of 154 % and a remaining term of 0.69 years and assumptions at December 31, 2024: stock price of $ 13.95 , a risk free rate of 4.22 % implied volatility of 138 % and a remaining term of 1.69 years . A gain on change in fair value of $ 2,247,848 and $ 435,864 was reported in the consolidated statements of operations for the years ended December 31, 2025 and 2024. RCB Equities #1, LLC On July 14, 2023, the Company issued a secured promissory note to RCB Equities #1, LLC, for $ 5,000,000 . The promissory note included a 2.5 % original issue discount or $ 125,000 , interest at 15 % per annum, and was scheduled to mature on September 9, 2026. The promissory note provides for an exit fee of $ 125,000 if paid off in full between October 12, 2023, and the maturity date, with no other considerations triggered for premiums or penalties. Further, the promissory note provided for an automatic rollover into the structure of certain future debt-financing transactions. On September 18, 2023, the RCB promissory note was rolled into the convertible senior secured term loan discussed below bearing interest at 12.5 % per annum including the $ 125,000 exit fee. Convertible Senior Secured Term Loan On September 18, 2023, the Company entered into a convertible senior secured term loan agreement, (the "2023 Term Loan Agreement"), with ATW Special Situations II LLC ("ATW II") as collateral agent (in such capacity, the “Collateral Agent”) and lender, and Transocean Finance Limited ("Transocean Finance"), ATW I, MIF, and RCB, as lenders. F-58 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The 2023 Term Loan Agreement provides the Company with up to $ 20 million of secured term loans. Any portion of the outstanding principal amount of the loans is prepayable at the Company’s option pro rata to each Lender upon at least 5 days' prior written notice to each Lender. The initial amount funded under the 2023 Term Loan Agreement was $ 11,600,000 , (the "2023 Term Loan"). The 2023 Term Loan Agreement included a 2.5 % exit fee of $ 290,000 , bearing interest at 12.50 % per annum, payable quarterly in arrears on the first day of each calendar quarter commencing April 1, 2024. The exit fee is being provided for over the period of the loan. The loan agreement included a 2.5 % original issue discount of $ 125,000 from the RCB promissory note. The loan includes assumed debt issuance costs of $ 577,500 and deemed interest from convertible debentures of $ 378,118 . The debt discount and debt issuance costs are being amortized to interest expense over the period of the loan. The Loans will mature on the earliest of (a) the third anniversary of the date of the 2023 Term Loan Agreement of September 17, 2026, (b) 91 days prior to the maturity of the 5 % Original Issue Discount Senior Secured Convertible Debentures, dated as of September 9, 2022. Subject to the terms and c onditions of the 2023 Term Loan Agreement, the Company may, upon at least two trading days’ written notice to the Lenders, elect to redeem some or all of the then outstanding principal amount of the Loans. In connection with any such election, which shall be irrevocable, the Company shall pay each Lender, on a pro rata basis, an amount in cash equal to the greater of (x) the sum of (i) 100 % of the then outstanding principal amount of the Loans, (ii) accrued but unpaid interest and (iii) all liquidated damages and other amounts due in respect of the Loans (including, without limitation, the Exit Fee (as defined in the 2023 Term Loan Agreement)) (the “Optional Redemption Amount”) and (y) the product of (i) the aggregate number of shares of the Company’s Common Stock, par value $ 0.0001 per share (“Common Stock”), then issuable upon conversion of the applicable Optional Redemption Amount (without regard to any limitations on conversion set forth in the 2023 Term Loan Agreement) multiplied by (ii) the highest closing sale price of the Common Stock on any trading day during the period commencing on the date immediately preceding the date that the applicable notice of redemption is delivered to the Lenders and ending on the trading day immediately prior to the date the Company makes the entire payment required to be made in connection with such redemption. The Loans are convertible, in whole or in part, at the option of each Lender into shares of Common Stock until the date that the Loans are no longer outstanding, at a conversion rate equal to the outstanding principal amount of the Loans to be converted divided by conversion price of $ 1,944 per share of Common Stock (the “Conversion Price”), subject to certain customary anti-dilution adjustments as described in the 2023 Term Loan Agreement. First Amendment to Convertible Senior Secured Term Loan On December 31, 2023, the Company entered into a First Amendment to 2023 Term Loan Agreement (the “First Amendment”), by and among the Company, the subsidiary guarantors (as defined in the First Amendment) and ATW II which amended that certain 2023 Term Loan Agreement dated as of September 18, 2023 with ATW II, as collateral agent (as replaced by Acquiom Agency Services LLC, in such capacity, the “Collateral Agent”) and lender, and Transocean Finance, ATW I, MIF, and RCB, as lenders. The First Amendment provided the Company with an incremental loan in the aggregate principal amount of $ 695,000 (the “December 2023 Incremental Loan”), subject to the terms and conditions set forth in the 2023 Term Loan Agreement and the First Amendment. The total loan funded under the 2023 Term Loan Agreement and First Amendment as of December 31, 2023 is $ 12,295,000 . The loan incurred debt issuance costs of $ 72,000 which are being amortized to interest expense over the period of the loan. Second Amendment to Convertible Senior Secured Term Loan On January 30, 2024, the Company entered into a Second Amendment to Term Loan Agreement, dated as of January 30, 2024 (the “Second Amendment”), by and among the Company, the guarantors (as defined in the Second Amendment) and the required lenders (as defined in the Second Amendment), which amended that certain Term Loan Agreement, dated as of September 18, 2023, by and among the Company, Transocean Finance, ATW I, MIF and RCB as lenders and ATW II, as collateral agent (as succeeded by Acquiom Agency Services LLC) . In connection with the Second Amendment, the Company also entered into a Second Agreement regarding incremental loans, dated as of January 30, 2024 (the “Second Agreement”), by and among the Company, the guarantors (as defined in the Second Agreement), and ATW II and MIF, as incremental lenders. The Second Agreement provides the Company with F-59 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS an incremental loan in the aggregate principal amount of $ 3,753,144 (the “January 2024 Incremental Loan”). The January 2024 Incremental Loan would be made on the same terms as the 2023 Term Loan and be deemed to be Additional Term Loans for all purposes under the Term Loan Agreement. New Senior Secured Term Loan Agreement On January 30, 2024, the Company also entered into a senior secured term loan agreement (the “2024 Term Loan Agreement”) with ATW Special Situations Management LLC (“ATW Management”), as collateral agent (in such capacity, the “Collateral Agent”) and lender, and ATW Special Situations III LLC (“ATW III”), MIF, VHG Investments, ATW II and ATW I, as lenders. The 2024 Term Loan Agreement provides the Company with an aggregate $ 9,551,856 of secured term loans (the “2024 Loans”), including $ 1,000,000 which has an extended repayment period, (the "ATW Extended Maturity Term Loan"). Any portion of the outstanding principal amount of the 2024 Loans are prepayable at the Company’s option pro rata to each Lender upon at least 5 days’ prior written notice to each Lender. The 2024 Term Loan Agreement also provided for up to an additional $ 6 million of secured term loans within 180 days of signing. The 2024 Loans assumed debt issuance costs of $ 1,237,291 which are being amortized to interest expense over the period of the loan. The 2024 Loans bear interest at the rate of 15 % per annum, payable quarterly in arrears on the first day of each calendar quarter commencing April 1, 2024. The Company shall pay interest in cash or the Company may, at its option, elect for up to (x) 100 % for the six ( 6 ) months after the Closing Date and (y) thereafter, 50 %, in each case, of any accrued but unpaid interest that would otherwise be payable on an Interest Payment Date, to be capitalized and added as of such date to the principal amount of the Loans (the “PIK Interest”). The principal amount of the Loans shall be deemed to be increased by the PIK Interest so capitalized and added to the unpaid principal balance of the Loans in accordance with the provisions hereof. The Company opted to capitalize the interest payable. The 2024 Loans (other than the ATW Extended Maturity Term Loan) will mature on the earliest of: (a) the third anniversary of the date of the Term Loan Agreement, (b) the maturity of the Indebtedness under the 2023 Term Loan Agreement among the Company, the lenders party thereto and Acquiom Agency Services LLC, as collateral agent, dated September 18, 2023, as amended on December 31, 2023, and as further amended on January 30, 2024, and (c) 91 days prior to the maturity of the 5 % Original Issue Discount Senior Secured Convertible Debentures, dated as of September 9, 2022, issued by the Company pursuant to that certain Securities Purchase Agreement, dated as of December 16, 2021, as amended on January 31, 2022, and as further amended on September 9, 2022, and as further amended on January 30, 2024. The ATW Extended Maturity Term Loan will mature on the earlier of the 30th anniversary of the date of the Term Loan Agreement or such earlier date as is required or permitted to be repaid under the Term Loan Agreement. The 2024 Loans were convertible, in whole or in part, at the option of each Lender into shares of Common Stock until the date that the 2024 Loans are no longer outstanding, at a conversion rate equal to the outstanding principal amount of the Loans to be converted divided by a conversion price of $ 148.50 per share of Common Stock, subject to certain adjustments as described in the 2024 Term Loan Agreement. On January 3, 2025, the Company voluntarily reduced the conversion price of the loans under the 2024 Term Loan Agreement dated as of January 30, 2024 to $ 14.31 on a post reverse split basis, in accordance with the original terms and provisions of the note agreement. Amendment to 2024 Term Loan Agreement On May 1, 2024, the Company entered into an amendment (the “May 2024 Amendment”) to the 2024 Term Loan Agreement dated January 30, 2024 between the Company, ATW Management as collateral agent, and the lenders party thereto. Pursuant to the Amendment, ATW I loaned an additional $ 1,000,000 (the “ May 2024 Incremental Loan ” ) to the Company. The May 2024 Incremental Loan has the same terms as the ATW Extended Maturity Term Loan under the 2024 Term Loan Agreement and will mature on the 30th anniversary of the date of the 2024 Term Loan Agreement or such earlier date as is required or permitted to be repaid under the 2024 Term Loan Agreement. The May 2024 Incremental Loan incurred debt issuance costs of $ 37,500 which are being amortized to interest expense over the period of the loan. The 2023 Term Loan, the December 2023 Incremental Loan, the January 2024 Incremental Loan, 2024 Loans and the May 2024 Incremental Loan are collectively the S enior Secured Convertible Term Loan. F-60 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Term Loan Note Conversions During the year ended December 31, 2025, ATW I and ATW II exchanged 2023 Term Loan notes with principal and interest amount of $ 3,360,164 and $ 453,794 , respectively, into 3,814 of Series C Preferred Stock (see Note 15, Preferred Stock). The fair value of the Series C Preferred Stock was $ 10,185,929 and a loss of extinguishment of debt of $ 6,666,623 was reported in the consolidated statements of operations for the year ended December 31, 2025 . During the year ended December 31, 2025, ATW I and ATW II converted 2024 Term Loan notes with principal amount of $ 2,551,855 and interest payable of $ 318,718 into 200,600 shares of Common Stock. On October 25, 2025, the Company entered into an Amendment to the 2023 Term Loan with each Lender, pursuant to which the conversion price was reduced to $ 1.76 for the period from October 25, 2025 to November 7, 2025, thereafter, the conversion price reverted to $ 1,944 . During this period, a lender converted 2023 Term Loan notes with principal amount of $ 3,000,000 and interest payable of $ 773,958 into 2,144,295 shares of Common Stock. The Company evaluated the transaction under ASC 470-20 and concluded it qualified as an induced conversion. The Company recognized an inducement expense of $ 3,941,929 , which represents the fair value of the incremental benefit provided to the lender. This amount was reported as interest expense in the consolidated income statements with a corresponding increase to additional paid-in-capital. This transaction did not involve any cash consideration. Interest Expense Interest expense includes the following relating to the S enior Secured Convertible Term Loan: Twelve months ended December 31, 2025 2024 Debt discount amortization $ 40,253 $ 40,036 Amortization of debt issuance costs 886,504 664,690 Provision for 2023 Term Loan Agreement exit fee ( 9,663 ) 97,694 Induced conversion expense 3,941,929 - During the years ended December 31, 2025 and 2024, $ 696,345 and $ 900,383 of interest relating to the 2024 Term Loans was capitalized as PIK interest. Small Business Association Loan (SBA) On June 19, 2020, SeaTrepid entered into a term loan with the US Small Business Administration in response to the COVID-19 pandemic. The loan amount was $ 485,300 with an annual interest rate of 3.75 %, and a maturity date of June 19, 2050. In connection with the acquisition of SeaTrepid on March 20, 2025, the loan, with an outstanding principal of $ 485,300 as of December 31, 2025, is now an obligation of the Company. The loan is secured by collateral which includes all tangible and intangible property of SeaTrepid. Under the terms of the agreement, the sale of collateral without lender consent constitutes a violation of the loan agreement. As of December 31, 2025, the lender had not issued a notice of default. As a result of this and as the Company intends to repay the loan on or before June 30, 2026, the outstanding loan balance has been classified as a current liability. Ameristate Loan On August 17, 2017, SeaTrepid entered into a term loan with AmeriState Bank. The loan amount was $ 2,335,000 with an annual interest rate of prime plus 2.5 %, and a maturity date of May 4, 2036. In connection with the acquisition of SeaTrepid on March 20, 2025, the loan with an outstanding principal of $ 1,865,689 as of December 31, 2025 is now an obligation of the Company. The loan is secured by collateral which includes all assets of SeaTrepid. The loan agreement includes customary affirmative and negative covenants, including financial covenants that require SeaTrepid to maintain a maximum Debt-to-Net Worth Ratio of 9.0 to 1.0 and a minimum Debt Service Coverage Ratio of 1.0 to 1.0, measured annually. The agreement also restricts the Company’s ability to incur additional indebtedness, pay dividends, compensate officers and owners, invest in fixed asset purchases, and dispose of collateral without the consent of the bank. Under the terms of the agreement, the sale of collateral without lender consent constitutes a violation of the loan agreement and as such constitutes a noncompliance with the financial covenants related to the debt-to-net worth ratio and debt service F-61 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS coverage ratio. As of December 31, 2025, the lender had not issued a notice of default. As a result of this and as the Company intends to repay the loan on or before June 30, 2026, the outstanding loan balance has been classified as a current liability. Reclassification of Debt During the year ended December 31, 2025, all of the Company's outstanding notes payable were reclassified from long-term to short-term liabilities, as the related obligations mature within twelve months of the balance sheet date. 9. Leases The Company determines if an arrangement is a lease at inception based on whether the Company has the right to control the use of an identified asset, the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset. After the criteria are satisfied, the Company accounts for these arrangements as leases in accordance with ASC 842, Leases. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, including payments at commencement that depend on an index or rate. For leases in which the Company is the lessee that do not have a readily determinable implicit rate, an incremental borrowing rate, based on the information available at the lease commencement date, is utilized to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. The Company uses the implicit rate for agreements in which it is a lessor. The Company has not entered into any material agreements in which it is a lessor. Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases. In March 2024, the Company extended the lease on its current office and manufacturing facility for an additional 3 years. The incremental borrowing rate on this lease of 8 % was used to determine the present value of lease payments and establish the right-of-use asset and lease liability at lease inception for this lease. In August 2023, the Company entered into an operating lease for office space in Norway. The lease had a term of 5 years. The Company’s secured borrowing rate of 15 % was used to determine the present value of the lease payments and establish the right-of-use asset and lease liability at lease inception for this lease. During the year ended December 31, 2024, the Company agreed with the lessor on two separate occasions to reduce the size of the office space leased and subsequently terminated the lease early resulting in a net loss on lease termination of $ 18,365 which was reported under other (income) expense on the consolidated statements of operations. In July of 2023, the Company entered into an operating lease for office space in Scotland. The lease had a term of 5 years with two options to extend. The Company’s secured borrowing rate of 15 % was used to determine the present value of the lease payments and establish the right-of-use asset and lease liability at lease inception for this lease. During the first quarter of 2024, management decided the Company would not extend this lease beyond its initial term and a loss on lease termination of $ 356 was reported under other (income) expense on the consolidated statements of operations. During the fourth quarter of 2025 management agreed early termination of the lease with the landlord and a loss on lease termination of $ 2,640 was reported under other (income) expense on the consolidated statement of operations. The Company’s other operating leases include leases for certain office equipment. The following table presents the Company’s lease costs which are included in general and administrative expenses in the consolidated statements of operations: Years ended December 31, 2025 2024 Fixed lease expense $ 474,527 $ 518,462 Variable lease expense $ 232,061 311,719 Total operating lease expense 706,588 830,181 Short-term lease expense 118,103 41,258 Total lease expense $ 824,691 $ 871,439 F-62 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Cash paid for operating leases was $ 468,320 and $ 397,376 for the years ended December 31, 2025 and 2024, respectively. The following table presents the balances of the Company’s right-of-use assets and lease liabilities included in the consolidated balance sheets: Years ended December 31, 2025 2024 Operating lease right-of-use assets, net $ 559,005 $ 1,094,743 Current portion of operating lease liabilities 434,200 435,307 Long-term operating lease liabilities 203,547 768,939 Total operating lease liabilities $ 637,747 $ 1,204,246 For operating lease assets and liabilities, the weighted average remaining lease term was 2.7 years and 3 years as of December 31, 2025 and 2024, respectively. The weighted average discount rate used in the valuation over the remaining lease terms was 10.5 % and 11.9 % as of December 31, 2025 and 2024, respectively. The following table presents the Company's maturities of lease liabilities as of December 31, 2025: Years Ending December 31, Operating Leases 2026 $ 413,315 2027 310,855 2028 3,477 2029 3,477 2030 2,897 Total lease payments 734,021 Total present value discount ( 96,274 ) Operating lease liabilities $ 637,747 10. Commitments and Contingencies Litigation – From time to time, we may be subject to litigation and other claims in the normal course of business. While the Company records accruals for certain matters as appropriate, it does not believe that any currently pending or threatened matters, individually or in the aggregate, are material to its consolidated financial statements. 11. Business Combination On March 20, 2025, the Company acquired substantially all of the assets and certain specified liabilities of SeaTrepid, an expert in providing subsea robotic services to customers throughout the world, for a total consideration of $ 14.2 million. The acquisition aligns with the Company’s long-term growth strategy and expands its presence in the offshore market. The acquisition was accounted for as a business combination using the acquisition method in accordance with ASC 805 Business Combinations, because the acquired assets and liabilities met the definition of a business, which includes inputs, processes, and outputs capable of generating revenue. $ 3.95 million of the total consideration was paid in cash at closing and the remaining purchase price (excluding the contingent consideration) was due on or before September 30, 2025 per the asset purchase agreement. The Company and counterparty mutually agreed to defer the payment, with the settlement now scheduled June 2026. The deferred amount is recorded in accrued liabilities in our consolidated balance sheet as of December 31, 2025 and will be settled in cash. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The acquisition of SeaTrepid includes a contingent consideration arrangement in which the Company agreed to issue shares of its common stock to the sellers of SeaTrepid, subject to the achievement of $ 4 million of business revenue for the year ended December 31, 2025. In accordance with the asset purchase agreement executed on March 5, 2025, the number of earnout shares is equal to $ 5.5 million divided by the Minimum Price, as defined under Nasdaq Rule 5635(d), determined as of the date of the asset purchase agreement. The Company calculated the number of earnout shares equals 671,544 shares, based on a Minimum Price of $ 8.19 as of the date of execution of the asset purchase agreement. At the acquisition date, the Company estimated the fair value of the contingent consideration to be approximately $ 6.9 million, which is included in the total consideration transferred for the business combination. The contingent consideration is classified as equity in accordance with ASC 815-40, as it will be settled in a fixed number of shares and does not meet the definition of a derivative or liability. As such, it will not be remeasured in future periods. As of December 31, 2025, the earnout target was achieved and the earnout shares have been issued to the sellers of SeaTrepid in March 2026. As part of the acquisition agreement, the purchase price is subject to a post-closing working capital adjustment. Based on the closing balance sheet, a working capital shortfall of approximately $ 0.5 million was identified and reduced the total purchase consideration. The following table summarizes the consideration transferred to acquire SeaTrepid and preliminary allocation of the purchase price to the identifiable assets acquired and liabilities assumed, based on their estimated fair values as of the acquisition date. The cash consideration includes the future cash payment of $ 4 million due on September 30, 2025 discounted to a net present value of $ 3.9 million as at March 20, 2025. Cash consideration $ 7,857,118 Earnout shares (fair value) 6,864,729 Purchase price adjustment ( 512,037 ) Total purchase price $ 14,209,810 Purchase Price Allocation March 20, 2025 Cash $ 78,008 Accounts receivable, net 138,354 Inventory 75,300 Other current assets 62,515 Property and equipment 5,594,303 Intangible assets 1,429,400 Goodwill 9,600,745 Accounts payable ( 287,766 ) Accrued liabilities ( 97,668 ) Notes payable - current ( 2,383,381 ) Total purchase price $ 14,209,810 For additional details on the fair value measurement of the acquired assets and liabilities, including the valuation techniques used, see Note 22 Fair Value Measurements. The results of SeaTrepid's operations have been included in the Company’s consolidated financial statements since the acquisition date. The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2024. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31, 2025 2024 Revenue $ 5,772,140 $ 9,518,395 Net loss $ ( 41,516,247 ) $ ( 133,634,269 ) These pro forma amounts reflect the historical operating results of the Company and SeaTrepid, adjusted for the effects of the acquisition, including the additional depreciation that would have been charged assuming the fair value adjustments to acquired property and equipment had been applied from January 1, 2024. For the year ended December 31, 2025, the Company incurred $ 1 million of acquisition-related costs. These expenses are included in general and administration expense on the condensed consolidated statement of operations for the year ended December 31, 2025. Measurement Period Adjustments The purchase price allocation for the SeaTrepid acquisition was preliminary as of the Company's previously issued interim financial statements and subject to adjustments during the measurement period, which extends up to one year from the acquisition date. During the measurement period, the Company obtained a third-party valuation report and finalized its assessment of the fair value of identifiable intangible assets acquired. As a result, the Company recognized $ 1.4 million of identifiable intangible assets, consisting primarily of customer relationships, intellectual property, trade name and non-compete agreements, with a corresponding decrease to goodwill. This adjustment resulted in incremental amortization expense of approximately $ 0.2 million for the year ended December 31, 2025. The Company additionally revised its measurement of deferred cash consideration to reflect the present value of the $ 4.0 million payment due subsequent to closing, resulting in a reduction of purchase consideration of approximately $ 0.1 million and a corresponding decrease to goodwill. The Company also recorded an adjustment to decrease the fair value of certain acquired fixed assets by $ 575,000 based on an independent third-party valuation. This adjustment resulted in a corresponding increase to goodwill and a reduction in depreciation expense of $ 44,825 for the period. 12. Goodwill The Company recognized goodwill as a result of the acquisition of SeaTrepid on March 20, 2025. The goodwill represents the excess of the purchase price over the fair value of net assets acquired and is attributable to expected synergies and the assembled workforce. The goodwill is not deductible for tax purposes. As of December 31, 2025 , goodwill total ed $ 9,600,745 . The Company did no t have any goodwill recorded on its balance sheet prior to this acquisition. The Company evaluates goodwill for impairment annually as of December 31, or more frequently if events or changes in circumstances indicate the asset might be impaired. No indicators of impairment were identified during 2025. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. Intangible Assets Intangible assets consisted of the following: December 31, 2025 Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Tradename- Trademark 15 years 687,300 35,720 651,580 Intellectual property 5 years 731,900 114,113 617,787 Non-Competes 3 years 10,200 2,651 7,549 Total intangible assets 1,429,400 152,484 1,276,916 A mortization expense is included within operating expense in the consolidated statements of operations. The following table presents the Company's estimated future amortization expense: Years ending December 31, Amount 2026 $ 195,600 2027 $ 195,600 2028 $ 192,949 2029 $ 192,200 2030 $ 78,087 Thereafter $ 422,480 Total $ 1,276,916 Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. Income Taxes The components of loss from continuing operations before income taxes were as follows: Year Ended December 31, 2025 2024 Domestic operations $ ( 40,506,558 ) $( 133,802,575 ) Foreign operations ( 321,844 ) ( 1,104,074 ) Loss before income taxes $ ( 40,828,402 ) $ ( 134,906,649 ) The income tax expense consisted of the following : Year Ended December 31, 2025 2024 Current income taxes: Federal $ - $ - State and local - - Total current tax - - Deferred income taxes: Federal - - State and local - - Total deferred tax - - Income tax expense $ - $ - There is no income tax expense recognized for years ended December 31, 2025 and December 31, 2024. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows, in accordance with the updated requirements of ASU 2023-09 for the year ended December 31, 2025: 2025 2024 $ % $ % Loss before income taxes ( 40,828,402 ) ( 134,906,649 ) Income taxes at U.S. federal statutory income tax rate ( 8,573,964 ) 21.0 % ( 28,330,397 ) 21.0 % State and local income taxes, net - - % - - % Foreign tax effects - - % Other foreign jurisdictions 67,587 ( 0.2 ) % - - % Change in valuation allowance 5,317,285 ( 13.0 ) % 9,141,378 ( 6.8 ) % Nontaxable or nondeductible items Debt Extinguishment 1,338,114 ( 3.3 ) % 19,393,825 ( 14.4 ) % Stock Based Compensation - - % Other 484,272 ( 1.2 ) % ( 137,868 ) 0.1 % Other Adjustments Change in UTP 1,468,795 ( 3.6 ) % - - % Other ( 102,089 ) 0.3 % ( 66,938 ) - % Total tax provision and effective tax rate - - % - - % As previously disclosed for the years ended December 31, 2024, and December 31, 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows: Year Ended December 31, Year Ended December 31, 2024 2023 Loss before income taxes $ ( 134,906,649 ) $ ( 50,686,601 ) Tax at Federal Statutory Rate ( 28,330,397 ) ( 10,644,186 ) Debt extinguishment 19,393,825 - Nondeductible (add back) expenses ( 137,868 ) 1,251,583 Federal return to accrual ( 66,938 ) ( 13,141 ) Change in valuation allowance 9,141,378 8,895,230 Deferred tax adjustment - 510,514 Income tax expense $ - $ - Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company’s deferred tax position reflects the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. Significant components of the deferred tax assets and liabilities are as follows: Year Ended December 31, 2025 2024 Deferred tax assets: Fixed assets $ 3,193,550 $ 3,709,975 Stock compensation 174,888 192,483 Warrant liability gain/loss 2,369 38,202 Net operating losses 33,063,184 25,424,520 Business credit carryforward - 1,441,159 Capitalized R&D expenses 306,914 467,113 Accrued expenses 352,206 496,060 Other assets 13,621 266,367 ROU Liability $ 133,927 $ - Subtotal 37,240,659 32,035,879 Valuation allowance ( 37,123,268 ) ( 31,805,983 ) Total deferred tax assets 117,391 229,896 Deferred tax liabilities: Other liabilities ( 117,391 ) ( 229,896 ) Total deferred tax liabilities ( 117,391 ) ( 229,896 ) Net deferred tax assets/(liabilities) $ - $ - The Company has federal net operating loss carryforwards of approximately $ 157 million and $ 121 million for as of December 31, 2025 and December 31, 2024, respectively, Approximately $ 31,000 begin to expire in 2035 and the remainder have no expiration. The Company has recorded a full valuation allowance against its net deferred tax assets due to recurring net losses. The Company accounts for uncertain tax positions in accordance with guidance in ASC Topic 740, which prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the financial statements. A reconciliation of the beginning and ending amount of uncertain tax positions is as follows: 2025 Activity Amounts Balance at January 1, 2025 - Additional based on tax positions related to prior years $ 1,441,159 Settlements $ - Balance at December 31, 2025 $ 1,441,159 The total amount of unrecognized tax benefits at December 31, 2025 was $ 1.4 million, of which it is reasonably possible that $ 0 could be settled during the next twelve-month period as a result of the conclusion of various tax audits or due to the expiration of the applicable statute of limitations. We estimate that $ 0 of the unrecognized tax benefits at December 31, 2025, excluding consideration of valuation allowance, would impact our future effective income tax rate, if recognized. We recognize interest and penalties related to uncertain tax positions within the provision for income taxes in the consolidated statements of comprehensive loss. As of December 31, 2025, we had accrued approximately $ 0 in interest and Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS penalties, respectively. During the year ended December 31, 2025, the change to our uncertain tax positions primarily relates to the recognition of certain tax credits from prior years. With the adoption of ASU 2023-09, a disclosure of income taxes paid, net of refunds received, to an individual taxing jurisdiction is now required if the net payments exceed a certain threshold. The Company did not have any income tax payments or refunds for both periods ending December 31, 2025 and December 31, 2024. On July 4, 2025, the “One Big Beautiful Bill Act” (“OBBBA”) was enacted into U.S. law. The OBBBA includes changes to several corporate tax provisions, including tax deductions for qualified research expenditures, changes to business interest expense limitations and bonus depreciation. The OBBBA legislation is not expected to have a material impact on the provision as of YE 2025. 15. Preferred Stock Rights and Preferences of the Series A, B and C Preferred Stock Each share of Series A, B and C Preferred Stock has a stated value of $ 1,000 per share and, when issued, the Preferred Stock will be fully paid and non-assessable. The Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, ranks senior to all capital stock of the Company, unless the Required Holders (as defined in the applicable Certificate of Designations) consent to the creation of other capital stock of the Company that is senior or equal in rank to the specific series of Preferred Stock. For the avoidance of doubt, the Series A, B and C Preferred Stock ranks in parity with each other. The holders of Series B and C Preferred Stock will be entitled to a 10 % per annum dividends and holders of Series A Preferred Stock will be entitled to 5 % per annum dividends. The dividends are payable to each record holder of the Preferred Stock in shares of Common Stock so long as there has been no Equity Conditions Failure (as defined in the applicable Certificate of Designations), and the Company may, at its option, under certain circumstances, capitalize the dividend by increasing the stated value of each Preferred Shares or elect a combination of the capitalized dividend and a payment in dividend shares. Management has elected to capitalize dividends on each dividend date, which is the first Trading Day of the quarter after to which the dividend relates. During the year ended December 31, 2025, dividends relating to the Series A, B and C Preferred Stock of $ 792,882 , $ 49,943 and $ 3,065 , respectively, were capitalized. The stated value of the Series A and B Preferred Stock increased to $ 1,037.97 and $ 1,015.28 , respectively. At December 31, 2025, dividends payable of $ 71,958 , $ 71,399 and $ 16,753 relating to Series A, B and C Preferred Stock, respectively, were reported under other creditors in the Consolidated Balance Sheets. If at any time the Company grants, issues or sells any options, convertible securities, or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of Common Stock (the “Purchase Rights”), then each holder of Preferred Stock will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion of all the Preferred Stock held by such holder immediately prior to the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights at the Alternate Conversion Price (as defined below); subject to certain limitations on beneficial ownership. Conversion at Option of Holder At any time from and after the first date of issuance of any Preferred Shares, each holder of Preferred Stock may convert all, or any part, of the outstanding Preferred Stock, at any time at such holder’s option, into shares of the Common Stock (which converted shares of Common Stock are referred to as “Conversion Shares” herein) at the fixed “Conversion Price” of $ 0.95 for Series C, and $ 0.5942 for Series A and B respectively, which is subject to proportional adjustment upon the Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS occurrence of any stock split, stock dividend, stock combination and/or similar transactions. The amounts to be converted include unpaid dividends and other charges for the Preferred Shares. Subject to the rules and regulations of the Nasdaq, the Company has the right, at any time, with the written consent of the Required Holders, to lower the fixed conversion price to any amount and for any period of time deemed appropriate by the board of directors of the Company. Alternate Conversion at the Holder’s Election At any time after the Initial Issuance Date, a holder may elect to convert the Preferred Stock held by such holder at the “Alternate Conversion Price” equal to the lesser of: • the Conversion Price; and • the greater of: ◦the floor price of $ 0.19 , $ 1.6524 and $ 2.214 for Series C, B and A Preferred Stock respectively (the “Floor price”); and ◦ 98 % of the lowest volume weighted average price ("VWAP") of the Common Stock during the 10 consecutive trading days immediately prior to such conversion. Alternate Conversion Upon a Triggering Event Following the occurrence and during the continuance of a Triggering Event (as defined below), each holder may alternatively elect to convert the Preferred Stock at the “Alternate Conversion Price”. The Certificate of Designations contains standard and customary triggering events (each, a “Triggering Event” including certain Bankruptcy Triggering Event (as defined therein)), including but not limited to: (i) the suspension from trading or the failure to list the Common Stock within certain time periods; (ii) failure to declare or pay any dividend when due; (iii) the occurrence of any default under, redemption of or acceleration prior to maturity of at least an aggregate of $ 500,000 of Indebtedness (as defined in the applicable exchange or purchase agreements) of the Company, (iv) the Company’s failure to cure a conversion failure of failure to deliver shares of the Common Stock upon conversion, or notice of the Company’s intention not to comply with a request for conversion of any Preferred Stock, and (v) bankruptcy or insolvency of the Company. From and after the occurrence and during the continuance of any Triggering Event, the Dividend Rate in effect shall automatically be increased to the lesser of 18 % per annum and the maximum rate permitted under applicable law. If at the time of a conversion the Alternate Conversion Price is determined to be the Floor Price because such Floor Price is greater than 98 % of the lowest VWAP of a share of Common Stock during the ten ( 10 ) trading day period ending and including the trading day immediately preceding the delivery or deemed delivery of the applicable conversion notice, then the Conversion Amount (as defined in the applicable Certificate of Designations) shall automatically increase pro rata, by the applicable Alternate Conversion Floor Amount (as defined in the applicable Certificate of Designations). Rights Upon Issuance of Other Securities If the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Convertible Securities and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale (or the time of execution of such agreement to issue or sell, as applicable) of such Convertible Securities for such price per share. For the purposes of this Section, the “lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale (or pursuant to the agreement to issue or sell, as applicable) of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof; and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS thereof or otherwise pursuant to the terms thereof, minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) with respect to any one share of Common Stock upon the issuance or sale (or the agreement to issue or sell, as applicable) of such Convertible Security plus the value of any other consideration received or receivable (including, without limitation, any consideration consisting of cash, debt forgiveness, assets or other property) by, or benefit conferred on, the holder of such Convertible Security (or any other Person). In determining the classification of the Series A, B and C Preferred Stock, the Company considered ASC 480 - Distinguishing Liabilities from Equity and ASC 815 - Derivatives and Hedging. The Company concluded the Preferred Stock be classified as permanent equity because it is not mandatorily redeemable except upon a Bankruptcy Triggering Event, which the Company views as a liquidation-type contingency rather than a substantive redemption feature. The instrument also does not provide holders with a general put right, and any holder-controlled exchange is contingent upon a Change of Control, an event subject to the Company’s governance and approval processes. In addition, the Company may settle the Change of Control Election Price in equity-linked rights convertible into the same consideration payable to common stockholders, and management has concluded that sufficient authorized shares exist to settle conversions in shares. Series A Convertible Preferred Stock - A total of 5,546 and 35,034 shares of Series A Convertible Preferred Stock were outstanding at December 31, 2025 and 2024, respectively. On November 4, 2024, the Company entered into the Second Amendment and Exchange Agreement, by and among the Company and ATW I, SLS and MIF pursuant to which such investors would exchange the remaining portion of the amount outstanding under the New Convertible Debenture and certain other amounts outstanding with respect thereto, into shares of Series A preferred convertible stock (the “Series A Preferred Stock”), subject to certain adjustments, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act. On December 26, 2024, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series A Convertible Preferred Stock of the Company and designated 40,000 shares of Series A Preferred Stock. On August 6, 2025, the Company issued additional equity securities (see Series B Convertible Preferred Stock) at a price per share below the then-effective conversion price of its Series A Preferred Stock triggering a full-ratchet anti-dilution adjustment. The conversion price of the Series A Preferred Stock was reduced from $ 11.07 per share to $ 8.26 per share. The resulting $ 4,047,585 value transfer was recorded as a reclassification within equity (charged to Accumulated Deficit and credit to APIC) and treated as a deemed dividend to preferred shareholders for EPS purposes. There was no impact on total stockholders’ equity or the consolidated statement of operations. On December 3, 2025, the Company issued additional equity securities (see Series C Convertible Preferred Stock) at a price per share below the then-effective conversion price of its Series A Preferred Stock. Under the terms of the Series A Certificate of Designation, a full-ratchet anti-dilution adjustment was triggered, reducing the conversion price of the Series A Preferred Stock from $ 8.26 per share to $ 0.5942 per share. The resulting $ 15,673,199 value transfer was recorded as a reclassification within equity (charged to Accumulated Deficit and credit to APIC) and treated as a deemed dividend to preferred shareholders for EPS purposes. There was no impact on total stockholders’ equity or the consolidated statement of operations. During the year ended December 31, 2025, 29,488 Series A Convertible Preferred Stock were converted into 10,768,900 shares of Common Stock. Series B Convertible Preferred Stock - A total of 2,813 and 0 shares of Series B Convertible Preferred Stock were outstanding at December 31, 2025 and December, 2024, respectively. On August 6, 2025, the Company, entered into a Securities Purchase Agreement (the “Series B Purchase Agreement”), by and among the Company and ATW pursuant to which the Company agrees to issue and sell in a private offering to ATW 3,000 shares of Series B Convertible Preferred Stock of the Company, $ 0.0001 par value (the “Series B Preferred Stock”), at a price per share of $ 980 (the “Series B Preferred Offering”) for an aggregate purchase price of $ 2,940,000 less offering costs of $ 85,000 . The Series B Preferred Offering also relates to the offering of the shares of the Company’s common stock issuable upon the conversion of or otherwise pursuant to the terms of the Series B Preferred Stock. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On August 7, 2025, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designations of Rights and Preferences of the Series B Convertible Preferred Stock of the Company and designated 50,000 shares of Series B Preferred Stock. On August 8, 2025, the Company and ATW closed on the initial closing transactions contemplated by the Purchase Agreement, and the Company issued 3,000 shares of Series B Preferred Stock to ATW. On December 3, 2025, the Company issued additional equity securities (see Series C Convertible Preferred Stock) at a price per share below the then-effective conversion price of its Series B Preferred Stock. Under the terms of the Series B Certificate of Designation, a full-ratchet anti-dilution adjustment was triggered, reducing the conversion price of the Series B Preferred Stock from $ 8.26 per share to $ 0.5942 per share. The resulting $ 8,266,572 value transfer was recorded as a reclassification within equity (charged to Accumulated Deficit and credit to APIC) and treated as a deemed dividend to preferred shareholders for EPS purposes. There was no impact on total stockholders’ equity or the consolidated statement of operations. During the year ended December 31, 2025, 187 Series B Convertible Preferred Stock were converted into 392,490 shares of Common Stock. Series C Convertible Preferred Stock - A total of 2,154 and 0 shares of Series C Convertible Preferred Stock were outstanding at December 31, 2025 and December, 2024, respectively. On December 3, 2025, the Company and certain institutional investors affiliated with ATW each entered into an Amendment and Exchange Agreement (collectively, the “Series C Exchange Agreements"), pursuant to which such investors may exchange, in one or more exchanges, portions of certain secured convertible term loans of the Company and the November 2024 Debentures (collectively the “Existing Securities”), into 3,814 of Series C preferred convertible stock (the “Series C Preferred Stock”), as set forth and subject to the terms and conditions in the Exchange Agreements, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933. In addition, by written notice from holders of the Existing Securities to the Company and subject to other terms and conditions set forth in the Series C Exchange Agreements, the Company shall exchange additional portion of the amounts outstanding under the Existing Securities as set forth in such notice into shares of Series C Preferred Stock, through one or more additional Exchanges, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act. On December 3, 2025, the Company filed a Certificate of Designations with respect to the Series C Preferred Stock with the Secretary of State of the State of Delaware, and three ( 3 ) institutional investors closed the Exchange. The Company issued 3,814 shares of Series C Preferred Stock to ATW. The fair value of the Series C Preferred Stock issued in this transaction was $ 10,185,929 . The Company designated 100,000 shares of the Company’s authorized and unissued preferred stock as Series C Preferred Stock and established the rights, preferences and privileges of the Series C Preferred Stock pursuant to the Certificate of Designations of Rights and Preferences of the Series C Preferred Stock, as summarized below. During the year ended December 31, 2025, 1,660 Series C Convertible Preferred Stock were converted into 2,740,740 shares of Common Stock. 16. Common Stock A total of 28,811,198 shares of Common Stock were outstanding at December 31, 2025. Reverse Stock Split - On September 5, 2025, the Company effected a 1-for-9 reverse stock split of the shares of the Company's common stock, par value $ 0.0001 per share. No fractional shares were issued in connection with the reverse stock split, but were instead rounded up to the nearest whole share. The Reverse Stock Split resulted in 42,758,379 shares of common stock being converted in to 4,750,954 shares of common stock. The Board of Directors of the Company approved the Certificate of Amendment to meet the share bid price requirements of the NASDAQ Capital Market. The Company’s stockholders authorized the reverse stock split and the Certificate of Amendment at a special meeting held on June 25, 2025. On July 22, 2024, the Company effected a 1-for-36 reverse stock split of the shares of the Company's common stock, par value $ 0.0001 per share. No fractional shares were issued in connection with the Reverse Stock Split, but were instead rounded up to the nearest whole share. The reverse stock split resulted in 150,107,598 shares of common stock being Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS converted in to 4,169,679 shares of common stock. The Board of Directors of the Company approved the Certificate of Amendment effecting the reverse stock split in order to meet the share bid price requirements of the NASDAQ Capital Market. The Company’s stockholders authorized the reverse stock split and the Certificate of Amendment at a special meeting held on June 17, 2024. All options, warrants and other convertible securities of the Company outstanding immediately prior to the split have been adjusted in accordance with the terms of the plans, agreements or arrangements governing such options, warrants and other convertible securities and subject to rounding to the nearest whole share. Each stockholder’s percentage ownership interest in the Company and proportional voting power remain virtually unchanged by the split, except for minor changes and adjustments that resulted from rounding fractional shares into whole shares. The rights and privileges of the holders of shares of the Company’s Common Stock were substantially unaffected. As the par value per share of common stock was not changed in connection with the 1-for-9 or 1-for-36 reverse stock splits, there was no change in the par value of the preferred stock related to the reverse stock splits recorded in the years ended December 31, 2025 and 2024. An adjustment to round fractional shares into whole shares was recorded in the year ended December 31, 2025 which increased Common Stock by 64,142 shares and $ 6 with a corresponding decrease in additional paid-in capital. An adjustment to round fractional shares into whole shares was recorded in the year ended December 31, 2024 which increased Common Stock by 14,886 shares and $ 1 with a corresponding decrease in additional paid-in capital. Common Stock – In October 2025, the Company filed a prospectus supplement to its shelf registration statement on Form S-3 (File No. 333-284675), initially filed with the SEC on February 3, 2025 registering the sale of up to $ 92 million of its common stock pursuant to its ATM offering program. During the year ended December 31, 2025, we issued and sold 6,826,700 shares, for gross proceeds of $ 33,124,953 and net proceeds of $ 31,948,652 after deducting commissions and offering expenses totaling $ 1,176,301 . At December 31, 2025, $ 86,036,768 remains available for issuance under the Company's ATM program pursuant to the prospectus supplement filed on October 31, 2025 under a registration statement on Form S-1. During the year ended December 31, 2024, the Company entered into an ATM Offering Agreement to offer and sell shares of our Common Stock having an aggregate offering price of up to $ 9,858,269 . Under this offering we issued and sold 156,269 shares, for gross proceeds of $ 9,857,857 and net proceeds of $ 9,357,954 after deducting commissions and offering expenses totaling $ 499,903 . During the year ended December 31, 2025, ATW I and SLS converted 27,188 and 2,300 shares of Series A Preferred Shares into 10,458,152 and 310,748 shares of Common Stock respectively. During the year ended December 31, 2024, ATW I converted 400 shares of Series A Preferred Shares into 61,659 shares of Common Stock. During the year ended December 31, 2025, 187 Series B Convertible Preferred Stock were converted into 392,490 shares of Common Stock. During the year ended December 31, 2025, 1,660 Series C Convertible Preferred Stock were converted into 2,740,740 shares of Common Stock. During the year December 31, 2025, ATW I and ATW II converted 2024 Term Loan notes with principal amount of $ 2,551,855 and interest payable of $ 318,718 into 200,600 shares of Common Stock. During the year ended December 31, 2025, a lender converted 2023 Term Loan notes with principal amount of $ 3,000,000 and interest payable of $ 773,958 into 2,144,295 shares of Common Stock. During the year ended December 31, 2025, November 2024 Debentures with a principal value of $ 2,050,000 and interest of $ 202,642 , were converted into 4,549,509 shares of Common Stock. During the year ended December 31, 2024, ATW I and SLS converted New Convertible Debentures with a fair value of $ 29,741,859 , principal values of $ 12,869,231 and $ 1,836,720 and interest of $ 442,140 and $ 4,785 into 535,426 and 77,673 shares of Common Stock, respectively. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Earnout Shares Following the closing of the Merger between CleanTech, Merger Sub and Nauticus Robotics Holdings on September 9, 2022, former holders of shares of Nauticus Robotics Holdings’ Common Stock (including shares received as a result of the Nauticus Preferred Stock Conversion and the Nauticus Convertible Notes Conversion) are entitled to receive their pro rata share of up to 23,149 Earnout Shares which are held in escrow. The Earnout Shares will be released from escrow upon the occurrence of the following (each a “triggering event”): i. one-half of the Earnout Shares will be released if, within a 5 -year period from September 9, 2022, the volume-weighted average price of our Common Stock equals or exceeds $ 4,860 per share over any 20 trading days within a 30 -day trading period; ii. one-quarter of the Earnout Shares will be released if, within a 5 -year period from September 9, 2022, the volume-weighted average price of our Common Stock equals or exceeds $ 5,670 per share over any 20 trading days within a 30 -day trading period; and iii. one-quarter of the Earnout Shares will be released if, within a 5 -year period from September 9, 2022, the volume-weighted average price of our Common Stock equals or exceeds $ 6,480 per share over any 20 trading days within a 30 -day trading period. As of December 31, 2025, the earn out targets have not been achieved and the Earnout Shares remain in escrow. Equity Purchase Facility Agreement On October 24, 2025, the Company entered into an equity purchase facility agreement (the “EPFA”) and a registration rights agreement (the “Registration Rights Agreement”) with a certain institutional investor (“Investor”), pursuant to which the Investor has committed to purchase up to $ 250.0 million of the Company’s common stock, par value $ 0.0001 per share. Upon the terms and subject to the satisfaction of the conditions set forth in the EPFA, the Company has the right, but not the obligation, to sell to the Investor, and the Investor is obligated to purchase, up to $ 250.0 million (the “Commitment Amount”) in shares of Common Stock. Such sales of Common Stock by the Company, if any, are subject to certain limitations set forth in the EPFA, and may occur from time to time, at the Company’s sole discretion, over a period of up to 24 months, commencing on the date of the EPFA (such period, the “Commitment Period”). During the Commitment Period, the Company may from time to time, by written notice delivered by the Company to the Investor (each, an “Advance Notice”), direct the Investor to purchase a number of shares of Common Stock up to the Maximum Advance Amount (as defined therein) as set forth in the Advance Notice, subject to limitations and adjustments as set forth in the EPFA. The prices at which such shares will be sold will be based on the applicable Market Price (as defined therein). Unless earlier terminated as provided under the EPFA, the term of the facility provided under the EPFA expires on the earlier to occur of (i) the first day of the next month following the 24-month anniversary of the first trading date after the date of the EPFA (the “Effective Date”), (ii) the date on which the Investor shall have made payment of Advances (as defined therein) pursuant to the EPFA for shares of Common Stock equal to the Commitment Amount and all shares of Common Stock purchased pursuant to the EPFA have been delivered, and (iii) the date on which the Company announces or publicly discloses a material restatement of its financial statements for two or more fiscal quarters (the “Lapsed Registration Termination”). Under the EPFA, the Company will control the timing and amount of sales of Common Stock to the Investor, if any. The Investor has no right to require the Company to sell any shares of Common Stock to the Investor, but the Investor is obligated to make purchases as the Company directs, subject to certain conditions set forth in the EPFA. Actual sales of shares of Common Stock to the Investor, if any, will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, trading volume, the trading prices for the Common Stock, and determinations by the Company as to the appropriate sources of funding for the Company and its operations. Consistent with the applicable Nasdaq listing rules, the aggregate number of shares of Common Stock that the Company may issue to the Investor under the EPFA may not exceed 19.99 % of the shares of Common Stock issued and outstanding as of the execution date of the EPFA (the “Exchange Cap”), unless the Company first obtains stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq listing rules. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Pursuant to the EPFA, the Company is required to provide each stockholder entitled to vote at a meeting of stockholders of the Company (the “Stockholder Meeting”), which shall be promptly called and held not later than 60 days following the date of the EPFA, a proxy statement in a form reasonably acceptable to the Investor and its counsel, at the expense of the Company to solicit each of the Company’s stockholders’ affirmative vote at the Stockholder Meeting for approval of the proposal to authorize the issuance of all shares of Common Stock issuable thereunder in compliance with the rules and regulations of Nasdaq, and the Company is required to use its reasonable best efforts to solicit its stockholders’ approval of such proposal and to cause the board of directors of the Company to recommend to the stockholders that they approve such proposal. A special meeting of stockholders was held on January 28, 2026 and the issuance of shares of Common Stock pursuant to the EPFA was approved. In connection with the EPFA, on October 24, 2025, the Company also entered into the Registration Rights Agreement with the Investor with respect to the resale of the shares of Common Stock issuable under the EPFA Agreement and the Commitment Shares. The Registration Rights Agreement requires a registration statement registering such shares (the “Resale Registration Statement”) to be filed and that to be declared effective under the Securities Act of 1933, as amended, by the earlier of the (i) 90th day after following the date the Resale Registration Statement is filed, or (ii) the fifth business day following the date when the SEC notifies the Company that the Resale Registration Statement will not be reviewed or is no longer subject to further review and comments of the SEC. 17. Warrants Public Warrants – As of December 31, 2025 there were 11,779,167 Public Warrants outstanding. For every 324 Public Warrants, the holder is entitled to purchase one share of Common Stock at a price of $ 11.50 , subject to adjustment. However, no Public Warrants will be exercisable for cash unless we have an effective and current registration statement covering the shares of Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to such shares of Common Stock. The Public Warrants expire on September 9, 2027, or earlier upon redemption or liquidation. Our Public Warrants are listed on Nasdaq under the symbol “KITTW”. We may redeem the outstanding Public Warrants, in whole and not in part, at a price of $ 0.01 per warrant: • at any time after the Public Warrants become exercisable, • upon not less than 30 days’ prior written notice of redemption to each warrant holder, • if, and only if, the reported last sale price of the shares of Common Stock equals or exceeds $ 5,346 per share (subject to adjustment for splits, dividends, recapitalizations, and other similar events), for any 20 trading days within a 30 -day trading period ending on the third business day prior to the notice of redemption to warrant holders, and • if, and only if, there is a current registration statement in effect with respect to the shares of Common Stock underlying such warrants at the time of redemption and for the entire 30 -day trading period referred to above and continuing each day thereafter until the date of redemption. If we call the Public Warrants for redemption as described above, we have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” The exercise price and number of shares of Common Stock issuable on exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. The Public Warrants, which are accounted for as liabilities in our consolidated balance sheets, were valued as of December 31, 2025 and 2024 at $ 1,612 and $ 9,080 , respectively, based on their publicly-traded price. The gain in value of the Public Warrants during the year ended December 31, 2025 and 2024 totaled $ 7,468 and $ 442,008 , respectively and was reported with other (income) expense in our consolidated statements of operations. Private Warrants – As of December 31, 2025, 4,020,833 Private Warrants were outstanding. For every 324 Private Warrants, the holder is entitled to purchase one share of Common Stock at an exercise price of $ 11.50 and are identical in all material respects to the Public Warrants except that such Private Warrants are exercisable for cash (even if a registration statement covering the shares of Common Stock issuable upon exercise of such warrants is not effective) or on a cashless Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS basis, at the holder’s option, and will not be redeemable by us, in each case so long as they are still held by the initial purchasers or their affiliates. The Private Warrants purchased by CleanTech Investments are not exercisable after 5 years from September 9, 2022, as long as Chardan Capital Markets, LLC or any of its related persons beneficially own these Private Warrants. The Private Warrants, which are accounted for as liabilities in our consolidated balance sheets, were valued as of December 31, 2025 and 2024 at $ 589 and $ 7,884 , respectively. The fair value of the Private Warrants was estimated using a Black-Scholes option pricing model using the following assumptions: stock price of $ 0.77 , no assumed dividends, a risk-free rate of 3.47 %, implied volatility of 231.3 % and remaining term of 1.69 years. The gain in value of the Private Warrants during the years ended December 31, 2025 and 2024 totaled $ 7,295 and $ 372,651 respectively, and was reported with other (income) expense in our consolidated statements of operations. SPA Warrants – On September 9, 2022 and pursuant to the Securities Purchase Agreement, we issued an aggregate 9,020 Original SPA Warrants to the SPA Parties. Upon issuance, each whole Original SPA Warrant was exercisable over its 10-year term for one share of Common Stock at a price of $ 6,480.00 per share, subject to certain adjustments including full ratchet anti-dilution price protections. On June 22, 2023, we entered into the Letter Agreements with the SPA Parties (the “Letter Agreements”), pursuant to which the SPA Parties (also being the holders of the Original SPA Warrants) agreed to amend the exercise price of the Original SPA Warrants, which, since issuance, had been exercisable to purchase an aggregate 9,020 shares of Common Stock in exchange for the Company’s agreement to (i) lower the exercise price of the Original SPA Warrants to a weighted average of $ 1062.72 per share, with multiple tranches priced between $ 660.96 and $ 1503.36 per share, and (ii) upon the SPA Parties’ exercise of the Amended SPA Warrants, issue New SPA Warrants to the SPA Parties to purchase, in the aggregate, up to 9,020 shares of Common Stock. During any period when we shall have failed to maintain an effective registration statement covering the shares of Common Stock issuable upon exercise of the Amended SPA Warrants, the registered holder may exercise its Amended SPA Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. The New SPA Warrants will be (and, with respect to those already issued, are) substantially in the form of the Amended SPA Warrants as described above except that the New SPA Warrants (i) have an exercise price of $ 6,480.00 per share (including, for purposes of clarification, full-ratchet anti-dilution on the exercise price and number of underlying shares issuable based on the aggregate exercise price using $ 6,480.00 as the base exercise price), (ii) are immediately exercisable upon issuance, and (iii) are exercisable until September 9, 2032. On January 30, 2024 SPA Warrants held by MIF and SLS were adjusted downwards by 798 and 287 , respectively, in connection with the Second Lien Restructuring Agreements. During the year ended December 31,2024, ATW I and SLS exercised 68,399 and 4,248 SPA Warrants, respectively, in exchange for the maximum number of shares of Common Stock purchasable and the Company did no t receive cash in respect of these transactions. Unless context otherwise requires, the term “SPA Warrants” means (i) before the entry into the Letter Agreements, the Original SPA Warrants, and (ii) upon and following the entry into the Letter Agreements, (a) the Amended SPA Warrants, and (b) the New SPA Warrants. The SPA Warrants, which are accounted for as liabilities in our consolidated balance sheets, were valued as of December 31, 2025 and 2024 at $ 9,080 and $ 164,949 , respectively, and were estimated using a Black-Scholes valuation model using the following assumptions: stock price $ 0.77 , implied volatility of 231.3 %, and remaining term of 6.75 years. The change in the value of the SPA Warrants during the years ended December 31, 2025 and 2024 was a gain of $ 155,869 and $ 12,744,351 , respectively, and was reported with other (income) expense in our consolidated statements of operations. 18. Stock-Based Compensation On September 6, 2022, shareholders approved our 2022 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) and on September 9, 2022, our board of directors ratified the Omnibus Incentive Plan. The Omnibus Incentive Plan provides for the grant of options, stock appreciation rights, RSUs, restricted stock and other stock-based awards, any of which may be Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS performance-based, and for incentive bonuses, which may be paid in cash, Common Stock or a combination thereof. As of December 31,2025, there were 305,556 shares authorized for issuance under the Omnibus Incentive Plan, and there were 143,128 remaining shares available for future grants. As of December 31, 2025, 712 options to purchase Common Stock remained outstanding from a legacy plan that was superseded by the Omnibus Incentive Plan. There are no remaining shares available for future grant under the legacy plan. Options vest assuming continuous service to the Company with 25 % of the options vesting one year after grant and the balance vesting in a series of 36 successive equal monthly installments measured from the first anniversary of grant. During the vesting period, holders have no rights of a stockholder with respect to the shares of Common Stock subject to an option, and the options may not be sold, assigned, transferred, pledged, or otherwise encumbered. Unvested options are forfeited upon termination of employment. Compensation expense for stock option grants is recognized based on the fair value at the date of grant using the Black-Scholes option pricing model. For the years ended December 31, 2025 and December 31, 2024, stock-based compensation expense for options totaled $ 48,046 and $ 132,335 , respectively, and was recorded in general and administrative expense. As of December 31, 2025, there was $ 1,909 of total unrecognized compensation cost related to options to be recognized over a remaining weighted average period of less than 1 year The following table summarizes options outstanding, as well as activity for the period presented: Shares Weighted Average Exercise Price Aggregate Intrinsic Value Outstanding as of December 31, 2024 2,177 $ 629.38 $ - Granted - Exercised - Forfeited ( 17 ) $ 671.41 Expired ( 1,448 ) $ 619.56 Outstanding as of December 31, 2025 712 $ 648.36 $ - Exercisable as of December 31, 2025 707 $ 647.21 $ - The weighted average remaining contractual term of both outstanding options and exercisable options as of December 31, 2025, was 3.8 years. The maximum contractual term of options is ten years . There were no options granted or exercised in 2024 or 2025. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following tabulation summarizes certain information related to outstanding and exercisable options at December 31, 2025: Options Outstanding Options Exercisable Range of Exercise Prices As of December 31, 2025 Weighted Average Remaining Contractual Life In Years Weighted Average Exercise Price As of December 31, 2025 Weighted Average Exercise Price $ 628.74 $ 628.74 313 1.86 $ 628.74 313 $ 628.74 $ 628.75 $ 628.75 322 5.12 $ 628.75 322 $ 628.75 $ 810.06 $ 810.06 77 6.19 $ 810.06 72 $ 810.06 $ 628.74 $ 810.06 712 3.80 $ 648.36 707 $ 647.21 Incentive Plans – The Compensation Committee and Board of Directors grant restricted units of our Common Stock to certain of our key executives, employees, and non-employee directors. Each Restricted Stock Unit (“RSU”) is a notional amount that represents the right to receive one share of Common Stock of the Company if and when the RSUs vest. RSUs were issued to the following recipients and vest as follows: Employee RSU grants are time-based and typically vest equally over a three-year period, conditional upon continued employment. Non-employee director RSU grants are time-based and vest fully on the earlier of the one-year anniversary of the grant date or the next Board of Directors Annual General Meeting if a grantee is not on the election ballot, conditional upon continued service as a director. Executive RSU grants issued as executive sign-on bonuses are time-based and vest 50 % on the one-year anniversary of the new hire date and 50 % on the two-year anniversary of the new-hire date. Performance-based RSU grants ("PRSU") granted to senior executives in 2022, were deemed earned in April 2023 and vested 50 % on December 31, 2023 and 50 % on December 31, 2024, in accordance with the terms of the applicable award agreements. No additional PRSUs were granted in 2024 or 2025. The Compensation Committee has a policy that the Company will not provide U.S. federal income tax gross-up payments to any of its directors or executive officers in connection with future awards of restricted stock or stock units. The following is a summary of our restricted stock unit activity for 2025: Shares Weighted Average Grant Date Fair Value Non-vested as of December 31, 2024 35,230 96.05 Granted 116,794 8.95 Vested ( 36,995 ) 54.10 Forfeited ( 2,815 ) 164.51 Non-vested as of December 31, 2025 112,214 17.51 The weighted-average grant-date fair value of RSUs granted during the year ended December 31, 2025 and 2024 was $ 8.95 and $ 77.15 , respectively. The total fair value of RSUs and PRSUs vested during the years ended December 31, 2025 and 2024 was $ 351,882 and $ 1,156,065 . Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The RSUs granted in 2024 and 2025 do not have voting rights or dividend rights unless the RSU has vested and the share of Common Stock underlying it has been distributed to the participant. Grants of RSUs are valued at their estimated fair values as of their respective grant dates. RSU grants in 2024 and 2025 were subject only to service and vesting conditions based on continued employment or service as a non-employee director; therefore, these grants were valued using the closing price of our stock on the Nasdaq Capital Market on the date of grant. Stock-based compensation expense attributable to PRSUs under the Omnibus Incentive Plan for the years ended December 31, 2025 and December 31, 2024 was $ 0 and a reversal of expense of $ 284,707 , respectively, and recorded in general and administrative expense. Stock-based compensation expense attributable to RSUs under the Omnibus Incentive Plan for years ended December 31, 2025 and December 31, 2024, respectively, was $ 1,248,509 and $ 2,455,426 and recorded in general and administrative expense. As of December 31, 2025, we had no future expense related to PRSUs and $ 1,132,373 of future expense related to RSUs to be recognized over a weighted-average period of approximately 2 years. Stock-based compensation expense for the years ended December 31, 2025 and December 31, 2024, including options, TPRSUs, and RSUs, totaled $ 1,296,555 and $ 2,303,054 , respectively. Total related recognized tax benefit for the years ended December 31, 2025 and 2024, was $ 262,000 and $ 457,000 , respectively. 19. Employee Benefit Plan Nauticus offers a 401(k) plan which permits eligible employees to contribute portions of their compensation to an investment trust. The Company makes contributions to the plan totaling 3 % of employees’ gross salaries and such contributions vest immediately. The 401(k) plan provides several investment options, for which the employee has sole investment discretion. The Company’s cost for the 401(k) plan was $ 147,586 and $ 201,734 for the years ended December 31, 2025 and 2024, respectively. 20. Related Party Transactions ATW I, ATW II, ATW III, MIF and SLS are considered related parties as they can significantly influence the management of the Company, and we require their consent on all material transactions. Further, MIF is considered a related party as Adam Sharkawy is a member of the Board of Directors of the Company and the founder and managing partner of MIF. SPA Warrants – The SPA Warrants are held by related parties ATW I, MIF and SLS Family Irrevocable Trust (see Note 17 – Warrants). Exchanged Senior Secured Convertible Debenture - On January 30, 2024, the Company and certain of its subsidiaries and ATW I entered into an Amendment and Exchange Agreement (the “Amendment and Exchange Agreement”), pursuant to which ATW I transferred its existing 5 % Original Issue Discount Senior Secured Convertible Debenture to the Company in exchange for a new Original Issue Discount Exchanged Senior Secured Convertible Debenture due September 9, 2026 (the “New Convertible Debentures”) in the aggregate principal amount of $ 29,591,600 . In addition, on January 30, 2024, the Company and certain of its subsidiaries entered into additional Amendment and Exchange Agreements with MIF and SLS on substantially similar terms, pursuant to which MIF and SLS transferred their existing 5 % Original Issue Discount Senior Secured Convertible Debentures to the Company in exchange for New Convertible Debentures in the aggregate principal amount of $ 5,102,000 and $ 1,836,720 , respectively. The fair value of the New Convertible Debentures was $ 99,195,791 upon issuance on January 30, 2024. During the year ended December 31, 2024, ATW I and SLS converted Senior Secured Convertible Debentures with a principal value of $ 12,869,231 and $ 1,836,720 and interest of $ 442,140 and $ 4,785 into 535,426 and 77,673 shares of Common Stock, respectively. The fair value of the conversion was $ 29,741,859 . Second Amendment and Exchange Agreement - On November 4, 2024, the Company entered into the Second Amendment and Exchange Agreement (the “Exchange Agreement”), by and among the Company and ATW I, SLS and MIF pursuant to which such investors would exchange the remaining portion of the amount outstanding under the New Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Original Issue Discount Exchanged Senior Secured Convertible Debentures and certain other amounts outstanding with respect thereto, into shares of Series A Preferred Stock (see Note 15 - "Preferred Stock"). On December 27, 2024, the Company and ATW I closed the exchange transaction, and the Company issued 27,588 shares of Series A Preferred Stock to ATW I. On December 31, 2024, the Company issued 2,504 and 5,342 shares of Series A Preferred Stock to SLS and MIF, respectively. November 2024 Debentures - On November 4, 2024, the Company entered into a Securities Purchase Agreement with ATW I, pursuant to which ATW I purchased, in a private placement, $ 1,150,000 in principal amount of debentures, with an option to purchase up to an additional aggregate of $ 20,000,000 in principal amount of original issue discount senior secured convertible debentures (the “November 2024 Debentures”). On December 11, 2024, ATW I purchased, in a private placement, $ 1,000,000 in principal amount of debentures. During the year ended December 31, 2025, November 2024 Debentures with a principal value of $ 2,050,000 and interest of $ 202,642 , and fair value of $ 4,668,008 , were converted into 4,549,509 shares of Common Stock. The principal amount outstanding on the November 2024 Debentures at December 31, 2025 and 2024 was $ 100,000 and $ 2,150,000 with a fair value of $ 163,672 and $ 2,583,832 , respectively. 2023 Term Loan Agreement - On September 18, 2023, the Company entered into a convertible senior secured term loan agreement (the “2023 Term Loan Agreement”) with ATW II as collateral agent and lender, and Transocean Finance Limited, ATW I, MIF and RCB, as lenders. The Convertible Senior Secured Term Loan Agreement provides the Company with up to $ 20.0 million of secured term loans and the initial amount funded was $ 11,600,000 . On December 31, 2023, the Company, entered into an amendment to the 2023 Term Loan Agreement which provided the Company with an incremental loan in the aggregate principal amount of $ 695,000 . On January 30, 2024, the Company entered into a second amendment to the 2023 Term Loan Agreement, which provided the Company with an incremental loan in the aggregate principal amount of $ 3,753,144 (see Note 8 - Notes Payable). During the year ended December 31, 2025, ATW I and ATW II converted 2023 Term Loan notes with principal and interest amount of $ 3,360,164 into 3,814 of Series C Preferred Stock (see Note 15 - "Preferred Stock"). 2024 Term Loan Agreement - On January 30, 2024, the Company also entered into a senior secured term loan agreement (the “2024 Term Loan Agreement”) with ATW Special Situations Management LLC, as collateral agent (in such capacity, the “Collateral Agent”) and lender, and ATW III, MIF, VHG Investments LLC, ATW II and ATW I, as lenders. The 2024 Term Loan Agreement provides the Company with an aggregate $ 9,551,856 of secured term loans. On May 1, 2024, the Company entered into an amendment to the 2024 Term Loan Agreement which provided the Company with an incremental loan in the aggregate principal amount of $ 1,000,000 (see Note 8 - "Notes Payable"). The principal amount outstanding on the convertible senior term loans on December 31, 2025 to ATW I, ATW II, ATW III and MIF was $ 0 , $ 2,687,981 , $ 7,197,668 , and $ 4,399,060 , respectively. The principal amount outstanding on the convertible senior term loans on December 31, 2024 to ATW I, ATW II, ATW III and MIF was $ 2,933,362 , $ 5,666,638 , $ 1,112,943 and $ 4,224,983 , respectively. For the year ended December 31, 2025 interest expense attributable to ATW I, ATW II, ATW III and MIF, on the convertible senior term loans was $ 0 , $ 541,487 , $ 104,489 and $ 462,365 . For the year ended December 31, 2024 interest expense attributable to ATW I, ATW II, ATW III and MIF, on the convertible senior term loans was $ 351,640 , $ 709,245 , $ 154,297 and $ 551,753 . Series A Convertible Preferred Stock - During the year ended December 31, 2025, ATW and SLS converted 27,188 and 2,300 Series A Convertible Preferred Stock were converted into 10,458,152 and 310,748 shares of Common Stock, respectively. As at December 31, 2025 MIF and SLS held 5,342 and 204 Series A Convertible Preferred Stock, respectively. Series B Convertible Preferred Stock - On August 8, 2025, the Company sold ATW 3,000 shares of Series B Convertible Preferred Stock for an aggregate purchase price of $ 2,940,000 . During the year ended December 31, 2025, ATW Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS converted 187 Series B Convertible Preferred Stock in 392,490 shares of Common Stock. At December 31, 2025, ATW held 2,813 shares of Series B Convertible Preferred Stock. Series C Convertible Preferred Stock - On December 3, 2025 ATW exchanged 2023 Term Loan notes with principal and interest amount of $ 3,360,164 and $ 453,794 into 3,814 of Series C Convertible Preferred Stock. During the year ended December 31, 2025, ATW converted 1660 Series C Convertible Preferred Stock into 2,740,740 shares of Common Stock. At December 31, 2025, ATW held 2,154 shares of Series C Convertible Preferred Stock. Flexible Consulting, LLC - On December 1, 2023, the Board appointed Victoria Hay as the Interim Chief Financial Officer and principal financial officer of the Company. Victoria Hay is the co-owner and President of Flexible Consulting, LLC, a financial and accounting consulting firm, with which the Company has engaged with since January 2023 to provide it with accounting and finance services relating to its quarterly reporting and mergers/acquisition activity. On July 25, 2025, the Board appointed Jimena Begaries, also a Flexible Consulting LLC employee, as the Interim Chief Financial Officer succeeding Victoria Hay. Flexible Consulting, LLC is considered to be a related party from December 1, 2023. The total value of services provided by Flexible Consulting, LLC to the Company for the year ended December 31, 2025 and 2024 was $ 1,177,684 and $ 1,015,558 respectively. Accounts payable included $ 45,000 and $ 160,366 due to Flexible Consulting, LLC at December 31, 2025 and December 31, 2024, respectively. 21. Loss Per Share Following is the computation of loss per basic and diluted share: Year Ended December 31, 2025 2024 Numerator: Net loss $ ( 40,828,402 ) $ ( 134,906,649 ) Preferred stock dividend ( 1,006,000 ) - Deemed dividends for Series A and B Convertible Preferred Stock ( 27,987,356 ) - Net loss attributable to Common Stockholders ( 69,821,758 ) ( 134,906,649 ) Denominator: Weighted average shares used to compute basic and diluted EPS 6,681,851 408,133 Basic and diluted loss per share ( 10.45 ) ( 330.55 ) Anti-dilutive securities excluded from shares outstanding: Stock options 1,291 2,160 Restricted and performance stock units 58,938 35,229 Warrants 60,602 60,602 Earnout shares 23,149 23,149 SeaTrepid earnout shares 671,544 - Convertible debt 877,567 318,437 Series A, B and C Convertible Preferred Stock 20,115,072 3,797,724 Total 21,808,163 4,237,301 Basic loss per share (“EPS”) is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In computing the loss attributable to common shareholders, the Company deducts dividends on its preferred stock in accordance with ASC 260, Earnings Per Share. For the year ended December 31, 2025, total preferred dividends of $ 1,006,000 were deducted from net loss, consisting of $ 845,890 of dividends that were capitalized and added to the stated value of the preferred stock in accordance with the Certificates of Designation; and $ 106,110 of dividends that were accrued but unpaid as of December 31, 2025. Total preferred dividends increased the loss attributable to common shareholders for purposes of calculating basic and diluted earnings per share. During the year ended December 31, 2025, the Company recognized deemed dividends totaling $ 27,987,356 associated with the down-round adjustments of its Series A Preferred Stock conversion price on December 3, 2025 and August 6, 2025 of $ 15,673,199 and $ 4,047,585 , respectively, and its Series B Preferred Stock conversion price on December 3, 2025 of $ 8,266,572 . This amount was deducted from net loss in determining loss attributable to common shareholders for purposes of calculating basic and diluted earnings per share. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 22. Fair Value Measurements The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels related to fair value measurements are as follows: Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The estimated fair values of accounts receivable, contract assets, accounts payable and accrued expenses approximate their carrying amounts due to the relatively short maturity or time to maturity of these instruments. Notes payable with related parties may not be arms-length transactions and therefore may not reflect fair value. The Company elected to measure the November 2024 Debentures at fair value under the fair value option in accordance with ASC 825-101, Financial Instruments - Fair Value Option. The fair value of the November 2024 Debentures are measured at each reporting date in accordance with ASC 820-10, Fair Value Measurement, using a Monte Carlo simulation model. This model incorporates Level 3 inputs, including, current stock price, stock price volatility (historical and implied), risk free interest rate (U.S. Treasury rates), and expected term to maturity. The fair value measurement is classified as Level 3 in the fair value hierarchy due to the use of unobservable inputs. At December 31, 2025 the following assumptions were used in order to estimate the fair value of the November 2024 Debentures: stock price of $ 0.77 a risk free rate of 3.55 %, implied volatility of 154 % and a remaining term of 0.69 years. The fair value of the Public, Private and SPA Warrants are measured at each reporting date in accordance with ASC 820-10. The Public Warrants were valued based on their publicly-traded price. The Private and SPA Warrants are considered Level 3 measurements as they involve significant unobservable inputs. In connection with the acquisition of SeaTrepid on March 20, 2025, the Company measured the identifiable assets acquired and liabilities assumed at fair value in accordance to ASC 820-10. The fair value of land and buildings acquired were measured using the market approach and considered Level 2 measurements as observable inputs from comparable sales were used. Machinery and equipment acquired were measured using cost approach and considered Level 3 measurements due to the use of unobservable inputs. The fair values of intangibles assets were measured based on the income approach and considered Level 3 measurements due to the use of unobservable inputs. Tradename/trademarks were valued using the Relief from Royalty Method assuming a royalty rate of 1.6 % and discount rate of 19.1 %. Intellectual property was valued using the Relief from Royalty Method assuming a royalty rate of 6.4 % and discount rate of 19.1 %. Non-competes were valued with the "With and Without" method assuming a 5 % probability of competing and impact on sales, a term of 3 years and discount rate of 17.5 %. The fair value of the earnout shares related to the acquisition were measured using the Monte Carlo simulation model. The model incorporates Level 3 inputs, including stock price of $ 10.26 , stock price volatility of 99.9 %, revenue volatility of 101.4 %, risk free rate of 4.15 % and a remaining term of 0.78 years. The fair value of notes payable acquired approximated their carrying values at the acquisition date as the Company plans to pay off the notes in the short term. The fair values of working capital items, including cash, accounts receivable, accounts payable, and accrued expenses, approximated their carrying values at the acquisition date due to their short-term nature. These items are not presented in the table below. The fair value of the Series C and A Preferred Stock were measured on the exchange dates of December 3, 2025, December 27, 2024 and December 31, 2024, respectively, in accordance with ASC 820-10, Fair Value Measurement, using a Monte Carlo simulation model. This model incorporates Level 3 inputs, including, current stock price, stock price volatility (historical and implied), risk free interest rate (U.S. Treasury rates), and expected term to maturity. The fair value measurement is classified as Level 3 in the fair value hierarchy due to the use of unobservable inputs. The following assumptions were used in order to estimate the fair value of the Series C Preferred Stock at December 3, 2025: stock price of $ 1.17 , risk free rate of 3.57 %, implied volatility of 174 %, and remaining term of 1.32 years respectively. The following assumptions were used in order to estimate the fair value of the Series A Preferred Stock at December 27, 2024 and December 31, 2024: stock price of $ 2.16 and $ 1.55 , risk free rate of 4.24 % and 4.19 %, implied volatility of 145 % and 148 %, and remaining term of 1.34 years and 1.33 years, respectively. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In connection with the issuance of Series C Preferred Stock on December 3, 2025, the Company measured the fair value of the Series A and B Preferred stock using a Monte Carlo simulation model. Consistent with the guidance in ASC 260-10-S99-2, the valuation incorporated two separate simulations: (a) the fair value of the instrument assuming the pre-reset conversion price ($ 8.26 per share), and (b) the fair value of the instrument assuming the reduced conversion price resulting from the down-round trigger ($ 0.5942 per share). All other model inputs, including the fair value of the Company’s common stock, volatility, and risk-free interest rate, were held constant between the two simulations. The incremental fair value resulting from the difference between these two measurements represents the value transferred due to the down-round feature and was recognized in the period’s fair-value remeasurement. In connection with the issuance of Series B Preferred Stock on August 6, 2025, the Company measured the fair value of the Series A Preferred stock using a Monte Carlo simulation model. The valuation incorporated two separate simulations: (a) the fair value of the instrument assuming the pre-reset conversion price ($ 11.07 per share post-reverse stock split), and (b) the fair value of the instrument assuming the reduced conversion price resulting from the down-round trigger ($ 8.26 per share post-reverse stock split). All other model inputs, including the fair value of the Company’s common stock, volatility, and risk-free interest rate, were held constant between the two simulations. The incremental fair value resulting from the difference between these two measurements represents the value transferred due to the down-round feature and was recognized in the period’s fair-value remeasurement. In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial liabilities that are required to be measured at fair value on a recurring and non-recurring basis and the related activity for periods presented: Fair Value as of December 31, 2025 Fair Value as of December 31, 2024 Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3 Financial liabilities: November Convertible Debentures 163,672 - - 163,672 2,583,832 - - 2,583,832 Warrant liability - Public Warrants 1,612 1,612 - 9,080 9,080 - - Warrant liability - Private Warrants 589 - - 589 7,884 - - 7,884 Warrant liability - SPA Warrants 9,080 - - 9,080 164,949 - - 164,949 Total warrant liability $ 11,281 $ 1,612 $ - $ 9,669 $ 181,913 $ 9,080 $ - $ 172,833 Non-recurring fair value instruments: Series A Preferred Stock $ - $ - $ - $ - $ 110,300,391 $ - $ - $ 110,300,391 Series C Preferred Stock at December 3, 2025 $ 10,185,929 $ - $ - $ 10,185,929 $ - $ - $ - $ - Series A Preferred Stock - strike price $ 0.5942 at December 3, 2025 $ 25,448,502 $ - $ - $ 25,448,502 $ - $ - $ - $ - Series A Preferred Stock - strike price $ 8.26 at December 3, 2025 $ 9,775,304 $ - $ - $ 9,775,304 $ - $ - $ - $ - Series B Preferred Stock - strike price $ 0.5942 at December 3, 2025 $ 13,509,764 $ - $ - $ 13,509,764 $ - $ - $ - $ - Series B Preferred Stock - strike price $ 8.26 at December 3, 2025 $ 5,243,192 $ - $ - $ 5,243,192 $ - $ - $ - $ - Series A Preferred Stock - strike price $ 8.26 at August 6, 2025 $ 31,365,924 $ - $ - $ 31,365,924 $ - $ - $ - $ - Series A Preferred Stock - strike price $ 11.07 at August 6, 2025 $ 27,318,339 $ - $ - $ 27,318,339 $ - $ - $ - $ - Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair Value as of March 20, 2025 Fair Value as of December 31, 2024 Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3 SeaTrepid Acquisition: Land $ 444,435 $ - $ 444,435 $ - $ - $ - $ - $ - Buildings $ 970,904 $ - $ 970,904 $ - $ - $ - $ - $ - Machinery and equipment $ 4,753,964 $ - $ - $ 4,753,964 $ - $ - $ - $ - Intangible assets $ 1,429,400 $ - $ - $ 1,429,400 $ - $ - $ - $ - Earnout shares $ 6,864,729 $ - $ - $ 6,864,729 $ - $ - $ - $ - The following table sets forth a summary of the changes in fair value of the Company’s financial liabilities categorized within Level 3: Warrant Liability November 2024 Debentures New Convertible Debentures Balance, December 31, 2023 $ 17,925,092 $ - $ - Fair value on issuance - 2,107,000 99,195,791 Exercise of warrants ( 4,635,257 ) - - Fair value conversion of new convertible debentures to common stock ( 29,741,859 ) Change in fair value of new convertible debentures - 435,864 ( 7,989,948 ) Change in fair value of warrant liabilities ( 13,117,002 ) - - Exchange of New Convertible Debentures to Series A Preferred Stock ( 61,429,200 ) Other - 40,968 ( 34,784 ) Balance, December 31, 2024 172,833 2,583,832 - Change in fair value of November 2024 Debentures - 2,247,848 - Fair value conversion of November 2024 Debentures to Common Stock - ( 4,668,008 ) - Change in fair value of warrant liabilities ( 163,164 ) - - Balance, December 2025 $ 9,669 $ 163,672 $ - 23. Segment Information The Company operates as a single operating and reportable segment. The Company's Chief Operating Decision Maker ("CODM"), the Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operational decisions, allocating resources, and evaluating financial performance. The Company’s operations are organized and managed as a single segment because its products and services share similar economic characteristics, including production processes, customer types, distribution methods and regulatory environment. Accordingly, the Company has determined that it has one reportable segment. The CODM assesses performance by reviewing the Consolidated Balance Sheets and Consolidated Statements of Operations quarterly. Segment assets are not regularly reviewed by the CODM and, therefore, are not disclosed. Substantially all of the Company's revenues are derived from customers located in the United States, and substantially all long-lived assets are located in the United States. Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 24. Subsequent Events Securities Purchase Agreement On February 6, 2026, the Company entered into a Securities Purchase Agreement and a registration rights agreement with Master Investment Group ("Investor"), pursuant to which the Company agreed to issue and sell in a private offering to Investor, (1) certain shares of Series D Convertible Preferred Stock of the Company, $ 0.0001 par value (the “Series D Preferred Stock”) for an aggregate purchase price of up to $ 3,000,000 and may issue additional shares of Series D Preferred Stock valued at up to $ 47,000,000 and (2) certain common stock purchase warrants (the “Warrants”) to purchase up to a number of shares of the Company’s common stock, par value $ 0.0001 per share (the “Common Stock”), equal to 30 % of the aggregate purchase price (the “Preferred Offering”). The Preferred Offering also relates to the offering of the shares of the Common Stock issuable upon the conversion of or otherwise pursuant to the terms of the Series D Preferred Stock (“Conversion Shares”) and the shares of the Common Stock issuable upon the exercise of the Warrants. Pursuant to the Purchase Agreement, the Company agreed to issue the Initial Preferred Shares for an aggregate purchase price of $ 3,000,000 in two closings, in each case following the demonstration that Investor has made expenditures agreed by, and on behalf of, the Company in an aggregate amount equal to the applicable milestone aggregate investment amount specified in the Purchase Agreement. At each such milestone closing, the Company will issue to Investor a number of shares of Series D Preferred Stock equal to the applicable milestone aggregate investment amount invested by Investor, at a price of $ 1,000 per share. The Company and Investor agree that the proceeds of the Preferred Offering will be deployed to exclusively as UAE related working capital to fund and support, directly or indirectly, the establishment and operation of the Company’s business in the United Arab Emirates. In addition, for a period of up to 3 years from the date of the Purchase Agreement (or such later date as mutually agreed to by the Company and Investor), by written notice from the Company to Investor and subject to other terms and conditions set forth in the Purchase Agreement, the Company may require the Investor to participate in one or more additional milestone closings and issue additional shares of Series D Preferred Stock to Investor up to an aggregate maximum purchase price of $ 47,000,000 in one or more tranches, and additional Warrants exercisable for an amount of shares of Common Stock with an aggregate initial value equal to 30 % of the value of the Series D Preferred Stock to be issued at each such additional closings, subject to mutually agreed milestones, assignments, and definitive documentation, and in each case, consent of certain existing holders of securities of the Company. The Purchase Agreement further provides for a two-year lock-up period, during which Investor shall not, without the prior written consent of the Company and certain existing holders of securities of the Company, sell, transfer, pledge or otherwise dispose of any shares of Common Stock upon conversion of the Series D Preferred Stock, nor enter into any swap or other arrangement that transfers the economic consequence of ownership of such shares. Pursuant to the Registration Rights Agreement, the Company agreed that in the event that the Company files a registration statement with the Securities and Exchange Commission, registering the offer and sale of any shares of its Common Shares under the Securities Act, the Investor shall have the option to require the Company to include registration under the Securities Act of 1933, as amended (the “Securities Act”), of the resale by Investor of shares of Common Stock issuable upon conversion of the Series D Preferred Stock and upon the exercise of the Warrants. The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. Warrants The Warrants, when issued pursuant to the Purchase Agreement, are immediately exercisable upon issuance and will expire on the fifth anniversary of the original issuance date. The Warrants have an initial exercise price equal to $ 1.1125 , subject to certain adjustments as described in the Warrant. A Warrant holder will not have the right to exercise any portion of the Warrants to the extent that, after giving effect to such conversion, the holder would beneficially own in excess of 4.99 % (the “Maximum Percentage”) of the number of shares of the Common Stock outstanding immediately after giving effect to such conversion. Series D Preferred Stock On or prior to the first milestone closing, the Company will designate 50,000 shares of the Company’s authorized and unissued preferred stock as Series D Preferred Stock and establish the rights, preferences and privileges of the Series D Table of Contents NAUTICUS ROBOTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Preferred Stock pursuant to the Certificate of Designations of Series D Preferred Stock (the “Certificate of Designations”), to be filed with the Secretary of State of the State of Delaware. ATM offering From January 1 2026 to April 15 2026, the Company has conducted ATM offerings to offer and sell shares of the Company's Common Stock. Under this offering we issued and sold 2,914,114 shares, for gross proceeds of $ 2,464,316 and net proceeds of $ 2,343,144 after deducting commissions and offering expenses totaling $ 121,172 . November 2024 Debentures Additional Notes and Conversions On February 9, 2026, the Company issued an Original Issue Discount Senior Secured Convertible Debenture Due 2026, in the aggregate principal amount of $ 2,000,000 (the “February 2026 Additional Note”), to an institutional investor which is convertible into 3,365,871 shares of common stock of the Company calculated at a conversion price of $ 0.5942 . On March 10, 2026, the Company issued an Original Issue Discount Senior Secured Convertible Debenture Due 2026, in the aggregate principal amount of $ 1,020,408 (the “March 2026 Additional Note”), to an institutional investor, which is convertible into 1,717,281 shares of common stock of the Company calculated at a conversion price of $ 0.5942 . The February 2026 and March 2026 Additional Notes (collectively the "Additional Notes") were issued pursuant to the securities purchase agreement dated as of November 4, 2024. The Additional Notes have the same terms as the Notes under the Securities Purchase Agreement dated November 4, 2024 and will mature on September 9, 2026 or such earlier date as is required or permitted to be repaid under such Additional Notes. On March 27, 2026, such Investor and the Company consummated an Exchange pursuant to the Exchange Agreement by and between the Company and such Investor, whereby the Investor exchanged $ 2,000,000 of the principal amount and corresponding interest of the Existing February Debenture into 2,023 shares of Series C Preferred Stock. Corrections to Certificates of Designations On April 15, 2026, the Company filed with the Secretary of State of the State of Delaware, amendments to the Certificates of Designations of Rights and Preferences, respectively, of the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock, and the Series C Convertible Preferred Stock, to correct an error in each such instrument. Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.