Business Combination and Ownership Structure - The Business Combination was completed on December 22, 2023, resulting in Nukkleus Inc. as a financial technology company focused on blockchain-enabled technology solutions [18][31]. - Following the Business Combination, Old Nukk stockholders own approximately 78.3% of the Combined Company, while Brilliant's public stockholders own about 0.5% [37]. - Upon consummation of the Business Combination, there are 13,899,712 shares of Nukkleus Common Stock and 6,701,000 Nukkleus Warrants outstanding, trading on NASDAQ under symbols "NUKK" and "NUKKW" respectively [36]. - The Business Combination involved the cancellation of all outstanding shares of Old Nukk in exchange for a pro-rata portion of 10,500,000 shares of Brilliant Common Stock [32]. - Holders of 330,345 shares of Brilliant Ordinary Shares redeemed their shares for cash at a redemption price of approximately $11.57 per share, totaling an aggregate redemption amount of $3,822,431.16 [34]. - The Backstop Pool in the Business Combination was equal to 40% of the aggregate number of Brilliant Ordinary Shares and Brilliant Rights, amounting to a maximum of 1,012,000 shares [33]. - A Lock-Up Agreement was established, preventing certain stockholders from selling or disposing of their shares for a period of two years following the Business Combination [38]. Financial Agreements and Revenue Focus - The Company entered into a Stock Purchase Agreement with White Lion Capital Partners for a maximum amount of $75,000,000, which was terminated on February 21, 2024 [40]. - Nukkleus Limited has a General Service Agreement with TCM, which stipulates a minimum payment of $1,600,000 per month, reduced from $2,000,000 per month [41]. - Nukkleus Limited also has a General Service Agreement with FXDIRECT, with a minimum payment of $1,575,000 per month, reduced from $1,975,000 per month [42]. - The Company is repositioning its focus on digital assets due to limited net income generated from services under the GSA with TCM [42]. - The largest customer, TCM, represented 90.2% of the company's revenue for the year ended September 30, 2023, and the agreement with TCM is currently in the process of being cancelled [107]. Technology and Product Development - Nukkleus Technology offers a full-service transactions technology and advisory business, providing end-to-end solutions with customizable leverage and global liquidity [19]. - Digital RFQ aims to provide cross-border payment solutions to institutional investors, utilizing a blockchain-enabled payment gateway for global fiat currency transfers [20]. - DigiClear is being developed to offer a custody and settlement utility operating system, aiming for fully automated asset transfers within milliseconds [24]. - The company plans to continue developing its blockchain-enabled payment processing technology, although significant expenditures may be required before generating substantial revenue [75]. - The company introduced fund transfer and payment processing using blockchain technologies in 2019, which remains in the early stages of development [147]. Market and Competitive Landscape - Nukkleus's management believes the FX market has expanded significantly, capturing a wide range of participants and leading to increased trading activity [44]. - Future growth depends on retaining existing customers and attracting new ones, with no minimum volume commitments from customers [77]. - Digital RFQ faces intense competition from established enterprises and early-stage companies, which may have greater resources and customer bases [80]. - The company has experienced significant growth through the acquisition of Match, which has increased operational complexity and demands on resources [74]. Risk Management and Compliance - The company has established a risk management and compliance framework to address Anti Money Laundering (AML) and Counter Terrorist Financing (CTF) considerations, in line with U.K. legislation [115]. - The company employs a three-tiered classification for customer relationships based on risk, with enhanced due diligence for high-risk clients [116]. - Digital RFQ conducts ongoing monitoring regardless of customer risk level, utilizing a risk-based approach for transaction reviews [121]. - The company faces potential liability for illegal activities conducted by customers using its products and services, which could adversely affect its business [109]. - The company is continually improving its information systems and technologies, but failures in implementation could negatively impact its operations and financial condition [98]. Regulatory Environment and Compliance Challenges - The company is subject to regulatory scrutiny, which could result in significant fines and penalties if service interruptions occur [99]. - The company must comply with evolving laws and regulations, with potential penalties for non-compliance impacting its operations [128]. - The financial services industry is facing significant regulatory changes that could adversely affect the company's business model and profitability [196]. - Increased scrutiny from regulators regarding compliance with anti-money laundering laws could result in higher operational costs and potential fines [201]. - The company is subject to various laws and regulations, including anti-money laundering and data protection, which could impact its operations [184]. Operational Risks and Challenges - The company has a limited operating history in a volatile industry, which may increase the risk of not achieving future success [69]. - Cybersecurity threats are a concern, with potential impacts on brand reputation and operational integrity [87]. - The company must manage operational demands effectively to avoid adverse impacts on business and financial condition [74]. - The company is at risk of service interruptions due to various factors, which could harm its reputation and lead to customer loss [96]. - The company depends on third-party partners for critical services, and disruptions in these relationships could materially affect its operations [103]. Financial Performance and Reporting - The company may experience significant fluctuations in quarterly operating results due to various factors, including changes in transaction volume and marketing expenses [156]. - There is uncertainty regarding the company's ability to maintain profitability, with potential revenue decline due to reduced demand or increased competition [154]. - The company is required to maintain effective internal controls over financial reporting, and any failure could adversely affect investor confidence and stock value [172]. - The company is exposed to fluctuations in currency exchange rates, which could impact the cost of products and local operating expenses [175]. - Business metrics and estimates used for performance evaluation may be inaccurate, affecting strategic decisions and perceived growth trends [169].
BRILLIANT ACQUIS(BRLIR) - 2023 Q4 - Annual Report