Earnings Call Transcript - NNE Q3 2025

Operator, Operator

Greetings, and welcome to the NANO Nuclear Energy third fiscal quarter financial results and business update call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Matt Barry, Director of Investor Relations and Capital Markets. You may begin.

Matthew James Barry, Director of Investor Relations and Capital Markets

Thank you, and good afternoon, everyone. Joining me on the call today are Jay Yu, NANO Nuclear's Founder, Chairman, and President; our CEO, James Walker; and CFO, Jaisun Garcha. Please note that today's earnings release and slide presentation to accompany today's webcast are available on our website. Before moving ahead, I'll quickly address forward-looking statements made on this call. Listeners should note that today's presentation will contain certain forward-looking statements about NANO Nuclear's future plans and potential milestones made under the safe harbor provisions of applicable federal securities laws. Words such as aim, may, could, should, seek, expects, intends, plans, believes, anticipates, hopes, estimates, goal, and variations of such words and similar expressions are intended to identify forward-looking statements. These statements are based upon many assumptions and estimates made by management, all of which are inherently subject to significant risks, uncertainties, and contingencies, many of which are beyond NANO's control. Many of these are shown on the slide you see here. You are cautioned that actual results, including, without limitation, the results of our microreactor development activities, strategies and other operational plans, including the results of our regulatory acquisition and research and development initiatives, as well as future potential results of operations or operating metrics and other matters about the future, which may be discussed, may differ materially and adversely from those expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors and other disclosures contained in NANO's filings with the Securities and Exchange Commission, including the risk factors and other disclosures in our most recent Form 10-K and other filings with the SEC, including today's Form 10-Q filing, all of which are or will be accessible on the Investor Relations section of NANO's website as well as the SEC's website. You're encouraged to review these disclosures carefully except to the extent required by law. NANO assumes no obligation to update statements as circumstances change. With that, I'll turn the call over to Jay Yu, NANO's Founder, Chairman, and President.

Jiang Yu, Founder, Chairman, and President

Thank you, Matt, and thank you to everyone joining the call today. NANO Nuclear continues to benefit from the global nuclear renaissance driven by several long-term sustainable growth trends and significant regulatory tailwinds. These include: growth in AI data centers; industrial reshoring and the broader electrification driving a significant need for clean and reliable power; energy sustainability; energy independence; and climate mandates requiring reliable zero-emissions energy; unprecedented bipartisan legislative and policy support; and, most importantly, broad recognition that advanced reactors will be crucial to future clean energy infrastructure. As we look at our competitive position in the advanced nuclear space, our January 2025 acquisition of KRONOS MMR microreactor has accelerated our trajectory, positioning us as a North American leader in the race to microreactor commercialization. Our team continued to build upon a strong start to 2025 by delivering another solid quarter of progress, highlighted by several strategic milestones in advancing our KRONOS MMR towards construction, demonstration, licensing, and deployment in the U.S. and Canada. We're confident that KRONOS' proven high-temperature gas reactor design, significant R&D investment by its previous owner, and numerous patents validate its high technology readiness level, differentiating it from our competition. We also continue to advance our commercially focused, vertically integrated strategy to de-risk microreactor development and deployment and enhance our competitive position. Before founding the company, our team spoke to key industry stakeholders at the DOE, NRC, and national labs as well as leaders in various companies with exposure to the nuclear fuel cycle. Our conversations confirmed our belief that next-generation fuel will be a significant bottleneck for advanced reactors, and having access to advanced fuel will be critical to successful development and deployment of our microreactors. We've since entered collaborations, expanded our internal capabilities to address key bottlenecks, including enrichment and transportation of next-generation fuel, and continue to evaluate attractive opportunities to further de-risk our fuel supply chain. Equally as important, more institutional investors are recognizing our long-term value proposition. As previously announced in late May, we closed on a private placement for net proceeds of $99 million, including primary participation for significant institutional investors. This private placement not only strengthens our balance sheet and expands institutional ownership but, more importantly, enables us to accelerate development of our KRONOS MMR and take advantage of attractive opportunities to de-risk our nuclear fuel supply chain and deliver shareholder value. With a stronger balance sheet and growing support from long-term oriented institutional investors, we believe we're well positioned to capitalize on the broader macro trends driving demand for advanced nuclear solutions. I would like to now provide more color around the secular tailwinds we are experiencing that shape our original vision, trends that are now increasingly recognized across both the industry and investment community. Nuclear energy has emerged as the leading alternative clean source of baseload power, well positioned to deliver both reliable and zero-carbon emission output. Our team identified early on that achieving net-zero targets in many countries will be virtually impossible without significant expansion of nuclear capabilities. Fossil fuels such as natural gas, oil, and coal are capable of providing consistent baseload power. They can at times be constrained by geography due to the need for continuous refueling and are unable to meet the standards set by global climate mandates and decarbonization goals. Renewable sources like wind, solar, and hydroelectric will play an important role in the global energy transition. However, each faces its own limitations. Their effectiveness is often geographically dependent on favorable natural conditions. And in the case of wind and solar, they struggle to provide stable and around-the-clock baseload power. More and more countries and companies are placing a premium on baseload-capable energy sources which offer a high capacity factor and are not dependent on local climate or geography, leaving nuclear energy as a clear winner. As a result, there is a growing global commitment amongst countries, leading institutions, and the world's largest energy users to triple nuclear capacity by 2050, solidifying growth in nuclear energy as a secular trend for the coming decades. Several of the world's largest tech leaders are rapidly expanding their nuclear energy capabilities to address their growing needs for scalability, clean and reliable baseload energy to enable projected growth in their AI data centers. Over the last 12 months, several major tech leaders announced substantial partnerships or plans to secure nuclear energy to support their data center projects, highlighting the importance of nuclear energy, empowering the future centered around AI. The combination of expected growth in AI data centers, the reshoring of industrial supply chains, and the electrification of various industries is prompting analysts to raise their projections for U.S. electricity consumption through 2030. Goldman Sachs projected demand for power to rise at approximately 2.4% CAGR between 2022 to 2030, a significant increase over the prior decade where U.S. power demand was essentially flat. Notably, more than a third of the expected increase through 2030 was projected to be driven by data centers, estimated to comprise 8% of the U.S. power by 2030 versus 3% in 2022. The growing reliance on nuclear by major tech companies has reinforced the strategic importance, not just for clean energy, but for national competitiveness. Politicians at the highest level of the U.S. government have consistently agreed on the strategic importance of nuclear power in addressing national security, energy independence, climate goals, and global leadership in AI. This has resulted in nuclear energy emerging as one of the few topics that has garnered broad bipartisan support in Washington and notable achievements in today's polarizing political environment. Over the past 7 years, nuclear energy has benefited from consistent legislative and executive support across both Republican and Democratic administrations, reflecting durable bipartisan recognition of its strategic importance. Legislative and executive actions have focused on streamlining regulatory processes, reducing licensing timelines and costs, establishing incentives for nuclear development and deployment, supporting the build-out of domestic fuel supply chain and accelerating commercialization of advanced reactors through targeted initiatives. In May 2025, the Trump administration issued 4 executive orders representing an unprecedented level of federal support for nuclear energy, signaling a new phase of regulatory momentum. In addition to several actions aimed at accelerating the development and deployment of nuclear energy in the U.S. with a notable emphasis on the development of advanced nuclear technologies, the directives set a national objective to quadruple nuclear energy capacity by 2050. In combination with the strong foundation of bipartisan legislative and prior regulatory actions over the past several years, we believe these policy shifts are highly supportive of our strategy, and it will help accelerate development and deployment of our microreactors and nuclear fuel capabilities. As we look ahead, we have never been more excited about the future of our company and more confident we have the right team to execute our vision. Before turning over the call to our CEO, I'd like to provide some insight into NANO Nuclear's corporate culture, which we believe is helping to drive our efforts and accomplishments. For years, nuclear energy has been dominated by big energy players, big bureaucracy, and strong academic focus. We are now working to change this. We are now pursuing a commercially focused, vertically integrated strategy in a nimble and entrepreneurial way. We went public early to capture the industry's tailwinds. We saw and tapped into the public market enthusiasm rather than relying on government grants. We're relentlessly driven, and we are laser-focused on progressing our programs with a view to ultimately commercialize following regulatory licensing. Our team members who have joined us from government and academic roles find our approach motivating and very exciting. We believe this culture differentiates us from many of our competitors and is a competitive advantage in the microreactor race. With that, I'll hand the call over to James Walker, our CEO, who will provide an update on our business and additional color around our strategy.

James Walker, CEO

Thank you, Jay. NANO delivered another strong quarter of progress, highlighted by several strategic milestones and collaborations during the quarter and in recent weeks. First, we advanced our patented KRONOS MMR Energy System toward construction, demonstration, and licensing with the U.S. Nuclear Regulatory Commission or NRC and deployment of our first reactor prototype at the University of Illinois Urbana-Champaign or UIUC. In April, we executed a strategic collaboration agreement to build out our first KRONOS MMR at the UIUC. We also received an approved fuel qualification methodology topical report from the U.S. NRC for the project. Following the quarter, we executed a master services agreement with AECOM, a global infrastructure leader, to support site-specific engineering, environmental analysis, and regulatory planning at UIUC. Each of these achievements is essential steps ahead of our planned construction permit application to the U.S. NRC. At the same time, we remain focused on resuming 4 more licensing activities of the KRONOS MMR in Canada, where KRONOS is the first microreactor to have completed a Phase 1 review with the Canadian Nuclear Safety Commission. We're optimistic the progress we're making in licensing KRONOS with the NRC will streamline and support parallel advancement through Canada's licensing process. With the potential to be the first commercial microreactor in the U.S. to successfully file for a construction permit application and the first licensed microreactor in Canada intended for commercial deployment, we believe KRONOS positions us as the leader in the North American microreactor race. Secondly, in terms of new collaborations, NANO signed an MOU with UrAmerica, a private exploration company in Argentina, to explore strategic development across Argentina's uranium fuel supply chain. We believe this collaboration supports our strategies to secure the necessary capabilities to de-risk and decentralize our fuel supply chain. Third, as Jay mentioned, our successful capital raise during the quarter bolstered our balance sheet, positioned us well to accelerate development of KRONOS, and take advantage of attractive opportunities to enhance our vertically integrated business model. In line with this plan, we acquired a 2.75-acre land and building package in Oak Brook, Illinois, to provide engineering, R&D, and manufacturing support for KRONOS' development. Notably, we expect the facility to support our collaboration with UIUC while also serving as a regional demonstration facility. Equally as important, we're actively pursuing commercial negotiations with several customers focused on AI data center projects while also evaluating exciting early-stage opportunities for remote projects or communities in the U.S., Canada, and abroad that value reliable, clean nuclear energy. And fourth, recent personnel additions, product development wins, and broadening institutional ownership validate our strong competitive position. We continue to attract and appoint high-caliber talent to key leadership roles, highlighted by the appointment of former Texas Governor and U.S. Secretary of Energy, Rick Perry, as Chairman of our Executive Advisory Board; Seth Berl, PhD and Global Chief Technologist at Intel, to our Board of Directors; Vice Admiral Charles Leidig, a distinguished 39-year Navy veteran, as Chairman of our Executive Advisory Board for naval nuclear initiatives. And we also hired over a dozen engineers to support the advancement of KRONOS through our licensing process. And we're planning on hiring up to 60 engineers, researchers, and support staff at our new Illinois facility. In July, we successfully advanced our proprietary annular linear induction pump or ALIP technology with its assembly on a test loop and integration to a controllable test setup for variable design validation of our Westchester, New York demonstration facility. We believe our ALIP technology can enable the development of next-generation reactors utilizing molten salts or liquid metals, and advancing ALIP through the SBIR Phase 3 process has allowed us to mature the system extensively, potentially opening the door to commercial sales activities later this year or in 2026. In addition, our recent inclusion in Solactive's Global Uranium & Nuclear Components Total Return Index and by extension, the Global X Uranium ETF marks another exciting achievement. Notably, NANO's inclusion increases our exposure to institutions seeking broad participation in the growth of the uranium and the nuclear industries while also validating our growing significance in the advanced nuclear industry. In combination, each of these key personnel additions and wins underscore the strength of our competitive positioning and long-term strategic vision. And at the center of that vision are our microreactors, which we believe are the future of nuclear energy. Traditional large-scale reactors have been a key source of clean, reliable baseload power over the past several decades that have come with significant cost and siting challenges. They require substantial on-site construction, take many years to permit, and don't benefit from modularity or factory-based manufacturing in a large scale, often leading to significant cost overruns. In addition, due to their size and safety risk profile, they're unable to co-locate with customer infrastructure, scale effectively or truly benefit from economies of scale. While smaller modular reactors or SMRs offer real promise and potential to address several of these challenges, several open questions remain, including how much of the design can truly be modular, how far mass manufacturing can be applied, and whether they can scale cost-effectively or be deployed directly at customer sites with reduced safety zones. This is where our portfolio of microreactors led by KRONOS offer compelling solutions. They're designed to be fully modular, assembled easily on-site, and can scale alongside demand. They're also designed to benefit from economies of scale driven by mass manufacturing and factory fabrication. And our designs beyond KRONOS have another substantial advantage of being portable. Microreactors significantly reduce safety risk by utilizing advanced fuels and substantially lower fuel volume and also feature inherently safe designs, which open the door to co-location at customer sites, whether that's a data center, a mining site, or a military base. Most importantly, they enable clean, reliable baseload power without complex on-site construction, lengthy permitting timelines, and provide the option to serve remote projects off the grid. One of the strongest examples of how we're turning that vision into reality is our lead project, the KRONOS MMR, a stationary modular system that combines a proven high-temperature gas reactor design with high technological readiness to meet the growing demand for colocated resilient and scalable power. KRONOS is differentiated from the competition with its high technological readiness rooted in a proven high-temperature gas reactor design that's been successfully used around the world in both research and commercial settings. We believe this global track record gives us a meaningful advantage, particularly when it comes to licensing where substantial historical data and familiarity with the reactor type could support a more streamlined regulatory path in both the U.S. and Canada. KRONOS is currently advancing in both the U.S. and Canada's licensing process. In the U.S., our team is targeting submission of a construction permit application to the NRC for our first prototype at the UIUC toward the end of this year or early 2026 and could be the first commercial microreactor in the U.S. to reach this critical milestone. In Canada, KRONOS is the first microreactor to formally enter the Canadian Nuclear Safety Commission's licensing process, validating the maturity of its technology, and we're working to resume 4 more licensing activities that were previously underway. Prior to our acquisition of KRONOS and other technology out of bankruptcy for less than $10 million in January 2025, we believe more than $120 million was raised for the development of KRONOS by its previous owner. Moreover, KRONOS is supported by numerous issued, pending, or published patents. We believe each of these factors de-risk our development timeline and position us well to accelerate construction, licensing, and deployment. With 15 megawatts electric and 45 megawatts thermal output, KRONOS is ideally suited for high-growth markets like data centers, where many units can be stacked, colocated, and deployed modularly, allowing us to scale efficiently while offering customers the benefit of energy resilience and the ability to site power directly where needed. Notably, KRONOS is as large as a reactor can be while still remaining fully modular and has been specifically designed to fully leverage the benefits of economies of scale through modularity, mass production, factory fabrication, and large-scale deployment. Ensuring the successful deployment of KRONOS requires more than just reactor design, which is why we have made it a strategic priority to focus on securing key stages of the nuclear fuel supply chain and this is why vertical integration is a key pillar of our approach. Our team recognized from a very early stage that the largest bottleneck to deploying advanced reactors isn't the reactor technology itself, but rather the fuel. As a result, we made the decision to gain exposure to areas like enrichment through our collaboration with a related party called LIS Technologies or LIST. LIST owns the only U.S. origin and patented laser enrichment technology, which we believe offers several major advantages over traditional methods such as gas diffusion, centrifuges, and traditional laser enrichment solutions. LIST was also selected as one of the six prime contractors under the U.S. DOE's LEU acquisition program, which provides a total of $3.4 billion across all such contractors over a 10-year period to strengthen domestic nuclear fuel supply chains to support the deployment of advanced nuclear technologies. LIST's selection underscores recognition that its patented laser-focused CRISLA technology could play a critical role in securing the nation's future fuel supply for next-generation reactors, and we are pleased to contribute to this important initiative as a key subcontractor. We view nuclear fuel transportation as another critical gap in the domestic supply chain, particularly for advanced nuclear fuels, where commercial scale capabilities don't exist today. To address this, we've hired former UPS executives to lead our subsidiary, Advanced Fuel Transportation Inc. And we've exclusively licensed a patented high-capacity HALEU fuel transportation basket developed by 3 major U.S. national nuclear labs and previously funded by the DOE. To support advancement of this technology, NANO has hired GNS, a leader in nuclear waste management, to manufacture and optimize HALEU transportation system solutions based on our fuel transportation basket design. As we look ahead, we're actively exploring additional opportunities, whether through collaborations or strategic M&A, to further expand our vertically integrated capabilities. Expanding our exposure to additional stages of the nuclear fuel cycle will not only enhance our potential commercial capabilities and strengthen our internal supply chain, but it also aligns closely with where the U.S. government and the DOE are focused in terms of funding, infrastructure, and national energy security. We expect progress in these areas to offer potential for near-term revenue generation in parallel with our core microreactor development. We also believe this integrated approach gives us leverage to capture upside across multiple verticals as the broader advanced reactor market grows. Before turning the call over to our CFO to provide our financial highlights for the quarter, I'll quickly reiterate why we view NANO Nuclear Energy as a compelling investment opportunity. Our flagship reactor, the KRONOS MMR, has a high technological readiness backed by a well-known reactor design with decades of operational precedent and is emerging as a leader in the North American microreactor race. With data center growth and climate mandates accelerating demand for clean, reliable baseload power, the opportunity for advanced nuclear has never been stronger. We've taken a vertically integrated approach to de-risk reactor development, strengthen our competitive position, and provide additional exposure to growth in the advanced reactor industry. This includes a strategic related party collaboration that could provide access to a differentiated, low-cost enrichment solution for advanced fuels. We're also benefiting from historic bipartisan support in Washington with growing federal support for nuclear innovation and fuel infrastructure, as well as growing support globally, which we believe should benefit advancement of our microreactors. We have world-class technical and regulatory teams with a nimble commercial strategy who are laser-focused on execution. And with a strong balance sheet and a clear access to capital, we believe we're well positioned to execute, not just in deploying reactors, but in capturing value across the broader nuclear energy sector. I'll now turn the call over to our CFO, Jaisun Garcha, to discuss our Q3 financial highlights.

Jaisun Garcha, CFO

Thank you, James. I'll now provide a summary of our year-to-date financial performance. The takeaway message here is simple. We have a strong balance sheet and are prudently deploying investor capital to achieve key corporate milestones and drive value for our shareholders. Year-to-date loss from operations was $35.8 million, an increase of approximately $28 million from the comparable 9-month prior year period. The increase was primarily driven by a $19 million rise in G&A expenses, reflecting higher equity-based compensation, professional fees, and personnel costs to support advancements of KRONOS and our other microreactors. R&D expenses also increased by $8.5 million due to higher development costs, equity-based compensation, and personnel costs for design and analysis of our microreactors. Year-to-date net loss totaled $32 million, up approximately $24 million from the prior year period, reflecting the increase in R&D and G&A expenses just mentioned, partially offset by an approximately $4 million increase in other income from higher interest income on a larger cash balance. Net cash used in operating activities increased by approximately $9 million to $14.7 million, driven by a higher net loss, partially offset by an approximate $17 million increase in equity-based compensation. Turning to the balance sheet, our overall cash position substantially increased during the period, ending the period with cash and cash equivalents of $210.2 million, an approximate $92 million increase from the end of our second fiscal quarter. The sequential increase was primarily driven by $99 million in proceeds following a May 2025 private placement. We expect these proceeds to enable further advancement of KRONOS development and licensing in the U.S. and Canada while also supporting strategic M&A activities to enhance our vertical integration and provide initial revenue generation. As we continue to position NANO for long-term growth, we also took steps during the quarter to further strengthen our financial flexibility. Following our recent shelf eligibility, we filed our first 3-year universal shelf registration statement, which included an at-the-market or ATM facility. It's important to note that as of today, our registration is still not effective, and we are unable to comment on the timing in which it may become effective. Consistent with the rationale of our shelf, we established the ATM when it was procedurally efficient to do so while recognizing that the ATM program, which has a relatively low cost of equity capital, is designed to support any near-term capital needs while also supporting our long-term growth. These actions align with our disciplined capital management strategy to expedite our long-term growth and provide the flexibility to take advantage of favorable market conditions if they arise. As institutional interest in our company continues to grow, we believe it's important to have flexible and efficient capital tools in place to support advancement of KRONOS. We remain focused on expanding our institutional shareholder base, and we're encouraged by the increasing interest we're seeing from long-term oriented institutional investors who recognize the strategic value of our business.

Operator, Operator

Our first question comes from the line of Jeff Grampp with Northland Capital Markets.

Jeffrey Scott Grampp, Analyst

Wanted to start first on the progress in Canada to license there. I think the press release referenced some potential, I guess, streamlining or parallel advancement through Canada's licensing process. So I was just hoping to get a little more color on what you guys view kind of re-engagement there looking like and any potential time lines you'd like to put out.

James Walker, CEO

I'm glad to address this question. Canada is currently a significant focus for us. With the acquisition of the MMR reactor system, it has already completed Phase 1 in Canada. Our goal was to resume the project from where it was left off. This process has involved taking the holding entity of the project out of bankruptcy, and we're nearly finished with that legal procedure. The advantage of this is that it allows us to proceed directly to Phase 2 of the licensing process with the Canadian Nuclear Safety Commission. There are three main components to the Canadian project: rescuing the entity from bankruptcy to access Phase 2, collaborating with the Canadian Nuclear Laboratory, which has provided us land at Chalk River, and developing all necessary legal documentation, plans, and financial assurances to prove we can execute this project. We are currently in the final stages of contractual negotiations with CNL for that land. Additionally, the Canadian government has a strong interest in this project, particularly given there are communities that rely on remote diesel for energy. This advanced reactor system could potentially serve around 300 such areas. The government is exploring the involvement of their Strategic Innovation Fund in our project investment. This collaboration would involve the Canadian Nuclear Laboratory and the government working through the regulatory process, which has been initiated and has made substantial progress. We are coordinating all these elements, but the details have not been made public yet as negotiations are ongoing. This reflects the collaborative efforts we have been undertaking with CNL, the Canadian government, SIF, and CNSC over the past few months.

Jiang Yu, Founder, Chairman, and President

I would like to add yes. This is Jay. Jeff, thank you for that question. This also positions NANO Nuclear as a North American provider of advanced nuclear technologies once we reestablish Canada. This also separates us from other U.S. reactor companies and microreactor companies.

Jeffrey Scott Grampp, Analyst

Yes. That's really helpful. Shifting gears for my follow-up. On ALIP, you guys mentioned some potential commercial sales opportunities there that you might be pursuing. Can you just educate me on what the next steps to commercialize that and what kind of market opportunities those might entail?

James Walker, CEO

One of the main goals of the ALIP project right now is to finish the SBIR Phase 3 process with the Department of Energy. This will allow us to become the go-to contractor for this type of technology for the government. Once we complete that process and validate the technology's commercialization, we're engaged in discussions with potential customers who are interested in purchasing it. This technology could be beneficial for both fission and fusion applications. For fission, advanced reactors that use heavy coolants, like lead or molten salt, require a sophisticated pump system to circulate these materials. By using ALIP to electromagneticize the coolant, we can reduce the reactor's size and complexity, which can lead to significant cost savings, especially for larger small modular reactors. We are already in early talks with major SMR manufacturers regarding the integration of this technology. On the fusion side, there is also a need to transport heavy materials around the reactor. The requirements for a pump system in this scenario are quite specific. An electromagnetic system could greatly enhance control and reduce risks compared to a traditional pump system. If a conventional system were to fail, it could render the reactor unusable. Additionally, we are exploring other potential applications, including discussions with space agencies about how ALIP could help reduce the size of components sent into space. However, these discussions may take longer to develop due to the unpredictable nature of the space industry.

Operator, Operator

Our next question comes from the line of Sameer Joshi from H.C. Wainwright.

Sameer S. Joshi, Analyst

I just had a question on cash usage during the remainder of 2025 and into 2026. I know I think James mentioned the expansion and hiring around 60 personnel, engineering and operating personnel. How should we see the operating expenses ramp from here over the next 18 months? Part of the reason is, I think, most of the GAAP numbers that you show are garbled by the stock-based compensation and other non-cash items. So just if you can give an idea of cash expenses over the next 18 months, that would be good.

Jaisun Garcha, CFO

Yes. It's Jaisun on the call for this question. Thanks for the question. We mentioned in our MD&A that we estimate our cash burn going into the next 12 months to be around $40 million. So it will be largely, as James mentioned in his description, hiring more staff and personnel as well as the other support costs to keep the operations going. We will also be updating that as things change. But currently, that's what our current projection is over the next 12 months.

Sameer S. Joshi, Analyst

Okay. And then you're targeting the construction permitting application for KRONOS, I think, later this year or early 2026. And given the executive order of 18 months for any reactor of any type, do you expect like a mid-July 2027 kind of time frame to receive this approval? Or is this something different?

James Walker, CEO

It's a very good question. We aim to complete the construction permit application by the end of this year, and at the latest, it will be done in the first quarter of next year. Permits generally have an 18-month executive order mandate that applies to all license applications, whether they are for the formal licensing process for a reactor, site license, or construction permit. Each of these requires different levels of work from the NRC and has varying timelines. Typically, we expect a construction permit application of this type to take about 12 months for approval. Once we receive that approval, we can begin the initial steps necessary for the reactor system's construction, such as groundwork and concrete pouring. As an example, only one other company, Kairos, is advancing on the construction strategy, and their novel reactor design was approved in about 16 months. I anticipate ours will take slightly less time or be similar. While the 18-month time frame seems to pertain more to licensing for new reactor systems than to construction permits, I hope that our timeline will be shorter. We are cautiously estimating between 12 and 18 months, with 18 months being the maximum reach, but I don't expect it will take that long.

Sameer S. Joshi, Analyst

Understood. And then just your strategy of vertical integration. You already have the transportation part. You are also participating in the fabric fuel side of things. So when you are saying that you will be targeting further integration, are we talking about additional fuel processing, enrichment, fabrication technologies, or supply chain partners? What should we think about in terms of your targets?

James Walker, CEO

So it's a good question, actually. So when we were building up the company and we were advancing the reactor systems, we obviously realized that the big bottleneck to success for any reactor system is the fuel. And usually, that focuses everybody up on the enrichment part because it's the major component of the fuel cycle, to get it to that point, and certainly, the biggest cost component of actually taking natural-grade uranium ore and turning it into a usable product that can go into a reactor system. But there are many other components that go along with it too. So mining, milling, and conversion are all upstream of the enrichment process. Now NANO has obviously invested very heavily into LIS Technologies. It is a related party transaction. It is a separate company for legal purposes and proliferation reasons. But we're pretty confident of that technology. Everything before that, NANO is actually examining how to involve itself to de-risk that upstream part of the supply chain. And that will include things like conversion, mining, and milling. And the executive team at the moment is looking at all the different aspects of how NANO can be involved in that. So again, there's been no public disclosures yet because nothing has been solidified by contractual arrangements yet. But I would expect in the future that NANO's vertically integrated strategy with regard to fuel supply chain will inevitably lead to greater involvement in that upstream process, so mining, milling, and conversion, everything that precedes the enrichment. I think everything downstream of enrichment, deconversion is certainly possible. I don't believe we have any anticipation about being involved in the fabrication of TRISO fuel because we already have a partner that is substantially progressed in that department that we're relatively happy with. But I think it would be very much in NANO's interest to de-risk itself with particularly involvement in things like conversion, where even if the enrichment issues get solved in the U.S., that will be a major significant bottleneck to even enrichment technology succeeding because it needs feed grade. Whether it's centrifuge or lasers, it needs UF6 feed.

Operator, Operator

Our final question comes from the line of Subash Chandra with Benchmark.

Subhasish Chandra, Analyst

Just curious, did you apply for the DOE advanced reactor pilot program? And can we interpret anything about Radiant's acceptance into that program as another type of high-temperature gas, TRISO, HALEU comp? It seems like that program aims to deploy these technologies quickly. Would that be a net benefit to KRONOS?

James Walker, CEO

We did not apply for the position in the DOE because we already have a licensed site where we are going to build a reactor. If we were to apply and succeed in the DOE program, it would lead to significantly higher costs for constructing a new reactor on DOE land, and it wouldn’t even result in a commercial reactor. After thoroughly reviewing the opportunity, we found only negatives for us: increased costs, no commercial advantage, potential delays, and diversion of personnel resources. Additionally, we assessed that the timelines involved wouldn’t allow any reactor system to be critical by next year, and even if that were possible, it wouldn't provide a commercial pathway. It appears that many larger companies also refrained from submitting applications for similar reasons. Regarding Radiant, I believe they have valuable technology; not only is their reactor a high-temperature gas reactor with TRISO, but they also have a competent team and a proven technology similar to ours. However, we don’t see Radiant as competition since their reactor system is significantly smaller, designed for different applications compared to our focus on larger systems like industrial operations, AI centers, and data centers. Their high-temperature gas reactor is a 1-megawatt system, which is much smaller and geared toward more remote locations than we target. The question remains why they decided to apply at all, considering that sourcing materials like nuclear-grade graphite and fabricating a reactor pressure vessel would already extend beyond the DOE's mandated timeline to criticality. We'll have to wait and see how things unfold, but there were certainly no advantages for us in applying for this program.

Jiang Yu, Founder, Chairman, and President

Yes. And I would like to add also, we're very supportive of these types of programs by the Department of Energy, but this wasn't a right fit for us. It wasn't a lack of interest. It was just didn't fit our business model because we currently have a site already. We're looking to commercialize rapidly. So that was the main reason. And we wish all these reactors luck, and we're looking out for them and we're cheering for them because in the end, if they win, NANO wins.

Subhasish Chandra, Analyst

Yes, that sounds great. I have a question regarding the graphite that James mentioned. Is it related to your containment strategy? Would it involve graphite, beryllium, or something similar? Also, how do you plan to handle the supply chain for that?

James Walker, CEO

This is a great question. The technology is well-developed and at a high level of readiness, so we don't have concerns regarding its functionality. High-temperature gas reactors have been operational for many years. The challenge lies mainly with the fuel, and other crucial components essential for the reactor's success, such as nuclear-grade graphite and the reactor pressure vessel. For nuclear-grade graphite, there are only three global suppliers that meet the required standards, with two located in China and one in Japan. While the capacity to produce sufficient graphite exists, we recognize the need to establish a core manufacturing facility in the U.S. to manufacture most reactor components. However, certain specialized components, like graphite, should be outsourced. We are already negotiating with suppliers for these specialized parts. Beyond graphite, the reactor pressure vessel also requires precise fabrication by experienced steel manufacturers due to its complexity. I believe both of these components should be handled by experts. NANO intends to build a facility for the majority of components that require less specialized expertise. However, if we were to develop graphite production capabilities elsewhere, it would likely take 7 to 10 years to reach the necessary manufacturing standards for reactor use. This is often overlooked, but it is a critical factor in any reactor production strategy.

Subhasish Chandra, Analyst

Yes. And James, to that point, so nuclear-grade graphite, which I imagine the suppliers have been going for the light water reactors for the most part. But does that need to be modified? And does that change the supply chain for high-temp gas reactor?

James Walker, CEO

I wouldn't say it completely alters the supply chain because the graphite for reactor systems has already been sourced from the three vendors we mentioned, and they have previously tailored their products. Essentially, we are utilizing the same supply chain, but the major difference will be that the necessary capacity of those manufacturing operations will need to increase to meet the demands. For high-temperature gas reactors, there is already a trend toward consolidating technologies in the reactor space. For instance, high-temperature gas reactors using TRISO technology, such as those from X-energy, our company, and Radiant, are all based on proven technology that we know will work. Similarly, systems like NuScale and light water reactors also use technology to manage the complexities of reactors. More experimental reactor designs might struggle because their supply chains are not as developed. This could significantly influence which companies can enter the market or respond to demand most effectively, impacting the success of certain reactor companies.

Operator, Operator

Thank you. This now concludes our question-and-answer session. I would like to turn the floor back over to Jay Yu for closing comments.

Jiang Yu, Founder, Chairman, and President

I want to thank everyone again for joining us on today's call. The interest and enthusiasm of our investors and market participants is a big part of NANO's story. And we're very grateful for the support we've received. We look forward to providing additional updates to you in the future. Have a great evening.

Operator, Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.