Nukkleus Inc., a financial technology company with ticker NUKK, has admitted to material weakness in its internal controls over financial reporting in its recent quarterly report filed with the Securities and Exchange Commission (SEC). The company’s management has concluded that, due to its small size and limited resources, internal controls over financial reporting were not effective as of March 31, 2023.
Table of Contents
Key Weaknesses Identified
According to the SEC report, management at Nukkleus Inc. identified three key weaknesses in the company’s internal controls:
1. Insufficient design, implementation, and documentation of internal controls at the entity level and across key business and financial processes, which impacts the accuracy and timeliness of financial reporting.
2. Inadequate controls for maintaining appropriate segregation of duties in business processes.
3. Reliance on third-party service providers in the financial services segment for determining amounts related to revenue and cryptocurrency asset completeness, accuracy, and existence. The third-party service providers lack proper service organization control reports.
Plans to Address Weaknesses
In order to address these weaknesses, Nukkleus Inc. plans to enhance and improve the design of its internal controls over financial reporting. The company hopes to implement changes during its fiscal year ending September 30, 2023, by designing, implementing, and documenting internal controls at the entity level and across key business and financial processes. Additionally, Nukkleus Inc. aims to design and implement controls and appoint or hire sufficient staff to maintain appropriate segregation of duties within its business processes.
Dependence on Additional Financing
However, the remediation efforts, as outlined by the company, are largely dependent on securing additional financing to cover the costs of implementing the necessary changes. If the company is unsuccessful in obtaining these funds, the remediation efforts may be adversely affected in a material manner.
Financial Statements Still Considered Fairly Stated
Despite the recognized material weakness in internal controls, management at Nukkleus Inc. believes that the consolidated financial statements for the quarter ended March 31, 2023, are fairly stated, in all material respects, in accordance with US Generally Accepted Accounting Principles (GAAP). The company has performed additional analyses and procedures to ensure the financial statements’ reliability.
Note that we may hold securities mentioned in this article. All data is based on recent SEC filings. Even though we have implemented various manual and automatic fact-checking and data acquisition processes, some incorrect information may have slipped through (false positive). Let us know if you find any inconsistencies!