US Nuclear Corp 10-Q for FY2023 Q3
US Nuclear Corp. (UCLE)
About this 10-Q
US Nuclear Corp filed this 10-Q on November 20, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $593.5K
- down 3.9% from $617.43K a year earlier
- Net loss
- $760.06K
- compared with a net loss of $655.82K a year earlier
- Diluted EPS
- -$0.02
- compared with -$0.02 a year earlier
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Commission file number:
(Exact name of registrant as specified in its charter)
| State or other jurisdiction of | (I.R.S. Employer | |
| Incorporation or organization | Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller reporting company | ||
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
The number of shares of the Registrant’s common stock outstanding
as of November 15, 2023, was
TABLE OF CONTENTS
| PART I | ||||
| Item 1. | Financial Statements (Unaudited) | 1 | ||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 22 | ||
| Item 4. | Controls and Procedures | 22 | ||
| PART II | ||||
| Item 1. | Legal Proceedings | 23 | ||
| Item 1A. | Risk Factors | 23 | ||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23 | ||
| Item 3. | Defaults Upon Senior Securities | 24 | ||
| Item 4. | Mine Safety Disclosures | 24 | ||
| Item 5. | Other Information | 24 | ||
| Item 6. | Exhibits | 25 | ||
| Signatures | 26 |
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Note receivable | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property and equipment, net | ||||||||
| Investments | ||||||||
| Acquisition deposit | ||||||||
| Goodwill | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Accrued liabilities | ||||||||
| Accrued compensation - officers | ||||||||
| Customer deposit | ||||||||
| Notes payable | ||||||||
| Convertible debt, net of debt discount | ||||||||
| Note payable to shareholder | ||||||||
| Line of credit | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENICES | ||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||
| Common stock, $ | ||||||||
| Common shares to be issued | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Selling, general and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Equity loss in investment | ||||||||
| Loss on deconsolidation | ||||||||
| Amortization of debt discount | ( | ) | ( | ) | ||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Deemed dividend for down-round provision in warrants | ||||||||
| Net loss attributed to common stockholders | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Selling, general and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Equity loss in investment | ( | ) | ||||||
| Loss on deconsolidation | ( | ) | ||||||
| Amortization of debt discount | ( | ) | ( | ) | ||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Deemed dividend for down-round provision in warrants | ( | ) | ( | ) | ||||
| Net loss attributed to common stockholders | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
3
US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(unaudited)
| Common | Additional | Total | ||||||||||||||||||||||
| Common Stock | Stock | Paid In | Accumulated | Shareholders’ | ||||||||||||||||||||
| Shares | Amount | Payable | Capital | Deficit | Equity | |||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Issuance of common stock for services | ||||||||||||||||||||||||
| Issuance of common stock for debt and interest | ||||||||||||||||||||||||
| Deemed dividend for down round provision in warrants | ( | ) | ||||||||||||||||||||||
| Common shares to be issued for services | ( | ) | ||||||||||||||||||||||
| Additional BCF discount for down round provision on notes | ||||||||||||||||||||||||
| Investment in Averox | ||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Issuance of common stock for services | ||||||||||||||||||||||||
| Cashless exercise of warrants | ( | ) | ||||||||||||||||||||||
| Additional BCF discount for down round provision on notes | ||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Issuance of common stock for services | ||||||||||||||||||||||||
| Additional BCF discount for down round provision on notes | ||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Issuance of common stock for services | - | |||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Issuance of common stock for loan incentive | ||||||||||||||||||||||||
| Issuance of common stock for services | - | |||||||||||||||||||||||
| Convertible debt, net of debt discounts | ||||||||||||||||||||||||
| Deemed dividend for down round provision in warrants | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Issuance of common stock for services | ||||||||||||||||||||||||
| Common stock issued for debt and interest | ||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
US NUCLEAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Nine Months Ended | ||||||||
| March | ||||||||
| 2023 | 2022 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Issuance of common stock for services | ||||||||
| Debt discount amortization | ||||||||
| Financing costs | ||||||||
| Loss on deconsolidation | ||||||||
| Equity loss in investment | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Note receivable | ||||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid | ( | ) | ||||||
| Accounts payable | ||||||||
| Accounts payable - related parties | ||||||||
| Accrued liabilities | ||||||||
| Accrued compensation - officers | ||||||||
| Customer deposits | ( | ) | ( | ) | ||||
| Operating lease liability | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Cash paid for investment | ( | ) | ||||||
| Note receivable | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Net borrowings (repayments) under lines of credit | ||||||||
| Net proceeds from issuance of note payable shareholder | ||||||||
| Proceeds from convertible note payable | ||||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH | ||||||||
| Beginning of period | $ | $ | ||||||
| End of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information | ||||||||
| Taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| Non-cash disclosures: | ||||||||
| Common stock issued for conversion of debt and interest | $ | $ | ||||||
| Original issue debt discount | $ | $ | ||||||
| Deemed dividend on down round provision | $ | $ | ||||||
| Additional beneficial conversion feature on down round provision | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
US NUCLEAR CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2023
(Unaudited)
Note 1 – Organization
Organization and Line of Business
US Nuclear Corp., formerly known as APEX 3, Inc., (the “Company” or “US Nuclear”) was incorporated under the laws of the State of Delaware on February 14, 2012.
On May 31, 2016, the Company entered into an Asset Purchase Agreement with Electronic Control Concepts (“ECC”) whereby the Company purchased certain tangible and intangible assets of ECC.
The Company is engaged in developing, manufacturing, and selling radiation detection and measuring equipment. The Company markets and sells its products to consumers throughout the world.
Note 2 – Basis Presentation
Interim financial statements
The unaudited interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosure is adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2022, and notes thereto included in the Company’s annual report on Form 10-K filed on May 12, 2023. The Company follows the same accounting policies in the preparation of interim reports. Results of operations for the interim period are not indicative of annual results.
Going Concern
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. The Company recorded a net loss of $
The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through some private placement offerings of debt and equity securities. These plans, if successful, will mitigate the factors which raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries which include Optron, Overhoff Technology Corporation (“Overhoff”), and its wholly owned subsidiary, Electronic Control Concepts (“ECC”), have been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.
6
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. There were no cash equivalents as of September 30, 2023, and December 31, 2022.
Concentration of credit risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents. The Company places its cash with high quality financial institutions and at times may exceed the FDIC insurance limit. The Company has not and does not anticipate incurring any losses related to this credit risk.
Accounts Receivable
The Company maintains reserves for potential credit
losses for accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer
concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy
of these reserves. Reserves are recorded based on the Company’s historical collection history. Allowance for doubtful accounts as
of September 30, 2023, and December 31, 2022, were $
Inventories
Inventories are valued at the lower of cost (determined primarily by the average cost method) or net realizable value. Management compares the cost of inventories with the net realizable value and allowance is made for writing down their inventories to net realizable value, if lower. As of September 30, 2023, and December 31, 2022, there was no allowance for slow moving or obsolete inventory. The Company periodically assessed its inventory for slow moving and/or obsolete items. If any are identified an appropriate allowance for those items is made and/or the items are deemed to be impaired.
Property and Equipment
Property and Equipment are stated at cost. Expenditures
for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When equipment is
retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain
or loss is included in operations.
| Furniture and fixtures | |
| Leasehold improvement | |
| Equipment | |
| Computers and software |
Long-Lived Assets
The Company applies the provisions of Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at September 30, 2023 and December 31, 2022, the Company believes there was no impairment of its long-lived assets.
7
Goodwill
Goodwill represents the excess of purchase price over the underlying net assets of businesses acquired. The entire goodwill balance in the accompanying financial statements resulted from the Company’s acquisition of Overhoff Technology Corporation in 2006. The Company complies with ASC 350, Goodwill and Other Indefinite Lived Intangible Assets, requiring that a test for impairment be performed at least annually. As of December 31, 2022, the Company performed the required impairment analysis which resulted in no impairment adjustments. Although the Company experienced a significant decline in revenue due to the effects of COVID-19, management expects that it is more likely than not that its revenue and cost of goods sold will be more in-line with pre-COVID-19 levels in upcoming periods. Significant estimates used in the goodwill impairment analysis may change in the upcoming year if revenues do not rebound and the cost of materials continues to increase.
Derivative Financial Instruments
The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of September 30, 2023, and December 31, 2022, there are no derivative liabilities associated with our convertible notes payable.
Investments
The Company accounts for investments in equity
securities without a readily determinable fair value at cost, minus impairment. If the Company identifies observable price changes in
orderly transactions for the identical or a similar investment of the same issuer, the Company measures the equity security at fair value
as of the date that the observable transaction occurred (“the measurement alternative”) in accordance with ASC 321. The Company
accounts for investments for which it owns
Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash, accounts receivable, accounts payable, accrued liabilities, customer deposits, and line of credit, the carrying amounts approximate their fair values due to their short maturities. In addition, the Company has a note payable to a shareholder that the carrying amount also approximates fair value.
Revenue Recognition
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. As sales are and have been primarily from the sale of products to customers, and the Company has no significant post-delivery obligations, this new standard did not result in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.
Revenues from product sales are recognized under Topic 606 in a manner that reasonably reflects the delivery of its products to customers in return for expected consideration and includes the following elements:
| ● | executed contracts with the Company’s customers that it believes are legally enforceable; |
| ● | identification of performance obligations in the respective contract; |
| ● | determination of the transaction price for each performance obligation in the respective contract; |
| ● | allocation the transaction price to each performance obligation; and |
| ● | recognition of revenue only when the Company satisfies each performance obligation. |
8
These five elements, as applied to each of the Company’s revenue category, is summarized below:
| ● | Product sales - revenue is recognized when the Company performs its obligations under the contracts it has with its customers to deliver products at an agreed upon price and it is generally when the control of the product has been transferred to the customer. |
Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as customer deposits.
Sales returns and allowances was $
See Notes 12 and 13 for disclosures of revenue disaggregated by geographical area and product line.
Customer Deposits
Customer deposits represent cash paid to the Company by customers before the product has been completed and shipped.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as
a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than
Stock-Based Compensation
The Company records stock-based compensation in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation.” FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.
Basic and Diluted Earnings Per Share
Earnings per share is calculated in accordance
with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of
common shares outstanding. Diluted EPS assumes that all dilutive convertible shares and stock warrants were converted or exercised. Dilution
is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average
market price during the period. As of September 30, 2023, and December 31, 2022, there were -
Segment Reporting
FASB ASC Topic 280, Segment Reporting,
requires use of the “management approach” model for segment reporting. The management approach model is based on the way a
company’s management organizes segments within the company for making operating decisions and assessing performance. The Company
determined it has
9
Related Parties
The Company accounts for related party transactions in accordance with ASC 850, Related Party Disclosures. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Reclassifications
Certain prior period amounts were reclassified to conform to the manner of presentation in the current period. These reclassifications had no effect on the net loss or stockholders’ equity.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 was issued to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope. The new standard represents significant changes to accounting for credit losses. Full lifetime expected credit losses will be recognized upon initial recognition of an asset in scope. The current incurred loss impairment model that recognizes losses when a probable threshold is met will be replaced with the expected credit loss impairment method without recognition threshold. The expected credit losses estimate will be based upon historical information, current conditions, and reasonable and supportable forecasts. This ASU as amended by ASU 2019-10, is effective for fiscal years beginning after December 15, 2022. The Company has determined that this ASU does not have a material effect on the Company’s consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contracts in the entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.
10
Note 3 – Inventories
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Raw materials | $ | $ | ||||||
| Work in Progress | ||||||||
| Finished goods | ||||||||
| Total inventories | $ | $ | ||||||
At September 30, 2023 and December 31, 2022, the inventory reserve
was $
Note 4 – Property and Equipment
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Furniture and fixtures | $ | $ | ||||||
| Leasehold Improvements | ||||||||
| Equipment | ||||||||
| Computers and software | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense for the nine months ended
September 30, 2023, and 2022 was $
Note 5 – Investments
MIFTEC
On August 3, 2018, the Company closed an agreement
by and among, MIFTEC Laboratories, Inc. (“MIFTEC”), a licensee of Magneto-Inertial Fusion Technologies, Inc., (“MIFTI”),
and the Company. MIFTEC is a licensee of MIFTI radionuclide technology. MIFTEC will engage the Company to manufacture equipment pursuant
to MIFTEC’s specifications and designs and have the Company as a sales representative for the manufactured equipment. The Company
will be the exclusive manufacturer and supplier to MIFTEC of equipment in North America and Asia. In addition, the Company received a
11
MIFTI
In April 2019,
Grapheton
On February 5, 2020, the Company entered into a Stock Purchase Agreement (“SPA”) with Grapheton, Inc., a California corporation (“Grapheton”). The transaction was closed on March 12, 2020. Grapheton is a start-up company that focuses on building energy storage devices, known as supercapacitors, from a new material system. The technology utilized by Grapheton has been proven to provide a compelling advantage in microelectrode arrays with superior electrical and electrochemical properties.
Pursuant to the terms of the SPA, the Corporation
will acquire a total of
In connection with the SPA, during the second
quarter of 2021 the Company received an additional
An additional “true up” issuance of the Company’s common stock to Grapheton may be made on the second anniversary of the closing of the SPA, based on the valuation of the Company’s common stock on that date by a third-party valuator.
The Company currently owns
Averox
On March 3, 2023, the Company divested itself
of its wholly owned subsidiary, Cali From Above, through a Membership Interest Purchase Agreement with the Company’s President and
Chief Executive Officer, Robert Goldstein. Consideration received by the Company was
12
Note 6 – Notes Payable
In connection with the acquisition of assets from
ECC, the Company issued a note payable to the owner of ECC. The note accrued interest at
On December 26, 2020, a line of credit held by
the company had matured, and based on the terms of the line of credit agreement was converted to a note payable upon demand. The obligation
accrues interest at the rate of $
On May 5, 2022, the Company received a loan in
connection with the issuance of stock warrants in the amount of $
On October
10, 2022, the Company received a loan in connection with the issuance of stock warrants in the amount of $
The total
debt discount amortization recorded on the Company’s notes for the nine months ended September 30, 2023, was $
| Years ended December 31, | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| $ | ||||
Note 7 – Note Payable to Shareholder
Robert Goldstein, the CEO and majority shareholder,
has loaned funds to the Company from time to time to cover general operating expenses. These loans are evidenced by unsecured, non-interest-bearing
notes, payable upon demand. During the nine months ended September 30, 2023, the Company’s majority shareholder loaned an additional
$
Note 8 – Line of Credit
As of September 30, 2023, the Company had four
lines of credit with a maximum borrowing amount of $
Note 9 – Leases
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate which is based on the interest rate of similar debt outstanding.
13
The Company leases its current facilities from
Gold Team Inc., a company owned by the Company’s CEO, which owns both the Canoga Park, CA and Milford, Ohio locations. The leases
expired on April 30, 2023, and the Company exercised its renewal option for an additional 12 months. The new lease is not more than 12
months; therefore, the disclosures under ASC 842 are not required. Future minimum lease payments under this agreement for the twelve months
ending December 31, 2022, is $
The lease expense for the nine months ended September
30, 2023, and 2022 was $
Note 10 - Commitments and Contingencies
From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no known or potential matters that would have a material effect on the Company’s financial position or results of operations.
Note 11 – Shareholders’ Equity
Common Stock
During the nine months ended September 30, 2023, the Company issued:
| ● |
| ● |
| ● |
| ● |
During the nine months ended September 30, 2022, the Company issued:
| ● |
| ● |
| ● |
Warrants
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Warrants | Exercise | Contractual | Intrinsic | |||||||||||||
| Outstanding | Price | Life | Value | |||||||||||||
| Outstanding, December 31, 2022 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Forfeited | ||||||||||||||||
| Exercised | $ | |||||||||||||||
| Outstanding, September 30, 2023 | $ | $ | ||||||||||||||
| Exercisable, September 30, 2023 | $ | $ | ||||||||||||||
The above
warrants contain a down-round provision that requires the exercise price to be adjusted if the Company sells shares of common stock below
the current exercise price. During the nine months ended September 30, 2023, the Company
issued shares of common stock for $
| X = Y(A-B) | ||||
| A | where: | X= | the number of warrant shares to be issued | ( |
| Y= | the number of warrant shares the holder elects to purchase | ( | ||
| A= | the Market Price | ($ | ||
| B= | Exercise Price | ($ |
14
Note 12 – Segment Reporting
ASC Topic 280, “Segment Reporting,”
requires use of the “management approach” model for segment reporting. The management approach model is based on the way a
company’s management organizes segments within the company for making operating decisions and assessing performance. The Company
has
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Sales | ||||||||||||||||
| Optron | $ | $ | $ | $ | ||||||||||||
| Overhoff | ||||||||||||||||
| Corporate | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Gross profit | ||||||||||||||||
| Optron | $ | $ | $ | $ | ||||||||||||
| Overhoff | ||||||||||||||||
| Corporate | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Income (loss) from operations | ||||||||||||||||
| Optron | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Overhoff | ( | ) | ( | ) | ||||||||||||
| Corporate | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Interest Expenses | ||||||||||||||||
| Optron | $ | $ | $ | $ | ||||||||||||
| Overhoff | ||||||||||||||||
| Corporate | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Net income (loss) | ||||||||||||||||
| Optron | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Overhoff | ( | ) | ( | ) | ||||||||||||
| Corporate | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
15
As of 2023 | As of December 31, 2022 | |||||||
| Total Assets | ||||||||
| Optron | $ | $ | ||||||
| Overhoff | ||||||||
| Corporate | ||||||||
| $ | $ | |||||||
| Goodwill | ||||||||
| Optron | $ | $ | ||||||
| Overhoff | ||||||||
| Corporate | ||||||||
| $ | $ | |||||||
Note 13 - Geographical Sales
Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Geographical sales | ||||||||
| North America | $ | $ | ||||||
| Asia | ||||||||
| Other | ||||||||
| $ | $ | |||||||
Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Geographical sales | ||||||||
| North America | $ | $ | ||||||
| Asia | ||||||||
| Other | ||||||||
| $ | $ | |||||||
Note 14 – Related Party Transactions
The Company leases its current facilities from
Gold Team Inc., a company owned by the Company’s CEO, which owns both the Canoga Park, CA and Milford, Ohio locations. Rent expense
for the nine months ended September 30, 2023, and 2022 was $
In addition, as of September 30, 2023, and December
31, 2022, the Company had accrued compensation payable to its majority shareholder of $
Also see Note 7.
16
Note 15 – Deconsolidation of Subsidiary
On March 3, 2023, the Company divested itself
of its wholly owned subsidiary, Cali From Above, through a Membership Interest Purchase Agreement with the Company’s President and
Chief Executive Officer, Robert Goldstein. Consideration received by the Company was
Upon deconsolidation, the Company recorded a loss
of $
Note 16 – Concentrations
Two customers accounted for
No vendors accounted for more than
Note 17 – Subsequent Events
Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were available to be issued and has determined that no material subsequent events exist other than the following:
On October 15, 2023, the Company issued
On October 16, 2023, the Company entered into
a note payable with a third party for $
On October 25, 2023, the Company issued
On October 27, 2023, the Company issued
On November 8, 2023, the Company amended its convertible
promissory notes originally entered into on May 5, 2022, and October 10, 2022, by extending the maturity dates of both notes to May 5,
2024. In connection and for consideration thereof, the Company issued a common stock purchase warrant for the purchase of
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand US Nuclear Corp, our operations and our present business environment. MD&A is provided as a supplement to—and should be read in conjunction with—our consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q. The audited financial statements for our fiscal year ended December 31, 2022, filed with the Securities Exchange Commission on Form 10-K on May 12, 2023, should be read in conjunction with the discussion below. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these unaudited financial statements.
We were incorporated in Delaware on February 14, 2012, and on March 2, 2012, we filed a registration statement on Form 10 to register with the U.S. Securities and Exchange Commission as a public company. We were originally organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation.
Since our acquisition of Overhoff Technology in 2006, we have had discussions with other companies in our industry for an acquisition. While we targeted Overhoff due to its unique position in the tritium market, we had not commenced an acquisition since our Overhoff Technology acquisition; we believe in part the reason was due to lack of additional capital, our status as a privately-held entity at the time, and focus on developing our own products. We will seek out companies whom our management believes will provide value to our customers and will complement our business. We will focus on diversifying our product line into a larger range so that our customers and vendors may have more expansive experience in type, choice, options, price, and selection. We also believe that with a more diverse product line we will become more competitive as our industry is intensely competitive.
Generally, our product concentration places a heavy reliance on our Overhoff Technology division. In 2022, we derived 55.9% of our total revenues from sales made by Overhoff to two customers. We expect to encounter a continuation of this trend unless we are successful in diversifying our client base, executing our acquisition strategy and experience increases in business from our Technical Associates division.
Our international revenues were 26.57% of our total revenue in 2022. We expect this to increase over time as we continue to field new orders inquires and engage new customers overseas and recover post-pandemic. We believe that South Korea and China will likely be a larger contributor to revenue within the next few years. While we maintain steady growth domestically, the international side of our business may be a larger component as nuclear technology and rapid development for clean energy grows abroad. Additionally, the Company relies on continued growth and orders from CANDU reactors (Canada Deuterium Uranium), and rapid development of the next generation of nuclear reactors called Molten Salt Reactors, (MSR) and Liquid-Fluoride Thorium Reactors (LFTR), all of which purchase tritium detection and monitor products. There can be no assurances as to our growth projections and our risk profile as we depend upon increased foreign customers for business.
18
For the next twelve months, we anticipate we will need less than $1,000,000 in additional capital to fund our business plans. If we do not raise the required capital, we may not meet our expenses and there can be no assurance that we will be able to do so and if we do, we may find the cost of such financing to be burdensome on the Company. Additionally, we may not be able to execute on our business plans due to unforeseen market forces such as lower natural gas prices, difficulty attracting qualified executive staff, general downturn in our sector or by competition as we operate in an extremely competitive market for all of our product offerings.
Robert I. Goldstein, our President, Chief Executive Officer and Chairman of the Board of Directors also maintains a position as President of Gold Team Inc., a Delaware company that invests in industrial real estate properties for investment purposes. He holds an 8% interest in Gold Team Inc. and spends approximately 5 hours per week on affairs related to Gold Team Inc. The Company leases its current facilities from Gold Team Inc. which owns both the Canoga Park, CA and Milford, Ohio properties at an expense of $7,000 for each facility per month.
On May 31, 2016, we entered into an Asset Purchase Agreement with Electronic Control Concepts (“ECC”) whereby the Company purchased certain tangible and intangible assets of ECC. ECC is a small manufacturer of test and maintenance meters for x-ray machines both medical and industrial. We acquired ECC to give a boost to our current x-ray related product and hospital/medical product sales.
On March 3, 2023, the Company divested itself of its wholly owned subsidiary, Cali From Above, through a Membership Interest Purchase Agreement with the Company’s President and Chief Executive Officer, Robert Goldstein. Consideration received by the Company was 65,000,000 shares of Averox, Inc. (OTC:AVRI), resulting in the Company owning 26% of the issued and outstanding shares of common stock of AVRI. The Company and Cali From Above also signed a Cooperation Agreement whereby the Company holds exclusive sourcing and manufacturing rights for Cali From Above products, thus making Cali From Above a new customer of the Company.
Results of Operations
For the three months ended September 30, 2023 compared to the three months ended September 30, 2022:
Three Months Ended September 30, | Change | |||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||
| Sales | $ | 593,502 | $ | 617,434 | $ | (23,392 | ) | -4.03 | % | |||||||
| Cost of goods sold | 127,727 | 405,471 | (277,744 | ) | -217.45 | % | ||||||||||
| Gross profit | 465,775 | 211,963 | (253,812 | ) | 54.49 | % | ||||||||||
| Selling, general and administrative expenses | 539,337 | 695,381 | (156,044 | ) | -28.93 | % | ||||||||||
| Loss from operations | (73,562 | ) | (483,419 | ) | 409,857 | -557.15 | % | |||||||||
| Other income (expense) | (686,500 | ) | (172,403 | ) | (514,097 | ) | 74.89 | % | ||||||||
| Loss before provision for income taxes | (760,062 | ) | (655,822 | ) | (104,240 | ) | 13.71 | % | ||||||||
| Provision for income taxes | - | - | - | |||||||||||||
| Net loss | $ | (760,062 | ) | $ | (655,822 | ) | $ | (104,240 | ) | 13.71 | % | |||||
Sales for the three months ended September 30, 2023, were $593,502 compared to $617,434 for the same period in 2022. The decrease of $23,392 or 4.03% is a result of an increase in sales from our Optron subsidiary of $86,165, a decrease in sales from our Overhoff subsidiary of $95,464, and a decrease of $14,633 reported through US Nuclear. The overall decrease in sales reflects the decrease in international sales. The sales breakdown for the three months ended September 30, 2023, is as follows:
| North America | 96.11 | % | ||
| Asia (Including Japan) | 1.86 | % | ||
| Other | 2.03 | % |
Our gross margins for the three months ended September 30, 2023, were 78.48% as compared to 34.33% for the same period in 2022. Gross margins increased by 44.15% for the three months ended September 30, 2023, due to a mix of higher margin products sold during the period. The Company expects this trend to continue due to increased sales of specialized products through our Overhoff subsidiary.
Selling, general and administrative expenses for the three months ended September 30, 2023, were $539,339 compared to $695,381 for the same period in 2022. The decrease of $156,042 or 28.93% was principally due to decreases in professional fees and trade show expenses. During the three months ended September 30, 2023, stock-based compensation was $396,847 compared to $158,425 during the same period in 2022. Stock-based compensation is issued as an incentive to consultants to increase revenues through the acquisition of new customers.
19
Other expense for the three months ended September 30, 2023, was $686,499, an increase of $514,096 from other expense of $172,403 for the same period in 2022. The increase was due to an increase in the amortization of debt discounts associated with convertible debentures of $518,012 offset by a decrease in interest expense of $3,916.
Net loss for the three months ended September 30, 2023, was $760,062 compared to $655,822 for the same period in 2022. The change was principally attributed to the factors described above.
For the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022:
Nine Months Ended September 30, | Change | |||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||
| Sales | $ | 1,588,099 | $ | 1,539,517 | $ | 48,492 | 3.05 | % | ||||||||
| Cost of goods sold | 651,992 | 837,523 | (185,531 | ) | -28.460 | % | ||||||||||
| Gross profit | 936,017 | 701,994 | 234,023 | 25.00 | % | |||||||||||
| Selling, general and administrative expenses | 1,875,583 | 2,103,637 | (228,054 | ) | -12.16 | % | ||||||||||
| Loss from operations | (939,565 | ) | (1,401,644 | ) | 462,078 | -49,18 | % | |||||||||
| Other income (expense) | (1,356,549 | ) | (270,099 | ) | (1,086,450 | ) | 80.09 | % | ||||||||
| Loss before provision for income taxes | (2,296,114 | ) | (1,671,743 | ) | (624,372 | ) | 27.19 | % | ||||||||
| Provision for income taxes | - | - | - | |||||||||||||
| Net loss | $ | (2,296,114 | ) | $ | (1,671,743 | ) | $ | (624,372 | ) | 27.19 | % | |||||
Sales for the nine months ended September 30, 2023, were $1,588,099 compared to $1,539,517 for the same period in 2022. The increase of $48,492 or 3.05% is a result of an decrease in sales from our Overhoff subsidiary of $39,591 and an increase in sales from our Optron subsidiary of $102,716, and a decrease of $14,633 reported through US Nuclear. The overall increase in sales is principally due to recovery from the impact of COVID-19. The sales breakdown for the nine months ended September 30, 2023, is as follows:
| North America | 87.50 | % | ||
| Asia (Including Japan) | 8.58 | % | ||
| Other | 3.91 | % |
Our gross margins for the nine months ended September 30, 2023, were 58.94% as compared to 45.6% for the same period in 2022. Gross margins increased by 13.34% for the nine months ended September 30, 2023, due to a mix of higher margin products sold. The Company expects this trend to continue due to increased sales of specialized products through our Overhoff subsidiary.
Selling, general and administrative expenses for the nine months ended September 30, 2023, were $1,875,583 compared to $2,103,637 for the same period in 2022. The decrease of $228,054 or 12.16% was principally due to an increase in stock-based compensation offset by decreases in employee benefits and advertising expenses. During the nine months ended September 30, 2023, stock-based compensation was $396,847 compared to $238,670 during the same period in 2022. Stock based compensation is issued as an incentive to consultants to increase revenues through the acquisition of new customers.
Other expense for the nine months ended September 30, 2023, was $1,356,549, an increase of $1,086,450 from other expense of $270,099 for the same period in 2022. The increase reflects an increase in the amortization of debt discounts associated with convertible debentures of $1,042,867, an increase in interest expense of $32,985, a $2,539 loss on the deconsolidation of Cali From Above, and a $8,059 loss on equity in our investment with Grapheton.
Net loss for the nine months ended September 30, 2023, was $2,296,114 compared to $1,671,743 for the same period in 2022. The change was principally attributed to an increase in stock compensation, an increase in amortization of debt discounts, and the factors described above.
20
Liquidity and Capital Resources
Our operations have historically been financed by our majority shareholder and more recently from proceeds from the sale of our common stock. As funds were needed for working capital purposes, our majority shareholder would loan us the needed funds. We anticipate funding the growth of our business through the sales of additional shares of our common stock and loans from our majority stockholder if necessary.
As of September 30, 2023, total assets decreased by .18% to $3,103,296 from $3,108,737 on December 31, 2022. The decrease reflects increases in cash, accounts receivable, and inventory, decreased by the fair value of our fixed assets and the carrying value of our investments, offset by a note receivable recorded during the period.
As of September 30, 2023, total liabilities increased by 20.94% to $4,372,908 from $3,457,041 on December 31, 2022. The increase is principally related to an increase in accrued liabilities, notes payable, and accrued compensation to officers.
Net cash used in operating activities for the nine months ended September 30, 2023, was ($102,283) compared to ($884,222) for the same period in 2022. The increase in cash from operations was principally due to changes in working capital accounts offset by non-cash transactions including stock-based compensation, amortization of debt discounts, and the equity loss on investment in Grapheton.
Net cash used in investing activities for the nine months ended September 30, 2023, was ($20,289) compared to ($12,986) for the same period in 2022. The increase in cash used investing activities was due to a decrease of $12,629 in the purchase of property and equipment offset by an increase related to a $18,250 note receivable and cash of $2,539 surrendered in the deconsolidation of Cali From Above during the period.
Net cash provided by financing activities for the nine months ended September 30, 2023, was $181,666 compared to $884,392 for the same period in 2022. The decrease in cash from financing activities reflects proceeds received on a convertible note payable and shareholder loan proceeds received in the prior period.
Critical Accounting Policies
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“US GAAP”). US GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expenses amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
We believe the following is among the most critical accounting policies that impact our consolidated financial statements. We suggest that our significant accounting policies, as described in our financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.
21
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
None
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we are responsible for conducting an evaluation of the effectiveness of the design and operation of our internal controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal quarter covered by this report. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of September 30, 2023.
Changes in internal controls
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation to determine whether any change in our internal controls over financial reporting occurred during the nine-month period ended September 30, 2023. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company’s internal controls over financial reporting during the nine months ended September 30, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are not presently material pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.
Item 1A. Risk Factors
See our Form 10K filed on May 12, 2023, for Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the year ending December 31, 2022, the Company issued 400,000 shares of common stock related to a consulting services agreement entered into with Prashant Mehta.
During the year ending December 31, 2022, the Company issued 625,000 shares of common stock in relation to debt that was obtained.
During the year ending December 31, 2022, the Company issued 1,600,000 shares of common stock in satisfaction of principle, interest, and fees on a Convertible Note held by a third party.
During the year ending December 31, 2022, the Company issued 203,027 shares of common stock to Carter Terry & Co. in connection with investor relations services provided by the consultant.
During the year ending December 31, 2022, the Company issued 40,000 shares of common stock to Richard Cavalli in connection with investor relations services provided by the consultant.
During the year ending December 31, 2022, the Company issued 200,000 shares of common stock to Howard Isaacs in connection with investor relations services provided by the consultant.
On January 9, 2023, the Company issued 100,000 shares of common stock related to a consulting services agreement entered into with Prashant Mehta.
On January 19, 2023, the Company issued 400,000 shares of common stock in satisfaction of principle, interest, and fees on a Convertible Note held by a third party.
On January 23, 2023, the Company issued 50,000 shares of common stock to Richard Cavalli in connection with investor relations services provided by the consultant.
On January 23, 2023, the Company issued 210,000 shares of common stock to Howard Isaacs in connection with investor relations services provided by the consultant.
On February 23, 2023, the Company issued 400,000 shares of common stock in satisfaction of principle, interest, and fees on a Convertible Note held by a third party.
On February 24, 2023, the Company issued 200,000 shares of common stock related to a consulting services agreement entered into with Prashant Mehta.
23
On March 14, 2023, the Company issued an aggregate of 1,500,000 shares to two Directors and its Chief Executive Officer as compensation for services provided to the Company.
On March 31, 2023, the Company issued 75,000 shares of common stock related to a consulting services agreement entered into with Prashant Mehta.
On April 11, 2023, the Company issued 771,845 common shares for a cashless exercise of warrants outstanding.
On April 26, 2023, the Company issued 420,000 shares of common stock to Howard Isaacs in connection with investor relations services provided by the consultant.
On April 26, 2023, the Company issued 50,000 shares of common stock to Richard Cavalli in connection with investor relations services provided by the consultant.
On May 25, 2023, the Company issued 517,391 common shares for a cashless exercise of warrants outstanding.
On June 12, 2023, the Company issued 75,000 shares of common stock related to a consulting services agreement entered into with Prashant Mehta.
On August 22, 2023, the Company issued 75,000 shares of common stock related to a consulting services agreement entered into with Prashant Mehta.
On August 22, 2023, the Company issued 530,300 shares of common stock related to Richard Landry, our former Chief Financial Officer, for services provided to the Company.
On August 25, 2023, the Company issued an aggregate of 1,100,000 shares to two Directors and its Chief Executive Officer as compensation for services provided to the Company.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
None.
24
Item 6. Exhibits.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| US Nuclear Corp | ||
| By: | /s/ Robert Goldstein | |
| President, Chief Executive Officer, Chairman of the Board of Directors | ||
| By: | /s/ Michael Hastings | |
| Chief Financial Officer | ||
Date: November 20, 2023
26
Exhibit 31.1
US Nuclear Corp.
OFFICER’S CERTIFICATE PURSUANT TO SECTION 302
I, Michael Hastings, certify that:
1. I have reviewed this annual report on Form 10-Q for the year ended September 30, 2023 (the “report”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: November 20, 2023
| By: | /s/ Michael Hastings | |
| Michael Hastings | ||
| Chief Financial Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
US Nuclear Corp.
OFFICER’S CERTIFICATE PURSUANT TO SECTION 302
I, Robert I. Goldstein, certify that:
1. I have reviewed this annual report on Form 10-Q for the year ended September 30, 2023 (the “report”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: November 20, 2023
| By: | /s/ Robert I. Goldstein | |
| Robert I. Goldstein | ||
| President, Chief Executive Officer, Chairman | ||
| (Principal Executive Officer) |
Exhibit 32.1
US Nuclear Corp.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of US Nuclear Corp. (the Registrant) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Michael Hastings, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Richard Landry and will be retained by US Nuclear Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: November 20, 2023
| By: | /s/ Michael Hastings | |
| Michael Hastings | ||
| Chief Financial Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
US Nuclear Corp.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of US Nuclear Corp. (the Registrant) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert I. Goldstein, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Robert I. Goldstein and will be retained by US Nuclear Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: November 20, 2023
| By: | /s/ Robert I. Goldstein | |
| Robert I. Goldstein | ||
| President, Chief Executive Officer, Chairman | ||
| (Principal Executive Officer) |