US Nuclear Corp. - 10-K

ITEM 1A. Risk Factors

Risks Related to Our Business and Industry

Our business is intensely competitive, and our revenues are unpredictable as a small company.

We compete with a formidable group of competitors in our business, many of which have greater resources and capabilities than our company. There are numerous companies that have established businesses and command larger market share such as Thermo Fisher Scientific, Canberra Industries, and Mirion Technologies, Ludlum Measurements, Smiths Detection and Lab Impex Systems Ltd. Many of these companies have products and services that compete directly with ours and many of them are supported with larger marketing budgets and sales staff that can provide stronger sales coverage and support to customers than our capabilities. Furthermore, competitors may have technological advantages and may be able to implement new technologies more rapidly than our Company. Additionally, to the extent of our bookings, we cannot accurately predict to a large degree of certainty what annual revenues and income outlook may be. Due to our relatively small size, many factors may contribute to differences in the future and therefore cannot be assured in any manner. The market for nuclear radiation safety equipment is dependent upon a number of factors beyond the Company’s control, which cannot be accurately predicted. Some of these factors include pricing, competition from new entrants, newer technologies, market regulation and government policy, as well as overall market demand. Other factors include fossil fuel energy prices that may have an effect upon nuclear energy demand. Lower oil, natural gas, and coal prices may result in less favorable decisions to pursue nuclear energy as a source of energy.

We rely heavily on our international customers for business and expect to continue to rely on international customers in the future.

Our international revenues were 23.82% of our total revenue in 2024. This was an increase of 12.39% from 2023 and was a result of management’s ability to field new orders and inquires and engage new customers overseas. We believe that South Korea, Japan and Australia in the Southeast Asian region, and France, Germany and other countries in Eastern and Western Europe, should be major contributors to our growth in revenues over 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. There can be no assurances as to our growth projections and our risk profile as we depend upon increased foreign customers for business.

Government Regulation

Although the sales of our equipment are not generally regulated by any local or federal government agency, the nuclear power industry itself is highly regulated by the Nuclear Regulatory Commission. As an independent agency of the United States government, the NRC is responsible for overseeing reactor safety, security, reactor licensing, renewal, radioactive material safety, and spent fuel disposal. The effects of the NRC’s policies therefore have an effect on our business. The impact of any negative decision in the nuclear power industry will ultimately affect us. We may also be affected by foreign government policy and regulation not covered by the NRC.

Nuclear Power, Fossil Fuel and Renewal Energy

While the conventional Fission based nuclear power industry is a key component of the generation of electricity in the world, there are new technologies in both fission and fusion reactors, that are transforming the entire industry. SMR (Small Modular Reactors) are much less expensive to build and operate, while being much safer as well. This technology should be available over the next 3-5 years and is expected to be the fastest growing source of nuclear power generation in the next decade and beyond.

The current landscape of nuclear power according to the Nuclear Regulatory Commission, or NRC, states that as of May 2023, there were 32 countries worldwide operating 436 nuclear reactors in operation in the world, with 57 new reactors under construction in 11 countries. Within the United States, there are 93 nuclear power plants providing 19% of the country’s total electric energy generation. Additionally, 28 of the 50 US states generate electricity from nuclear power plants, and four states, New Hampshire, South Carolina, Connecticut, and Illinois rely on nuclear power for more than 50 percent of their electricity.

Recent estimates indicate that the United States produced approximately 30% of the world’s gross nuclear-generated electricity in 2023 with France at 18%, China 16%, Japan 9% Russia 8%, South Korea 7%, and the rest of the world at 11%. However, only two conventional nuclear power plants were under construction in 2023, the Vogtle Plants, in eastern Georgia. Overall, about 30 countries are considering, planning, or starting nuclear power programs. These range from sophisticated economies to developing nations. Bangladesh, Egypt and Turkey are all constructing their first nuclear power plants. In July 2022, the European Parliament endorsed labeling all nuclear energy projects “green”, allowing them access to loans and subsidies. In the context of emissions, nuclear power is considered to be green and clean. It produces zero carbon emissions and does not produce other noxious greenhouse gases. It is difficult to predict if these plans domestically and internationally will materialize or be postponed indefinitely were negative market forces to develop.

Nuclear Fusion Power Research and Prototypes

While it will be some years before commercial fusion power plants will be supplying electricity, already in 2023, the US Department of energy (DOE) lists 124 active fusion power laboratories working to make energy by fusing Tritium and Deuterium, resulting in a growing market for Tritium detection equipment.

Opponents to Nuclear Energy are formidable due to concerns over safety.

Maintaining the demand for our products and future growth in demand will depend in part upon continued acceptance of nuclear technology as a means of generating electricity. In many cases, countries have embraced nuclear technology because alternate means of energy have either been at a high cost with heavy pollution, or other means have not been practical. However, incidents involving nuclear energy production, such as overheating reactors, radiation leaks and reactor melt-downs, can cause a significant decrease in public acceptance of nuclear technology. Events at the Fukushima Daiichi nuclear complex in Japan on March 11, 2011 may have adverse long-term effects in some countries decision to either continue using nuclear power or suspend its nuclear power program. While the long-term impact is unclear, several countries have suspended operations at existing nuclear power plants. Specifically, on May 30, 2011, Germany announced that in addition to the permanent closure of eight reactors and with only three nuclear power plants left with a license to operate at full capacity, the nuclear phase out in Germany is almost complete. Switzerland has made a policy decision to phase out of their 5 reactors by 2034. Italy, while not having any operating reactors, has implemented a moratorium on nuclear power. The ultimate results of these safety reviews and/or public resistance to nuclear technology may lead to suspension or cancellation of permitting and development activities, license extensions of existing nuclear facilities, and possibly even the closure of operating nuclear facilities by one or more countries. Lack of public acceptance of nuclear technology would adversely affect the demand for nuclear power and therefore demand for radiation detection equipment.

Continued growth of CANDU reactors and rapid development of next generation Molten Salt (MSR) and Liquid-Fluoride Thorium Reactors (LFTR).

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), for its tritium-based equipment. MSR and LFTR are new types of reactors that utilize thorium as a fuel rather than traditional uranium or plutonium. Thorium is a more abundant element than uranium. Many countries with heavy energy needs such as China have begun to adopt MSR and LFTR programs. However, the numbers of these types of reactors are still small in numbers and there can be no assurances that they will ever reach large numbers capable of sustaining rapid growth and development for nuclear-radiation safety products such as our tritium equipment. If CANDU reactors experience adverse events such as long-term inactivity due to political or environmental concerns, or economic issues, and if MSR and LFTR reactors fail to develop beyond its current growth forecasts worldwide, the Company will experience lower demand for its products which would have an adverse effect on the Company’s sales and profitability.

Failure to make accretive acquisitions and successfully integrate them could adversely affect our future financial results.

As part of our growth strategy, we plan to seek, when management deems advantageous to the Company, to acquire complementary (including competitive) businesses, facilities or technologies and enter into joint ventures.  Our goal is to make such acquisitions, integrate these acquired assets into our operations and reduce operating expenses.  The process of integrating these acquired assets into our operations may result in unforeseen operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for the ongoing development of our business.  We cannot assure you that the anticipated benefits of any acquisitions will be realized. In addition, future acquisitions by us could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities and amortization expenses related to goodwill and other intangible assets, any of which can materially and adversely affect our operating results and financial position.  Acquisitions also involve other risks, including entering geographic markets in which we have no or limited prior experience and the potential loss of key employees.

We have filed a provisional patent for our product based on our tritium products but hold no current patents on our products, and our business employs proprietary technology and information which may be difficult to protect and may infringe on the intellectual property rights of third parties.

In general, we rely primarily on a combination of trade secrets, copyright and trademark laws, and confidentiality procedures to protect our technology. Due to the technological change that characterizes our business, we believe that the improvement of existing products, reliance upon trade secrets and unpatented proprietary know-how and the development of new products are generally as important as patent protection in establishing and maintaining a competitive advantage.

We have currently filed a provisional utility-type patent on our tritium products to protect our intellectual property, but currently rely on trade secrets, proprietary know-how and technology that we seek to protect, in part, by confidentiality agreements with prospective joint venture partners, employees and consultants.  We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets and proprietary know-how will not otherwise become known or be independently discovered by others. Other than the provisional patent, we currently do not hold patents from the United States Patent and Trademark Office on any of our products we manufacture. Our success depends, in part, on our ability to keep competitors from reverse engineering our products, maintain trade secrecy and operate without infringing on the proprietary rights of third parties.  We cannot assure you that the patents of others will not have an adverse effect on our ability to conduct our business, that any of our trade secrets and applications will be protected, that we will develop additional proprietary technology that is defensible against theft or will provide us with competitive advantages or will not be challenged by third parties.  Further, we cannot assure you that others will not independently develop similar or superior technologies, duplicate elements of our technology or design around it.

It is possible that we may need to acquire licenses to, or to contest the validity of, issued or pending patents or claims of third parties.  We cannot assure you that any license acquired under such patents would be made available to us on acceptable terms, if at all, or that we would prevail in any such contest.  In addition, we could incur substantial costs in defending ourselves in suits brought against us for alleged infringement of another party’s patents or in defending the validity or enforceability of any patents we may seek in the future, or in bringing patent infringement suits against other parties.

In December, 2013, we were granted a registered trademark of the US Nuclear Corp name and logo from the United States Patent and Trademark Office and consider it important to the protection of our US Nuclear Corp brands. We have not been, nor are we currently involved in or aware of any litigation regarding any of our intellectual property.

Our failure to obtain capital may significantly restrict our proposed operations.

We will need to raise more capital to expand our business. It is anticipated that we will require an additional capital raise of $5 million dollars over the next twelve months to fund our business plans. Future sources of capital may not be available to us when we need it or may be available only on unacceptable terms.

We are subject to the risk that certain key personnel, including key employees named below, on whom we depend, in part, for our operations, will cease to be involved with us.  The loss of any these individuals would adversely affect our financial condition and the results of our operations.

We are dependent on the experience, knowledge, skill and expertise of our President and CEO Robert I. Goldstein. We are also in large part dependent on current CFO, Michael Hastings. The loss of any of the key personnel listed above could materially and adversely affect our future business efforts. Our success depends in substantial part upon the services, efforts and abilities of Robert I. Goldstein, our Chairman and Chief Executive Officer, due to his experience, history and knowledge of the nuclear radiation industry and his overall insight into our business direction. The loss or our failure to retain Mr. Goldstein, or to attract and retain additional qualified personnel, could adversely affect our operations. We do not currently carry key-man life insurance on Mr. Goldstein or any of our officers and have no present plans to obtain this insurance.  See “Management.”

The loss of any of our executive officers could adversely affect our business.

We depend to a large extent on the efforts and continued employment of our executive officers. The loss of any executive officer could adversely disrupt our operations.

Competition from other radiation detection or related companies could result in a decrease of our business and a decrease in our financial performance.

We operate in a highly competitive industry. Many of our current and potential competitors, including larger multinational companies, domestic manufacturing companies with multiple product lines in radiation detection products have existed longer and have larger customer bases, greater brand recognition and significantly greater financial, marketing, personnel, technical and other resources than US Nuclear Corp. In addition, many of these competitors may be able to devote significantly greater resources to:

research and development of new products

attracting and retaining key employees;

maintaining a large budget for marketing and promotional expenses

providing more favorable credit terms to suppliers and channel distributors

Regulations, including those contained in and issued under the Sarbanes-Oxley Act of 2002 (“SOX”) and the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), increase the cost of doing business and may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain or retain listing of our Common Stock.

We are a public company.  The current regulatory climate for public companies, even smaller reporting companies such as ours, may make it difficult or prohibitively expensive to attract and retain qualified officers, directors and members of board committees required to provide for our effective management in compliance with the rules and regulations which govern publicly-held companies, including, but not limited to, certifications from executive officers and requirements for financial experts on boards of directors. The perceived increased personal risk associated with these changes may deter qualified individuals from accepting these roles.  For example, the enactment of the Sarbanes-Oxley Act of 2002 has resulted in the issuance of a series of rules and regulations and the strengthening of existing rules and regulations by the SEC.  Further, proposed regulations under Dodd-Frank heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters.  We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, the management of our business could be adversely affected.

Limitations on director and officer liability and our indemnification of our officers and directors may discourage stockholders from bringing suit against a director.

Our Certificate of Incorporation and By-Laws provide, with certain exceptions as permitted by Delaware corporation law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on our behalf against a director. In addition, our Certificate of Incorporation and By-Laws provide for mandatory indemnification of directors and officers to the fullest extent permitted by governing state law.

We may incur a variety of costs to engage in future acquisitions of companies, products or technologies, to grow our business, to expand into new markets, or to provide new services. As such, the anticipated benefits of those acquisitions may never be realized.

It is management’s intention to acquire other businesses to grow our customer base, to expand into new markets, and to provide new product lines.  We may make acquisitions of, or significant investments in, complementary companies, products or technologies, although no additional material acquisitions or investments are currently pending.  Acquisitions may be accompanied by risks such as:

difficulties in assimilating the operations and employees of acquired companies;

diversion of our management’s attention from ongoing business concerns;

our potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products and services;

additional expense associated with amortization of acquired assets;

additional expense associated with understanding and development of acquired business;

maintenance and implementation of uniform standards, controls, procedures and policies; and

impairment of existing relationships with employees, suppliers and customers as a result of the integration of new management employees.

We must attract and retain skilled personnel.  If we are unable to hire and retain technical, sales and marketing, and operational employees, our business could be harmed.

Our revenues are generated by the sales of our radiation detection products from our direct sales, sales to catalogs, distributors and to a lesser extent, our website.  Our ability to manage our growth will be particularly dependent on our ability to develop and retain an effective sales force and qualified technical and managerial personnel. We intend to hire additional employees, including engineers, sales and marketing employees and operational employees.  The competition for engineers, qualified sales, technical, and managerial personnel in the technology and manufacturing community, is intense, and we may not be able to hire and retain sufficient qualified personnel.  In addition, we may not be able to maintain the quality of our operations, control our costs, maintain compliance with all applicable regulations, and expand our internal management, technical, information and accounting systems in order to support our desired growth, which could have an adverse impact on our operations.

Our failure to manage growth effectively could harm our ability to attract and retain key personnel and adversely impact our operating results.

There can be no assurance that we will be able to manage our expansion through acquisitions effectively. Our current and planned personnel, systems, procedures and controls may not be adequate to support and effectively manage our future operations, especially as we employ personnel in multiple geographic locations. We may not be able to hire, train, retain, motivate and manage required personnel, which may limit our growth, damage our reputation and negatively affect our financial performance and harm our business.

If we obtain financing, existing shareholder interests may be diluted.

If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our shareholders will be diluted. In addition, any new securities could have rights, preferences and privileges senior to those of our common stock. Furthermore, we cannot assure you that additional financing will be available when and to the extent we require or that, if available, it will be on acceptable terms.

Risks Related to Our Common Stock

Our stock price may be volatile or may decline regardless of our operating performance, and the price of our common stock may fluctuate significantly.

The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

competition from other radiation detection companies or related businesses;

changes in government regulations, general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the nuclear power industry;

changes in key personnel;

entry into new geographic markets;

actions and announcements by us or our competitors or significant acquisitions, divestitures, strategic partnerships, joint ventures or capital commitments;

changes in operating performance and stock market valuations of other radiation detection and related companies;

investors’ perceptions of our prospects and the prospects of the nuclear power industry;

fluctuations in quarterly operating results, as well as differences between our actual financial and operating results and those expected by investors;

the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;

announcements relating to litigation;

financial guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;

changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;

the development and sustainability of an active trading market for our common stock;

future sales of our common stock by our officers, directors and significant stockholders; and

changes in accounting principles affecting our financial reporting.

These and other factors may lower the market price of our common stock, regardless of our actual operating performance.

The stock markets and trading facilities, including the OTC Bulletin Board, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities in many companies. In the past, stockholders of some companies have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

Our Common Stock is subject to risks arising from restrictions on reliance on Rule 144 by shell companies or former shell companies.

Under a regulation of the SEC known as “Rule 144,” a person who has beneficially owned restricted securities of an issuer and who is not an affiliate of that issuer may sell them without registration under the Securities Act provided that certain conditions have been met. One of these conditions is that such person has held the restricted securities for a prescribed period, which will be 6 months or 1 year, depending on various factors. The holding period for our common stock would be 1 year if our common stock could be sold under Rule 144. However, Rule 144 is unavailable for the resale of securities issued by an issuer that is a shell company (other than a business combination related shell company) or that has been at any time previously a shell company. The SEC defines a shell company as a company that has (a) no or nominal operations and (b) either (i) no or nominal assets, (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets. Until the merger, we were a shell company.

The SEC has provided an exception to this unavailability if and for as long as the following conditions are met:

The issuer of the securities that was formerly a shell company has ceased to be a shell company,

The issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act,

The issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and

At least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company known as “Form 10 Information.”

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our common stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrades our common stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which could cause our stock price and trading volume to decline.

Our management and other affiliates have significant control of our Common Stock and could control our actions in a manner that conflicts with the interests of other stockholders.

Our executive officers, directors and their affiliated entities together will beneficially own approximately 37.3% of our Common Stock. As a result, these stockholders, acting together, will be able to exercise considerable influence over matters requiring approval by our stockholders, including the election of directors, and may not always act in the best interests of other stockholders. Such a concentration of ownership may have the effect of delaying or preventing a change in our control, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices.

Penny Stock Considerations

Our shares likely will be “penny stocks” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:

Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks; and

Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account.

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and operating results. In addition, current and potential stockholders could lose confidence in our financial reporting, which could have an adverse effect on our stock price.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud.  If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed.

During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404.  In addition, if we fail to maintain the adequacy of our internal accounting controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404.  Failure to achieve and maintain an effective internal control environment could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have an adverse effect on our stock price.

We do not expect to pay any cash dividends for the foreseeable future.

The continued operation and growth of our business will require substantial cash. Accordingly, we do not anticipate that we will pay any cash dividends on shares of our Common Stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, contractual restrictions relating to indebtedness we may incur, restrictions imposed by applicable law and other factors our Board of Directors deems relevant. Investors seeking cash dividends in the foreseeable future should not purchase our Common Stock.

OTC Bulletin Board Qualification for Quotation

On February 6, 2015, we were issued our ticker symbol, UCLE on the OTC Bulletin Board from FINRA. On March 20, 2015, we were approved for DTC eligibility by the Depository Trust and Clearing Corporation,) (“DTCC”).

Holders

As of the date of this 10-K, we had 50 holders of record of our Common Stock.

Quantitative and Qualitative Disclosures about Market Risk

We have entered into derivative financial instruments such as futures contracts, options and swaps, forward foreign exchange contracts or interest rate swaps and futures. In 2022, we entered into two convertible debt instruments that included stock purchase warrants. Though there were no derivatives associated with the Notes, the instruments are affected by changes in market interest rates. We believe that adequate controls are in place to monitor any hedging activities. While we do have significant sales outside the United States, all of our sales are settled with US currency, and we do not currently own assets and operate facilities in countries outside the United States and, consequently, we are not affected by foreign currency fluctuations or exchange rate changes. Overall, we believe that our exposure to interest rate risk and foreign currency exchange rate changes is not material to our financial condition or results of operations.

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.

Critical Accounting Policies

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As a “smaller reporting company,” we have the option to delay adoption of new or revised accounting standards until those standards would otherwise apply to private companies, until the earlier of the date that (i) we are no longer a smaller reporting company or (ii) we affirmatively and irrevocably opt out of the extended transition period for complying with such new or revised accounting standards. We have elected to opt out of this extended transition period. As noted, this election is irrevocable.

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, which include Goodwill and accounts receivable.

We suggest that our significant accounting policies, as described in our financial statements in the Summary of Significant Accounting Policies (Note 2), be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued guidance (ASC 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, the guidance removes the liability and equity separation models for convertible instruments. Instead, entities will account for convertible debt instruments wholly as debt unless convertible instruments contain features that require bifurcation as a derivative or that result in substantial premiums accounted for as paid-in capital. The guidance also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a retrospective or modified retrospective basis. We adopted this guidance on January 1, 2024, using the modified retrospective approach whereby amounts previously reported have not been revised. Upon adoption we recognized a decrease to additional paid-in capital of $751,809, an increase to long-term debt of $47,078, and a cumulative-effect adjustment to accumulated deficit of $704,731.

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The main provisions of ASU 2023-07 require a public entity to disclose on an annual and interim basis: (i) significant segment expenses provided to the chief operating decision maker, (ii) an amount representing the difference between segment revenue less segment expenses disclosed under the significant segment expense principle and each reported measure of segment profit or loss and a description of its composition, (iii) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required under Topic 280 in interim periods, (iv) clarify that if the chief operating decision maker uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit, (v) the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (vi) all disclosures required by ASU 2023-07 and all existing segment disclosures under Topic 280 for an entity with a single reportable segment. The new guidance is effective for the fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company adopted ASU 2023-07 as of December 31, 2024, and has determined that this ASU does not have a material effect on the Company’s consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency and decision usefulness of income tax disclosures. The main provisions of ASU 2023-09 require a public entity to disclose on an annual basis (i) specific prescribed categories in the rate reconciliation, (ii) additional information for reconciling items that meet a quantitative threshold, (iii) the amount of income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes, (iv) the amount of income taxes paid, net of refunds received, disaggregated by individual jurisdictions in which income taxes paid is equal to greater than 5 percent of total income taxes paid, (v) income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign, and (vi) income tax expense or benefit from continuing operations disaggregated by federal, state, and foreign. ASU 2023-09 also removes certain disclosure requirements related to unrecognized tax benefits and cumulative unrecognized temporary differences. The new guidance is effective for the fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company adopted ASU 2023-09 as of December 31, 2024, and has determined that this ASU does not have a material effect on the Company’s consolidated financial statements and related disclosures.

Control by Management

As of December 31, 2024, management currently owns 27.9% of all the issued and outstanding capital stock of the Company. Consequently, due to our CEO and CFO also being board members, management has significant ability to control the operations of the Company and will have the ability to control substantially all matters submitted to stockholders for approval, including:

Election of the board of directors;

Removal of any directors;

Amendment of the Company’s certificate of incorporation or bylaws; and

Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination.

This Report Contains Forward-Looking Statements and Information Relating to Us, Our Industry and To Other Businesses.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

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 thereto contained in “Item 8. Financial Statements and Supplementary Data” of this report on Form 10-K. 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.

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.

On April 18, 2012, Richard Chiang, then our sole director and shareholder, entered into a Stock Purchase Agreement whereby Mr. Goldstein of US Nuclear Corp purchased 10,000,000 shares of our common stock from Mr. Chiang, which constituted 100% of our issued and outstanding shares of common stock. Mr. Chiang then resigned from all positions. Subsequently, on May 18, 2012, the Registrant appointed Mr. Chiang to serve as a member of the Board of Directors. He resigned from this position on March 31, 2013.

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 a 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 2024, we derived 50.49% of our total revenues from sales made by Overhoff to four 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 23.8% of our total revenue in 2024. 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.

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 with 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 $9,000 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 year ended December 31, 2024, compared to the year ended December 31, 2023

Year Ended December 31,

Change

Sales

Cost of goods sold

Gross profit

Selling, general and administrative expenses

Loss from operations

Other expense

Loss before provision for income taxes

Provision for income taxes

Net income (loss)

Revenue for the year ended December 31, 2024, was $2,190,398 compared to $2,231,095 for the year ended December 31, 2023. The decrease of $40,697 or 1.8% is considered by management to be indicative of slowed growth due to political and economic uncertainties. The revenue breakdown for the year ended December 31, 2024, is as follows:

North America 76.18%

Asia (including Japan) 18.10%

Other 5.73%

Our gross margin for the year ended December 31, 2024, was 46.37% as compared to 41.43% for the year ended December 31, 2023. The increase in gross margin is due to the mix of products sold during the period and their respective costs.

Selling and general and administrative expenses for the year ended December 31, 2024, decreased by $15,168 or 0.6% to $2,550,782; down from $2,565,950 for the year ended December 31, 2023. The decrease is largely attributed to a reduction in payroll benefits.

Other expense for the year ended December 31, 2024, was $204,773, a decrease of $1,587,387 from $1,792,160 for 2023. Other expense in 2024 largely consisted of interest and dividend expenses. In 2023, other expenses consisted of amortization of debt discount, equity loss in investment, loss on deconsolidation, loss on an investment deposit, loss on extinguishment of debt, loss on conversion of stock, and gain on debt forgiveness. The decrease in 2024 was largely due to reductions in interest expense and additional debt discounts recorded related to the down-round provisions of our convertible notes payable.

The net loss for the year ended December 31, 2024, was $1,739,926, compared to $3,433,804 for the year ended December 31, 2023.

Liquidity and Capital Resources

Our operations have historically been financed by our majority stockholder. As funds were needed for working capital purposes, our majority stockholder would loan us the needed funds. During the year ended December 31, 2024, the Company’s majority shareholder loaned $531,100 to the Company and was repaid $155,868. We anticipate meeting our capital needs through the sale of our common and preferred stock and loans from our majority stockholder, if necessary.

At December 31, 2024, total assets decreased by $210,029 or 7.35% from $2,856,876 at December 31, 2023, primarily due to decreases in inventory.

At December 31, 2024, total liabilities decreased by 27.62% to $3,503,012 from $4,839,495 at December 31, 2023, due to decreases in accrued liabilities, accounts payable, related party accounts payable, accrued compensation paid to officers, and note payable to shareholder.

Cash Flow

The following table summarizes our cash flows for the periods indicated below:

For the

Year Ended

For the

Year Ended

December 31,

December 31,

Cash used in operating activities

Cash used in investing activities

Cash provided by financing activities

Cash Used in Operating Activities

During the year ended December 31, 2024, and December 31, 2023, cash used in operating activities of $509,053 and $263,444, respectively, primarily reflected our net income for the period, adjusted by non-cash charges such as depreciation, common stock issued for services, debt discounts and financing costs, loss on extinguishment of debt, loss on conversion of stock, as well as changes in accounts receivable, prepaids, deposits, accounts payable, and accrued expenses.

Cash Used by Investing Activities

During the year ended December 31, 2024, and December 31, 2023, cash used in investing activities was $30,767, which consisted of an employee advance and a note receivable. During the year ended December 31, 2023, cash used in investing activities was $24,546, which included purchase of assets, cash paid for an investment, and a note receivable.

Cash Provided by Financing Activities

During the year ended December 31, 2024, cash provided by financing activities was $517,820, which consisted of net borrowings from lines of credit, shareholder debt, and notes payable, offset by repayments on our convertible notes. During the year ended December 31, 2023, cash provided by financing activities was $314,721, which primarily consisted of net borrowings from lines of credit, notes payable, shareholder debt, and convertible notes.

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.

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.

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.

Contractual Obligations

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.