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Nukkleus Inc. (NASDAQ:NUKK), a management consulting services company with a current market capitalization of $2.92 million and an InvestingPro Financial Health Score of 0.66 (labeled as "Weak"), entered into a significant agreement on Sunday, December 15, 2024, to acquire a majority stake in Star 26 Capital Inc. ("Star"), a company specializing in defense acquisitions.
This transaction will give Nukkleus a controlling 51% interest in Star, which holds a 95% share of B. Rimon Agencies Ltd., an Israeli supplier of generators for defense applications, including "iron dome" launchers.
The terms of the deal involve Nukkleus paying $15 million, with at least $5 million in cash and the remainder through a promissory note due in 12 months. Additionally, Nukkleus will issue 2,385,170 shares of its common stock to Star and a five-year warrant for Star to purchase up to 6,907,859 shares at $1.50 per share.
According to InvestingPro data, the company's current ratio of 0.06 indicates potential challenges in meeting short-term obligations, a crucial consideration for this cash-intensive acquisition. The company also has an option to acquire the remaining 49% of Star for $16,084,250, which would be paid via cash, promissory note, common stock, and additional warrants.
This strategic acquisition positions Nukkleus in the defense sector at a time when the company expects growth and transformation within the global defense market. With current gross profit margins at 4.67% and a negative EBITDA of $14.54 million for the last twelve months, this move represents a significant strategic pivot.
Nukkleus plans to integrate Star's operations with its current business and continue seeking opportunities for further expansion. For deeper insights into Nukkleus's financial health and growth prospects, InvestingPro subscribers have access to over 10 additional key metrics and analysis tools.
The agreement is subject to customary closing conditions, including regulatory approvals, third-party consents, a fairness opinion, and approval by Nukkleus shareholders as required by Nasdaq rules. If Nukkleus's stock is delisted from Nasdaq within 12 months post-closing, Star can require the company to exchange the promissory note for Nukkleus's shares in Star, canceling the option for additional equity.
Rimon, the entity under Star, operates in the sale and engineering of defense-related products, including tactical vehicles and trailers, primarily to Israeli Defense Forces and other defense and intelligence agencies.
The transaction is detailed in the Securities Purchase Agreement, which was filed with the SEC as part of the Form 8-K submission. This article is based on the information contained in that press release statement.
In other recent news, Nukkleus Inc. has been navigating a series of significant changes. The company recently finalized the termination of key service agreements with Triton Capital Markets Ltd. and FXDirectDealer LLC. Concurrently, Nukkleus has executed a one-for-eight reverse stock split and increased its authorized shares from 40,000,000 to 150,000,000.
The company has also issued Senior Unsecured Promissory Notes totaling $437,500 with a 12% annual interest rate to X Group Fund of Funds. In addition, Nukkleus sold 138,556 shares of common stock, raising $246,145 in gross proceeds.
However, Nukkleus is currently investigating a potential discrepancy in the number of common stock shares it is required to issue following the recent reverse stock split. The Depository Trust & Clearing Corporation suggested an additional 182,004 shares needed to be issued to account for the rounding of fractional shares, a figure Nukkleus is questioning.
Significant leadership changes have also occurred, with Menachem Shalom replacing Jamal Khurshid as CEO, and David Rokach joining the board of directors. Other board changes included the resignations of Daniel Marcus, Brian Shwieger, and Nicholas Gregory, and the appointments of Tomer Nagar and Aviya Volodarsky as independent directors.
Despite these developments, Nukkleus is grappling with potential delisting from Nasdaq due to compliance issues, including not meeting the minimum bid price and market value requirements. These are the recent developments in the company's ongoing operations.
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