NUKKLEUS INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
The accompanying notes to
unaudited condensed consolidated financial statements are an integral part of these statements.
The accompanying notes to
unaudited condensed consolidated financial statements are an integral part of these statements.
NUKKLEUS INC. AND SUBSIDIARIES
The accompanying notes to
unaudited condensed consolidated financial statements are an integral part of these statements.
The accompanying notes to
unaudited condensed consolidated financial statements are an integral part of these statements.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 1 – THE COMPANY HISTORY AND NATURE
OF THE BUSINESS
Nukkleus Inc. (f/k/a Compliance & Risk Management
Solutions Inc.) (“Nukkleus” or the “Company”) was formed on July 29, 2013 in the State of Delaware as a for-profit
Company and established a fiscal year end of September 30.
The Company is a financial technology company
which is focused on providing software and technology solutions for the worldwide retail foreign exchange (“FX”) trading industry.
The Company primarily provides its software, technology, customer sales and marketing and risk management technology hardware and software
solutions package to Triton Capital Markets Ltd. (“TCM”), formerly known as FXDD Malta Limited (“FXDD Malta”).
The FXDD brand (e.g., see FXDD.com) is the brand utilized in the retail forex trading industry by TCM.
Nukkleus Limited, a wholly-owned subsidiary of
the Company, provides its software, technology, customer sales and marketing and risk management technology hardware and software solutions
package under a General Services Agreement (“GSA”) to TCM. TCM is a private limited liability company formed under the laws
of Malta. The GSA provides that TCM will pay Nukkleus Limited at minimum $1,600,000 per month. Emil Assentato is also the majority member
of Max Q Investments LLC (“Max Q”), which is managed by Derivative Marketing Associates Inc. (“DMA”). Mr. Assentato,
who is our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and chairman, is the sole owner and
manager of DMA. Max Q owns 79% of Currency Mountain Malta LLC, which in turn is the sole shareholder of TCM.
In addition, in order to appropriately service
TCM, Nukkleus Limited entered into a GSA with FXDirectDealer LLC (“FXDIRECT”), which provides that Nukkleus Limited will pay
FXDIRECT a minimum of $1,575,000 per month in consideration of providing personnel engaged in operational and technical support, marketing,
sales support, accounting, risk monitoring, documentation processing and customer care and support. FXDIRECT may terminate this agreement
upon providing 90 days’ written notice. Currency Mountain Holdings LLC is the sole shareholder of FXDIRECT. Max Q is the majority
shareholder of Currency Mountain Holdings LLC.
In July 2018, the Company incorporated Nukkleus
Malta Holding Ltd., which is a wholly-owned subsidiary. In July 2018, Nukkleus Malta Holding Ltd. incorporated Markets Direct Technology
Group Ltd (“MDTG”), formerly known as Nukkleus Exchange Malta Ltd. MDTG was exploring potentially obtaining a license to operate
an electronic exchange whereby it would facilitate the buying and selling of various digital assets as well as traditional currency pairs
used in FX Trading. During the fourth quarter of fiscal 2020, management made the decision to exit the exchange business and to no longer
pursue the regulatory licensing necessary to operate an exchange in Malta.
On August 27, 2020, the Company renamed Nukkleus Exchange Malta Ltd. to
Markets Direct Technology Group Ltd (“MDTG”). MDTG manages the technology and IP behind the Markets Direct brand (which is
operated by TCM). MDTG holds all the IP addresses and all the software licenses in its name, and it holds all the IP rights to the brands
such as Markets Direct and TCM. MDTG then leases out the rights to use these names/brands licenses to the appropriate entities.
On May 24, 2021, the Company and the shareholders of Match Financial
Limited (the “Match Shareholders”), a private limited company formed in England and Wales (“Match”) entered into
a Purchase and Sale Agreement (the “Match Agreement”) pursuant to which the Company agreed to acquire 1,152 ordinary shares
of Match representing 70% of the issued and outstanding ordinary shares of Match in consideration of 70,000,000 shares of common stock
of the Company (the “Initial Transaction”). Further, the Match Agreement provided that the Company, in consideration of the
issuance of 100,000 shares of common stock of the Company to the Match Shareholders, will have an option during the period from May 29,
2021 through September 30, 2021 to acquire from the Match Shareholders the balance of 493 ordinary shares of Match representing 30% of
the issued and outstanding ordinary shares of Match for an additional 30,000,000 shares of common stock of the Company. The closing date
of the Initial Transaction occurred on May 28, 2021.
The unaudited condensed consolidated financial
statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern,
which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. The Company
incurred a net loss for the nine months ended June 30, 2021 of $154,084, and had a working capital deficit of $1,186,573 at June 30, 2021. The
Company’s ability to continue as a going concern is dependent upon the management of expenses and ability to obtain necessary financing
to meet its obligations and pay its liabilities arising from normal business operations when they come due, and upon profitable operations.
We cannot be certain that such necessary capital
through equity or debt financings will be available to us or whether such capital will be available on terms that are acceptable to us.
Any such financing likely would be dilutive to existing stockholders and could result in significant financial operating covenants that
would negatively impact our business. In the event that there are any unforeseen delays or obstacles in obtaining funds through the aforementioned
sources, Currency Mountain Holdings Bermuda, Limited (“CMH”), which is wholly-owned by an entity that is majority-owned
by Mr. Assentato, has committed to inject capital into the Company in order to maintain the ongoing operations of the business.
The ramifications of the outbreak of the novel
strain of COVID-19, reported to have started in December 2019 and spread globally, are filled with uncertainty and changing quickly. Our
operations have continued during the COVID-19 pandemic and we have not had significant disruption.
The Company is operating in a rapidly changing
environment so the extent to which COVID-19 impacts its business, operations and financial results from this point forward will depend
on numerous evolving factors that the Company cannot accurately predict. Those factors include the following: the duration and scope
of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 2 – RESTATEMENT OF PREVIOUSLY
FILED FINANCIAL STATEMENTS
The Company concluded
it should restate its previously issued financial statements by amending its Quarterly Report on Form 10- Q for the quarterly period ended
June 30, 2021, filed with the Securities and Exchange Commission (the “SEC”) on August 16, 2021 (the “Original Filing”),
to record the classification of amortization of intangible assets representing licenses and banking infrastructure acquired on Match acquisition.
The Company had previously recorded the amortization of intangible assets as operating expenses. In July 2022, the Company realized its
financial services segment is unable to generate revenue without the licenses and bank infrastructure. As a result, the Company reclassified
the amortization of intangible assets from operating expenses to cost of revenue – financial services.
In accordance with SEC
Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the correction
and has determined that the related impact was material to the previously filed financial statements that contained the error, reported
in the Company’s Form 10-Q for the quarterly period ended June 30, 2021 (the “Affected Quarterly Period”). Therefore,
the Company concluded that the Affected Quarterly Period should be restated to present the reclassification. As such, the Company is reporting
the restatement to the period in this quarterly report.
The following table represents the impacts of
the adjustment described above:
| |
As Reported | | |
Adjustment | | |
As Restated | |
Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss for the Three Months Ended June 30, 2021 | |
| | |
| | |
| |
Cost of revenue - financial services | |
$ | 27,636 | | |
$ | 117,145 | | |
$ | 144,781 | |
Total costs of revenues | |
$ | 4,752,636 | | |
$ | 117,145 | | |
$ | 4,869,781 | |
Gross profit (loss) - financial services | |
$ | 13,966 | | |
$ | (117,145 | ) | |
$ | (103,179 | ) |
Total gross profit (loss) | |
$ | 88,966 | | |
$ | (117,145 | ) | |
$ | (28,179 | ) |
Amortization of intangible assets | |
$ | 117,145 | | |
$ | (117,145 | ) | |
$ | - | |
Total operating expenses | |
$ | 188,714 | | |
$ | (117,145 | ) | |
$ | 71,569 | |
| |
As Reported | | |
Adjustment | | |
As Restated | |
Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss for the Nine Months Ended June 30, 2021 | |
| | |
| | |
| |
Cost of revenue - financial services | |
$ | 27,636 | | |
$ | 117,145 | | |
$ | 144,781 | |
Total costs of revenues | |
$ | 14,202,636 | | |
$ | 117,145 | | |
$ | 14,319,781 | |
Gross profit (loss) - financial services | |
$ | 13,966 | | |
$ | (117,145 | ) | |
$ | (103,179 | ) |
Total gross profit (loss) | |
$ | 238,966 | | |
$ | (117,145 | ) | |
$ | 121,821 | |
Amortization of intangible assets | |
$ | 117,145 | | |
$ | (117,145 | ) | |
$ | - | |
Total operating expenses | |
$ | 389,240 | | |
$ | (117,145 | ) | |
$ | 272,095 | |
The reclassifications did not have any impact
on consolidated operating loss, net loss or earnings per share, cash flows or balance sheets.
NOTE 3 – BASIS
OF PRESENTATION
These interim condensed consolidated financial
statements of the Company and its subsidiaries are unaudited. In the opinion of management, all adjustments (consisting of normal recurring
accruals) and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been included.
The results reported in the unaudited condensed consolidated financial statements for any interim periods are not necessarily indicative
of the results that may be reported for the entire year. The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all information and
footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in
the United States of America (U.S. GAAP).
The Company’s unaudited condensed consolidated
financial statements include the accounts of the Company and its consolidated subsidiaries. These accounts were prepared under the accrual
basis of accounting. All significant intercompany accounts and transactions have been eliminated in consolidation.
Certain information and footnote disclosures
normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated
financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2020
filed with the Securities and Exchange Commission on December 28, 2020. The consolidated balance sheet as of September 30, 2020 contained
herein has been derived from the audited consolidated financial statements as of September 30, 2020, but does not include all disclosures
required by U.S. GAAP.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 4 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of the
unaudited condensed consolidated financial statements in conformity with U.S. 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 reporting period. Actual results could differ from these estimates.
Significant estimates during the three and nine months ended June 30, 2021 and 2020 include valuation of deferred tax assets and the associated
valuation allowances, and valuation of stock-based compensation.
Cash and cash equivalents
At June 30, 2021 and September 30, 2020, the Company’s
cash balances by geographic area were as follows:
Country: | |
June 30, 2021 | | |
September 30, 2020 | |
United States | |
$ | 345,555 | | |
| 94.7 | % | |
$ | 82,675 | | |
| 99.8 | % |
England | |
| 19,048 | | |
| 5.2 | % | |
| - | | |
| - | |
Malta | |
| 174 | | |
| 0.1 | % | |
| 174 | | |
| 0.2 | % |
Total cash | |
$ | 364,777 | | |
| 100.0 | % | |
$ | 82,849 | | |
| 100.0 | % |
For purposes of the condensed consolidated statements
of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less when purchased and money market
accounts to be cash equivalents. The Company had no cash equivalents at June 30, 2021 and September 30, 2020.
Fair value of financial instruments and
fair value measurements
The investment in digital currency as of
September 30, 2020 of $12 is recorded with prepaid expense and other current assets on the condensed consolidated balance sheet. The
carrying values of cash, accounts receivable, prepaid expense and other current assets, due from affiliates, due to affiliates, and
accounts payable and accrued liabilities in the Company’s condensed consolidated balance sheets approximated their fair values
as of June 30, 2021 and September 30, 2020 due to their short-term nature.
Credit risk and uncertainties
The Company maintains a portion of its cash in
bank and financial institution deposits within U.S. that at times may exceed federally-insured limits of $250,000. The Company manages
this credit risk by concentrating its cash balances in high quality financial institutions and by periodically evaluating the credit quality
of the primary financial institutions holding such deposits. The Company has not experienced any losses in such bank accounts and believes
it is not exposed to any risks on its cash in bank accounts. At June 30, 2021, the Company’s cash balances in United States bank
accounts had approximately $96,000 in excess of the federally-insured limits.
Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of trade accounts receivable. A portion of the Company’s sales
are credit sales which is to the customer whose ability to pay is dependent upon the industry economics prevailing in these areas; however,
concentrations of credit risk with respect to trade accounts receivable is limited due to short-term payment terms. The Company also performs
ongoing credit evaluations of its customers to help further reduce credit risk.
Accounts receivable and allowance for doubtful
accounts
Accounts receivable are presented net of an allowance
for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable
on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In
evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance,
a customer’s payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive
efforts at collection.
Management believes that
the accounts receivable are fully collectable. Therefore, no allowance for doubtful accounts is deemed to be required on its accounts
receivable at June 30, 2021. The Company historically has not experienced significant uncollectible accounts receivable.
Prepaid expense and other current assets
Prepaid expense and other current assets primarily
consist of prepaid OTC Markets listing fees, which are recognized as expense over the related listing periods. As of June 30, 2021 and
September 30, 2020, prepaid expense and other current assets amounted to $19,719 and $7,010, respectively.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 4 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible assets
Intangible assets consist of license and banking
infrastructure, which are being amortized on a straight-line method over the estimated useful life of 10 years.
Impairment of long-lived assets
In accordance with ASC Topic 360, the Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future
cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value. There were no triggering events requiring assessment of impairment as of June 30, 2021. For the
nine months ended June 30, 2021 and 2020, no impairment of long-lived assets was recognized.
Revenue recognition
The Company accounts
for revenue under the provisions of ASC Topic 606.
The Company’s revenues
are derived from providing:
| ● | General support services under a GSA to a related party. The transaction price is determined in accordance with the terms of the GSA and payments are due on a monthly basis. There are multiple services provided under the GSA (including operational reporting and technical support infrastructure, website hosting and marketing solutions, accounting maintenance, risk monitoring services, new account processing and customer care and continued support) and these performance obligations are combined into a single unit of accounting. Fees are recognized as revenue over time as the services are rendered under the terms of the GSA. The Company recognizes the full contracted amount each period with no deferred revenue. The nature of the performance obligation is to provide the specified goods or services directly to the customer. The Company engages another party to satisfy the performance obligation on its behalf. The Company’s performance obligation is not to arrange for the provision of the specified good or service by another party. The Company is primarily responsible for fulfilling the promise to provide the specified good or service. Therefore, the Company is deemed to be a principal in the transaction and recognizes revenue for that performance obligation. The Company is a financial technology company which is focused on providing software and technology solutions for the worldwide retail foreign exchange (“FX”) trading industry. Under a General Services Agreement (“GSA”), the Company is contractually obligated to provide for the fulfillment software, technology, customer sales and marketing and risk management technology hardware and software solutions package to Triton Capital Markets Ltd. (“TCM”) The Company provides these services, obtained from affiliate service provider FXDirect Dealer, LLC which is under common ownership, and controls the services of its service provider necessary to legally transfer of the services to TCM. Consequently, the Company is defined as the principal in the transaction. The Company, as principal, satisfies its obligation by providing ongoing service support enabling TCM to conduct its retail FX business without interruption. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The monthly GSA price is calculated by applying the Company's 1.6% mark-up to the costs of the services being provided by FXDirect Dealer, LLC. |
| ● | Financial services to its customers. Revenue related to its financial services offerings are recognized
at a point in time when service is rendered. |
Disaggregation of revenues
The Company’s revenues stream detail are
as follows:
Revenue Stream |
|
Revenue Stream Detail |
General support services |
|
Providing software, technology, customer sales and marketing and risk management technology hardware and software solutions package under a GSA to a related party |
Financial services |
|
Providing payment services from one fiat currency to another |
In the following table,
revenues are disaggregated by segment for the three and nine months ended June 30, 2021 and 2020:
| |
Three Months Ended June 30, | | |
Nine Months Ended June 30 | |
Revenue Stream | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
General support services | |
$ | 4,800,000 | | |
$ | 4,800,000 | | |
$ | 14,400,000 | | |
$ | 14,400,000 | |
Financial services | |
| 41,602 | | |
| - | | |
| 41,602 | | |
| - | |
Total revenues | |
$ | 4,841,602 | | |
$ | 4,800,000 | | |
$ | 14,441,602 | | |
$ | 14,400,000 | |
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 4 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-based compensation
The Company accounts for its stock-based compensation
awards in accordance with Accounting Standards Codification (“ASC”) Topic 718, Compensation—Stock Compensation (“ASC
718”). ASC 718 requires all stock-based payments to employees and non-employees to be recognized as expense in the statements of
operations based on their grant date fair values.
Per share data
ASC Topic 260, Earnings per Share, requires
presentation of both basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
Basic net earnings per share are computed
by dividing net earnings available to common stockholders by the weighted average number of shares of common stock outstanding during
the period. Diluted net earnings per share is computed by dividing net earnings applicable to common stockholders by the weighted average
number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Diluted
earnings per share reflects the potential dilution that could occur if securities were exercised or converted into common stock or other
contracts to issue common stock resulting in the issuance of common stock that would then share in the Company’s earnings subject
to anti-dilution limitations. In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the
computation of diluted shares outstanding as they would have an anti-dilutive impact. For the three
and nine months ended June 30, 2021 and 2021, potentially dilutive common shares consist of common stock issuable upon the conversion
of Series A preferred stock (using the if-converted method).
The following is a reconciliation of the basic
and diluted net (loss) income per share computations for the three and nine months ended June 30, 2021 and 2020:
Basic net (loss) income
per share
| |
Three Months Ended June 30,
2021 | | |
Three Months Ended June 30,
2020 | | |
Nine Months Ended June 30,
2021 | | |
Nine Months Ended June 30,
2020 | |
Net (loss) income available to Nukkleus Inc. for basic net (loss) income per share of common stock | |
$ | (103,804 | ) | |
$ | 11,492 | | |
$ | (157,350 | ) | |
$ | (97,659 | ) |
Weighted average common stock outstanding - basic | |
| 257,055,897 | | |
| 230,485,100 | | |
| 239,342,032 | | |
| 230,485,100 | |
Net (loss) income per common share attributable to Nukkleus Inc.: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.00 | ) | |
$ | 0.00 | | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 4 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Per share data (continued)
Diluted net (loss)
income per share
| |
Three Months Ended June 30,
2021 | | |
Three Months Ended June 30,
2020 | | |
Nine Months Ended June 30,
2021 | | |
Nine Months Ended June 30,
2020 | |
Net (loss) income available to Nukkleus Inc. for basic net (loss) income per share of common stock | |
$ | (103,804 | ) | |
$ | 11,492 | | |
$ | (157,350 | ) | |
$ | (97,659 | ) |
Add: interest expense for redeemable preferred stock | |
| - | | |
| 938 | | |
| - | | |
| - | |
Subtract: unamortized debt discount for redeemable preferred stock | |
| - | | |
| (2,118 | ) | |
| - | | |
| - | |
Net (loss) income available to Nukkleus Inc. for diluted net (loss) income per share of common stock | |
$ | (103,804 | ) | |
$ | 10,312 | | |
$ | (157,350 | ) | |
$ | (97,659 | ) |
Weighted average common stock outstanding - basic | |
| 257,055,897 | | |
| 230,485,100 | | |
| 239,342,032 | | |
| 230,485,100 | |
Effect of dilutive securities: | |
| | | |
| | | |
| | | |
| | |
Series A preferred stock | |
| - | | |
| 1,250,000 | | |
| - | | |
| - | |
Weighted average common stock outstanding - diluted | |
| 257,055,897 | | |
| 231,735,100 | | |
| 239,342,032 | | |
| 230,485,100 | |
Net (loss) income per common share attributable to Nukkleus Inc.: | |
| | | |
| | | |
| | | |
| | |
Diluted | |
$ | (0.00 | ) | |
$ | 0.00 | | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
For the three and nine months ended June 30, 2021
and for the nine months ended June 30, 2020, a total of 1,250,000 shares of common stock from the assumed redemption of the Series A convertible
redeemable preferred stock at the contractual floor of $0.20 per share have been excluded from the computation of diluted weighted average
number of shares of common stock outstanding as they would have had an anti-dilutive impact.
Foreign currency translation
The reporting currency of the Company is U.S.
Dollars. The functional currency of the parent company, Nukkleus Inc., Nukkleus Limited, Nukkleus Malta Holding Ltd. and its subsidiaries,
is the U.S. dollar and the functional currency of Match Financial Limited and its subsidiary is the British Pound (“GBP”).
Monetary assets and liabilities denominated in currencies other than the reporting currency are translated into the reporting currency
at the rates of exchange prevailing at the balance sheet date. Revenue and expenses are translated using average rates during each reporting
period, and shareholders’ equity is translated at historical exchange rates. Cash flows are also translated at average translation
rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding
balances on the consolidated balance sheet. Translation adjustments resulting from the process of translating the local currency financial
statements into U.S. dollars are included in determining comprehensive income/loss. Transactions denominated in foreign currencies are
translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated
in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any
transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional
currency are included in the results of operations as incurred.
Most of the Company’s revenue transactions
are transacted in the functional currency of the Company. The Company does not enter into any material transaction in foreign currencies.
Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.
Asset and liability accounts at June 30, 2021 were translated at 0.7246 GBP to $1.00, respectively, which were the exchange rates on the
balance sheet dates. Equity accounts were stated at their historical rates. The average translation rates applied to the statements of
operations for the period from May 28, 2021 through June 30, 2021 was 0.7133 GBP to $1.00, respectively. Cash flows from the Company’s
operations are calculated based upon the local currencies using the average translation rate.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 4 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Comprehensive loss
Comprehensive loss is comprised of net loss and
all changes to the statements of equity, except those due to investments by stockholders, changes in paid-in capital and distributions
to stockholders. For the Company, comprehensive loss for the three and nine months ended June 30, 2021 consisted of net loss and unrealized
gain from foreign currency translation adjustment.
Non-controlling interest
As of June 30, 2021,
several individuals aggregately owned 30% of the equity interests of Match Financial Limited, which is not under the Company’s control.
Segment reporting
The Company uses “the management approach”
in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s
chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s
reportable segments. The Company’s chief operating decision maker is its Chief Executive Officer (“CEO”), who reviews
operating results to make decisions about allocating resources and assessing performance for the entire company. The Company has determined
that it has two reportable business segments: general support services segment, and financial services segment. These reportable segments
offer different types of services and products, have different types of revenue, and are managed separately as each requires different
operating strategies and management expertise.
Reclassification
Certain prior period amounts have been reclassified
to conform to the current period presentation. These reclassifications have no effect on the previously reported financial position, results
of operations and cash flows.
Recently issued accounting pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments - Credit Losses (“Topic 326”). The ASU introduces a new accounting model, the Current Expected Credit
Losses model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related
to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses
at the time the financial asset is originated or acquired. ASU 2016-13 is effective for annual period beginning after December 15, 2022,
including interim reporting periods within those annual reporting periods. The Company expects that the adoption will not have a material
impact on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair
Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements (“ASU
2018-13”), which aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs
to companies when preparing fair value measurement disclosures. ASU 2018-13 is effective for annual and interim periods in the fiscal
years beginning after December 15, 2019. Early adoption is permitted. Retrospective adoption is required, except for certain disclosures,
which will be required to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year
of adoption. The adoption of this guidance as of October 1, 2020 did not have a material impact
on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Simplifying
the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles
in the existing guidance for income taxes and making other minor improvements. The amendments in the ASU are effective for the Company
on October 1, 2021. The Company does not expect the adoption of ASU 2019-12 will have a material impact on its consolidated financial
statements and will adopt the standard effective October 1, 2021.
Other accounting standards that have been issued
or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the unaudited condensed
consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an
impact on or are unrelated to its unaudited condensed consolidated financial condition, results of operations, cash flows or disclosures.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 5 - ACQUISITION
As described
in Note 1, on May 28, 2021, the Company completed its acquisition of Match in accordance with the terms of the Match Agreement. To
determine the accounting for this transaction under ASU 2017-01, an assessment was made as to whether an integrated set of assets and
activities should be accounted for as an acquisition of a business or an asset acquisition. The guidance requires an initial screen test
to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group
of similar identifiable assets. If that screen is met, the set is not a business. In connection with the acquisition, substantially all
of the fair value is concentrated in license and banking infrastructure. As such, the acquisition has been treated as an acquisition of
Match assets and an assumption of Match liabilities.
Under the
terms of the Match Agreement, the Company issued 70,000,000 shares of its common stock to the Match Shareholders to acquire 1,152 ordinary
shares of Match representing 70% of the issued and outstanding ordinary shares of Match (the “Initial Transaction”). Also,
in conjunction with the acquisition, the Company issued 100,000 shares of common stock to the Match Shareholders as consideration
of an option during the period from May 29, 2021 through September 30, 2021 to acquire from the Match Shareholders the balance
of 493 ordinary shares of Match representing 30% of the issued and outstanding ordinary shares of Match for an additional 30,000,000 shares
of common stock of the Company. The shares of common stock issued to the Match stockholders have
been valued at $0.14 per share which was the closing price of the Company’s common stock on May 28, 2021, the date the acquisition
closed.
The direct
transaction costs have been classified as costs of acquisition.
The following
summarizes total consideration transferred to the March Stockholders under the acquisition as well as the fair value of the assets acquired
and liabilities assumed under the acquisition:
| |
May 28, 2021 | |
Assets acquired: | |
| |
Cash | |
$ | 21,370 | |
Accounts receivable | |
| 46,602 | |
Other current assets | |
| 142 | |
Intangible assets | |
| 14,057,402 | |
Total assets | |
| 14,125,516 | |
Liabilities assumed: | |
| | |
Accounts payable and accrued liabilities | |
| 78,745 | |
Total liabilities | |
| 78,745 | |
Non-controlling interest | |
| 4,200,000 | |
Purchase price | |
$ | 9,846,771 | |
The fair values of the current assets acquired and the current liabilities
assumed were estimated to be equal to the carrying value on the books of the acquired entity. The acquisition cost of all other assets
and liabilities acquired were allocated to those individual assets acquired and liabilities assumed, based on their estimated relative
fair values. Upon completion of a third party valuation report being prepared in connection with the acquisition, the Company may adjust
the estimated allocation to reflect the results of that valuation if there are material differences between the third party valuation
and the Company’s estimated allocation.
NOTE 6 – INTANGIBLE ASSETS
In connection with the
acquisition of Match (See Note 5), the valuation of identifiable intangible assets acquired, representing
license and banking infrastructure. The Company uses its best estimates and assumptions as part of the purchase price allocation process
to accurately value the identifiable intangible assets at the acquisition date. The straight-line method of amortization represents the
Company’s best estimate of the distribution of the economic value of the identifiable intangible assets. Furthermore, the Company
is in the process of having a third-party valuation firm conduct a valuation of the acquisition. As such, the Company’s valuation
is preliminary and subject to change pending the results of the third-party valuation report.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 6 – INTANGIBLE ASSETS
(continued)
At June 30, 2021, intangible
assets consisted of the following:
| |
Useful Life | |
June 30,
2021 | |
License and banking infrastructure | |
10 Years | |
$ | 14,057,402 | |
Less: accumulated amortization | |
| |
| (117,145 | ) |
| |
| |
$ | 13,940,257 | |
For the three and nine
months ended June 30, 2021, amortization expense amounted to $117,145, which represented amortization from May 28, 2021 (the date of acquisition)
to June 30, 2021. There was no comparable amortization prior to the date of acquisition.
Amortization of intangible assets attributable
to future periods is as follows:
Twelve-month ending June 30: | |
Amortization amount | |
2022 | |
$ | 1,405,740 | |
2023 | |
| 1,405,740 | |
2024 | |
| 1,405,740 | |
2025 | |
| 1,405,740 | |
2026 and thereafter | |
| 8,317,297 | |
| |
$ | 13,940,257 | |
NOTE 7 – ACCOUNTS PAYABLE
AND ACCRUED LIABILITIES
At June 30, 2021 and September 30, 2020, accounts payable and accrued
liabilities consisted of the following:
| |
June 30,
2021 | | |
September 30,
2020 | |
Directors’ compensation | |
$ | 160,537 | | |
$ | 130,537 | |
Professional fees | |
| 49,023 | | |
| 46,640 | |
Accounts payable | |
| 44,568 | | |
| - | |
Interest payable | |
| - | | |
| 35,229 | |
Other | |
| 30,308 | | |
| - | |
Total | |
$ | 284,436 | | |
$ | 212,406 | |
NOTE 8 – SHARE CAPITAL
Preferred stock
The Company’s Board of Directors is
authorized to issue, at any time, without further stockholder approval, up to 15,000,000 shares of preferred stock. The Board of Directors
has the authority to fix and determine the voting rights, rights of redemption and other rights and preferences of preferred stock.
Common stock and Series A preferred stock
sold for cash
On June 7, 2016, the
Company sold to CMH 15,450,000 shares of common stock and 100,000 shares of Series A preferred stock for $1,000,000. The common stock
was recorded as equity and the Series A preferred stock was recorded as a liability. On February 13, 2018, 75,000 of the preferred shares
were redeemed and cancelled.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 8 – SHARE CAPITAL (continued)
Common stock and Series A preferred stock
sold for cash (continued)
The Series A preferred
stock has the following key terms:
| 1) | A stated value of $10 per share; |
| 2) | The holder is entitled to receive cumulative dividends at the annual rate of 1.5% of stated value payable
semi-annually on June 30 and December 31; |
| 3) | The preferred stock must be redeemed at the stated value plus any unpaid dividends in 5 years (on or before
June 7, 2021); |
| 4) | The Series A preferred stock is non-voting. However, without the affirmative vote of the holders of the
shares of the Series A preferred stock then outstanding, the Company may not alter or change adversely the powers, preferences or rights
given to the Series A preferred stock or alter or amend the Certificate of Designation except to the extent that such vote relates to
the amendment of the Certificate of Designation; |
| 5) | The holders of the Series A preferred stock are not entitled
to receive any preference upon the liquidation, dissolution or winding up of the business of the Company. Each holder of Series A preferred
stock shall share ratably with the holders of the common stock of the Company. |
The $1,000,000 of proceeds received was allocated
to the common stock and Series A preferred stock according to their relative fair values determined at the time of issuance, and as a
result, the Company recorded a total discount of $45,793 on the Series A preferred stock, which is being amortized to interest expense
to the date of redemption. For the three months ended June 30, 2021 and 2020, amortization of debt discount amounted to $400 and $572,
respectively. For the nine months ended June 30, 2021 and 2020, amortization of debt discount amounted to $1,545 and $1,717, respectively.
The terms of the Series A preferred stock
issued represent mandatory redeemable shares, with a fixed redemption date (in 5 years) and the Company has a choice of redeeming the
instrument either in cash or a variable number of shares of common stock based on a formula in the certificate of designation. The conversion
price has a floor of $0.20 per share. As such, all dividends accrued and/or paid and any accretions are classified as part of interest
expense. For the three months ended June 30, 2021 and 2020, dividends on redeemable preferred stock amounted to $750 and $938, respectively.
For the nine months ended June 30, 2021 and 2020, dividends on redeemable preferred stock amounted to $2,625 and $2,813, respectively.
On June 7, 2021, the outstanding redeemable preferred
stock of $250,000 and related accrued dividend of $37,854 were exchanged for 1,439,271 shares of the Company’s common stock.
Common
stock issued for acquisition
On May 28, 2021, the Company issued 70,000,000
shares of its common stock to Match Shareholders for acquisition of 70% equity interest of Match. These shares were valued at $9,800,000,
the fair market value on the grant date using the reported closing share price on the date of grant.
On May 28, 2021, the Company issued 100,000 shares of its common stock
to Match Shareholders as consideration of an option commencing any time after the closing of the Initial Transaction to acquire from the
Match Shareholders the balance of 493 ordinary shares of Match representing 30% of the issued and outstanding ordinary shares of Match
for an additional 30,000,000 shares of common stock of the Company. The 100,000 shares of the Company’s common stock were valued
at $14,000, the fair market value on the grant date using the reported closing share price on the date of grant and were included in the
costs of acquisition.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 9 – RELATED PARTY TRANSACTIONS
Services provided
by related parties
The Company uses affiliate employees for various
services such as the use of accountants to record the books and accounts of the Company at no charge to the Company, which are considered
immaterial.
Office space from
related parties
The Company uses office space of affiliate
companies, free of rent, which is considered immaterial.
Revenue from related party and cost of
revenue from related party
The Company’s general support services operate
under a GSA with TCM providing personnel and technical support, marketing, accounting, risk monitoring, documentation processing and customer
care and support. The minimum monthly amount received is $1,600,000.
The Company’s general support services operate
under a GSA with FXDIRECT receiving personnel and technical support, marketing, accounting, risk monitoring, documentation processing
and customer care and support. The minimum monthly amount payable is $1,575,000.
Both of the above entities are affiliates through
common ownership.
During the three and nine months ended June 30,
2021 and 2020, general support services provided to the related party, which was recorded as revenue – general support services
- related party on the accompanying unaudited condensed consolidated statements of operations and comprehensive (loss) income were as
follows:
| |
Three Months Ended June 30,
2021 | | |
Three Months Ended June 30,
2020 | | |
Nine Months Ended June 30,
2021 | | |
Nine Months Ended June 30,
2020 | |
Service provided to: | |
| | |
| | |
| | |
| |
TCM | |
$ | 4,800,000 | | |
$ | 4,800,000 | | |
$ | 14,400,000 | | |
$ | 14,400,000 | |
| |
$ | 4,800,000 | | |
$ | 4,800,000 | | |
$ | 14,400,000 | | |
$ | 14,400,000 | |
During the three and nine months ended June
30, 2021 and 2020, services received from the related party, which was recorded as cost of revenue – general support services -
related party on the accompanying unaudited condensed consolidated statements of operations and comprehensive (loss) income were as follows:
| |
Three Months Ended June 30,
2021 | | |
Three Months Ended June 30,
2020 | | |
Nine Months Ended June 30,
2021 | | |
Nine Months Ended June 30,
2020 | |
Service received from: | |
| | |
| | |
| | |
| |
FXDIRECT | |
$ | 4,725,000 | | |
$ | 4,725,000 | | |
$ | 14,175,000 | | |
$ | 14,175,000 | |
| |
$ | 4,725,000 | | |
$ | 4,725,000 | | |
$ | 14,175,000 | | |
$ | 14,175,000 | |
Due from affiliates
At June 30, 2021 and
September 30, 2020, due from related parties consisted of the following:
| |
June 30,
2021 | | |
September 30, 2020 | |
NUKK Capital (*) | |
$ | 144,696 | | |
$ | 144,696 | |
TCM | |
| 2,473,177 | | |
| 3,565,076 | |
Total | |
$ | 2,617,873 | | |
$ | 3,709,772 | |
| (*) | An entity controlled
by Emil Assentato, the Company’s chief executive officer, chief financial officer and chairman. |
The balances of due from NUKK Capital represent
the Company’s prior investment in digital currency that was transferred to NUKK Capital in March 2019. The balance of due from TCM
represent unsettled funds due related to the General Services Agreement and monies that the Company paid on behalf of TCM.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 9 – RELATED PARTY TRANSACTIONS
(continued)
Management believes that the related parties’
receivables are fully collectable. Therefore, no allowance for doubtful account is deemed to be required on its due from related parties
at June 30, 2021 and September 30, 2020. The Company historically has not experienced uncollectible receivable from the related parties.
Due to affiliates
At June 30, 2021 and
September 30, 2020, due to related parties consisted of the following:
| |
June 30,
2021 | | |
September 30,
2020 | |
Forexware LLC (*) | |
$ | 579,229 | | |
$ | 579,229 | |
FXDIRECT | |
| 3,340,547 | | |
| 4,111,277 | |
CMH | |
| 42,000 | | |
| 42,000 | |
FXDD Trading (*) | |
| 471 | | |
| 471 | |
Total | |
$ | 3,962,247 | | |
$ | 4,732,977 | |
| (*) | Forexware LLC and FXDD
Trading are both controlled by Emil Assentato, the Company’s chief executive officer, chief financial officer and chairman. |
The balances of due to related parties represent
expenses paid by Forexware LLC, FXDIRECT, and FXDD Trading on behalf of the Company and advances from CMH. The balance due to FXDIRECT
may also include unsettled funds due related to the General Service Agreement.
The related parties’ payables are short-term
in nature, non-interest bearing, unsecured and repayable on demand.
NOTE 10 – INCOME TAXES
The Company recorded no income tax expense for
the three and nine months ended June 30, 2021 and 2020 because the estimated annual effective tax rate was zero. As of June 30, 2021,
the Company continues to provide a valuation allowance against its net deferred tax assets since the Company believes it is more likely
than not that its deferred tax assets will not be realized.
NOTE 11 – CONCENTRATIONS
Customers
The following table sets forth information as
to each customer that accounted for 10% or more of the Company’s revenues for the three and nine months ended June 30, 2021 and
2020.
| |
Three Months Ended June 30, | | |
Nine Months Ended June 30, | |
Customer | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
A – related party | |
| 99.1 | % | |
| 100 | % | |
| 99.7 | % | |
| 100 | % |
One customer, whose outstanding receivable accounted
for 10% or more of the Company’s total outstanding accounts receivable, and accounts receivable – related party (which is
included in due from affiliates on the accompanying consolidated balance sheets) at June 30, 2021, accounted for 97.7% of the Company’s
total outstanding accounts receivable, and accounts receivable – related party at June 30, 2021.
One customer, whose outstanding receivable accounted
for 10% or more of the Company’s total outstanding accounts receivable – related party (which is included in due from affiliates
on the accompanying consolidated balance sheets) at September 30, 2020, accounted for 100.0% of the Company’s total outstanding
accounts receivable – related party at September 30, 2020.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 11 – CONCENTRATIONS (continued)
Suppliers
The following table sets forth information as
to each supplier that accounted for 10% or more of the Company’s costs of revenues for the three and nine months ended June 30,
2021 and 2020.
| |
Three Months Ended June 30, | | |
Nine Months Ended June 30, | |
Supplier | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
A – related party | |
| 99.4 | % | |
| 100 | % | |
| 99.8 | % | |
| 100 | % |
One supplier, whose outstanding payable accounted
for 10% or more of the Company’s total outstanding accounts payable, and accounts payable – related party (which is included
in due to affiliates on the accompanying consolidated balance sheets) at June 30, 2021, accounted for 98.7% of the Company’s total
outstanding accounts payable, and accounts payable – related party at June 30, 2021.
One supplier, whose outstanding payable accounted
for 10% or more of the Company’s total outstanding accounts payable – related party (which is included in due to affiliates
on the accompanying consolidated balance sheets) at September 30, 2020, accounted for 100.0% of the Company’s total outstanding
accounts payable – related party at September 30, 2020.
NOTE 12 – NON-CONTROLLING
INTEREST
As of June 30, 2021,
several individuals aggregately owned 30% of the equity interests of Match, which is not under the Company’s control.
The following is a summary
of non-controlling interest activities in the nine months ended June 30, 2021.
| |
Amount | |
Non-controlling interest at September 30, 2020 | |
$ | - | |
Non-controlling interest acquired on acquisition | |
| 4,200,000 | |
Net income attributable to non-controlling interest | |
| 3,266 | |
Foreign currency translation adjustment attributable to non-controlling interest | |
| 36 | |
Non-controlling interest at June 30, 2021 | |
$ | 4,203,302 | |
NOTE 13 – SEGMENT INFORMATION
For the three and nine months ended June 30, 2021,
the Company operated in two reportable business segments - (1) the general support services segment, in which we provide software, technology,
customer sales and marketing and risk management technology hardware and software solutions package under a GSA to a related party, and
(2) the financial services segment, in which we provide payment services from one fiat currency to another. For the three and nine months
ended June 30, 2020, the Company operated in one reportable business segment – the general support services segment. The Company’s
reportable segments are strategic business units that offer different services and products. They are managed separately based on the
fundamental differences in their operations.
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 13 – SEGMENT INFORMATION
(continued)
Information with respect
to these reportable business segments for the three and nine months ended June 30, 2021 and 2020 was as follows:
| |
Three Months Ended June 30, | | |
Nine Months Ended June 30, | |
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Revenues | |
| | |
| | |
| | |
| |
General support services | |
$ | 4,800,000 | | |
$ | 4,800,000 | | |
$ | 14,400,000 | | |
$ | 14,400,000 | |
Financial services | |
| 41,602 | | |
| - | | |
| 41,602 | | |
| - | |
Total | |
| 4,841,602 | | |
| 4,800,000 | | |
| 14,441,602 | | |
| 14,400,000 | |
| |
| | | |
| | | |
| | | |
| | |
Costs of revenues | |
| | | |
| | | |
| | | |
| | |
General support services | |
| 4,725,000 | | |
| 4,725,000 | | |
| 14,175,000 | | |
| 14,175,000 | |
Financial services | |
| 144,781 | | |
| - | | |
| 144,781 | | |
| - | |
Total | |
| 4,869,781 | | |
| 4,725,000 | | |
| 14,319,781 | | |
| 14,175,000 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit (loss) | |
| | | |
| | | |
| | | |
| | |
General support services | |
| 75,000 | | |
| 75,000 | | |
| 225,000 | | |
| 225,000 | |
Financial services | |
| (103,179 | ) | |
| - | | |
| (103,179 | ) | |
| - | |
Total | |
| (28,179 | ) | |
| 75,000 | | |
| 121,821 | | |
| 225,000 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Financial services | |
| 3,439 | | |
| - | | |
| 3,439 | | |
| - | |
Corporate/Other | |
| 68,130 | | |
| 62,222 | | |
| 268,656 | | |
| 336,241 | |
Total | |
| 71,569 | | |
| 62,222 | | |
| 272,095 | | |
| 336,241 | |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Financial services | |
| 360 | | |
| - | | |
| 360 | | |
| - | |
Corporate/Other | |
| (1,150 | ) | |
| (1,286 | ) | |
| (4,170 | ) | |
| 13,582 | |
Total | |
| (790 | ) | |
| (1,286 | ) | |
| (3,810 | ) | |
| 13,582 | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| | | |
| | | |
| | | |
| | |
General support services | |
| 75,000 | | |
| 75,000 | | |
| 225,000 | | |
| 225,000 | |
Financial services | |
| (106,258 | ) | |
| - | | |
| (106,258 | ) | |
| - | |
Corporate/Other | |
| (69,280 | ) | |
| (63,508 | ) | |
| (272,826 | ) | |
| (322,659 | ) |
Total | |
| (100,538 | ) | |
| 11,492 | | |
| (154,084 | ) | |
| (97,659 | ) |
| |
| | | |
| | | |
| | | |
| | |
Amortization | |
| | | |
| | | |
| | | |
| | |
Financial services | |
| 117,145 | | |
| - | | |
| 117,145 | | |
| - | |
Total | |
$ | 117,145 | | |
$ | - | | |
$ | 117,145 | | |
$ | - | |
Total assets at June 30, 2021 and September 30, 2020 | |
June 30, 2021 | | |
September 30, 2020 | |
Financial services | |
$ | 14,017,184 | | |
$ | - | |
Corporate/Other | |
| 2,983,183 | | |
| 3,799,631 | |
Total | |
$ | 17,000,367 | | |
$ | 3,799,631 | |
NUKKLEUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(AS RESTATED)
NOTE 14 – CONTINGENCY
On April 16, 2020, the
Company was named as a defendant in the Adversary Proceeding filed in the United States Bankruptcy Court for the District of Massachusetts
(Case No. 15-10745-FJB; Adversary Proceeding No. 16-01178) titled In re: BT Prime Ltd (“BT Prime”). The Adversary Proceeding
is brought by BT Prime against Boston Technologies Powered by Forexware LLC f/k/a Forexware LLC (“Forexware”), Currency Mountain
Holdings LLC, Currency Mountain Holdings Limited f/k/a Forexware Malta Holdings Ltd., FXDirectDealer, LLC, FXDD Malta Ltd., Nukkleus Inc.,
Nukkleus Bermuda Limited and Currency Mountain Holdings Bermuda, Ltd. In the Amended Complaint, BT Prime is seeking, amongst other relief,
a determination that the Company and the other defendants are liable for all of the debts of BT Prime stemming from its bankruptcy proceedings,
and is seeking to recover certain amounts transferred to Forexware and FXDD Malta prior to the initiation of the bankruptcy case. In the
sole claim asserted against the Company, BT Prime alleges that the Company operated as a single business enterprise with no separate existence
outside of its collective business relationship with certain of the other Defendants, is a continuation of the business of Forexware and
is a successor-in-interest to Forexware. Based on this theory, BT Prime alleges that the Company should be jointly and severally liable
for any liability attributable to Forexware or the other Defendants, should the Court eventually find any such liability. The Company
maintains that there is no basis for BT Prime’s claim against it and intends to vigorously defend against the claim. The Company,
joined by certain other defendants, filed a summary judgment motion seeking, among other things, dismissal of the sole claim against
it. That motion was fully submitted on December 4, 2020, and the Court held an oral argument on February 2, 2021. No decision has been
issued as of the date of this report.
NOTE 15 – SUBSEQUENT
EVENTS
Management has evaluated subsequent events through
the date of the filing.