Nukkleus which obtained a shareholder stake in IBIH Limited the parent company of IronFX Global Group files Q2 financial report 

Nukkleus Inc. has filled its Quarterly Report with the U.S. Securities and Exchange Commission (SEC) in the Form of FORM 10-Q/A, providing, among other, insights of the acquisition of a 9.9% shareholder stake in IBIH, as well as the acquisition of the operations of IronFX and GVS Ltd.

Highlights of the report are below:

The Company History and Nature of the Business

Nukkleus Inc. (formerly Compliance & Risk Management Solutions Inc.) (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. On February 25, 2015, John Nettlefold closed a transaction in which he purchased a total of 3,500,000 shares of restricted stock of the Company, representing 88% of the shares in the Company from Mountain Laurel Holdings. At the same time, Mr. Christopher Neuert, the former Director resigned his position at that time and the shareholders of the Company elected Mr. Nettlefold as Director of the Company.

Subsequent to the change in control on February 25, 2015, the new Director John Nettlefold decided to transition the company from business technology to advertising technology. To this effect, on May 22, 2015, Mr. Nettlefold undertook a Merger between Nukkleus Inc., a Nevada entity and Compliance Risk & Management Solutions, Inc., a Delaware entity & former name of this Company

On July 2, 2015 the State of Delaware approved an Amendment of the Articles to increase the Authorized shares of the Company to 300,000,000. On July 6, 2015, the state of Delaware approved the forward stock split at the ratio of 39.37:1. FINRA gave final approval for this forward stock split, name change and ticker symbol change from CRMV to the current NUKK on July 24, 2015.

By late July, management had decided that many of the underlying factors of Mr. Nettlefold’s business would not be feasible as presented. As such, on July 26, 2015, the previous Merger Agreement was rescinded.

On July 27, 2015, Charms Investments, Inc. closed a transaction in which it acquired the majority restricted block from the Director John Nettlefold, representing 88% of the company’s shares, as seen on the 8K filed July 27, 2015.

On August 17, 2015, Mr. Nettlefold resigned as Director of the Company, and on the same day the majority of the shareholders elected Mr. Peter Maddocks as Director of the Company. Since this transition, the Company has been conducting due diligence and reviewing several possibilities within the technology arena.

On February 5, 2016, Charms Investments, Ltd, a non-affiliated company, sold 146,535,140 shares of common stock to Currency Mountain Holdings Bermuda, Limited (“CMH”), the parent of the Company. CMH is wholly-owned by an entity that is owned by the Company’s sole officer and director. In addition, on the same date, CMH acquired 3,937,000 shares of common stock from another non-affiliated company. The aggregate purchase price paid by CMH was $347,500.

On May 24, 2016, the Company acquired selected technology assets from CMH. As the acquisition was from an entity under common control, the Company recorded these assets at CMH’s carrying values, which were zero.

On May 27, 2016, the Company obtained a 9.9% shareholder stake in IBIH Limited (parent company of IronFx Global Group (IronFx)) and acquired 100% of the issued and outstanding shares of GVS limited, a BVI corporation (a former subsidiary of IBIH limited). In addition, the Company entered into a Stock Purchase Agreement pursuant to which it has agreed to acquire the remaining equity in IBIH Limited and prior to such closing, the Company is required to enter into an option agreement to acquire FML Malta, Ltd. and FXDD Trading Limited operating units, which are affiliates through common ownership. These transactions are subject to regulatory approval, where applicable. (See Note 3)

On June 3, 2016, the Company agreed to sell to CMH 30,900,000 shares of common stock and 200,000 shares of Series A preferred stock for $2,000,000 in two equal installments. The first close occurred on June 7, 2016. The second close will occur with the closing of the Company’s acquisition of IBIH.

Overview

The management of the Company has stated that the acquisition of a 9.9% shareholder stake in IBIH, as well as the acquisition of the operations of IronFX and GVS Ltd. is just a first intended step towards the Company’s long term strategy of identifying leading retail forex brands from around the world as well as leading financial companies related to the industry, which can potentially be included and synergistically folded into the Company. It is the stated intention of the Company’s management to maintain the separate brand identity, operational autonomy, and segregated customer deposits for each individual retail forex brand it may potentially acquire in the future, while simultaneously capitalizing on efficiencies afforded by scale, shared backbones and optimized regulatory capital structure.

As a result of these above described transactions, which were entered in May 2016, as well as further contemplated transactions, the Company’s goal is to create an industry leading sector consolidated platform, combining strong global retail and institutional trading flows covering FX, commodities, futures, CFD and equities, with a cutting edge technological product suite, turnkey software and technological development capabilities. These contemplated transactions could potentially result in a global financial trading and financial technology group, with operations and clients, as well as one of the most comprehensive regulatory licenses coverage in the world.

Share Capital

The Company was authorized to issue 300,000,000 shares of common stock at par value of $0.0001 and 15,000,000 shares of Series A preferred stock at par value of $0.0001. On May 26, 2016, the Company increased its authorized common shares to 900,000,000.

On May 24, 2016, CMH sold certain intellectual property, hardware, software and other assets (collectively, the “Assets”) to the Company in consideration of 48,400,000 shares of common stock of the Company. As the acquisition was from an entity under common control, the Company recorded the Assets at CMH’s carrying values, which were zero.

On May 27, 2016, the Company entered into a Stock Purchase Agreement to acquire, from IBIH Limited, 2,200 issued and outstanding common stock for $1,000,000, representing 9.9% of IBIH Limited. In addition, the Company acquired 100% of the issued and outstanding shares of GVS Limited, a BVI corporation (a former subsidiary of IBIH Limited) for 24,156,000 shares of common stock of the Company (‘first closing’). The cost of acquisition paid in cash has been recorded on the balance sheet as a “deposit on potential acquisition,” and the common stock as “contingent common stock” as the transaction is contingent upon regulatory approval (see the following paragraph). The shares were valued at $.0023 per share.

The Company agreed to acquire the remaining 20,000 shares of IBIH Limited for 219,844,000 shares of its common stock, subject to IBIH Limited obtaining regulatory approvals from the Financial Conduct Authority in the United Kingdom and from the regulators in Cyprus (‘second closing’). The second closing is subject to the Company signing an option agreement with FML Malta, Ltd and FXDD Trading Limited, providing that the Company may acquire both entities for $1. If the second closing does not occur before November 28th, 2016, the $1,000,000 is returned to the Company and the first closing is unwound. As a result of the first closing being contingent on the second closing, the 24,156,000 shares for the purchase of IBIH Limited was recorded as contingent common stock, due to the uncertainty of the closing of the transaction. At June 30, 2016, the Company had not recorded an amount to reflect the value of the option to acquire FML Malta Ltd. and FXDD Trading Limited.

The Company agreed to sell to CMH 30,900,000 shares of common stock and 200,000 shares of Series A preferred stock for $2,000,000 in two equal installments. The first close occurred on June 7, 2016. The second close will occur with the closing of the Company’s acquisition of IBIH.

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 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. The Company has a choice of redeeming either in cash or in shares of common stock based on a formula in the certificate of designation. The conversion price has a floor of $0.20 per share.

At June 30, 2016, during the first close, 15,450,000 shares of common stock and 100,000 shares of Series A preferred stock were issued and were recorded as equity and as a long-term liability, respectively. 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 discount on the Series A preferred stock, which is being amortized to interest expense to the date of redemption. 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. As such, all dividends accrued and/or paid and any accretions are classified as part of interest expense.

Related Party Transactions

On May 24, 2016, the Company entered into a Global Service Agreement with FXDD Trading Limited, Bermuda. This service agreement was replaced by one with FML Malta Ltd, with substantially the same terms. The Company is to invoice FML Malta Ltd, a minimum of $2,000,000 per month in consideration for providing personnel and technical support, marketing, accounting, risk monitoring, documentation processing and customer care and support.

In addition, the Company entered into a Global Service Agreement with FXDirectDealer LLC to pay $1,975,000 per month for providing personnel and technical support, marketing, accounting, risk monitoring, documentation processing and customer care and support.

Both of the above entities are affiliates through common ownership.

On August 1, 2013, the Company had engaged the services (the “Agreement”) of Ocean Cross Business Solutions Group LLC (“OCBSG”), to provide assistance with filing of the SEC Form S-1, general accounting, finance, general management and client delivery services. OCBSG is owned by William Schloth the husband of the previous majority shareholder MLH. The Agreement provided for a monthly consulting fee of $5,000. The Agreement was mutually and satisfactorily terminated by the parties as of February 24, 2015 and no amount was due to OCBSG. The Company has reflected this arrangement in the statement of operations as related party expenses. For the three months ended June 30, 2015, there no related party costs and expenses. For the nine months ended June 30, 2015, $14,500 and $13,827 have been allocated to cost of revenue and operating expenses, respectively.

As of June 30, 2016, the due to stockholder balance principally consisted of professional and various filings fees borne by CMH on behalf of the Company.

Results of Operations

Summary of Key Results

For the three months ended June 30, 2016 versus June 30, 2015

Revenues and Cost of Revenues

Total revenue for the three months ended June 30, 2016; versus June 30, 2015 were $2,400,000 and $0 respectively. Revenues are from general support services rendered to a related party. The significant increase is due to revenues derived from the service agreement entered in May, 2016. No such agreement was in place as of June 30, 2015.

Costs of revenues for the three months ended June 30, 2016 versus June 30, 2015 were $2,370,000 and $0, respectively. Cost of revenue represents amount incurred for general support services rendered by a related party. The significant increase in costs was due to expenses incurred by the general expenses agreement entered in May, 2016. No such agreement existed as of June 30, 2015.

Operating Expenses

Total operating expenses for the three months ended June 30, 2016 versus June 30, 2015, were $158,429 versus $8,297, respectively. These amounts were primarily third party professional fees.

For the nine months ended June 30, 2016 versus June 30, 2015

Revenues and Cost of Revenues

Total revenue for the nine months ended June 30, 2016; versus June 30, 2015 were $2,400,000 and $32,469, respectively. Revenues in 2016 are for general support services rendered to a related party. The significant increase is due to revenues derived from the service agreement entered in May, 2016. No such agreement was in place as of June 30, 2015.

Costs of revenues for the nine months ended June 30, 2016 versus June 30, 2015 were $2,370,000 and $14,665, respectively. Cost of revenues included merchant account charges of $0 and $165, respectively. The remaining amount, $2,370,000 and $14,500, respectively, were related-party costs for the delivery of the general support services. The significant increase in costs was due to expenses incurred as a result of the General Services Agreement entered in May, 2016. No such agreement existed as of June 30, 2015

Operating Expenses

Total operating expenses for the nine months ended June 30, 2016 versus June 30, 2015 were $168,429 versus $49,395, respectively. The increase in costs was primarily due to the increased use of professional services providers.

Liquidity and Capital Resources

At June 30, 2016, we had cash of $0 and working capital of $894,988.

We had a total stockholders’ deficit of ($115,466) and a retained deficit of ($257,460) as of June 30, 2016.

We had ($148,428) and ($37,605) in net cash used in operating activities for the nine months ended June 30, 2016 and June 30, 2015, respectively. These include ($139,127) and ($31,591) in net losses, respectively. Cash flows used in operating activities included changes in operating assets and liabilities totaling ($9,988) and ($6,014) for the nine months ended June 30, 2016 and 2015, respectively.

For the Full report: SEC FORM 10-Q/A Nukkleus Inc.

Source: SEC

Read also: SEC released: Nukkleus Inc. acquired 9.9% of IBIH Limited and 100% of Iron Australia 

 

 

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