Business Combination and Acquisitions - The Business Combination was completed on December 22, 2023, resulting in the formation of Nukkleus Inc., a financial technology company focused on blockchain-enabled technology solutions [20]. - The Company entered into a Securities Purchase Agreement to acquire a controlling 51% interest in Star 26 Capital Inc., a defense acquisition company, on December 15, 2024 [22]. - The Company will acquire 51% of Star for a total consideration of $15,000,000, which includes $5,000,000 in cash and a promissory note for the remaining balance [38]. - The acquisition includes the issuance of 2,385,170 shares of common stock and a five-year warrant to purchase 6,907,859 shares at an exercise price of $1.50 per share [38]. - The Company has an option to purchase the remaining 49% of Star for $16,084,250, which includes $3,000,000 in cash and a promissory note [38]. - Star's acquisition strategy focuses on small and medium businesses with an enterprise value of less than $200 million, primarily in the defense sector [46]. - Star intends to finance acquisitions primarily through public or private sales of equity and debt securities, minimizing delays and enhancing acquisition capabilities [60]. - The Company believes the acquisition will lead to growth and transformation in the global defense sector [41]. Financial Performance and Revenue Generation - The Company historically generated revenue primarily through a General Services Agreement with Triton Capital Markets Ltd., which was terminated effective January 1, 2024, due to non-payment, resulting in a minimum monthly revenue loss of $1,600,000 [23]. - The largest customer, TCM, represented 81.1% of revenue for the year ended September 30, 2024, and the termination of the agreement with TCM could adversely affect operations [130]. - 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 [81]. - The company has also entered into a General Service Agreement with FXDIRECT, with a minimum payment of $1,575,000 per month, down from $1,975,000 [82]. - The Company plans to sell its subsidiary Digital RFQ Limited for £1,000 due to ongoing net losses generated by DRFQ [34]. Financing and Capital Structure - The Company issued a Senior Unsecured Promissory Note to X Group in the principal amount of $312,500, with a stock purchase warrant for 150,000 shares at $2.00 per share [25]. - The Company issued an additional Senior Unsecured Promissory Note to East Asia Technology Investments Limited for $515,000, with a stock purchase warrant for 175,000 shares at $2.00 per share [30]. - A private placement was completed on December 20, 2024, raising $10,000,000 through the sale of 1,666,666 units at $6.00 per unit [42]. - The Company entered into a Standby Equity Purchase Agreement allowing it to sell up to $10 million of common stock to YA II PN, LTD, subject to certain conditions [36]. - The Company converted outstanding debt of $771,085 into 319,952 shares of common stock and an additional warrant to purchase 351,424 shares at an amended exercise price of $2.41 [29]. - The company has primarily funded operations through equity financings, convertible notes, and revenue, and may require additional capital for business growth [184]. Digital RFQ and Blockchain Technology - Digital RFQ aims to provide cross-border payment solutions and blockchain-enabled financial services to institutional investors, with a focus on secure and compliant transactions [77]. - Digital RFQ utilizes stablecoins on Bitcoin, Ethereum, and Tron networks for payment processing, ensuring they are fully collateralized and well-established [79]. - Digital RFQ emphasizes the importance of full collateralization for stablecoins, contrasting it with the vulnerabilities seen in algorithmically-backed models like UST Terra Luna [99]. - Digital RFQ conducts ongoing monitoring of customer data and transactions using a risk-based approach, with enhanced due diligence for high-risk factors [143]. - The company introduced fund transfer and payment processing using blockchain technologies in 2019, which remains in early development stages and is subject to various unpredictable factors [159]. Regulatory and Compliance Challenges - The company is subject to systemic risk due to interdependence on financial institutions, which could materially affect its ability to raise new funding and overall financial condition [128]. - The risk management and compliance framework is designed to address Anti Money Laundering (AML) and Counter Terrorist Financing (CTF) considerations, consistent with regulatory requirements [138]. - The company faces significant uncertainty and costs associated with detecting and monitoring transactions for compliance with local laws [134]. - The company is subject to various anti-money laundering and counter-terrorist financing laws globally, which may increase compliance costs and operational challenges [210]. - The evolving regulatory landscape may impose conflicting obligations on the company as it expands its international activities, complicating compliance efforts [209]. Operational Risks and Challenges - The company acknowledges the risks associated with its limited operating history and the evolving nature of the financial services industry [91]. - Cybersecurity threats pose significant risks to Digital RFQ's reputation and operational stability, with potential impacts from breaches affecting customer confidence [109]. - The company operates as a remote-first organization, facing heightened operational and cybersecurity risks due to employees working from home, which may lead to data or financial loss [157]. - The company faces intense competition for qualified personnel, particularly in executive talent and financial regulatory expertise, which could affect its ability to grow [191]. - The company is dependent on third-party partners for liquidity and regulatory compliance, which raises risks if those partners fail to perform [164]. Market and Competitive Landscape - The Company anticipates significant growth in the defense sector due to increasing global conflicts and rising defense budgets [57]. - Star expects to identify attractive acquisition opportunities in niche geographical markets, particularly in the defense, government, and military sectors, with a focus on the U.S. and Israel [58]. - The defense industry market size in the U.S. was approximately $76.1 billion in 2022 and is projected to grow to $184.7 billion by 2027, with a compound annual growth rate of approximately 15.9% from 2022 to 2027 [76]. - The company faces intense competition from both established enterprises and early-stage companies, which may have greater resources and customer bases [103]. - The company recognizes intense competition from well-established entities in the acquisition space, which may limit its ability to acquire larger target businesses [65].
BRILLIANT ACQUIS(BRLIR) - 2024 Q4 - Annual Report