Earnings Call Transcript - NNE Q1 2026

Operator, Operator

Greetings, and welcome to the Nano Nuclear First Quarter 2026 Financial Results and Business Update Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host. Thank you, and good afternoon, everyone. Joining me on the call today are Jay Yu, Nano Nuclear's Founder, Chairman and President; James Walker, our CEO; and Jaisun Garcha, our CFO. Please note that today's press release and slide presentation to accompany this webcast are available on our website. Before moving ahead, I'll quickly address forward-looking statements made on this call. As reflected in more detail on Slide 2, today's presentation contains forward-looking statements about Nano's future that are made under the safe harbor provisions of the applicable federal securities laws. You are cautioned that actual results, including, without limitation, the results of Nano's microreactor development activities, strategies, timelines and other operational plans, may differ materially and adversely from those expressed or implied by the forward-looking statements. Important risks and other factors that could cause actual results to differ from those in our forward-looking statements are contained in our filings with the SEC, including our annual report on Form 10-K filed this past December, which you are encouraged to review. The forward-looking information provided today is accurate only as of today, and Nano disclaims any obligation to update any information provided except as required by law. With that, I'll turn the call over to Jay Yu, Nano's Founder, Chairman and President.

Jay Yu, Founder, Chairman and President

Thank you, Matt, and thank you, everyone, for joining the call today. Nano Nuclear continues to differentiate itself as a microreactor developer with a focus on vertical integration across the nuclear fuel supply chain. We are advancing our KRONOS MMR, a high technology readiness level, high-temperature gas-cooled reactor design backed by decades of operating history and meaningful prior capital investments, which we believe can significantly derisk future construction, licensing, and deployment. We expect the compact modular design of our KRONOS MMR system to support factory fabrication, repeatable construction, and learnings that can accelerate deployment timelines and drive cost efficiencies over time. Importantly, we believe the inherent safety profile of our KRONOS MMR can enable a smaller footprint, co-location, and off-grid deployment, unlocking high-value applications previously unavailable to traditional nuclear reactors. We paired this foundation with a focus on vertical integration across critical aspects of the nuclear fuel supply chain, which we believe will give us an advantage over our competitors, uniquely positioning us to expedite reactor deployment, benefit from the growing nuclear renaissance, and enhance the long-term economics of our reactors. Turning to our Q1 highlights, we continue to make meaningful progress across the business during this quarter. Our KRONOS MMR continues to advance towards licensing and construction. We completed site characterization and drilling at the University of Illinois and are incorporating those results into our planned construction permit application to the U.S. Nuclear Regulatory Commission. We also signed a formal memorandum of understanding with the Board of Trustees at the University of Illinois, detailing the next steps as we advance the project. The State of Illinois announced that we will receive $6.8 million in incentive awards, underscoring growing support for advanced nuclear technology. In Canada, we continue to make progress towards initiating formal licensing following our acquisition of Global First Power, now rebranded as True North Nuclear. And lastly, we're advancing discussions with numerous supply chain partners for key components and long lead items, as well as discussions with commercial enrichment providers and TRISO manufacturers to procure fuel for our first KRONOS MMR prototypes. On the commercial side, we signed a feasibility study agreement with BaRupOn to evaluate the potential deployment of many KRONOS MMR systems to provide up to 1 gigawatt of power for their AI data center and manufacturing campus under development. We believe this announcement highlights the potential scalability of our platform for customers with significant energy needs. Nano is also expanding its pipeline of potential data center, industrial, and military customers interested in KRONOS for a range of power needs. Nano saw a growing interest from potential strategic partners, highlighted by a recent memorandum of understanding with DS Dansuk to explore localization, manufacturing, and deployment opportunities for KRONOS reactors in South Korea and the broader Asian region. DS Dansuk is a leading South Korean industrial enterprise with extensive capabilities in energy, chemical processing, and advanced manufacturing, providing a strong platform to support commercialization of our technology. We also signed an MOU with Ameresco to explore integration of their EPC capabilities for deployments for our KRONOS MMR systems on federal and commercial sites. These announcements reflect a broader trend of interest from strategic partners, including established companies with decades of experience with large-scale energy and industrial infrastructure projects who recognize the value proposition of KRONOS. As it relates to our strategic focus of vertical integration, we also made progress towards expanding our conversion and transportation capabilities through active exploration partnerships and acquisitions. In addition, our strategic affiliate, LIS Technologies, received a key radioactive material license for Tennessee's demonstration facility while also announcing plans to invest $1.38 billion over time to build a commercial enrichment facility in Oak Ridge, Tennessee supported by its patented laser enrichment technology. Each of these announcements reinforces our progress in securing our nuclear fuel supply chain. From a financial perspective, we raised gross proceeds of $400 million through an October private placement, significantly strengthening our balance sheet and extending our operational runway. This capital raise included participation from a growing base of institutional investors, reflecting increased confidence in our strategy and execution. We were also added to the Morgan Stanley National Security index, further expanding our visibility among institutional investors. Our Q1 progress reflects our continued execution, advancing KRONOS towards licensing, construction, expanding commercial traction, working to expand our vertical integration across the nuclear fuel supply chain, and maintaining our strong financial position to support execution of our long-term strategy. We believe our progress to date differentiates technology and strategy have positioned us to be a key benefactor of the global nuclear renaissance driven by several durable secular growth trends. These include growth in demand for reliable baseload energy for AI data centers, industrial reshoring, and the broader electrification, energy, sustainability, independence, climate mandates, and unprecedented policy support. Recent developments in the U.S. power markets are bringing increased focus on each of these trends. Electricity demand tied to AI data centers and other power-intensive applications is expanding faster than the new generation and transmission can be delivered, creating rising concerns around power availability, grid expansion, and energy affordability. In January, the administration supported an emergency auction organized by the largest regional grid operator aimed at driving 15-year power purchase agreements to fund an estimated $15 billion of new generation. The same grid operator is also considering co-location generation policies to help large energy users bring supply closer to demand. While these actions are important and reflect a growing recognition of current power bottlenecks, they alone are unlikely to close the structural gap between demand growth and reliable supply. Against that backdrop, we believe assets capable of delivering high uptime, long-term cost certainty, and operational resilience independent of constrained grid infrastructure are likely to command a meaningful premium in the future. We view our KRONOS MMR as an ideal feature solution to address these challenges, which are expected to intensify in the years ahead. By offering the potential to provide behind-the-meter or off-grid baseload power directly to the end users and customers, we can meet expected demand growth without driving higher costs for everyday Americans. In short, the recent actions across the country are reinforcing the need for a global nuclear renaissance and highlighting what we have long believed: reliable, clean baseload energy is a strategic necessity, and we are building our KRONOS MMR as a next-generation solution aligned with national priorities, customer needs, and the long-term economics of the AI-driven energy future. Before handing the call over to our CEO, James, I'll briefly highlight why we view 2026 as an important year with multiple potential catalysts offering the opportunity to create shareholder value. First, we expect progress towards regulatory licensing of KRONOS in the U.S. and Canada. We are targeting submission of a construction permit application to the NRC in the coming months to formally begin the U.S. licensing process. This submission will represent a key milestone that could set the stage for initial construction at the University of Illinois in mid- to late 2020. Second, we see potential for several commercial announcements this year, reflecting growing interest in our KRONOS MMR from customers in several markets. Third, we're advancing discussions on commercial partnerships and acquisition opportunities across the nuclear fuel supply chain, providing the potential to address key bottlenecks in areas like conversion and fuel transportation. And lastly, we expect additional progress on our strategic partnerships that could accelerate and derisk large-scale deployment of our reactors while also significantly expanding commercial opportunities globally. With that, I'll turn the call over to James.

James Walker, CEO

Thank you, Jay. Let me start with a brief update on our University of Illinois prototype project, which will be essential to advancing our KRONOS MMR towards commercial deployment. As Jay mentioned, we've completed site characterization and drilling and also signed an MOU with U of I's Board of Trustees to outline the next steps for the design, construction, ownership, and operation of our KRONOS MMR system on campus. We remain on track to submit our construction permit application to the NRC in the coming months under the Part 50 licensing pathway. Our team is working on the application closely with AECOM and other partners and have begun engaging with the NRC for several months to ensure alignment on scope and technical requirements. In parallel, we're advancing discussions to procure key long lead components, including discussions around reactor pressure vessel capacity, fuel enrichment application, graphite supply, and other key components. Based on our progress to date, we aim to begin construction in mid- to late 2027 and see a realizable road map to a full-scale prototype online in or around 2030. Our team is also evaluating opportunities to accelerate this schedule and secure additional project funding to reduce overall capital costs. Turning to our growing pipeline of commercial opportunities, we believe growing commercial interest has been driven by KRONOS' compelling value proposition. KRONOS has a strong safety profile that we expect to enable co-location directly at the customer site and provides the option for off-grid power. KRONOS is also particularly well-suited for large-scale multi-unit deployments where reactors can be connected and scaled over time to match customer demand. Its modular architecture and compatibility with factory fabrication and standardized production create the opportunity to capture meaningful economies of scale as we deploy at larger scales. We believe manufacturing efficiencies combined with operational learning curves can position us to achieve highly competitive economics over time, while still delivering the 24/7 reliability and uptime that data centers, industrial customers, and other mission-critical users require. Moreover, KRONOS' patented flexible design also provides the ability to serve projects with smaller power needs, requiring only one or several units, expanding our served available market to new applications previously unavailable to nuclear energy. During the quarter, we announced a feasibility study with BaRupOn to evaluate the potential deployment of up to 1 gigawatt of power to support their AI data center and manufacturing campus. We are actively advancing the study, which includes the site evaluation, project scoping, and timeline development. Following completion, we'll aim to perform EPC cost estimates, begin early project development activities, and work towards finalizing a formal agreement to sell our reactors. Beyond BaRupOn, we continue to build a growing pipeline of prospective customers across data center, industrial, and military applications. A consistent theme across these discussions is the need for reliable baseload power, particularly solutions with favorable footprints that can be deployed behind the meter to reduce grid dependence and accelerate deployment timelines. Notably, power requirements for these projects range from below 50 megawatts up to 1 gigawatt plus. We also see meaningful opportunities in additional markets where KRONOS is well-suited, including remote communities, mining operations, and other energy-intensive applications requiring reliable off-grid solutions. As Jay highlighted, we're making progress towards several strategic partnerships we believe can further expand our commercial reach and accelerate deployment, beginning with our recent MOU with DS Dansuk. We recently announced a collaboration with DS Dansuk, a leading South Korean industrial company to accelerate deployment of our KRONOS MMR in South Korea. DS Dansuk brings deep capabilities and operational experience across energy, chemical processing, and advanced manufacturing, along with long-standing relationships across key industrial and government stakeholders in South Korea. We're confident that their credibility within the Korean industrial ecosystem can facilitate engagement with state-owned entities as well as potential Korean industrial customers seeking reliable, carbon-free baseload energy. As such, our collaboration with DS Dansuk has the potential to meaningfully derisk regulatory licensing as well as accelerate site identification and project development, facilitate introductions to prospective customers, and support localization of manufacturing and component production within South Korea. Moreover, we also see this collaboration as a pathway to strengthen project financing opportunities and establish broader strategic partnerships that can accelerate commercialization and deployment in South Korea, one of the world's most sophisticated nuclear and industrial markets, as well as the broader Asia region. Now that we've touched upon KRONOS' growing commercial momentum and value proposition, I'd now like to elaborate on KRONOS' technical differentiation. KRONOS is supported by a proven and well-understood foundation with nearly a decade of development and an estimated $120 million invested into its design by its prior owner. We believe this materially derisks the platform and provides a strong technical basis as we advance towards licensing and deployment. KRONOS' 15-megawatt electric design builds on high-temperature gas-cooled reactor technology that has been deployed and validated across multiple countries for more than 5 decades. Core elements of the design, including TRISO fuel, helium coolant, and graphite moderation are mature technologies supported by extensive real-world operating data. Beyond the reactor itself, our balance of plant strategy prioritizes commercially proven systems, including steam generators, turbines, and thermal energy storage technologies already in use in today's concentrated solar plants. We also expect to operate within conservative temperature and pressure parameters that align with successful deployments. As a result, our focus is not on developing new or experimental reactor technology, but on integrating well-understood components into a compact modular microreactor platform that can be licensed, manufactured, and deployed efficiently. With that operating history in mind, I'll now outline the key advantages of KRONOS as a prismatic high-temperature gas-cooled reactor. First, on technology readiness, prismatic high-temperature gas-cooled reactors utilize well-characterized materials with established commercial supply chains and the performance data from prior deployments provides a high TR level foundation for our design. Second, the safety profile is fundamentally different from other reactor types. TRISO fuel retains fission products at extreme temperatures. Helium is an inert coolant, and the design relies on passive heat removal. As such, we don't expect a credible meltdown pathway, and the core can shut itself down without reliance on active safety systems. Third, prismatic high-temperature gas-cooled reactors are inherently simple. There are few active systems and high-stress components, and many elements can be commercially off-the-shelf rather than safety grade. The core configuration itself has no moving parts other than the control rods, and the materials are inert and well understood, contrasting with the complexity of certain other advanced designs. Fourth, prismatic high-temperature gas reactors like KRONOS are especially well-suited for export. The use of TRISO fuel presents minimal proliferation risk compared with other fuel technologies, and a superior safety case potentially offers streamlined licensing with international regulators. Fifth, we believe this architecture is uniquely flexible. In particular, the standard design can be deployed for smaller capacities by simply decreasing operating pressure. This flexibility allows KRONOS' output to be scaled without redesign to meet the needs of a wide array of customers. And lastly, we believe these characteristics could enable lower long-term maintenance and stronger economies of scale. Inert coolant, passive safety, and advanced fuel reduce the need for complex chemistry controls and high maintenance systems. Combined with a simpler design and greater use of nonspecialized commercial components, we see opportunity for reduced operating costs, lower maintenance costs, and favorable cost scaling over time. Our focus on vertical integration stems from our belief that one of the largest constraints to deploying advanced reactors at scale isn't the reactor technology, but fuel availability. We're working to gain exposure to several critical stages of the fuel cycle, starting with enrichment through our collaboration with our affiliate, LIS Technologies. LIS owns the only U.S. origin patented laser enrichment technology, and our relationship with LIS has the potential to provide Nano with a differentiated uranium enrichment solution. In parallel, we're exploring opportunities to build our capabilities in conversion and fuel transportation through strategic commercial partnerships and acquisitions. Further progress in each of these areas can not only derisk future reactor deployments, but also positions Nano to generate revenue across the nuclear fuel cycle while remaining aligned with federal funding opportunities and national energy security needs. With that, I'll turn the call over to our CFO, Jaisun, to provide financial highlights.

Jaisun Garcha, CFO

Thank you, James. I'll now provide a summary of our Q1 financial performance. Our overall cash position increased significantly during the quarter, ending the period with cash and cash equivalents of $577.5 million. This was an approximate $374 million increase during the quarter ended December 31, driven by the net proceeds of our successful October 2025 private placement. We're confident our substantial cash balance and proven ability to raise capital at scale position us well to accelerate development and commercialization of the KRONOS MMR. Our strong financial position also provides flexibility to pursue value-accretive opportunities via M&A and strategic partnerships to enhance our vertical integration. Turning to the income statement, Q1 loss from operations was $11.6 million. The higher year-over-year loss resulted from an approximate $8 million increase in operating expenses. A substantial majority of these expenses focused on advancement of our KRONOS MMR and other strategic growth opportunities. Q1 net loss totaled $6.5 million, up approximately $3 million from the comparable prior-year period. The net loss was lower than the loss from operations as we earned approximately $5 million of interest income on our larger cash balance. Net cash used in operating activities increased by approximately $1 million from the prior-year period to $4 million. This resulted from the aforementioned increase in G&A and R&D expenses. Net cash used in investing activities totaled $3.1 million and included payments for our Oak Brook, Illinois engineering facility. Before turning the call over to the operator for Q&A, I'd like to reiterate that our strong balance sheet places us in a great position to execute our strategy of advancing our KRONOS MMR and enhancing our vertical integration. As we look ahead, we will continue to generate value for shareholders by allocating our time and capital prudently toward opportunities offering compelling return on investment. With that, I'll now turn the call over to the operator to open up the call for Q&A.

Operator, Operator

Our first question comes from Sameer Joshi with H.C. Wainwright.

Sameer Joshi, Analyst

So the one strategic alliance you announced with the DS Dansuk group, are there any sort of milestones or catalysts over the next 12 to 18 months that we should be watching out for?

James Walker, CEO

I'm happy to discuss the strategic alliance with DS Dansuk. Our collaboration is significant, as they anticipate considerable challenges related to power in their industry. When my technical team and I visited them, we discussed establishing a manufacturing facility. We've been actively working with them to analyze and break down the reactor into manageable sections, determining what can be manufactured in Korea and what cannot. Recently, we focused on identifying feasible fabrication options and sourcing materials. Companies are particularly concerned about how to mass manufacture reactors once they're built and licensed, and our attention is on that in the U.S. DS Dansuk is looking to replicate this strategy in Korea. Over the next year, we expect to further develop our plans for a centralized local core manufacturing facility to serve the South Korean market and the broader East Asia region where there is high demand. Consequently, we anticipate more collaboration with DS Dansuk, progressing our memorandum of understanding into critical planning phases. While it’s challenging to share specific timelines, you can expect to see factories being established for mass reactor manufacturing. Additionally, we’ll forge more partnerships with DS Dansuk on key strategic elements like graphite acquisition and fuel supply. Given the strong demand, we will likely release news regarding our interactions with the South Korean government, KHNP, and significant vendors. Over the years, we expect to see increasing contracts related to power purchase agreements and similar arrangements, ensuring we're prepared to begin immediate reactor manufacturing once construction and licensing are complete, achieving economies of scale for mass installations.

Sameer Joshi, Analyst

Understood. Should we discuss strategic partnerships on a global scale as well as those within the U.S. and North America? Should we also consider establishing a strong EPC partnership in this region?

James Walker, CEO

Yes. So this is a very good point, actually, because now is that we are on the verge of submitting our construction permit. We're very close to finishing that submission. Now when that goes in, that means that we can pivot the technical team to be able to refocus on what the next big stages are. And one of the big next stages is going to have to be how we mass manufacture these things. Now beyond that, there becomes a larger question. Say we have 10 sites, a dozen sites, whatever it is, that we need to surface. Now that is a lot of local construction crews that need to be coordinated. And so the EPC element to this becomes quite important because when you are doing that kind of digging that well for the reactor to go into because it means concrete, that's all stuff that Nano doesn't have to be involved and it can locally contract out. But that's still a huge amount of coordination. So you might have seen partnerships between ourselves and Ameresco and Hatch. And previously, even Hyundai, I think, we were involved in looking at how we deploy this reactor around the world. So the EPCM part of this is going to be a fairly large component of how we deploy here. So we have made a few announcements as we begin to look at how we deploy these things, how it gets coordinated. That is obviously a very separate thing from DS Dansuk where they are going to be an industrial factory partner. So they wouldn't be doing EPC. But those EPC contractors in the U.S. are going to be very important. In South Korea, they're going to be just as important as well.

Sameer Joshi, Analyst

Understood. Just one last question. Will we receive any news about the construction permit before you submit the application, and is that still on track for the first half of this year?

James Walker, CEO

It is on track for the first half of this year. It's actually going very well at the moment. We've been quite aggressive about it. So we worked the team pretty hard on this one because it is a very big differentiator. There might be a lot of reactor companies that are sprouting up because it's a hot market, but there's nobody putting in for a construction permit because it is a big difference between a paper reactor that you can make in your bedroom and an application to actually build. There's a lot of technical data that need to go into it. I wouldn't say we're going to announce anything prior to the submission specifically on this, but we will announce when it gets submitted because it is important to let the industry know where we are. And it is as well a very good indicator for the market that this is a very credible thing that's being taken forward at a time when there's not a lot of reactors being constructed. And if we stick to our timelines, we should still be the first company in the U.S. to build a full-scale licensed microreactor system.

Operator, Operator

Our next question comes from the line of Nate Pendleton with Texas Capital Bank.

Nate Pendleton, Analyst

Congrats on the continued progress. Staying on the same topic, James, in your prepared remarks, you mentioned looking at ways to accelerate the 2030 timeline for the UIUC project. Can you elaborate on the potential pathways there?

James Walker, CEO

It's a great question. Recently, there has been significant government pressure on the NRC to speed up timelines, which has resulted in the formal licensing period being reduced to 18 months and then to 12 months. This could potentially expedite our licensing process. However, our 2030 timeline doesn't take these adjustments into account because we want to be conservative. Nonetheless, safety remains the primary focus of any regulator, and even with increased resources, expediting the assessment of a reactor system is challenging. While it's possible to accelerate our timeline, we believe it's wise to stick to our original 2030 target. There has been a trend of companies setting overly ambitious timelines, many of which will likely not be met. If we can deliver earlier, that's great, but we prefer to avoid that kind of situation. We're also focused on getting construction moving as quickly as possible. We've allocated resources for full construction, but our success will depend on the industry and supply chain factors, which we are already addressing. It's important to note that many companies are concentrating on getting their first reactor built and licensed, which is indeed a critical milestone. However, once a reactor is ready for commercial sale, the challenge becomes scaling production. To achieve this, we need to concentrate on mass manufacturing capabilities and ensure that we have the right EPCM contractors in place for localization. There are two aspects to this: initiatives that could potentially advance our timeline and the need for us to proactively solve these issues now. Once the construction permit is submitted, we need to channel our efforts into figuring out what can be manufactured in the U.S. and how to centralize production. Identifying the right partners for critical components will be essential for a successful launch by 2030 or even earlier. Despite the NRC's pressures to speed things up, we are cautious about changing our timelines, drawing from our extensive experience with licensing and the complexities involved in the evaluation process.

Nate Pendleton, Analyst

Got it. That makes complete sense. And then shifting gears a little bit for my follow-up. Can you talk a bit about your decision to announce the request for information for the LOKI MMR? Specifically, what options are your team looking at for that reactor design? And have you received any notable feedback?

James Walker, CEO

We have made progress. The LOKI design can be seen as a smaller version of the KRONOS reactor. As we develop KRONOS, it directly benefits the LOKI reactor's advancement. Initially, LOKI was intended for space power applications. As we considered allocating more resources to LOKI, we noted previous interest primarily from organizations like Blue Origin and NASA, which were drawn to it due to its advanced space reactor capabilities. This consideration for increased resources coincided with a growing interest in space initiatives. We recognized that we are in a strong position to create a functional system that could provide power for various projects in zero or low gravity environments, applicable to multiple uses within the space program. However, we do not operate within the space industry; we lack space engineers and experts. Therefore, if we are to pursue this, it must be in collaboration with organizations that understand the space sector. When we issued the request for information, we sought partners already engaged in the space industry who were in need of power. Numerous companies, including some outside the space sector like launch companies, expressed interest. We received a substantial number of RFIs and recently finalized a submission with one of those inquiries. It’s important to note that we are still in the early stages as we begin to explore the space industry. While LOKI could also be utilized in terrestrial settings, we want to capitalize on the interest within the space sector. LOKI has significantly advanced compared to other space reactor types, benefitting from years of development and investment. This prompted our interest in collaborating with established players in the space industry, as we are well-versed in nuclear technology, but the space industry is somewhat unfamiliar to us.

Operator, Operator

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

Jeffrey Grampp, Analyst

James, I'm curious with respect to the supply chain and some of the work you guys are doing to engage various partners and strategics there, what's your kind of assessment on the longest lead times or most challenging parts of that puzzle that need to get solved sooner rather than later? And is there any imminent need from your standpoint to solve any of these, say, in calendar '26? Or would you say you have a little bit of time given the timing with engaging with the NRC, getting the permit, and that sort of thing?

James Walker, CEO

This is an excellent question and very relevant for anyone involved in the nuclear sector today. The advantage we have with KRONOS is that most of the components are not highly specialized. For instance, the entire adjacent plant that converts thermal output from the reactor into electricity involves basic turbine systems and other elements like heat exchangers and control rod mechanisms that can be constructed without needing NRC involvement. While these components must meet certain standards, we don't have to worry about lengthy lead times because they can be manufactured readily, or there are immediate solutions that can be implemented quickly. However, there are some components that have longer lead times. For example, our reactor and several others require nuclear-grade graphite. This is an area that warrants special attention due to the limited number of producers worldwide—three, to be exact, with two in China and one in Japan. This means there will be significant demand for this material, and it is unlikely that more sources will come online in the near future. Establishing a new mine and reaching the certification necessary for quality production can take over a decade. Therefore, while I anticipate that North America will eventually start producing nuclear-grade graphite, in the interim, we plan to purchase or possibly co-build production lines with these manufacturers. This will require some investment, and we are already in discussions about pricing and preparing for first-of-a-kind and second-of-a-kind costs. Another major concern for the U.S. is the fuel supply. The U.S. government is investing heavily to address this, with billions allocated to areas like enrichment. However, there are significant bottlenecks, particularly with conversion processes that produce feed grade. The Department of Energy is working to ensure their own uranium hexafluoride supply for enrichment purposes, allowing them to retain control over that fuel source. For companies in the uranium market, the timelines for bringing on enrichment capacity, whether through Centrus, Arano, LIS Technologies, General Matter, or Urenco, are somewhat uncertain. This is a key reason why Nano has designed a reactor that can utilize low-enriched uranium, as that fuel is currently available. In fact, most users are expected to adopt high-assay low-enriched uranium, meaning they may experience even longer waiting periods to access fuel compared to us. This is because they will need to upgrade certain facilities to handle Category 2 material, which also takes time. We are fortunate not to face these delays, and our reactor is capable of using HALEU fuel in the future as well. However, securing fuel supply warrants careful attention. Additionally, the fabrication of the TRISO fuel is important, and several leading companies are involved in this area, including Standard Nuclear in collaboration with Framatome, which has significant expertise in fuel technologies. BWXT is also highly experienced. While I don't foresee any major risks from these firms in executing these tasks, the high demand might lead to a bottleneck in fuel supply. Therefore, placing orders now is crucial, and we are currently determining the right contracts for sustainable fabrication fees. Our strategy also involves investing significantly in the fuel supply to maintain ownership and ensure that we can provide the necessary materials to fabricators to avoid disruptions. While fuel and graphite are the major long-lead items that need early attention, we have the capability in North America to construct reactor vessels, which are not as concerning. It’s primarily these longer lead items that require early engagement to mitigate risks.

Jeffrey Grampp, Analyst

Great. I really appreciate that answer, James. You kind of hit on the follow-up that I was hoping to ask on the fuel side of things. You guys have been seemingly increasingly vocal about some acquisition or strategic opportunities to put some capital to work there. So I was just hoping to get a little bit of an update on, I guess, level of maturity or intensity of conversations with different companies in that endeavor or just any kind of, I guess, update on what we could see from you guys in that avenue of the cycle.

James Walker, CEO

Sure, I need to be cautious because this information is not public yet. It's no secret that we've been very concerned about the fuel supply chain, especially as we advance towards mass manufacturing reactors. We want to ensure that the fuel supply is ready. Over the past few years, we've explored fuel supply options, including a related party transaction called LIS Technologies that we helped establish. This partnership focuses on enrichment and utilizes proven chemical technology from the '90s, which gives us confidence in its potential. However, the lead time for this is longer than our timeline for mass manufacturing reactors, so we need to partner with companies like Urenco that are currently enriching the low-enriched uranium we require for reactors. Yet, there are challenges with enrichment that lead to bottlenecks in producing uranium hexafluoride, which we recognized as early as 2023. For a time, we engaged in discussions with uranium-producing countries like Namibia about building facilities to convert yellow cake into uranium hexafluoride for export. I can share that we have identified better options and have made significant progress with national governments concerning the acquisition of some facilities. While I can't provide many specifics right now, I expect to announce some substantial developments in this area later this year as we finalize discussions and acquisitions.

Operator, Operator

Our next question comes from the line of Sherif Elmaghrabi with BTIG.

Sherif Elmaghrabi, Analyst

I missed a little bit of your response on LEU versus HALEU fuel, but I thought it was pretty interesting. So a couple more on that. From a regulatory point of view, are we talking about a separate regulatory process at NRC or CNSC to use one versus the other? Or is it kind of one approval to run at any enrichment level?

James Walker, CEO

It's a good question because once we get the reactor licensed, we will almost certainly have it licensed to demonstrate that it can operate with HALEU fuel. We are well-positioned to do this due to the wide operating parameters of our reactors. For example, when operating at 600 degrees Celsius, the melting temperature is 1,800. This significant margin makes the safety case we present to the NRC for higher enriched fuel relatively straightforward. Not many companies have this advantageous position. When they are licensing their reactors, they typically do so directly at the HALEU level, whereas our safety parameters allow us to do it simultaneously. The main challenge with HALEU is not about feasibility; we have been enriching fuel to HEU levels for decades. The issue in the U.S. is the lack of a commercial Category 2 site. While BWXT has a Category 1 site, it is primarily focused on military applications, which can drive up costs. The NRC needs to upgrade sites to Category 2 and fuel facilities to handle HALEU fuel while addressing the associated proliferation concerns. These concerns diminish once the fuel is fabricated, but the NRC will still need to process the enrichment of fuel. We aim to leverage HALEU fuel, but having the option to license the reactor for immediate deployment with low-enriched uranium is crucial. Once HALEU becomes available, we want to seamlessly switch it out without further licensing delays, which is a key aspect of our strategy.

Sherif Elmaghrabi, Analyst

Yes, that's interesting. It sounds like it's not as binary as for other operators. So just one more on the University of Illinois. You guys signed that MOU kind of lengthening your relationship. So do they retain a commercial stake when you look to commercialize your design down the road?

James Walker, CEO

No. So they will be the owners and operators of the first-of-a-kind reactor system. And they will supply a huge amount of labor and resources into this project to make sure the first-of-a-kind reactor is built. But beyond that, we own and operate the design of this reactor, and the commercial venture will be strictly Nano's. Now the University of Illinois, the big benefit to them is obviously a reactor system that provides them clean energy for their campus system. And also, they have a big nuclear engineering department that they all benefit from being involved in this. So it's obviously a big draw if you're training nuclear engineers to say, we're building this next-generation Gen 4 reactor system. So they get immediate benefits from this first-of-a-kind. But beyond this, once we have a commercial venture, that will be a strictly Nano endeavor.

Operator, Operator

Our next question comes from the line of Subhash Chandra with StoneX.

Subhasish Chandra, Analyst

A couple of, I guess, NRC questions. So first, the licensing, so you got on the reactor. To what degree is the balance of plant in that process? And as you sort of address these various use cases, does that again go through the NRC? So just sort of confused there on where that distinction is between the reactor and balance of plant.

James Walker, CEO

No, it's actually a very good question because, ironically, most of the KRONOS MMR system is not a nuclear system. For example, even though your reactor vessel must be nuclear qualified to a certain level to house the reactor itself, it can still be manufactured in a facility that does not require oversight from the NRC. If you're fabricating that reactor vessel, that facility does not need to be inspected. However, the component must meet specific standards. There are nuances even with parts that are crucial for reactor deployment. The NRC mainly focuses on safety systems and how safe a reactor is. Their assessment is relevant only when it is a nuclear device. Regarding the balance of plants, you could consider the entire adjacent plant, including the secondary cooling loop that stores power essentially functioning like a battery, which allows quick ramp-up and ramp-down. This is a non-nuclear heatsink device and falls outside NRC jurisdiction. The adjacent plant with turbine systems converting heat to electricity would have similar construction for both gas and nuclear operations, and again, this is outside of the NRC's purview. As you get closer to the reactor, the distinctions become less clear. For instance, the citadel where the reactor sits can be built by local contractors and includes concrete and steel work. The standards must be met, and you need to demonstrate compliance. However, the construction itself is not as critical as the reactor's operation. The regulation Part 52 subpart F allows that once the reactor is licensed by the NRC, like KRONOS is expected to be by 2030, all subsequent reactors can be licensed for deployment with less regulatory involvement, resulting in significant cost savings. There are some complexities because you still must provide the NRC with necessary information for inspections. You'll need to conduct geotechnical drilling to ensure the ground meets NRC criteria, and there may be inspections of mass-produced cores for quality assurance. But if you meet all the aimed criteria, you could deploy many such reactors across the country without additional regulatory involvement. Most of the system will be produced in a centralized manufacturing facility, handling components like reactor protection and control mechanisms, helium service systems, mold and salt loops, instrumentation, electrical systems, and operator training, which mainly fall under mechanical engineering. Most of the reactor components can adhere to ISO standards instead of NQA1 nuclear-grade standards. While there are details to navigate, it becomes significantly easier after the first reactor is licensed because you then have a template and standards to follow. Once you meet those, the need for further regulatory engagement decreases notably.

Subhasish Chandra, Analyst

Yes. Thank you. Regarding the AI question, initially, AI was focused on accessing a vast amount of documents to streamline processes and reduce repetition. However, recently there has been discussion about implementing digital twins for simulations. Do you think this could have a significant impact on the licensing process, especially considering its length? Please go ahead.

James Walker, CEO

No, I was going to say that is my actual big hope because I've been involved in licensing before, and it is an enormously complicated thing. I'm not trying to undermine Vogtle, but for example, Vogtle is being built very competently. However, if the regulator suddenly questions a component of the reactor that was installed two years ago and is now buried in concrete, how do we know it's safe? Did it pass inspection before it was encased in concrete? If we don’t have that information, we may need to excavate it, leading to delays and additional costs, which is why Vogtle is so expensive. Ultimately, that scenario reflects human error—someone may have missed the qualification of that component or it could have been installed without realizing it needed qualification. My hope is that an AI system could quickly identify what requires qualification and reduce human error significantly. The licensing process is incredibly complicated—it would take a warehouse filled with A4 sheets of paper to hold all the licensing documentation, representing millions of documents. Even with a near-perfect accuracy rate, thousands of errors can still occur due to the sheer scale of the work involved. Therefore, I'm hopeful AI can greatly decrease the risk of oversight. A computer that understands the licensing process and has access to recent data could quickly pinpoint priorities and necessary actions at various stages. This could represent a significant advancement in nuclear licensing, reducing time and errors associated with overlooked components. It would benefit the entire industry, and I believe this potential will materialize. My hope for AI is not just about reviewing our submissions but about identifying what needs to be done, what has been overlooked, and what might be missed. This seems very plausible, and if realized, it could simplify our work and ultimately reduce reactor costs in the long term.

Operator, Operator

There are no further questions at this time. I would like to turn the floor back over to Jay Yu for any closing remarks.

Jay 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 are important to us, and we're very grateful for your support. We look forward to providing additional updates in the future. Have a great evening.

Operator, Operator

Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.