Nukkleus Inc

Nukkleus Inc. (formerly known as, Brilliant Acquisition Corporation) (the “Company” or “Nukkleus”) was formed on May 24, 2019. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar business combination with one or more businesses or entities. on June 23, 2023, Brilliant Acquisition Corporation, a British Virgin Islands company (prior to the Merger “Brilliant”, and following the Merger, a Delaware corporation “Nukkleus”), entered into an Amended and Restated Agreement and Plan of Merger (as amended by the First Amendment to the Amended and Restated Agreement and Plan of Merger on November 1, 2023, the “Merger Agreement”), by and among Brilliant BRIL Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Brilliant (“Merger Sub”), and Nukkleus Inc., a Delaware corporation (“Old Nukk”). Old Nukk (f/k/a Compliance & Risk Management Solutions Inc.) 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 Merger Agreement provides that, among other things, at the closing (the “Closing”) of the transactions contemplated by the Merger Agreement, Merger Sub merged with and into Old Nukk (the “Merger”), with Old Nukk surviving as a wholly-owned subsidiary of Brilliant. In connection with the Merger, Brilliant changed its name to “Nukkleus Inc.” (“Nukkleus” or “Combined Company”). The Merger and other transactions contemplated by the Merger Agreement are hereinafter referred to as the “Business Combination.”

In connection with the Business Combination, Brilliant changed its name to “Nukkleus Inc.” The Business Combination was completed on December 22, 2023.

Overview

As a result of Business Combination, we are now a financial technology company with the aim of providing blockchain-enabled technology solutions.

Nukkleus Technology

Our Nukkleus Technology business unit offers a full-service transactions technology and advisory business providing end-to-end transactions technology solutions. We offer an advanced transactions platform for dealing and risk management with global liquidity and customizable leverage, where users have control over quote and liquidity strategies. Such technology and advisory services are currently offered through our GSA with FXDD (for more information see the section captioned “GSA Agreements” below).

Digital RFQ

Through our Digital RFQ subsidiary, we aim to provide cross-border payment and transactions solutions to institutional investors, and offer blockchain-enabled financial services solutions to institutional investors in a secure, compliant and globally accessible manner. The blockchain-enabled payment gateway we have developed has the capability to deliver global cross-border transfers of fiat currencies using blockchain rails. Digital RFQ currently offers payment and settlement services, including those utilizing blockchain networks, but does not provide custody or wallet services with respect to digital assets, and does not hold digital assets, reducing the risks and regulatory burden on its business. In future, Digital RFQ plans to offer a white-labelled digital bank with end-to-end digital banking solutions for international business. We are uncertain as to when we will be able to offer these products and intend to evaluate potential strategic opportunities for DigiClear which may include the sale of the assets or a joint venture, of which there is no guarantee. Our competitors in this product category are banks and other financial institutions, and we intend to compete by offering faster and more reliable products using more advanced technology. Products and services offered by Digital RFQ are distributed through our website.

Digital RFQ is regulated in the United Kingdom by the Financial Conduct Authority and is in good standing and is and has been in the past in material compliance with the applicable laws, rules and regulations promulgated thereby. Digital RFQ is subject to Anti Money Laundering (“AML”) and Counter Terrorist Finance (“CTF”) regulations consistent with our authorization by the Financial Conduct Authority as an Electronic Money Directive Agent, among others. For a discussion of the various laws and regulations Digital RFQ is subject.

The “blockchain technology” used by Digital RFQ in its payment processing business includes only advanced-stage and fully tested, well-established and fully collateralized stablecoins operated on the Bitcoin, Ethereum and Tron networks. However, in future, we will be free to use other blockchain networks if we determine that they offer more sophisticated or secure technology. Based on our risk assessments, we determine the appropriate network to use for a particular transaction or customer. We do not use stablecoins of an algorithmic nature, and in the event that we determine any particular stablecoin presents a threat or risk to the security of our business, customers or the transactions we process, we promptly move to another stablecoin network. We do not accept payment in digital assets and do not hold digital assets for investment or offer digital wallet services. For a description of the risks associated with the use of blockchain technology in financial services generally, and payment processing specifically.

DigiClear

Through DigiClear, we plan to develop technology that offers a custody and settlement utility operating system aiming to deliver value and a high-functioning automated post-trade solution. DigiClear aims to provide clients with the means to transfer underlying assets to alternative custodians at any time. We intend for DigiClear to use hardware security modules to offer technology that can secure client assets to block any unwanted modification of client settlement instructions or transfers. We expect that the transfer process that DigiClear’s technology will offer will be fully automated, monitored and can be processed within milliseconds. We are uncertain as to when we will be able to offer these products and intend to evaluate potential strategic opportunities for DigiClear which may include the sale of the assets or a joint venture, of which there is no guarantee. Our competitors in this product category are banks and other financial institutions and smaller financial technology companies, and we intend to compete by offering faster and more reliable products using more advanced technology. Assuming we are offer DigiClear products and services once commercially developed these will be distributed through our website.

Recent Developments

Merger Agreement – Brilliant Acquisition Corporation

On June 23, 2023, Brilliant Acquisition Corporation, a British Virgin Islands company (prior to the Merger “Brilliant”, and following the Merger, a Delaware corporation “Nukkleus”), entered into an Amended and Restated Agreement and Plan of Merger (as amended by the First Amendment to the Amended and Restated Agreement and Plan of Merger on November 1, 2023, the “Merger Agreement”), by and among Brilliant BRIL Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Brilliant (“Merger Sub”), and Nukkleus Inc., a Delaware corporation (“Old Nukk”).

The Merger Agreement provides that, among other things, at the closing (the “Closing”) of the transactions contemplated by the Merger Agreement, Merger Sub merged with and into Old Nukk (the “Merger”), with Old Nukk surviving as a wholly-owned subsidiary of Brilliant. In connection with the Merger, Brilliant changed its name to “Nukkleus Inc.” (“Nukkleus” or “Combined Company”). The Merger and other transactions contemplated by the Merger Agreement are hereinafter referred to as the “Business Combination.”

Brilliant held a special meeting, at which its shareholders voted to approve the proposals outlined in the final prospectus and definitive proxy statement dated November 13, 2023 (the “Joint Proxy Statement/Prospectus”) and filed with the Securities and Exchange Commission (“SEC”), including, among other things, the adoption of the Merger Agreement. On December 22, 2023, as contemplated by the Merger Agreement, Merger Sub merged with and into Old Nukk, and the separate corporate existence of Merger Sub ceased, with Old Nukk being the surviving corporation and wholly owned subsidiary of Brilliant. The reverse transaction was accounted for as a reverse recapitalization and the financial information throughout is Old Nukk.

In connection with the Business Combination, Brilliant (a) re-domiciled out of the British Virgin Islands and continued as a company incorporated in the State of Delaware, prior to the Closing (the “Domestication”); (b) upon the Domestication adopted the Interim Charter; (c) filed an amended and restated certificate of incorporation (the “Amended Certificate of Incorporation”) and (d) changed its name to “Nukkleus Inc.”

Business Combination Consideration

As a result of the Business Combination, all of the outstanding shares of common stock, par value $0.0001 per share, of Old Nukk (“Old Nukk Common Stock”) were cancelled in exchange for the right to receive a pro-rata portion of 10,500,000 shares of common stock of Brilliant (“Brilliant Common Stock”). Each outstanding option to purchase shares of Old Nukk Common Stock (whether vested or unvested) was assumed by Brilliant and automatically converted into an option to purchase shares of Brilliant Common Stock (each, an “Assumed Option”). The holder of each Assumed Option has: (i) the right to acquire a number of shares of Brilliant Common Stock equal to (as rounded down to the nearest whole number) the product of (A) the number of shares of Old Nukk Common Stock subject to such option prior to the effective time of the Merger, multiplied by (B) the exchange ratio of 1:35 (the “Exchange Ratio”); (ii) have an exercise price equal to (as rounded up to the nearest whole cent) the quotient of (A) the exercise price of the option, divided by (B) the Exchange Ratio; and (iii) be subject to the same vesting schedule as the applicable option of Old Nukk.

In connection with the Domestication, all of the issued and outstanding ordinary shares, no par value per share, of Brilliant (“Brilliant Ordinary Shares”), rights to receive one-tenth of one ordinary share of Brilliant per right (“Brilliant Rights”) and warrants entitling the holder thereof to purchase one Brilliant Ordinary Share at a price of $11.50 per Brilliant Ordinary Share (“Brilliant Warrants”) will remain outstanding and become substantially identical securities of the SPAC as a Delaware corporation. The holders of Brilliant securities, other than Brilliant’s sponsor or affiliates, received an additional issuance, as follows: (1) in the case of holders of Brilliant Ordinary Shares, such number of newly issued shares of Brilliant Common Stock equal to a pro rata share of the Backstop Pool (as defined below); and (2) in the case of holders of Brilliant Rights, such number of shares of Brilliant Common Stock equal to a pro rata share of the Backstop Pool, in each case subject to rounding in accordance with the Merger Agreement (such ratio of the aggregate number of shares of Brilliant Common Stock issuable to each Brilliant public shareholder, including such shareholder’s share in the Backstop Pool, to the aggregate number of Brilliant Ordinary Shares and Brilliant Rights held by such Brilliant public shareholder, the “SPAC Additional Share Ratio”). Outstanding Brilliant Warrants held by holders other than Brilliant’s sponsor or affiliates received a number of Brilliant Warrants equal to one warrant exercisable to receive one share of Brilliant Common Stock plus an additional number of warrants equal to the SPAC Additional Share Ratio, with each warrant exercisable to receive one share of Brilliant Common Stock per warrant. The Backstop Pool is defined in the Merger Agreement as a pool of shares of Brilliant Common Stock equal to the lower of (1) 1,012,000 and (2) 40% of the aggregate number of Brilliant Ordinary Shares and Brilliant Rights, subject to rounding in accordance with the Merger Agreement. In connection with the Business Combination, the Backstop Pool was equal to 40% of the aggregate number of Brilliant Ordinary Shares and Brilliant Rights.

Closing

In connection with the Business Combination, holders of 330,345 shares of Brilliant Ordinary Shares exercised their right to redeem their shares for cash at a redemption price of approximately $11.57 per share, for an aggregate redemption amount of $3,822,431.16.

Immediately after giving effect to the redemption of 256,994 shares of Brilliant Ordinary Shares in connection with the Business Combination, there were 1,557,702 shares of Brilliant Ordinary Shares (consisting of Brilliant public shares Brilliant founder shares, and Brilliant private shares) and 6,701,000 Brilliant Warrants outstanding.

After giving effect to the redemption of Brilliant Common Stock in connection with the Business Combination, and the Business Combination, there are 13,899,712 shares of Nukkleus Common Stock, and 6,701,000 Nukkleus Warrants outstanding. Upon the consummation of the Business Combination, Nukkleus Common Stock and Nukkleus Warrants began trading on December 26, 2023 on the NASDAQ under the symbols “NUKK and “NUKKW” respectively. The Brilliant Common Stock, Brilliant Units, Brilliant Rights and Brilliant Warrants ceased trading under the symbols BRLI, BRLIU, BRLIR and BRLIW.

Following the Business Combination, Old Nukk stockholders own approximately 78.3% of the Combined Company, Brilliant’s public stockholders own approximately 0.5% of the Combined Company, Brilliant’s sponsor and Brilliant’s, officers, directors and advisors (collectively the “Initial Stockholders”) own approximately 8.0% of the Combined Company.

Lock-Up Agreement

In connection with the Closing, the Sponsor, certain stockholders of Brilliant and certain former equity holders of Old Nukk (each, a “Lock-up Holder”) entered into an agreement (the “Lock-Up Agreement”), pursuant to which and subject to certain customary exceptions, during the period commencing on the date of the Closing and ending on the date that is two (2) years after the consummation of the Business Combination such Lock-up Holder agreed not to (i) offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of the Lock-up Shares (as defined in the Lock-Up Agreement, which shall include certain securities held by the Lock-Up Holders), (ii) enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such Lock-up Shares, whether any of these transactions are to be settled by delivery of any such Lock-up Shares, in cash or otherwise, (iii) publicly disclose the intention to make any offer, sale, pledge or disposition, or (iv) enter into any transaction, swap, hedge or other arrangement, or engage in any short sales with respect to any security of Brilliant.

Registration Rights Agreement

In connection with the Closing, Nukkleus entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which, Brilliant, Nukkleus and the other parties thereto agreed to, among other things, file a resale shelf registration statement registering certain of the securities held by the Holders (as defined in the Registration Rights Agreement, which includes certain stockholders of Brilliant and certain equity holders of Old Nukk) no later than 45 business days after the Closing of the Business Combination. The Registration Rights Agreement also provides certain registration rights, including customary demand registration rights and piggyback registration rights to the Holders, subject to customary exceptions, terms and conditions. Nukkleus also agreed to pay certain fees and expenses relating to registrations under the Registration Rights Agreement.

White Lion Stock Purchase Agreement

On May 17, 2022, the Company entered into a Stock Purchase Agreement (the “White Lion Agreement”) with White Lion Capital Partners, LLC a California-based investment fund (“White Lion”). Under the terms of the White Lion Agreement, the Company had the right, but not the obligation, to require White Lion to purchase shares of its common stock up to a maximum amount of $75,000,000. On February 21, 2024, the Company terminated the White Lion Agreement.

GSA Agreements

On May 24, 2016, Nukkleus Limited entered into a General Service Agreement to provide its software, technology, customer sales and marketing and risk management technology hardware and software solutions package to FML Malta Ltd. In December 2017, Nukkleus Limited, FML Malta Ltd. and TCM entered into a letter agreement providing that there was an error in drafting the General Service Agreement and acknowledging that the correct counter-party to Nukkleus Limited in the General Service Agreement is TCM. Accordingly, all references to FML Malta Ltd. have been replaced with TCM. TCM is a private limited liability company formed under the laws of Malta. The General Service Agreement entered with TCM provides that TCM will pay Nukkleus Limited at minimum $2,000,000 per month. On October 17, 2017, Nukkleus Limited entered into an amendment of the General Service Agreement with TCM. In accordance with the amendment, which was effective as of October 1, 2017, the minimum amount payable by TCM to Nukkleus Limited for services was reduced from $2,000,000 per month to $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 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, on May 24, 2016, in order to appropriately service TCM, Nukkleus Limited entered into a General Service Agreement with FXDIRECT, which provides that Nukkleus Limited will pay FXDIRECT a minimum of $1,975,000 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. On October 17, 2017, Nukkleus Limited entered into an amendment of the General Service Agreement with FXDIRECT. Pursuant to the amendment, which was effective as of October 1, 2017, the minimum amount payable by Nukkleus Limited to FXDIRECT for services was reduced from $1,975,000 per month to $1,575,000 per month. Currency Mountain Holdings LLC is the sole shareholder of FXDIRECT. Max Q is the majority shareholder of Currency Mountain Holdings LLC. Due to non-payment by TCM under the GSA, the Company has advised TCM that the GSA has been terminated. The Company has historically generated substantially most of its revenue through the services rendered under the GSA. The Company is repositioning its focus on digital assets as the services generated under the GSA with TCM generated limited net income.

The foregoing descriptions of the terms and conditions of the General Services Agreement with FML Malta Ltd, the amendment to such General Services Agreement, and the General Services Agreement with FXDIRECT are not complete and are qualified in their entirety by the full text of the applicable agreement, which are filed herewith as Exhibit and incorporated herein by reference.

The Market Opportunity

The FX market is a global, decentralized market for the trading of currencies. Nukkleus’s management believes that FX trading involves the simultaneous buying and selling of a currency pair for the purposes of hedging currency risk or to generate a profit. Nukkleus’s management believes that the FX market, once limited to large financial institutions, has expanded and matured over the past decade, and now captures a wide range of participants, including central banks, commercial banks, non-bank corporations, hedge funds, brokers and individual investors and traders. The market’s expansion has helped lead to a significant increase in trading activity. In addition to the increase in the breadth of market participants, management believes the key factors driving higher transaction volumes include the adoption of electronic and high frequency trading, tighter trading spreads, rising volatility among currencies and enhanced access to FX trading markets for retail investors.

Management believes that FX trading, initially utilized primarily for hedging purposes, has evolved as investor sophistication levels have risen, trading costs have fallen, and as currencies have become increasingly viewed as a viable investment asset class. FX’s low, (or even negative) correlation among certain other portfolio assets, namely equities and fixed income, may help investors reduce overall portfolio volatility. As such, we believe that currencies are often viewed as an important portfolio diversification tool.

Participants in the retail FX market are geographically dispersed. Retail FX brokers are seeking to expand their presence in projected high growth regional areas, such as Asia and the Middle East.

Systems and Services

Nukkleus provides its services in the following service categories. Under the General Services Agreement which is presently in process of being cancelled, Nukkleus has historically provided software technology and technical support to TCM in each of these service categories.

Category One: Introducing Broker Dealer Network

Nukkleus has historically provided clients an introducing broker (IB) network spread across China, Japan and the Middle East. The Company initially provided TCM with FX services. The agreement with TCM is presently in the process of being cancelled and, as a result, the Company is now seeking other clients to offer the services it provides to the FX industry. Our approach to the retail FX market is to focus on the development of relationships with independent local referring brokers who provide a recurring source of new customers. These referring brokers do not have an exclusive relationship with us, but are offered a competitive commission structure to deliver new customers to us. Our account managers primarily focus on building relationships with referring brokers, and master referring brokers (who refer other referring brokers to us), as well as with customers referred to us by referring brokers and acquired by us directly. We believe this approach, in contrast to retail FX brokers that focus solely or primarily on acquiring accounts through online marketing campaigns, has allowed us to provide services which allows entities to achieve strong levels of net trading income, and accounts, as well as lower up front customer acquisition costs and greater customer satisfaction. Referring brokers are typically either individuals who are current or former FX traders or individuals or companies active in the area of FX trading and education and investment services advisory business.

The Introducing Broker Interface: The Introducing Broker (“IB”) interface empowers our partners to view real time account data such as payouts, customer activity and reports.

Nukkleus is seeking to deliver the software product in this category to clients in the FX industry and does not monitor or measure the number of end users of the software.

Category Two: Bridging Software to the XWare (MT4 and MT5) platforms

*XWare 4 Bridge:*The MT4 Bridge is a middleware product that connects the XWare server with the XW Trading System. The Bridge passes both market data (i.e. quotes) and trading data (i.e. trade executions) between MT4 and the XW servers. By seamlessly integrating the two, the Bridge allows for real time trade execution, reduced slippage, and access to liquidity through the XW Liquidity Matrix.

Category Three: Forex Market Liquidity Access

*XWare Liquidity Matrix:*Dealers need access to as much liquidity as possible. Forexware’s liquidity aggregation technology supports API from most of the world’s largest liquidity providers, including banks, hedge funds and electronic communication networks (ECN). Our aggregation technology integrates seamlessly with customers’ existing infrastructure, providing the power to optimize trading processes, manage accounts and revealing the most relevant information to make effective trading decisions.

*The XWare Liquidity Bridge:*With the XWare liquidity bridge, brokers can automatically submit trade requests to the liquidity provider of choice and receive confirmation prior to sending an “accept” or “reject” message to the broker’s client. The XWare Liquidity Bridge was developed to improve liquidity processes, risk and availability by providing a direct line of communication to vital backend processes. Brokers can create unique price streams from aggregated liquidity with sophisticated control over liquidity sources, pricing models, execution models and risk management.

*XWare Live Rate Feed:*The XWare Live Rate Feed provides customers with streaming liquidity and prices in real time that integrate seamlessly with existing trading platforms. The Quote Aggregator identifies outliers and bad ticks to ensure our clients capture accurate and reliable pricing to protect them from price fluctuations and anomalies that frequently occur with Liquidity Providers.

Category Four: Turnkey Risk Management Support Software, and Risk Management Team

Nukkleus, by arrangement pursuant to our services agreement with FXDIRECT, fields a risk management team of seasoned professionals who constantly monitor liquidity flows and manage the hedging of transactions on a 24 / 7 basis, with three eight-hour shifts. This service is offered to third-party clients who request this service.

*XWare Risk Monitor:*The XWare Risk Manager is an essential component of the Forexware’s turnkey Xware suite, offered to new brokers entering the market, or existing brokers looking to replace their existing systems. Our management is of the belief that the Risk Manager software suite is the most vigorous and advanced risk management system available in the market today providing customers the power to customize risk management settings at their fingertips.

Category Five: Front End Software Retail Trading Platforms and Customer Application Systems

*XWare Trader:*is a proprietary platform for retail and institutional traders. It offers fully customizable layouts including colors, layout manager and undocking of windows. Advanced charting, one-click trading, and automated execution for algo traders are all embedded in a modern interface.

*Swordfish Trader:*Swordfish Trader is a proprietary platform for retail and institutional traders. It offers fully customizable layouts including colors, layout manager, and undocking of windows. Advanced charting, one-click trading, and automated execution for algo traders are all embedded in a modern interface. Swordfish further offers risk management monitors unique from other trading platforms. Nukkleus has also acquired the right to apply for a US federal copyright in relation to Swordfish Trader.

Category Six: Back Office Systems Management:

*XWare Apptracker:*Xware Apptracker is a data workflow system designed to automate and manage new customer applications and account information in a centralized location. Xware App Tracker provides customers easy to use tools that save time, organize and track customer application information and manage new customer contract details for fast and efficient review and approval.

*Reporting System:*This complex and proprietary application generates customized reports, with numerous data queries pre-loaded to run in addition to those a client to choose to customize. It is designed to pull any number of named, defined data fields from both local databases and those from third party-run databases.

In regard to its Digital RFQ business, Nukkleus currently can quantify and monitor certain metrics and indicators on a weekly, monthly, quarterly, semi-annual, and annual basis, including the following. For a discussion of the KPIs Nukkleus currently tracks.

The Company has agreed, in its good faith, that it is open to negotiate the sale of its wholly owned subsidiary, Digital RFQ Ltd. (“Digital”) to Digital’s current management team led by Jamie Khurshid subject to approval of the Company’s Board of Directors and shareholders and subject to compliance with all federal, state and Nasdaq rules.

Intellectual Property

We have several registered trademarks and service marks (US and foreign) and software assets. We also intend to pursue additional foreign trademark registrations. Nukkleus has been assigned various registrations and trademarks relating to:

Nukkleus has further acquired Patent Number 8799142 in relation to Forexware Patent. This relates to a method of displaying information associated with currency exchange transactions in real time.

In addition to the revenues from our General Services Agreement with TCM, Nukkleus received revenue from financial services through Digital RFQ.

Corporate Office

Nukkleus’s principal executive office is 525 Washington Blvd, 14 th Floor, Jersey City, New Jersey 07310. Our main telephone number is 212-791-4663.

Employees

We have the equivalent to approximately 12 employees, of which 11 employees work for Digital RFQ and one employee works for Nukkleus. Through our relationship with FXDIRECT, we have access to approximately 30 account managers who speak over 10 different languages, and FXDIRECT has contractual relationships with hundreds of referring brokers in at least twenty different countries. It also has contracts with various independent contractors and consultants to fulfill additional needs, including investor relations, exploration, development, permitting, and other administrative functions, and may staff further with employees as it expands activities and brings new projects online.