T3 Defense Inc. quarterly report, Q2 FY2023

Issuer and reporting period

Important identity note: The supplied filing is Brilliant Acquisition Corporation’s Form 10-Q for the quarter ended June 30, 2023, filed August 18, 2023. It is not a T3 Defense Inc. filing. Brilliant is a blank-check company and reported no operating business or revenue.

Brilliant’s stated purpose was to complete a business combination. It had a proposed combination with Nukkleus Inc.; the filing lists an amended and restated merger agreement dated June 23, 2023.

Key financial metrics

MetricJune 30, 2023 / periodComparison
RevenueNone; no operations commencedNone in 2022
Operating costs$123,748 for Q2; $343,326 for six months$144,590 and $613,861, respectively, in 2022
Net loss$122,363 for Q2; $342,866 for six months$35,544 and $495,826, respectively, in 2022
Cash and cash equivalents$4,597,048 on the balance sheet, including approximately $4.530 million in the Trust Account and $67,497 in operating cash$6,110,807 at December 31, 2022
Operating cash flow$(183,291) for six months$(913,769) in 2022
Financing cash flow$(1,330,468) for six months$(5,224,565) in 2022
Current liabilities$4,503,847$3,965,850 at December 31, 2022
Shareholders’ deficit$(4,446,530)$(3,919,964) at December 31, 2022

Margins are not meaningful for this pre-combination SPAC. Related-party balances included $1,165,600 due on demand and $2,863,927 of promissory notes, generally non-interest-bearing and payable upon a business combination. The company disclosed a $1,572,423 working-capital deficit excluding Trust Account funds.

Material changes versus prior comparable periods

  • Q2 net loss increased to $122,363 from $35,544, despite lower operating costs, because 2022 included $52,704 of Trust Account interest income and a $56,342 warrant fair-value gain; 2023 had no interest income and a $1,385 warrant fair-value gain.
  • Six-month net loss improved to $342,866 from $495,826, mainly reflecting lower operating costs and smaller noncash warrant fair-value gains; Trust Account interest income was nil in 2023 versus $56,652 in 2022.
  • Cash declined by $1,513,759 during the first half of 2023, primarily reflecting redemptions and operating cash use. Redeemable public shares fell to 405,475 from 564,936 at year-end.

Outlook, risks, contingencies, and unusual items

  • Management reported substantial doubt about the company’s ability to continue as a going concern, citing limited operating cash, a working-capital deficit, ongoing costs, and the need to complete a combination or obtain further support or an extension.
  • After quarter-end, shareholders approved an extension on July 20, 2023, to a deadline of up to December 23, 2023, with monthly Trust Account deposits required for further extensions. The filing reports 1,779 additional shares redeemed for $19,837 in connection with that extension.
  • Brilliant had no operating revenues and depended on sponsor or affiliate financing; such parties were not obligated to provide further working capital. Failure to complete a combination by the applicable deadline could result in liquidation and redemption of public shares; rights and warrants could expire worthless.
  • Management identified ineffective internal control over financial reporting due to a material weakness in accounting for complex financial instruments, including warrants and redeemable shares. Remediation was planned, with no assurance it would be successful.
  • The filing notes potential effects from COVID-19 and the Russia-Ukraine conflict, but says their specific impact was not determinable. It reports no legal proceedings and no off-balance-sheet financing arrangements.

Investor verification points

  • Confirm the issuer: this source is Brilliant Acquisition Corporation, not T3 Defense Inc.
  • Verify the status and terms of the Nukkleus business combination and whether it was completed or further amended.
  • Check subsequent deadline extensions, sponsor funding, redemptions, and current Trust Account and operating cash balances.
  • Review the going-concern disclosure and progress in remediating the material weakness in internal controls.
  • Reconcile related-party advances and notes, including repayment terms and any further financing commitments.