Nukkleus Inc. - Quarter Report: 2015 December (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the three months ended December 31, 2015.
OR
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o
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to .
Nukkleus Inc
(Exact name of registrant in its charter)
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Delaware
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38-3912845
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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3324 West University Ave Gainesville, FL
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32609
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(Address of principal executive offices)
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(Zip Code)
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Issuer’s telephone number: 800-604-1724
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.0001
Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
(Does not currently apply to the Registrant)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 if the Exchange Act.
| Large accelerated filter | o | Accelerated filter | o |
| Non-accelerated filter | o | Smaller reporting company | þ |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.
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Class
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Outstanding March 11, 2016
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Common Stock, $0.0001 par value per share
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166,535,100 shares
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TABLE OF CONTENTS
| PART I FINANCIAL INFORMATION | |||
| 3 | |||
| 10 | |||
| 11 | |||
| 12 | |||
| 12 | |||
| PART II OTHER INFORMATION | |||
| 13 | |||
| 13 | |||
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ITEM 2.
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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ITEM 3
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DEFAULTS UPON SENIOR SECURITIES
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ITEM 4
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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ITEM 5
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OTHER INFORMATION
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| 13 | |||
| SIGNATURES | 14 | ||
2
PART I. Financial Information
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Condensed Balance Sheets as of December 31, 2015 (Unaudited) and September 30, 2015
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4
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Condensed Statements of Operations for the three months ended December 31, 2015 and 2014 (unaudited)
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5
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Statements of Cash Flow for the three months ended December 31, 2015 and 2014 (unaudited)
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6
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Notes to Condensed Financial Statements (unaudited)
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7
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3
CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2015 (UNAUDITED) AND SEPTEMBER 30, 2015
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ASSETS
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12/31/15
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9/30/15
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CURRENT ASSETS:
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Cash or cash equivalents
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$ | - | $ | - | ||||
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TOTAL CURRENT ASSETS
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- | - | ||||||
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TOTAL ASSETS
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$ | - | $ | - | ||||
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LIABILIATIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
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Accounts payable and accrued expenses
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$ | - | $ | - | ||||
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Due to shareholder
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21,882 | 21,882 | ||||||
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Accrued taxes
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250 | 250 | ||||||
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TOTAL CURRENT LIABILITIES
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22,132 | 22,132 | ||||||
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TOTAL LIABILITIES
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22,132 | 22,132 | ||||||
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STOCKHOLDERS' (DEFICIT)
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Preferred stock, $.0001 par value, 15,000,000 shares authorized,
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none issued and outstanding
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- | - | ||||||
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Common stock, $.0001 par value, 300,000,000 shares authorized,
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166,535,100 shares issued and outstanding,
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as of December 31, 2015 and September 30, 2015
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16,654 | 16,654 | ||||||
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Additional paid-in capital
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79,547 | 79,547 | ||||||
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Retained deficit
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(118,333 | ) | (118,333 | ) | ||||
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TOTAL STOCKHOLDERS' (DEFICIT)
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(22,132 | ) | (22,132 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)
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$ | - | $ | - | ||||
The accompanying notes to condensed financial statements are an integral part of these statements.
4
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2015 AND 2014 (UNAUDITED)
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Three Months Ended
December 31,
2015
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Three Months Ended
December 31,
2014
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Revenues:
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Professional service revenues
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$ | - | $ | 25,925 | ||||
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Total Revenues
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- | 25,925 | ||||||
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Cost of revenues
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- | 125 | ||||||
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Cost of revenues from a related party
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- | 11,000 | ||||||
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Gross Profit
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- | 14,800 | ||||||
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Operating expenses:
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General and administrative
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- | 13,291 | ||||||
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General and administrative costs from a related party
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- | 4,000 | ||||||
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Total operating expenses
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- | 17,291 | ||||||
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Income (Loss) from operations
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- | (2,491 | ) | |||||
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Income (loss) before taxes
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- | (2,491 | ) | |||||
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Income tax provision
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- | - | ||||||
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Net income (loss) applicable to common shareholders
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$ | - | $ | (2,491 | ) | |||
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Net (loss) per share - basic and diluted
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$ | 0.00 | $ | (0.00 | ) | |||
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Weighted number of shares outstanding - Basic and diluted
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166,535,100 | 166,535,100 | ||||||
The accompanying notes to condensed financial statements are an integral part of these statements.
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CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2015 AND 2014 (UNAUDITED)
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Three Months Ended
December 31,
2015
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Three Months Ended
December 31,
2014
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CASH FLOWS USED IN OPERATING ACTIVITIES:
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Net (loss)
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$ | - | $ | (2,491 | ) | |||
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Change in operating assets and liabilities:
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Due from shareholder
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- | (2,500 | ) | |||||
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Accounts payable and accrued expenses
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- | 1,391 | ||||||
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Net cash used in operating activities
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- | (3,600 | ) | |||||
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NET DECREASE IN CASH
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- | (3,600 | ) | |||||
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CASH AND CASH EQUIVALENTS at beginning of period
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- | 12,904 | ||||||
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CASH AND CASH EQUIVALENTS at end of period
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$ | - | $ | 9,304 | ||||
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Supplemental disclosure of cash flow information
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Cash paid for:
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Interest
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0.00 | 0.00 | ||||||
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Income Taxes
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0.00 | 0.00 | ||||||
The accompanying notes to financial statements are an integral part of these statements.
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NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
Note 1. 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 25th, 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 25th, 2015, the new Director John Nettlefold decided to transition the company from business technology to advertising technology. To this effect, on May 22nd, 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 2nd, 2015 the state of Delaware Approved Amendment of the Articles to increase the Authorized shares of the Company to 300,000,000. On July 6th, 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 24th, 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 26th, 2015, the previous Merger Agreement was rescinded.
On July 27th, 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 27th, 2015.
On August 17th, 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.
The 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. Since inception, the Company has incurred net losses of $118,333 and has a working capital deficit of $22,132 at December 31, 2015. Our ability to continue as a going concern is dependent upon achieving sales growth, management of operating expenses and ability of the Company to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due, and upon profitable operations.
We need to either borrow funds or raise additional capital through equity or debt financings. However, we cannot be certain that such capital (from our shareholders or third parties) 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. If we are unable to raise sufficient additional capital on acceptable terms, we will have insufficient funds to operate our business or pursue our planned growth.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Organization
The accompanying financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents. The Company’s cash and cash equivalents are located in a United States bank.
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Loss per Common Share
Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the period ended September 30, 2015.
Revenue Recognition
Prior to February 13, 2015, the Company derives its revenue from the sale of general compliance and risk management consulting services (professional services revenue). The Company utilizes written contracts as the means to establish the terms and condition services are sold to customers.
Because the Company provides its applications as services, it follows the provisions of Securities and Exchange Commission Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition The Company recognizes revenue when all of the following conditions are met:
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there is persuasive evidence of an arrangement;
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the service has been provided to the customer;
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the collection of the fees is reasonably assured; and
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the amount of fees to be paid by the customer is fixed or determinable.
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The Company records revenue as services are performed. Invoicing is done at the beginning of each month for the services to be rendered that month.
Income Taxes
The Company accounts for income taxes pursuant to FASB ASC 740. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Fair Value of Financial Instruments
The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of December 31, 2015 the carrying value of accounts payable-trade and accrued liabilities approximated fair value due to the short-term nature and maturity of these instruments.
Stock-Based Compensation
Stock compensation arrangements with non-employee service providers are accounted for in accordance ASC 505-50 Equity-Based Payments to Non-Employees, using a fair value approach.
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Estimates
The financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of December 31, 2015. Actual results could differ from those estimates made by management.
3. Common Stock
The Company is authorized to issue 300,000,000 shares of common stock and 15,000,000 preferred stock, both $0.0001 par value. As of December 31, 2015 the Company had 166,535,100 common shares outstanding.
4. Income Taxes
The provision for income taxes for the three months end December 31, 2015 was as follows (assuming a 15% effective tax rate):
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Three Months Ended
March 30,
2015
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Three Months ended
March 31,
2014
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Current Tax Provision:
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Federal-State-Local
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- | - | ||||||
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Total current tax provision
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$ | - | $ | - | ||||
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Deferred Tax Provision:
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Federal
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- | - | ||||||
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Loss carry-forwards
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- | (374 | ) | |||||
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Change in valuation allowance
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- | 374 | ||||||
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Total deferred tax provision
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$ | - | $ | - | ||||
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The Company had deferred income tax asset as of December 31, 2015 as follows:
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Loss carry-forwards
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$ | 17,750 | ||||||
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Less - valuation allowance
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(17,750 | ) | ||||||
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Total net deferred tax assets
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$ | - | ||||||
The Company provided a valuation allowance equal to the deferred income tax assets for year ended December 31, 2015 because it is not presently known whether future taxable income will be sufficient to utilize the loss carry-forwards.
As of December 31, 2015, the Company had approximately $118,333 in tax loss carry-forwards that can be utilized future periods to reduce taxable income, and expire by the year 2035.
The Company did not identify any material uncertain tax positions. The Company did not recognize any interest or penalties for unrecognized tax benefits.
The federal income tax returns of the Company are subject to examination by the IRS, generally for three years after they are filed. All periods since inception are still subject to examination.
5. Related Party Loans and Transactions
Affiliated Company Transactions
On August 1, 2013, the Company has 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 24th, 2015, no amount was due to OCBSG. The Company has reflected this arrangement in the statement of operation as related party expenses. For the three months ended December 31st, 2015 and 2014, the Company has paid out $0 and $15,000, respectively. For the three months ended December 31, 2015 and 2014, $4,000 and $11,000 have been allocated to operating expenses and cost of revenue, respectively.
6. Other Matters
There are no additional matters to be disclosed.
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FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:
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1.
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our future operating results;
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2.
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our business prospects;
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3.
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any contractual arrangements and relationships with third parties;
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4.
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the dependence of our future success on the general economy;
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5.
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any possible financings; and
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6.
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the adequacy of our cash resources and working capital.
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These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of filing of this Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
The Company has decided to not pursue its original business plan and is currently in the process of evaluating new business opportunities. Our CEO is exploring such options.
Our auditor has expressed substantial doubt as to whether we will be able to continue to operate as a “going concern” due to the fact that the Company has incurred net operating losses of $118,333 from inception though September 30, 2015 and has not yet established on going source of revenues sufficient to cover its operating costs and allow it continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining the adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
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Results of Operations
Summary of Key Results
For the three months ended December 31, 2015 versus December 31, 2014
Revenues and Cost of Revenues
Total revenue for the three months ended December 31, 2015, versus December 31, 2014 were $22,132 and $25,925, respectively. Revenues are from professional services rendered. The decrease in revenue was due to loss of clients and revisions to the Company’s business plan.
Cost of revenues for the three months ended December 31, 2015 versus December 31, 2014 were, $0 and $11,125, respectively. Cost of revenue included merchant account charges of $0 and $125, respectively. The remaining amount, $0 and $11,000, respectively were related party independent contractor labor costs for the delivery of the professional services. The decrease in costs was due to loss of clients and revisions to the Company’s business plan.
Operating Expenses
Total operating expenses for the three months ended December 31, 2015 versus December 31, 2014, where $0 versus $17,291, respectively. These amounts include $0 and $4,000, respectively, in related party independent contractor costs for accounting and financial reporting. The remaining amounts were primarily third party professional fees. The decrease in costs where primarily due to revisions to the Company’s business plan.
Liquidity and Capital Resources
At December 31, 2015, we had cash of $0 and a working capital deficit of $0. Since inception, we have raised $58,350 in equity capital.
We had a total stockholders’ deficit of $22,132 and an accumulated deficit of $118,333 as of December 31, 2015.
We had $0 and ($3,600) in net cash used in operating activities for the three months ended December 31, 2015 and December 31, 2014, respectively. These include $0 and $2,491 in net losses, respectively. Cash flows used in operating activities included changes in operating assets and liabilities totaling $0 and $3,600 for the three months ended December 31, 2015 and September 30, 2014, respectively.
We had $0 and $0 of net cash provided by financing activities for the three months ended December 31, 2015 and December 31, 2014.
As of December 31, 2015, we did not have any fixed operating expenses.
Consistent with Section 144 of the Delaware General Corporation Law, it is our current policy that all transactions between us and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are approved by vote of the stockholders, or are fair to us as a corporation as of the time it is authorized, approved or ratified by the board. We will conduct an appropriate review of all related party transactions on an ongoing basis.
With respect to shares issued for services, our board of directors determines the value of the services provided and authorizes the issuance of shares based upon the fair market value of our shares.
Off-Balance Sheet Arrangements
We had no outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K
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Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company.
(a) Evaluation of Disclosure Controls and Procedures
Based on the evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Accounting Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (“SECs”) rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in the Company’s Internal Controls Over Financial Reporting
Other than described above, there have been no changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II- Other Information
We are not a party to any legal proceedings. Management is not aware of any legal proceedings proposed to be initiated against us. However, from time to time, we may become subject to claims and litigation generally associated with any business venture operating in the ordinary course.
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K
None.
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In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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NUKKLEUS INC
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Dated: March 11, 2016
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By:
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/s/ Peter Maddocks | |
| Peter Maddocks | |||
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Chief Executive Officer, Chief Accounting Officer & Chairman
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.
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Signature
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Title
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Date
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/s/ Peter Maddocks
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Chief Executive Officer, Chief Accounting Officer & Chairman
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March 11, 2016
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14