Financial Analysis

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 Companys 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. 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 numb …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

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. …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

"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 holders option at 120% of the principal amount at a conversion price of $4,860 or 9,020 …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

"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 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 va …

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"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 Deben …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

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. A reconciliation of the U.S. federal statutory tax rate to the Companys 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 t …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

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 Companys right to use the underlying asset for the lease term and lease liabilities represent the Companys 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 …

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"The Company has adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures as issued by the Financial Accounting Standards Board (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 …

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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 Companys cost for the 401(k) plan was $147,586 and $201,734 for the years ended December 31, 2025 and 2024, respectively. …

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"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 valu …

RelatedPartyTransactionsDisclosureTextBlock · excerpt; the full note is in the filing

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. Co …

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"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 Companys 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."

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"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 mon …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

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 Companys 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 Companys stockholders authorized the reverse stock split and the Certificate of Amendment at …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

"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 Companys 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 su …

SubsequentEventsTextBlock · excerpt; the full note is in the filing